|
2 |
|
|
|
5 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
A. |
[Reserved.] |
6 |
|
|
|
B. |
Capitalization and Indebtedness |
6 |
|
|
|
C. |
Reasons for the Offer and Use of Proceeds
|
6 |
|
|
|
D. |
Risk Factors |
6 |
|
|
|
|
38 |
|
|
A. |
History and Development of the Company |
38 |
|
|
|
B. |
Business Overview |
39 |
|
|
|
C. |
Organizational Structure |
|
|
|
|
D. |
Property, Plants and Equipment |
|
|
|
|
|
91 |
|
|
|
91 |
|
|
A. |
Operating Results |
92 |
|
|
|
B. |
Liquidity and Capital Resources |
98 |
|
|
|
C. |
Research and Development, Patents and Licenses,
Etc. |
100 |
|
|
|
D. |
Trend Information |
100 |
|
|
|
E. |
Critical Accounting Estimates |
100 |
|
102 |
|
|
A. |
Directors and Senior Management |
102 |
|
|
|
B. |
Compensation |
104 |
|
|
|
C. |
Board Practices |
110 |
|
|
|
D. |
Employees |
120 |
|
|
|
E. |
Share Ownership |
120 |
|
|
|
F. |
Disclosure of a Registrant’s Action to Recover
Erroneously Awarded Compensation |
120 |
|
|
|
|
121 |
|
|
A. |
Major Shareholders |
121 |
|
|
|
B. |
Related Party Transactions |
123 |
|
|
|
C. |
Interests of Experts and Counsel |
124 |
|
|
|
|
124 |
|
|
A. |
Consolidated Statements and Other Financial Information
|
124 |
|
|
|
B. |
Significant Changes |
124 |
|
|
|
|
125 |
|
|
A. |
Offer and Listing Details |
125 |
|
|
|
B. |
Plan of Distribution |
125 |
|
|
|
C. |
Markets |
125 |
|
|
|
D. |
Selling Shareholders |
125 |
|
|
|
E. |
Dilution |
125 |
|
|
|
F. |
Expenses of the Issue |
125 |
|
|
|
|
125 |
|
|
A. |
Share Capital |
125 |
|
|
|
B. |
Memorandum and Articles of Association |
125 |
|
|
|
C. |
Material Contracts |
125 |
|
|
|
D. |
Exchange Controls |
126 |
|
|
|
E. |
Taxation |
126 |
|
|
|
F. |
Dividends and Paying Agents
|
137 |
|
|
|
G. |
Statement by Experts |
138 |
|
|
|
H. |
Documents on Display |
138 |
|
|
|
I. |
Subsidiary Information |
138 |
|
|
|
J. |
Annual Report to Security Holders
|
138 |
|
138 |
|
|
|
139 |
|
|
|
147 |
|
|
|
147 |
|
|
|
147 |
|
|
|
147 |
|
|
|
148 |
|
|
|
148 |
|
|
|
148 |
|
|
|
149 |
|
|
|
150 |
|
|
|
150 |
|
|
|
150 |
|
|
|
150 |
|
|
|
151 |
|
|
|
151 |
|
|
|
151 |
|
|
|
151 |
|
|
|
152 |
|
|
|
152 |
|
|
|
153 |
|
|
|
153 |
|
|
|
155 |
|
|
INDEX |
F-1 |
INTRODUCTION
In this Annual Report on Form 20-F (the “Annual Report”), unless context otherwise requires:
• |
references to “Chemomab
Therapeutics Ltd.”, “Chemomab,” the “Company,” “us,” “we” and “our”
refer to Chemomab Therapeutics Ltd., an Israeli company and its consolidated subsidiaries; however, with respect to the presentation of
financial results for historical periods that preceded the Merger (as defined below), these terms refer to the financial results of the
Company’s wholly owned subsidiary, Chemomab Ltd., which was the accounting acquirer in the Merger; |
• |
references to “ordinary
shares,” “our shares” and similar expressions refer to the Company’s ordinary shares, no nominal (par) value;
|
• |
references to “ADS”
refer to the American Depositary Shares listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CMMB,”
each representing twenty (20) ordinary shares; |
• |
references to “dollars,”
“U.S. dollars” and “$” are to United States Dollars; |
• |
references to “NIS”
are to New Israeli Shekels; |
• |
references to the “Companies
Law” are to Israel’s Companies Law, 5759-1999, as amended; |
• |
references to the “SEC”
are to the U.S. Securities and Exchange Commission; and |
• |
references to the “Merger”
refer to the merger involving Anchiano Therapeutics Ltd., or Anchiano, and Chemomab Ltd., whereby a wholly owned subsidiary of Anchiano
merged with and into Chemomab Ltd., with Chemomab Ltd. surviving as a wholly owned subsidiary of Anchiano. Upon consummation of the Merger
on March 16, 2021, Anchiano changed its name to “Chemomab Therapeutics Ltd.” and the business conducted by Chemomab Ltd. became
primarily the business conducted by the Company. |
This Annual Report
contains estimates, projections and other information concerning our industry and our business, as well as data regarding market research,
estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or
similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and
circumstances that are assumed in this information. The industry in which we operate is subject to a high degree of uncertainty and risk
due to a variety of factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements”
and Item 3.D. “Risk Factors” in this Annual Report.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS AND A SUMMARY OF RISK FACTORS
This Annual Report
contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking statements as contained in Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements
contained in this Annual Report other than statements of historical fact, including, without limitation, statements regarding our future
operating results and financial position, including our revenue and operating expenses profitability; our business strategies and plans;
our expectations regarding the development of our industry and the competitive environment in which we operate; our expectations regarding
partnerships and collaborations; our objectives for future operations; our ability to raise additional capital to fund our operations;
and the sufficiency of our cash, cash equivalents and short-term investments, are forward-looking statements. The words “may,”
“might,” “will,” “could,” “would,” “should,” “expect,” “plan,”
“anticipate,” “intend,” “target,” “seek,” “believe,” “estimate,”
“predict,” “potential,” “continue,” “contemplate,” “possible,” “forecasts,”
“aims” or the negative of these terms and similar expressions are intended to identify forward-looking statements, though
not all forward-looking statements use these words or expressions. These forward-looking statements are contained principally in the sections
titled Item 3.D. “Key Information-Risk Factors,” Item 4. “Information on the Company,” and Item 5. “Operating
and Financial Review and Prospects.” These statements are neither promises nor guarantees, but involve known and unknown risks,
uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to,
the following:
•
|
we have incurred significant
losses since inception and anticipate that we will continue to incur increasing levels of operating losses over the next several years
and for the foreseeable future. We are unable to predict the extent of any future losses or when we will become profitable, if at all.
Even if we become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis;
|
|
|
• |
we have a limited operating history
and funding, which may make it difficult to evaluate our prospects and likelihood of success; |
|
|
• |
our business is highly dependent
on the success of our lead product candidate, CM-101, and any other product candidates that we advance into clinical studies. All of our
programs will require significant additional clinical development; |
|
|
•
|
our central objective is to design
and develop targeted treatments for inflammation and fibrosis with an initial focus on the antagonism of CCL24 signaling, which is known
to regulate fibrotic and inflammatory processes. While several studies are currently underway, our approach in the area of fibrotic diseases
is novel and unproven and may not result in marketable products; |
|
|
• |
the successful completion of
clinical studies is a prerequisite to submitting a marketing application to the FDA and similar marketing applications to comparable foreign
regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates.
We may experience negative or inconclusive results, which may result in us deciding, or regulators requiring us, to conduct additional
clinical studies or trials or abandon some or all of our product development programs, which could have a material adverse effect on our
business; |
|
|
• |
we may encounter difficulties
enrolling patients in our clinical studies, including any public health emergencies and related clinical development activities could
be delayed or otherwise adversely affected; |
• |
our ongoing and future clinical
studies may reveal significant adverse events or immunogenicity-related responses and may result in a safety profile that could delay
or prevent regulatory approval or market acceptance of our product candidate; |
|
|
• |
the regulatory approval processes
of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable
to obtain regulatory approval for CM-101 or any other product candidates, our business will be substantially harmed; |
|
|
• |
if we do not achieve our projected
development and commercialization goals in the timeframes we announce and expect, the commercialization of our product candidates may
be delayed and our business will be harmed; |
|
|
• |
we face substantial competition,
which may result in others discovering, developing or commercializing products before or more successfully than us; |
|
|
•
|
we have been granted Orphan Drug
Designation for CM-101 in connection with three indications and may seek Orphan Drug Designation for other indications or product candidates,
and we may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity,
and may not receive Orphan Drug Designation for other indications or for our other product candidates; |
|
|
•
|
we expect to experience significant
growth in the number of our employees over time and the scope of our operations, particularly in the areas of product candidate development,
regulatory affairs and sales and marketing. We will therefore need to expand our organization, and we may experience difficulties in managing
this growth, which could disrupt our operations; |
|
|
• |
if we are unable to protect our
patents or other proprietary rights, or if we infringe the patents or other proprietary rights of others, our competitiveness and business
prospects may be materially damaged. In addition, changes in patent laws or patent jurisprudence could diminish the value of patents in
general, thereby impairing our ability to protect our product candidates; |
|
|
• |
risks related to our operations
in Israel could materially adversely impact our business, financial condition and results of operations; |
|
|
•
|
our principal executive offices
are located in Israel and US and certain of our product candidates may be manufactured at third-party facilities located in Europe. In
addition, our business strategy includes potentially expanding internationally if any of our product candidates receives regulatory approval.
A variety of risks associated with operating internationally could materially adversely affect our business; |
|
|
• |
holders of ADSs are not treated
as holders of our Ordinary Shares; |
• |
holders of ADSs may not have
the same voting rights as the holders of our Ordinary Shares and may not receive voting materials in time to be able to exercise their
right to vote; |
|
|
• |
holders of ADSs may be subject
to limitations on the transfer of their ADSs and the withdrawal of the underlying Ordinary Shares; |
|
|
• |
we are entitled to amend the
deposit agreement and to change the rights of ADS holders under the terms of such agreement, or to terminate the deposit agreement, without
the prior consent of the ADS holders; |
|
|
• |
ADSs holders may not be entitled
to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s)
in any such action; |
|
|
• |
obtaining and maintaining our
patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental
patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements; |
|
|
• |
the regulatory approval processes
of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable
to obtain regulatory approval for CM-101 or any other product candidates, our business will be substantially harmed; |
|
|
• |
obtaining and maintaining regulatory
approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our
product candidates in other jurisdictions; |
|
|
• |
even if we obtain regulatory
approval for CM-101 or any product candidate, we will still face extensive and ongoing regulatory requirements and obligations and any
product candidates, if approved, may face future development and regulatory difficulties; |
|
|
•
|
disruptions at the FDA and other
government agencies caused by funding shortages or global health concerns could hinder our ability to hire, retain or deploy key leadership
and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner
or at all, which could negatively impact our business; |
|
|
• |
if we do not achieve our projected
development and commercialization goals in the timeframes we announce and expect, the commercialization of our product candidates may
be delayed and our business will be harmed; |
|
|
• |
we face substantial competition,
which may result in others discovering, developing or commercializing products before or more successfully than us; |
|
|
• |
even if CM-101 or any other product
candidate we develop receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors
or others in the medical community necessary for commercial success; |
|
|
• |
we rely completely on third-party
suppliers to manufacture our clinical drug supplies for our product candidates, and we intend to rely on third parties to produce preclinical,
clinical, and commercial supplies of any future product candidates; |
|
|
• |
if we are unable to establish
sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing
CM-101, if approved; |
|
|
• |
a variety of risks associated
with operating internationally could materially adversely affect our business; |
|
|
• |
conditions in Israel, including
the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may affect our operations;
|
|
|
• |
because a certain portion of
our expenses are incurred in currencies other than the U.S. Dollar, our results of operations may be harmed by currency fluctuations and
inflation; |
• |
we received Israeli government
grants for certain of their research and development activities as detailed below. The terms of those grants require us to satisfy specified
conditions in order to transfer outside of Israel the manufacture of products based on know-how funded by the Israel Innovation Authority
or to transfer outside of Israel the know-how itself. If we fail to comply with the requirements of Israeli law in this regard, we may
be required to pay penalties, and it may impair our ability to sell our technology outside of Israel; |
|
|
• |
we will need to raise additional
capital to fund our operations, which may be unavailable to us on acceptable terms or at all, or may cause dilution or place significant
restrictions on our ability to operate our business; |
|
|
• |
the trading price of the ADSs
has been highly volatile, and is expected to continue to be volatile; |
|
|
• |
we have not paid dividends in
the past and do not expect to pay dividends in the future, and, as a result, any return on investment may be limited to the value of the
ADSs; and |
|
|
• |
if we fail to continue to meet
all applicable Nasdaq requirements, Nasdaq may delist the ADSs, which could have an adverse impact on the liquidity and market price of
the ADSs. |
You should not rely
on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report
primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial
condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties
and other factors described in the section titled “Risk factors” and elsewhere in this Annual Report. Moreover, we operate
in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for
us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report.
The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events
or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking
statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation
to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report
or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans,
intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking
statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint
ventures or investments.
PRESENTATION
OF FINANCIAL INFORMATION
Our consolidated financial
statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. We present
our consolidated financial statements in U.S. dollars.
Our fiscal year ends
on December 31 of each year.
Certain monetary amounts,
percentages and other figures included elsewhere in this Annual Report have been subject to rounding adjustments. Accordingly, figures
shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed
as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages
that precede them.
PART I
Item 1. Identity
of Directors, Senior Management and Advisers
Item 2. Offer
Statistics and Expected Timetable
Item 3.
Key Information
B. |
Capitalization and
Indebtedness
|
C. |
Reasons for the Offer
and Use of Proceeds
|
You
should carefully consider the risks and uncertainties described below and the other information contained in this Annual Report before
making an investment decision. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business operations. Our business, financial condition, results of operations, or strategic objectives could be materially
and adversely affected by any of these risks and uncertainties. The trading price and value of our ordinary shares could decline due to
any of these risks and uncertainties, and you may lose all or part of your investment. This Annual Report also contains forward- looking
statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks and uncertainties faced by us described below and elsewhere in this Annual
Report.
Risks Relating to Our Business
and Industry
Our limited
operating history and funding may make it difficult to evaluate our prospects and likelihood of success.
We are a clinical-stage biopharmaceutical
company with a limited operating history. We were incorporated in 2011, have no products approved for commercial sale and have not
generated any revenue. Our operations to date have been limited to organizing and staffing the company, business planning, raising capital,
establishing our intellectual property portfolio and conducting research and development of our product candidates, technology related
to CCL24 and novel therapies for the treatment of inflammation and fibrosis. Our approach to the discovery and development of product
candidates is unproven, and we do not know whether we will be able to develop any products of commercial value. In addition, our lead
product candidate, CM-101, is in relatively early clinical development for the treatment of primary sclerosing cholangitis (PSC) (as defined
below) and systemic sclerosis (SSc) (as defined below). The clinical programs will require substantial additional development and clinical
research, both in time and resources, before we are in a position to apply for or receive regulatory approvals and begin generating revenue
in connection with the sale of such product candidates. We have not yet demonstrated the ability to successfully complete a large-scale,
pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on our
behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about
our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully
developing and commercializing pharmaceutical products.
Our business is
highly dependent on the success of our lead product candidate, CM-101, and any other product candidates that we advance into clinical
studies. All of our programs will require significant additional clinical development.
We currently have no products
that are approved for commercial sale and may never be able to develop marketable products. We are relatively early in our development
efforts and have only one product candidate, CM-101, in clinical development. Because CM-101 is our lead product candidate, if CM-101
encounters safety or efficacy problems, development delays, regulatory issues or other problems, our development plans and business would
be significantly harmed. We have completed a Phase 1a single ascending dose (SAD) safety study with healthy volunteers, a Phase 1b multiple
ascending dose (MAD) study of CM-101 in non-alcoholic fatty liver disease, or NAFLD, a Phase 2a safety, Pk and liver fibrosis biomarker
study in non-alcoholic steatohepatitis, or NASH patients, an open-label exploratory study in severe lung injury in hospitalized COVID-19
patients and completed recruitment of patients in a Phase 2 PSC trial.
We expect that a substantial
portion of our efforts and expenditures over the next few years will be devoted to CM-101, which will require additional clinical development,
management of clinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, building
of a commercial organization, substantial investment and significant marketing efforts before we can generate any revenues from any commercial
sales. We cannot be certain that we will be able to successfully complete any of these activities. In addition, if one or more of our
product candidates are approved, we may need to ensure access to sufficient commercial manufacturing capacity and conduct significant
marketing efforts in connection with any commercial launch. These efforts will require substantial investment, and we may not have the
financial resources to continue the development of our product candidates.
We
will need to raise substantial additional funds through public or private equity or debt transactions and/or complete one or more strategic
transactions or partnerships, to complete development of CM-101 or any other product candidates. If we are unable to raise such financing
or complete such a transaction, we may not be able to fund the clinical trials of our product candidates and potentially commercialize
those product candidates.
As a result of the expected
development timeline to potentially obtain FDA approval for CM-101, the substantial additional costs associated with the development of
our product candidates, including the costs associated with clinical trials related thereto, and the substantial cost of commercializing
CM-101, we will need to raise substantial additional funding through public or private equity or debt transactions or a strategic combination
or partnership. If we are delayed in obtaining funding or are unable to complete a strategic transaction, we may have to delay or discontinue
development activities on CM-101 and our other product candidates. Even if we are able to fund continued development of CM-101 or any
of our other product candidates is approved, we expect that we will need to raise substantial additional funding through public or private
equity or debt securities or complete a strategic transaction or partnership to successfully commercialize CM-101 or any other product
candidate.
We believe our cash and cash
equivalents and bank deposits as of December 31, 2023 will be sufficient to fund our operations through March 31, 2025. Sales of our ADSs
dilute the ownership interest of our shareholders and may cause the price per ADS to decrease. Changing circumstances may cause us to
consume capital significantly faster or slower than we currently anticipate. We have based these estimates on assumptions that may prove
to be wrong, and we could exhaust our available financial resources sooner than currently anticipated.
Our liquidity, and ability to raise additional
capital or complete any strategic transaction, depends on a number of factors, including, but not limited to, the following:
• |
the costs and timing for potential additional clinical trials in order to gain possible regulatory approval
for CM-101and our other product candidates; |
|
|
• |
the market price of our ADSs and the availability and cost of additional equity capital from existing and
potential new investors; |
|
|
• |
our ability to retain the listing of our ADSs on the Nasdaq Capital Market; |
|
|
• |
general economic and industry conditions affecting the availability and cost of capital, including as a
result of deteriorating market conditions due to investor concerns regarding inflation and continued hostilities between Israel and Hamas,
and Russia and Ukraine; |
|
|
• |
our ability to control costs associated with our operations; |
|
|
• |
the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights; and |
|
|
• |
the terms and conditions of our existing collaborative
and licensing agreements. |
The sale of additional equity
or convertible debt securities would likely result in substantial dilution to our shareholders. If we raise additional funds through the
incurrence of indebtedness, the obligations related to such indebtedness would be senior to rights of holders of our capital stock and
could contain covenants that would restrict our operations. We also cannot predict what consideration might be available, if any, to us
or our shareholders, in connection with any strategic transaction. Should strategic alternatives or additional capital not be available
to us, or not be available on acceptable terms, we may be unable to realize value from our assets and discharge our liabilities in the
normal course of business which may, among other alternatives, cause us to further delay, substantially reduce or discontinue operational
activities to conserve our cash resources.
Our
approach in the area of fibrotic diseases is novel and unproven and may not result in marketable products.
Our central objective is to
design and develop targeted treatments for inflammation and fibrosis with an initial focus on the neutralization of CCL24 signaling, which
is shown to regulate fibrotic and inflammatory processes. While several studies are currently underway, this mechanism has not yet been
proven to successfully treat inflammation and fibrosis in patients. Targeting CCL24 to treat inflammation and fibrosis is a novel approach
in a rapidly developing field, and there can be no assurance that we can avoid unforeseen problems or delays in the development of our
product candidates, that such problems or delays will not result in unanticipated costs, or that any such development problems can or
will be solved. We have only completed clinical studies of our lead product candidate, CM-101, in relatively early trials in healthy volunteers,
NAFLD, NASH and COVID-19 lung injury patients. Therefore, we may ultimately discover that our approach does not possess properties required
for therapeutic effectiveness. As a result, we may elect to abandon the program or never succeed in developing a marketable product, which
would have a significant effect on the success and profitability of our business.
Clinical
development involves a lengthy, complex and expensive process, with an uncertain outcome.
Before obtaining the
requisite regulatory approvals from the FDA or other comparable foreign regulatory authorities for the sale of any of our product candidates,
we must support our application with clinical studies that prove that such product candidate is safe and effective in humans. Clinical
testing is expensive and can take many years to complete, and its outcome is inherently uncertain. In particular, the general approach
for FDA approval of a new drug requires positive data from two well-controlled Phase 3 clinical studies of the relevant drug in the relevant
patient population. Failure can occur at any time during the clinical study process. We may experience delays in initiating and completing
any clinical studies that we are conducting or intend to conduct, including as a result of public health emergencies, and we do not know
whether our ongoing or planned clinical studies will begin or progress on schedule, need to be redesigned, enroll patients on time or
be completed on schedule, or at all.
Phase 3 clinical studies
typically involve hundreds of patients, have significant costs and take years to complete. A product candidate can fail at any stage of
testing, even after observing promising signals of activity in earlier preclinical studies or clinical trials. The results of preclinical
studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical studies. In addition,
initial or interim success in clinical studies may not be indicative of results obtained when such studies are completed. There is typically
an extremely high rate of attrition from the failure of product candidates proceeding through clinical studies. Product candidates in
later stages of clinical studies may fail to show the desired safety and efficacy profile despite having progressed through preclinical
studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced
clinical studies due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier studies. Most product
candidates that commence clinical studies are never approved as products and there can be no assurance that any of our future clinical
studies will ultimately be successful or support further clinical development of CM-101. Product candidates that appear promising in the
early phases of development may fail to reach the market for several reasons, including:
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the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of
our clinical studies; |
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obtaining regulatory authorizations to commence a trial or consensus with regulatory authorities on trial’s
design; |
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reaching an agreement on acceptable terms with prospective clinical research organizations, or CROs, and
clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial
sites; |
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obtaining IRB approval at each site, or Independent Ethics Committee, or IEC, approval at sites outside
the United States; |
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imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues
or side effects or failure of trial sites to adhere to regulatory requirements or follow trial protocols; |
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clinical studies may show the product candidates to be less effective than expected (e.g., a clinical study
could fail to meet its primary endpoint(s)) or to have unacceptable side effects or toxicities; |
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failure to establish clinical endpoints that applicable regulatory authorities would consider clinically
meaningful; |
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the occurrence of serious adverse events in trials
of the same class of agents conducted by other companies; |
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adding a sufficient number of clinical study
sites; |
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manufacturing sufficient quantities of product
candidate with sufficient quality for use in clinical studies; |
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having patients complete a trial or return for
post-treatment follow-up; |
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recruiting suitable patients to participate in
a trial in a timely manner and in sufficient numbers; |
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a facility manufacturing our product candidates
or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down
due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, or infections or cross-contaminations
of product candidates in the manufacturing process; |
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third-party clinical investigators losing the
licenses or permits necessary to perform our clinical studies, not performing our clinical studies on our anticipated schedule or consistent
with the clinical study protocol, GCP, or other regulatory requirements; |
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third-party contractors not performing data collection
or analysis in a timely or accurate manner; |
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manufacturing costs, formulation issues, pricing
or reimbursement issues, or other factors that make a product candidate uneconomical; or |
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the proprietary rights of others and their competing
products and technologies that may prevent our product candidates from being commercialized. |
In addition, differences
in trial design between early-stage clinical studies and later-stage clinical studies make it difficult to extrapolate the results of
earlier clinical studies to later clinical studies. Moreover, clinical data are often susceptible to varying interpretations and analyses,
and many companies that have believed their product candidates performed satisfactorily in clinical studies have nonetheless failed to
obtain marketing approval of their products.
In addition, the standards
used by the FDA and comparable foreign regulatory authorities when regulating us require judgment and can change, which makes it difficult
to predict with certainty how they will be applied. For more information, see “Risk Factors –
Risks Related to Our Regulatory Approvals.”
Successful completion
of clinical studies is a prerequisite to submitting a marketing application to the FDA and similar marketing applications to comparable
foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product
candidates. We may experience negative or inconclusive results, which may result in us deciding, or us being required by regulators, to
conduct additional clinical studies or trials or abandon some or all of our product development programs, which could have a material
adverse effect on our business.
We may
incur additional costs or experience delays in completing the development and commercialization of CM-101 or any other product candidates.
We may experience delays in
initiating or completing clinical studies. We also may experience numerous unforeseen events during, or as a result of, any future clinical
studies that could delay or prevent our ability to receive marketing approval or commercialize CM-101 or any other product candidates,
including:
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regulators, IRBs, or IECs may not authorize us or our investigators to commence a clinical study or conduct
a clinical study at a prospective trial site; |
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the FDA or other comparable regulatory authorities may disagree with our clinical study design, including
with respect to dosing levels administered in our planned clinical studies, which may delay or prevent us from initiating our clinical
studies with our originally intended trial design; |
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we may experience delays in reaching, or fail to reach, agreement on acceptable terms
with prospective trial sites and prospective CROs, which can be subject to extensive negotiation and may vary significantly among different
CROs and trial sites; |
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the number of subjects required for clinical
studies of any product candidates may be larger than we anticipate or subjects may drop out of these clinical studies or fail to return
for post-treatment follow-up at a higher rate than we anticipate; |
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our third-party contractors may fail to comply
with regulatory requirements or meet our contractual obligations to us in a timely manner, or at all, or may deviate from the clinical
study protocol or drop out of the trial, which may require that we add new clinical study sites or investigators; |
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due to the impact of emerging public health threats,
we may experience, delays and interruptions to clinical studies, we may experience delays or interruptions to our manufacturing supply
chain, or we could suffer delays in reaching, or we may fail to reach, agreement on acceptable terms with third-party service providers
on whom we rely; |
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additional delays and interruptions to our clinical
studies could extend the duration of the trials and increase the overall costs to finish the trials as our fixed costs are not substantially
reduced during delays; |
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we may elect to, or regulators, IRBs, Data Safety Monitoring Boards
or ethics committees may require that us or its investigators, suspend or terminate clinical research or trials for various reasons, including
noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; |
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we may not have the financial resources available to begin and complete
the planned trials, or the cost of clinical studies of any product candidates may be greater than we anticipate; and |
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the supply or quality of our product candidates
or other materials necessary to conduct clinical studies of our product candidates may be insufficient or inadequate to initiate or complete
a given clinical study. |
Our product development costs
will increase if we experience additional delays in clinical testing or in obtaining marketing approvals. We do not know whether any of
our clinical studies will begin as planned, will need to be restructured or will be completed on schedule, or at all. If we do not achieve
our product development goals in the time frames we announce and expects, the approval and commercialization of our product candidates
may be delayed or prevented entirely. Significant clinical study delays also could shorten any periods during which we may have the exclusive
right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing
our ability to successfully commercialize our product candidates and harming our business and results of operations. Any delays in our
clinical development programs may harm our business, financial condition and results of operations significantly.
Our ongoing
and future clinical studies may reveal significant adverse events or immunogenicity related responses and may result in a safety profile
that could delay or prevent regulatory approval or market acceptance of our product candidate.
We completed our Phase 1a
and Phase 1b and Phase 2a clinical studies of our product candidate, CM-101, in healthy volunteers, NAFLD, NASH and COVID-19 lung injury
patients, and, with the exception of a number of reported minor adverse events (including mild headaches, changes in blood pressure and
mild-moderate increases in liver enzymes,) and one serious adverse event (a transient ischemic attack or seizure judged to be unrelated
to administration of CM-101), CM-101 was observed to be generally well-tolerated across all doses in about 70 trial participants. Some
potential therapeutics developed in the biopharmaceutical industry that initially showed therapeutic promise in early-stage trials have
later been found to cause side effects that prevented their further development and ultimately commercialization. Even if side effects
do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance
of the approved product due to its tolerability versus other therapies.
Protein biopharmaceuticals, including monoclonal
antibodies, or mAbs, may be immunogenic and promote immune responses against themselves. In particular, anti-drug antibodies, or ADAs,
may be produced by patients following infusion mAbs and may disturb the pharmacokinetics of mAbs, neutralize their therapeutic activities
or induce allergic or autoimmune symptoms. Clinical immunogenicity can range from mild, transient antibody responses with no apparent
clinical manifestations to loss of therapeutic efficacy and even life-threatening reactions. Several approved therapeutic antibodies have
been found to induce neutralizing antibodies, as illustrated by the approved anti-TNFa antibodies infliximab and adalimumab as well as
the approved anti-IL-17 mAb ixekizumab. Our product candidate, CM-101, is a humanized antibody that, similar to other humanized approved
mAbs, was shown to include several non-germline sequences that may serve as a source for immunogenicity in therapeutic antibodies. Clinical
studies to date have not identified any anti-drug antibodies, or ADAs. Additional larger clinical studies will be needed to address the
risk of immunogenicity and, if discovered, our business will be materially and adversely affected.
Additionally, if unacceptable
side effects, including materialized risks of immunogenicity, do arise in the development of our product candidates, we, the FDA or the
IRBs at the institutions in which our studies are conducted, or the Data Safety Monitoring Board, if constituted for our clinical studies,
could recommend a suspension or termination of our clinical studies, or the FDA or comparable foreign regulatory authorities could order
us to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related
side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability
claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have
to train medical personnel using our product candidates to understand the side effect profiles for our clinical studies and upon any commercialization
of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates
could result in patient injury or death. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally, if one or more
of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products,
a number of potentially significant negative consequences could result, including:
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regulatory authorities may withdraw approvals of such product;
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regulatory authorities may require additional
warnings on the label, such as a “black box” warning or contraindication; |
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additional restrictions may be imposed on the
marketing of the particular product or the manufacturing processes for the product or any component thereof; |
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we may be required to implement a Risk Evaluation
and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;
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we could be sued and held liable for harm caused
to patients; |
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the product may become less competitive; and
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our reputation may suffer. |
Any of these events could
prevent us from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm our business,
results of operations and prospects.
Interim,
topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become
available or as additional analyses are conducted and are subject to audit and verification procedures that could result in material changes
in the final data.
From time to time, we may
publicly disclose preliminary, interim or topline data from our clinical trials. The preliminary data is based on a preliminary analysis
of then available data, and the results and related findings and conclusions are subject to change following a more comprehensive review
of the data related to the particular study or trial. For example, we may report tumor responses in certain patients that are unconfirmed
at the time and which do not ultimately result in confirmed responses to treatment after follow-up evaluations. We also make assumptions,
estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully
and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or
different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline
data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary
data we previously published. As a result, topline data should be viewed with caution until the final data are available. In addition,
we may report interim analyses of only certain endpoints rather than all endpoints. Interim data from clinical trials that we may complete
are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient
data become available. Adverse changes between interim data and final data could significantly harm our business and prospects. Further,
additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common
stock.
In addition, the information
we choose to publicly disclose regarding a particular clinical trial is typically selected from a more extensive amount of available information.
You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure,
and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views,
activities or otherwise regarding a particular product candidate or our business. If the preliminary or topline data that we report differ
from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability
to obtain approval for any product candidates that we may develop in the future may be harmed, which could harm our business, financial
condition, results of operations and prospects.
Changes
in methods of product candidate manufacturing or formulation may result in additional costs or delay.
As product candidates progress
through preclinical studies and clinical trials to regulatory approval and commercialization, it is common that various aspects of the
development program, such as manufacturing methods and formulation, are altered along the way in an effort to optimize yield and manufacturing
batch size, minimize costs and achieve consistent quality and results. Any material manufacturing changes made to any product candidate
that we may develop could perform differently and affect the results of planned clinical trials or other clinical trials conducted with
the altered materials. This could delay completion of clinical trials, require the conduct of bridging clinical trials or the repetition
of one or more clinical trials, increase clinical trial costs, delay approval of our product candidates and jeopardize our ability to
commercialize any product candidates that we may develop in the future, if approved, and generate revenue.
If
we encounter difficulties enrolling patients in our clinical studies, including due to COVID-19 or other public health emergencies, our
clinical development activities could be delayed or otherwise adversely affected.
We may experience difficulties
in patient enrollment in our clinical studies for a variety of reasons. The timely completion of clinical studies in accordance with our
protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the trial until its conclusion.
The enrollment of patients depends on many factors, including:
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the patient eligibility and exclusion criteria defined in the protocol;
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the need to receive study drug via an IV infusion;
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the size of the patient population required for
analysis of the trial’s primary endpoints and the process for identifying patients; |
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the willingness or availability of patients to
participate in our trials (including due to fears of contracting COVID-19); |
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the proximity of patients to trial sites;
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the design of the trial; |
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our ability to recruit clinical study investigators
with the appropriate competencies and experience; |
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clinicians’ and patients’ perceptions
as to the potential advantages and risks of the product candidate being studied with respect to other available therapies, including any
new products that may be approved for the indications we are investigating; |
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the availability of competing commercially available
therapies and other competing product candidates’ clinical studies; |
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our ability to obtain and maintain patient informed
consents; and |
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the risk that patients enrolled in clinical studies
will drop out of the trials before completion. |
Further, timely enrollment
in clinical studies is reliant on clinical study sites which may be adversely affected by global health matters, including, among other
things, pandemics or armed conflicts. For example, our clinical study sites were previously affected by the COVID-19 pandemic.
Some factors from a resurgent
emerging public health emergencies that we believe could potentially adversely affect enrollment in our trials include:
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the diversion of healthcare resources away from
the conduct of clinical study matters to focus on pandemic concerns, including the attention of infectious disease physicians serving
as our clinical study investigators, hospitals serving as our clinical study sites and hospital staff supporting the conduct of our clinical
studies; |
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the inability of patients to come to hospitals
to participate in our trials, which may force us to conduct our trials in patients’ homes, rendering the trials more difficult and
costly to conduct; |
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limitations on travel that interrupt key trial
activities, such as clinical study site initiations and monitoring; and |
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employee furlough days that delay necessary interactions
with local regulators, ethics committees and other important agencies and contractors. |
These and other factors arising
from a resurgent COVID-19 pandemic or other emerging public health emergencies could adversely impact our clinical studies.
The
market opportunities for CM-101, if approved, may be smaller than we anticipate.
We expect to initially seek
approval of CM-101 for the treatment of PSC and SSc. Our projections of the number of PSC and SSc patients is based on our beliefs and
estimates. These estimates have been derived from a variety of sources, including scientific literature, patient foundations and publicly
available databases, and may prove to be incorrect. Further, new sources may reveal a change in the estimated number of patients, and
the number of patients may turn out to be lower than we expected. The potential addressable patient population for our current programs
or future product candidates may be limited. The ultimate market opportunity for our product candidates will depend on, among other things,
the final labeling for such product candidates as agreed with the FDA or comparable foreign regulatory authorities, acceptance by the
medical community and patient access, potential competition and drug pricing and reimbursement. Even if we obtain significant market share
for any product candidate, if approved, if the potential target populations are small, we may never achieve profitability without obtaining
marketing approval for additional indications.
Due
to our limited resources and access to capital, we must make decisions on the allocation of resources to certain programs and product
candidates; these decisions may prove to be wrong and may adversely affect our business.
We have limited financial
and human resources and intend to initially focus on research programs and product candidates for a limited set of indications. As a result,
we may forgo or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater
commercial potential or a greater likelihood of success.
There can be no assurance that we will ever
be able to identify additional therapeutic opportunities for our product candidates or to develop suitable potential product candidates
through internal research programs, which could materially adversely affect our future growth and prospects. We may focus our efforts
and resources on potential product candidates or other potential programs that ultimately prove to be unsuccessful.
If product liability
lawsuits are brought against us, we may incur substantial financial or other liabilities and may be required to limit commercialization
of our product candidates.
We face an inherent risk of
product liability as a result of testing CM-101, and will face an even greater risk if we commercialize any products. For example, we
may be sued if any of our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical
studies, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects
in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could
also be asserted under state consumer protection acts. If we cannot successfully defend itself against product liability claims, we may
incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require
significant financial and management resources. Our inability to obtain sufficient product liability insurance at an acceptable cost to
protect against potential product liability claims could prevent or inhibit the commercialization of products we develop. We will need
to obtain additional insurance for clinical studies as we continue clinical development of CM-101 and as additional product candidates
enter clinical studies. However, we may be unable to obtain, or may obtain on unfavorable terms, clinical study insurance in amounts adequate
to cover any liabilities from any of our clinical studies. Our insurance policies may also have various exclusions, and we may be subject
to a product liability claim for which we have no coverage. We may have to pay any amount awarded by a court or negotiated in a settlement
that exceeds our coverage limitations or that are not covered by insurance, and we may not have, or be able to obtain, sufficient capital
to pay such amounts. Even if our agreements with any future corporate collaborators entitles us to indemnification against losses, such
indemnification may not be available or adequate should any claim arise.
We
have been granted Orphan Drug Designation for CM-101 in connection with three indications and may seek Orphan Drug Designation for other
indications or product candidates, and we may be unable to maintain the benefits associated with Orphan Drug Designation, including the
potential for market exclusivity, and may not receive Orphan Drug Designation for other indications or for our other product candidates.
Regulatory authorities in
some jurisdictions, including the United States and Europe, may designate drugs intended for relatively small patient populations as orphan
drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition,
which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater
than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from
sales in the United States. In the United States, Orphan Drug Designation has entitled a party to financial incentives such as opportunities
for grant funding toward clinical study costs, tax advantages and user-fee waivers. In addition, if a product that has Orphan Drug Designation
subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug
exclusivity, which means that the FDA may not approve any other applications, including a full NDA to market the same product for the
same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan
drug exclusivity or where the manufacturer is unable to assure sufficient product quantity. However, Orphan Drug Designation neither shortens
the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
In 2022, the Eleventh Circuit’s decision in Catalyst Pharmaceuticals, Inc. v. FDA challenges FDA’s long-standing interpretation
and provides that the orphan drug exclusivity should be applied to block FDA approval of the same drug for the “same disease or
condition” instead of the approved indication during the exclusivity period. If the Catalyst decision is applied beyond the facts
of that case, FDA may revoke approvals or the grant of subsequent orphan exclusivity periods for the same drugs approved for different
indications within the same orphan-designated disease or condition. Catalyst has created some uncertainty with respect to the scope of
the orphan drug exclusivity and may increase legal challenges in the field. FDA may work with the Congress to amend the orphan drug provisions
in the law to provide more clarity to stakeholders. The extent of the impact of the Catalyst decision on the industry and on FDA’s
regulation and policies with respect to orphan exclusivity as well as the impact of any future legislation on orphan drug approval and
exclusivity is unclear.
In Catalyst Pharms., Inc.
v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the orphan drug exclusivity
only applies to the approved use or indication within an eligible disease. This decision created uncertainty in the application of the
orphan drug exclusivity. On January 24, 2023, the FDA published a notice in the Federal Register to clarify that while the agency complies
with the court’s order in Catalyst, FDA intends to continue to apply its longstanding interpretation of the regulations to matters
outside of the scope of the Catalyst order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the
uses or indications for which a drug is approved, which permits other sponsors to obtain approval of a drug for new uses or indications
within the same orphan designated disease or condition that have not yet been approved. It is unclear how future litigation, legislation,
agency decisions, and administrative actions will impact the scope of the orphan drug exclusivity.
The FDA and EMA granted Orphan
Drug Designation to CM-101 in its primary indications of PSC, SSc and idiopathic pulmonary fibrosis, or IPF. We may seek Orphan Drug Designations
for CM-101 in other indications or for other product candidates. There can be no assurance that we will be able to obtain such designations.
Even if we obtain Orphan Drug
Designation for any product candidate in specific indications, we may not be the first to obtain marketing approval of such product candidate
for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive
marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication
or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable
to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
Further, even if we obtain
orphan drug exclusivity in the United States for a product, that exclusivity may not effectively protect the product from competition
because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved,
the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later
drug is safer, more effective or makes a major contribution to patient care.
We
will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our operations.
As of December 31, 2023, we had
20 employees / full time consultants. In the future, we expect to experience significant growth in the number of our employees and the
scope of our operations, particularly in the areas of product candidate development, regulatory affairs and sales and marketing. We may
have difficulty identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities
on our management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors.
Also, our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial
amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may
result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced
productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources
from other projects, such as the development of product candidates. If our management is unable to effectively manage our growth, our
expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement
our business strategy. Our future financial performance and our ability to commercialize our product candidates and compete effectively
will depend, in part, on our ability to effectively manage any future growth.
Many of
the biopharmaceutical companies that we compete against for qualified personnel and consultants have greater financial and other resources,
different risk profiles and a longer history in the industry than we do. If we are unable to continue to attract and retain high-quality
personnel and consultants, the rate and success at which we can discover and develop product candidates and operate our business will
be limited.
We have
incurred significant operating losses since our inception and anticipate we will incur continued losses for the foreseeable future.
We have has funded our operations
to date through proceeds from sales of our equity and grants from the Israel Innovation Authority, or the IIA, which as of December 31,
2023, resulted in gross proceeds of approximately $98.5 million. As of December 31, 2023, our cash, cash equivalents and deposits were
approximately $19.9 million. We have incurred net losses in each year since our inception, and we have an accumulated deficit of $88.7
million as of December 31, 2023. We expect our existing cash, cash equivalents and bank deposits will allow us to fund our operating expenses
and capital expenditure requirements through March 31, 2025.
Substantially all of
our operating losses have resulted from general and administrative costs associated with our operations, and costs associated with our
research and development programs, including for our preclinical and clinical product candidates. We expect to incur increasing levels
of operating losses over the next several years and for the foreseeable future. Our prior losses, combined with expected future losses,
have had and will continue to have an adverse effect on our shareholders’ deficit and working capital. In any particular quarter
or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause the price of
our ADSs to decline.
We expect our research
and development expenses to significantly increase in connection with our clinical studies of our product candidates. In addition, if
we obtain marketing approval for our product candidates, we will incur significant sales and marketing, legal, and outsourced-manufacturing
expenses. As a public company, we expect to continue to incur significant and increasing operating losses for the foreseeable future.
Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are also unable to predict the
extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain
or increase our profitability on a quarterly or annual basis.
We
may be subject to cyber-attacks or other disruptions to or breaches of our information technology, systems or networks that could irreparably
damage our reputation and our business, expose us to liability and materially and adversely affect our results of operations.
In conducting our business,
we routinely collect, store and otherwise process proprietary, confidential or sensitive data, including personal information and proprietary
technology and information about our business and patients, suppliers and business partners, including proprietary technology. The secure
maintenance, transmission and other processing of this data and information is critical to our operations and business strategy. Our employees
occasionally work remotely, based on a hybrid work model, which creates a heightened risk of cyber-attacks or other disruptions to or
breaches of our information technology, systems or networks.
We may be subject to
cyber-attacks or other disruptions to or breaches of our information technology, systems or networks caused by computer viruses, software
bugs, server malfunctions, software or hardware failure, illegal hacking, criminal fraud or impersonation, ransomware attacks, denial-of-service
attacks, malware, social engineering or phishing attacks, acts of vandalism or terrorism, unauthorized access, theft or employee malfeasance
or error.
Cyber-attacks are increasing
in number and sophistication, are well-financed, in some cases supported by state actors, and are designed to not only attack, but also
to evade detection. Since the techniques used to obtain unauthorized access to information technology, systems, and networks, or to otherwise
sabotage them, change frequently, have become increasingly complex and sophisticated, including through the use of artificial intelligence,
and are often not recognized until launched against a target, we and third parties associated with us may be unable to anticipate these
techniques or to implement adequate preventative measures. Cyber-attacks can originate from a wide variety of sources, including organized
crime, hackers, activists, terrorists, nation-states, nation-state supported actors and others, any of which may see their effectiveness
enhanced by the use of artificial intelligence.
In addition, certain
global geopolitical events can increase our cybersecurity risk. For example, due to the ongoing Russia-Ukraine conflict, there have been
publicized threats to increase cyber-attack activity against the critical infrastructure of any nation or organization that retaliates
against Russia for its invasion of Ukraine. There have also been similar publicized threats in connection with the geopolitical tension
with the Iranian regime and more specifically in connection with the terror attacks by Hamas on Israel, since October 7, 2023. These
threats include threats to harm Western countries’ infrastructure and assets. The costs to us to reduce the risk of or alleviate
cybersecurity breaches and vulnerabilities could be significant.
Any type of security
breach, attack or misuse of data, whether actual or perceived, and whether experienced by us or an associated third party, could harm
our reputation or deter existing or prospective patients from enrolling or continuing in clinical trials, increase our operating expenses
in order to contain and remediate the incident, expose us to unbudgeted or uninsured liability, disrupt our operations, divert management
focus away from other priorities, increase our risk of regulatory scrutiny, result in litigation from patients, employees or other third
parties, lead to the imposition of penalties, reporting obligations and fines under state, federal and foreign laws or by payment networks
or adversely affect our continued payment network registration and financial institution sponsorship. Moreover, any such compromise of
our information security could result in the loss, misappropriation, corruption or unauthorized publication of our confidential business
or proprietary information or personal or sensitive information, or that of other parties with which we do business, an interruption or
other failure of our information technology, systems, networks or operations, the unauthorized transfer of cash or other of our assets,
the unauthorized release of patient or employee data or a violation of laws, regulations, industry standards or other legal or contractual
obligations related to privacy, data protection and information security. Computer programmers and hackers also may be able to develop
and deploy viruses, worms and other malicious software programs that attack our products, or that otherwise exploit any security vulnerabilities,
and any such attack, if successful, could expose us to liability to patient claims. In addition, our ability to monitor our third-party
service providers’ data security is limited. Some of our third-party service providers may store or have access to our data and
may not have effective controls, processes, or practices to protect our information from loss, unauthorized disclosure, unauthorized use
or misappropriation or other cyber-attacks or other disruptions to or breaches of information security. A vulnerability in our third-party
service providers’ software or information technology, systems or networks, a failure of our third-party service providers’
safeguards, policies or procedures, or a cyber-attack or other disruption to or breach of information security affecting any of these
third parties could irreparably damage our reputation and business. The costs related to significant cyber-attacks or other disruptions
to or breaches of our information technology, systems or networks could be material and cause us to incur significant expenses. If the
information technology, systems or networks of third parties associated with us become subject to cyber-attacks or other disruptions or
security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate
the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring. Any of the
foregoing could irreparably damage our reputation and business, which could have a material adverse effect on our results of operations.
We cannot ensure that
any limitation of liability provisions in our agreements with patients, service providers, business partners and other third parties with
which we do business would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any
particular claim in connection with a cyber-attack or other disruption to or breach of information security. Additionally, we cannot be
certain that our insurance coverage will be adequate for cybersecurity liabilities actually incurred, that insurance will continue to
be available to us on economically reasonable terms, or at all, or that our insurer will not deny coverage as to any future claim.
Risks Related to Our Intellectual Property Rights
If
we are unable to protect our patents or other proprietary rights, or if we infringe the patents or other proprietary rights of others,
our competitiveness and business prospects may be materially damaged.
Patent and other proprietary
rights are essential to our business. Our success depends to a significant degree on our ability to obtain and enforce patents and licenses
to patent rights, both in the United States and in other countries. We cannot guarantee that pending patent applications will result in
issued patents, that patents issued or licensed will not be challenged or circumvented by competitors, that the patents and other intellectual
property rights of us and our business partners will not be found to be invalid or that the intellectual property rights of others will
not prevent us from selling our products or from executing on our strategies.
The patent position
of a biopharmaceutical company is often uncertain and involves complex legal and factual questions. Significant litigation concerning
patents and products is pervasive in our industry. Patent claims include challenges to the coverage and validity of our patents on products
or processes as well as allegations that our products infringe patents held by competitors or other third parties. A loss in any of these
types of cases could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of
sales, or otherwise materially affect future results of operations. We also rely on trademarks, copyrights, trade secrets and know-how
to develop, maintain and strengthen our competitive positions. Third parties may know, discover or independently develop equivalent proprietary
information or techniques, or they may gain access to our trade secrets or disclose such trade secrets to the public.
Although our employees,
consultants, parties to collaboration agreements and other business partners are generally subject to confidentiality or similar agreements
to protect our confidential and proprietary information, these agreements may be breached, and we may not have adequate remedies for any
breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our
employees, consultants, parties to collaboration agreements and other business partners use intellectual property owned by others in their
work for the company, disputes may arise as to the rights in related or resulting know-how and inventions.
Furthermore, our intellectual
property, other proprietary technology and other sensitive company data is potentially vulnerable to loss, damage or misappropriation
from system malfunction, computer viruses, unauthorized access to data or misappropriation or misuse thereof by those with permitted access
and other events. While we have invested to protect our intellectual property and other data, and continue to work diligently in this
area, there can be no assurance that our precautionary measures will prevent breakdowns, breaches, cyber incidents or other events. Such
events could have a material adverse effect on our reputation, business, financial condition or results of operations. Misappropriation
or other loss of our intellectual property from any of the foregoing could have a material adverse effect on our competitive position
and may cause us to incur substantial litigation costs.
We
may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent,
which might adversely affect our ability to develop, manufacture and market our product candidates.
From time to time we may identify
patents or applications in the same general area as our products and product candidates. We may determine these third-party patents are
irrelevant to our business based on various factors, including our interpretation of the scope of the patent claims and our interpretation
of when the patent expires. If the patents are asserted against us, however, a court may disagree with our determinations. Further, while
we may determine that the scope of claims that will issue from a patent application does not present a risk, it is difficult to accurately
predict the scope of claims that will issue from a patent application, our determination may be incorrect, and the issuing patent may
be asserted against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims.
If we fail in any such dispute, in addition to being forced to pay monetary damages, we may be temporarily or permanently prohibited from
commercializing our product candidates or be required to obtain a license under such patent, which may not be available on reasonable
terms or at all. We might, if possible, also be forced to redesign our product candidates so that it no longer infringes, misappropriates
or otherwise violates the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could
require us to divert substantial financial and management resources that we would otherwise be able to devote to our business. Any of
the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Changes
in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing our ability to protect our product
candidates.
As is the case with other biopharmaceutical
and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing
patents in the biopharmaceutical and pharmaceutical industries involves both technological and legal complexity. Therefore, obtaining
and enforcing biopharmaceutical and pharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the Leahy-Smith
America Invents Act, or the AIA, which was passed in September 2011, resulted in significant changes to the United States patent system.
An important change introduced
by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent” to a “first-to-file”
system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming
the same invention. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor
to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the
invention earlier. A third party that files a patent application in the USPTO after that date but before we could therefore be awarded
a patent covering an invention of ours even if we made the invention before it was made by the third party. This will require us to be
cognizant of the time from invention to filing of a patent application and be diligent in filing patent applications, but circumstances
could prevent us from promptly filing patent applications on our inventions.
Among some of the other changes
introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third
parties to challenge any issued patent with the USPTO. This applies to all of our United States patents, even those issued before March
16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts
necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO
to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court
action.
Accordingly, a third party
may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the
third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of our
business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our or our
licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.
We may become involved in
opposition, interference, derivation, inter partes review, post-grant review, reexamination or other proceedings challenging our or our
licensors’ patent rights, and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding
could reduce the scope of, or invalidate, our owned or in-licensed patent rights, in whole or in part, allow third parties to commercialize
our technology or products and compete directly with us, without payment to it, or result in our inability to manufacture or commercialize
products without infringing third-party patent rights.
Additionally, the United States
Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances
or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain
patents in the future, this combination of events has created uncertainty with respect to the validity, enforceability and value of patents,
once obtained. Depending on decisions by Congress, the federal courts and the USPTO, as well as similar bodies in other jurisdictions,
the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to
enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent
laws have also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that
are allowed during prosecution. Complying with these laws and regulations could limit our ability to obtain new patents in the future
that may be important for our business, and these laws and regulations patents could continue to change in unpredictable ways that could
have a material adverse effect on our existing patent rights and our ability to protect and enforce our intellectual property in the future.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO and European and other patent agencies
require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
In addition, periodic maintenance, renewal and annuity fees on any issued patent are due to be paid to the USPTO and European and other
patent agencies over the lifetime of a patent. While an inadvertent failure to make payment of such fees or to comply with such provisions
can in many cases be cured by additional payment of a late fee or by other means in accordance with the applicable rules, there are situations
in which such noncompliance will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss
of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application
include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and
submit formal documents within prescribed time limits. If we or our licensors fails to maintain the patents and patent applications covering
our product candidates or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, our competitors
might be able to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize
our product candidates in any indication for which they are approved, which could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
Risks Related to Our Regulatory Approvals
The regulatory
approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are
ultimately unable to obtain regulatory approval for CM-101 or any other product candidates, our business will be substantially harmed.
The time required to obtain
approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical
studies and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies,
regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s
clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application.
Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that
our data is insufficient for approval and require additional preclinical, clinical or other data. Even if we eventually complete clinical
testing and receives approval of any regulatory filing for our product candidates, the FDA and other comparable foreign regulatory authorities
may approve our product candidates for a more limited indication or a narrower patient population than we originally requested. We have
not obtained regulatory approval for any product candidate and it is possible that we will never obtain regulatory approval for CM-101
or any other product candidate. We are not permitted to market any of our product candidates in the United States until we receive regulatory
approval of an NDA from the FDA.
Prior to obtaining approval
to commercialize a product candidate in the United States or abroad, we must demonstrate with substantial evidence from well-controlled
clinical studies, and to the satisfaction of the FDA or foreign regulatory agencies, that such product candidate is safe and effective
for its intended use. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if we believe the
preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA
and other regulatory authorities.
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the FDA or any foreign regulatory bodies can
delay, limit or deny approval of our product candidates or require us to conduct additional preclinical or clinical testing or abandon
a program for many reasons, including: |
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the FDA or comparable foreign regulatory authorities
may disagree with the design or implementation of our clinical studies; |
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we may be unable to demonstrate to the satisfaction
of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;
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serious and unexpected drug-related side effects
experienced by participants in our clinical studies or by individuals using drugs similar to our product candidates, or other products
containing the active ingredient in our product candidates; |
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negative or ambiguous results from our clinical
studies or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities
for approval; |
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the population studied in the clinical study
may not be sufficiently broad or representative to assure efficacy and safety in the full population for which we seek approval;
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we may be unable to demonstrate that a product
candidate’s clinical and other benefits outweigh its safety risks; |
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the FDA or comparable foreign regulatory authorities
may disagree with our interpretation of data from preclinical studies or clinical trials; |
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the data collected from clinical studies of our
product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory
approval in the United States or elsewhere, and we may be required to conduct additional clinical studies; |
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the FDA’s or the applicable foreign regulatory
agency’s disagreement regarding the formulation, labeling and/or the specifications of our product candidates; |
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the FDA or comparable foreign regulatory authorities
may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which our contracts
for clinical and commercial supplies; and |
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the approval policies or regulations of the FDA
or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
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Moreover, preclinical and clinical
data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed
satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or comparable foreign regulatory authority
approval. We cannot guarantee that the FDA or foreign regulatory authorities will interpret trial results as we do, and more trials could
be required before we are able to submit applications seeking approval of our product candidates. To the extent that the results of the
trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, we may be required to
expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product
candidates. Furthermore, the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly
change in a manner rendering our clinical data insufficient for approval, which may lead to the FDA or comparable foreign regulatory authorities
delaying, limiting or denying approval of our product candidates.
Of the large number
of drugs in development, only a small percentage successfully complete the regulatory approval processes and are commercialized. This
lengthy approval process, as well as the unpredictability of future clinical trial results, may result in us failing to obtain regulatory
approval to market CM-101 or any other product candidate, which would significantly harm our business, results of operations and prospects.
In addition, the FDA
or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than
we originally requested, and the FDA or applicable foreign regulatory agency may approve a product candidate with a REMS or a label that
does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Regulatory
authorities may also grant approval contingent on the performance of costly post-marketing clinical trials. Any of the foregoing scenarios
could materially harm the commercial prospects for our product candidates.
Obtaining
and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval of our product candidates in other jurisdictions.
In order to market
any product outside of the United States, we must establish and comply with the numerous and varying safety, efficacy, and other regulatory
requirements of other countries. Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not
guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining
regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Our product candidates
may not receive marketing approval even if they achieve their primary endpoints in future Phase 3 clinical studies or registrational trials.
The FDA or comparable foreign regulatory authorities may disagree with our trial designs and our interpretation of data from preclinical
studies or clinical trials. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate
even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 or registrational clinical study. In addition,
any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than our request or may
grant approval contingent on the performance of costly post-marketing clinical trials. The FDA or comparable foreign regulatory authorities
may not approve the labeling claims that we believe would be necessary or desirable for the successful commercialization of our product
candidates, if approved.
Furthermore, even if
the FDA or other comparable foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities
in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval
procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United
States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted
by regulatory authorities in other jurisdictions. The marketing approval processes in other countries may implicate all of the risks detailed
above regarding FDA approval in the United States, as well as other risks. In many jurisdictions outside the United States, a product
candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we
intend to charge for our products is also subject to approval.
Obtaining foreign regulatory
approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could
delay or prevent the introduction of our products in certain countries. Failure to obtain marketing approval in other countries or any
delay or other setback in obtaining such approval would impair our ability to market our product candidates in such foreign markets. Any
such impairment would reduce the size of our potential market, which could have a material adverse impact on our business, results of
operations, and prospects.
Even
if we obtain regulatory approval for CM-101 or any product candidate, we will still face extensive and ongoing regulatory requirements
and obligations and any product candidate, if approved, may face future development and regulatory difficulties.
Any product candidate for
which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution,
adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other
things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements
include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements,
continued compliance with cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance
of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and GCP requirements for
any clinical studies that we conduct post-approval.
Even if marketing approval
of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may
be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of our product candidates receives marketing
approval, the accompanying label may limit the approved indicated use of the product candidate, which could limit sales of the product
candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety
or efficacy of a product. Violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs
may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well
as state consumer protection laws.
In addition, later discovery
of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes or failure to comply
with regulatory requirements, may yield various results, including:
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restrictions on manufacturing such products; |
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restrictions on the labeling or marketing of products; |
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restrictions on product manufacturing, distribution or use;
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requirements to conduct post-marketing studies or clinical trials;
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warning letters or untitled letters; |
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withdrawal of the products from the market; |
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refusal to approve pending applications or supplements to approved
applications that we submit; |
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recall of products; |
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fines, restitution or disgorgement of profits or revenues; |
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suspension or withdrawal of marketing approvals; |
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refusal to permit the import or export of our products; |
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product seizure; or |
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injunctions or the imposition of civil or criminal penalties.
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Further, the FDA’s
policies may change, and additional government regulations may be enacted that could impose extensive and ongoing regulatory requirements
and obligations on any product candidate for which we obtain marketing approval. If we are slow or unable to adapt to changes in
existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may
lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or
sustain profitability.
Disruptions
at the FDA and other government agencies caused by funding shortages or global health concerns could hinder our ability to hire, retain
or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized
in a timely manner or at all, which could negatively impact our business.
The ability of the
FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability
to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times
at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research
and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and
other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would
harm our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the United States government
has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical
activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process
our regulatory submissions, which could harm our business.
During the COVID-19 pandemic,
the FDA imposed preventive measures, including postponements of non-United States manufacturing and product inspections. If global health
concerns re-occur, similar restrictions could be implemented that might prevent the FDA or other regulatory authorities from conducting
their regular inspections, reviews, or other regulatory activities. This could significantly impact the ability of the FDA or other regulatory
authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
Risks Related to Commercialization
of Our Product Candidates
If
we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization
of our product candidates may be delayed and our business will be harmed.
For planning purposes,
we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives.
These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the
regulatory submissions or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these
milestones, such as the completion of an ongoing clinical study, the initiation of other clinical studies, receipt of regulatory approval
or the commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones
are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates,
including:
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our available capital resources or capital constraints
we experience; |
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the rate of progress, costs and results of our
clinical studies and research and development activities, including the extent of scheduling conflicts with participating clinicians and
collaborators; |
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our ability to identify and enroll patients who
meet clinical study eligibility criteria; |
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our receipt of authorizations by the FDA and
comparable foreign regulatory authorities, and the timing thereof; |
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other actions, decisions or rules issued by regulators;
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our ability to access sufficient, reliable and
affordable supplies of materials used in the manufacture of our product candidates; |
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our ability to manufacture and supply clinical
study materials to our clinical sites on a timely basis; |
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the efforts of our collaborators with respect
to the commercialization of our products, if any; and |
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the securing of, costs related to, and timing
issues associated with, commercial product manufacturing as well as sales and marketing activities. |
If we fail to achieve
announced milestones in the timeframes we expect, the commercialization of any of our product candidates may be delayed, and our business,
results of operations, financial condition and prospects may be adversely affected.
We
face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully
than it.
The development and commercialization
of new drug products is highly competitive. We may face competition with respect to any product candidates that we seek to develop or
commercialize in the future from major biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies
worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations
that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and
commercialization.
There are a number of large
biopharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of inflammation
and fibrosis. Companies that we are aware of that are targeting the treatment of inflammation and fibrosis include large companies
with significant financial resources such as Biogen, Inc., AbbVie Inc., Bristol Myers Squibb Co., and Novartis AG. However, we do not
know of any other companies currently in clinical development with an anti CCL24 mAb. For additional information regarding our competition,
see “Business Overview - Competition.”
Many of our current or potential
competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting clinical studies, obtaining regulatory approvals, and marketing approved products
than we do.
Even
if CM-101 or any other product candidate we develop receives marketing approval, it may fail to achieve market acceptance by physicians,
patients, third-party payors or others in the medical community necessary for commercial success.
If CM-101 or any other product
candidate we develop receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients,
third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, we may not generate significant
product revenues or become profitable. The degree of market acceptance of our product candidates, if approved, will depend on a number
of factors, including but not limited to:
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the efficacy and potential advantages compared
to alternative treatments; |
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effectiveness of sales and marketing efforts;
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the cost of treatment with respect to alternative
treatments, including any similar generic treatments; |
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our ability to offer our products for sale at
competitive prices; |
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the convenience and ease of administration compared
to alternative treatments; |
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the willingness of the target patient population
to try new therapies and of physicians to prescribe these therapies; |
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the strength of marketing and distribution support;
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the timing of market introduction of competitive
products; |
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the availability of third-party coverage and adequate
reimbursement; |
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product labeling or product insert requirements
of the FDA, EMA or other regulatory authorities, including any limitations on warnings contained in a product’s approved labeling;
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the prevalence and severity of any side effects;
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any restrictions on the use of our product together
with other medications. |
Because we expect sales of
our product candidates, if approved, to generate substantially all of our revenues for the foreseeable future, the failure of our product
candidates to find market acceptance would harm its business and could require us to seek additional financing.
We rely
completely on third-party suppliers to manufacture our clinical drug supplies for our product candidates, and we intend to rely on third
parties to produce preclinical, clinical, and commercial supplies of any future product candidates.
We do not currently
have, nor do we plan to acquire, the infrastructure or capability to internally manufacture our clinical drug supply of our product candidates,
or any future product candidates, for use in the conduct of our preclinical studies and clinical trials.
We lack the internal
resources and the capabilities to manufacture any product candidates on a clinical or commercial scale. The facilities used by our contract
manufacturers to manufacture the active pharmaceutical ingredient and final drug product must complete a pre-approval inspection by the
FDA and other comparable foreign regulatory agencies to assess compliance with applicable requirements, including cGMPs, after we submit
our NDA or relevant foreign regulatory market application to the applicable regulatory agency.
We are responsible for setting the product specifications and approving master batch records, but do not oversee the
manufacturing process itself, and are completely dependent on our contract manufacturers to comply with cGMPs for manufacture of both
active drug substances and finished drug products. If our contract manufacturers cannot successfully manufacture material that conforms
to our specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able
to pass a pre-approval inspection or secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have
no direct control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance, and qualified
personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products
for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result,
failure to satisfy the regulatory requirements for the production of those materials and products may affect the regulatory clearance
of our contract manufacturers’ facilities generally. If the FDA or an applicable foreign regulatory agency determines now or in
the future that these facilities for the manufacture of our product candidates are noncompliant, we may need to find alternative manufacturing
facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market our product candidates. Our
reliance on contract manufacturers also exposes us to the possibility that they, or third parties with access to their facilities, will
have access to and may compromise our trade secrets or other proprietary information.
If
we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we
may not be successful in commercializing CM-101, if approved.
We do not have any infrastructure
for the sales, marketing or distribution of CM-101, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness
of doing so. In order to market and successfully commercialize CM-101 or any other product candidate we develop, if approved, we must
build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform
these services. We expect to build a focused sales, distribution and marketing infrastructure to market CM-101, if approved. There are
significant expenses and risks involved with establishing our own sales, marketing and distribution capabilities, including our ability
to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales
and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development
of our internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization
of that product. Additionally, if the commercial launch of CM-101 for which we recruit a sales force and establishes marketing capabilities
is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This
may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our
efforts to commercialize our product candidates on our own include:
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our inability to recruit, train and retain adequate numbers of effective
sales and marketing personnel; |
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the inability of sales personnel to obtain access to physicians or
attain adequate numbers of physicians to prescribe our products; and |
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unforeseen costs and expenses associated with creating an independent
sales and marketing organization. |
We do not anticipate having
the resources in the foreseeable future to allocate to the sales and marketing of our product candidates, if approved, in certain markets
overseas. Therefore, our future success will depend, in part, on our ability to enter into and maintain collaborative relationships for
such capabilities, the collaborator’s strategic interest in a product and such collaborator’s ability to successfully market
and sell the product. We intend to pursue collaborative arrangements regarding the sale and marketing of CM-101, if approved, for certain
markets overseas; however, we cannot guarantee that we will be able to establish or maintain such collaborative arrangements, or if able
to do so, that we will have effective sales forces. To the extent that we depend on third parties for marketing and distribution, any
revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.
If we are unable to build our
own sales force or negotiate a collaborative relationship for the commercialization of CM-101, we may be forced to delay the potential
commercialization of CM-101 or reduce the scope of our sales or marketing activities for CM-101. If we need to increase our expenditures
to fund commercialization activities for CM-101, we will need to obtain additional capital, which may not be available to us on acceptable
terms, or at all. We may also have to enter into collaborative arrangements for CM-101 at an earlier stage than otherwise would be ideal
and we may be required to relinquish rights to CM-101 or otherwise agree to terms unfavorable to us. Any of these occurrences may have
an adverse effect on our business, operating results and prospects.
If we are unable to establish
adequate sales, marketing and distribution capabilities, either on our own or in collaboration with third parties, we will not be successful
in commercializing our product candidates and may never become profitable. We will be competing with many companies that currently have
extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing
and sales functions, we may be unable to compete successfully against these more established companies.
A
variety of risks associated with operating internationally could materially adversely affect our business.
Our research and development
facilities and certain of our executives are located in Israel and certain of our product candidates may be manufactured at third-party
facilities located in Europe. In addition, our business strategy includes potentially expanding internationally if any of our product
candidates receives regulatory approval. Doing business internationally involves a number of risks, including but not limited to:
• |
multiple, conflicting and changing laws and regulations,
such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental
approvals, permits and licenses; |
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failure by us to obtain and maintain regulatory
approvals for the use of our products in various countries; |
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additional potentially relevant third-party patent
rights; |
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complexities and difficulties in obtaining protection
and enforcing our intellectual property; |
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difficulties in staffing and managing foreign
operations; |
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complexities associated with managing multiple
payor reimbursement regimes, government payors or patient self-pay systems; |
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limits in our ability to penetrate international
markets; |
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financial risks, such as longer payment cycles,
difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and
exposure to foreign currency exchange rate fluctuations; |
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natural disasters, political and economic instability,
including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
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certain expenses including, among others, expenses
for travel, translation and insurance; and |
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regulatory and compliance risks that relate to
maintaining accurate information and control over sales and activities that may fall within the purview of the United States Foreign Corrupt
Practices Act, its books and records provisions, or its anti-bribery provisions. |
Any of these factors could
significantly harm our international expansion and operations and, consequently, our results of operations.
Risks Related to Our Incorporation
and Location in Israel
Conditions
in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and elsewhere in the region, and
Israel’s war against them, may affect our operations.
Our headquarters, ten of our employees, including
our Chief Executive Officer and Chief Financial Officer, and two members of our board of directors (not including our Chief Executive
Officer) are located in Israel and therefore our business and operations are at risk of being directly affected by economic, political,
geopolitical and military conditions in Israel.
Since the establishment of
the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations
active in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various
parts of Israel, which have negatively affected business conditions in Israel.
In October 2023, Hamas terrorists
infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas
also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza
Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians
and soldiers in the southern part of the country. Following the attack, Israel’s security cabinet declared war against Hamas and
a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. In addition,
since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with
the Hezbollah terror organization) and southern border (with the Houthi movement in Yemen, as described below). It is possible that hostilities
with Hezbollah in Lebanon will escalate, and that other terrorist organizations, including Palestinian military organizations in the West
Bank as well as other hostile countries, such as Iran, will join the hostilities. Such clashes may escalate in the future into a
greater regional conflict.
The intensity and duration
of Israel’s current war against Hamas is difficult to predict, as are the war’s economic implications, that may involve a
downgrade in Israel's credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from
A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative”), for our business and operations
and for Israel's economy in general.
In connection with the war,
several hundred thousand Israeli military reservists were called up to service. With the exception of one employee, all of our Israeli
personnel (including employees, consultants and directors) are exempt from military reserve duty, including our Chief Executive Officer
and Chief Financial Officer. The single employee who was called up has since returned to work.
CM-101 clinical trial supplies
for our Phase 2 PSC trial are manufactured by our supplier in Denmark and are not required to be manufactured in Israel under the regulations
of the Israel Innovation Authority of the Israeli Ministry of Economy and Industry. CM-101 clinical trial supplies for our Phase
2 PSC trial are packaged and stored in Germany for ongoing importation to an Israeli depot and final distribution to our clinical sites
in Israel. The current inventory at the Israeli depot and sites is sufficient to support the ongoing patient enrollment and activity.
Resupply to the depot and sites is triggered based on product usage. That process is ongoing during the study and has been proceeding
without any complications at this time.
As of the date of this annual
report, we have not experienced any impact to patient treatment visits in accordance with our protocol and active patients continue to
receive treatments as scheduled.
Depending on the intensity and duration of the current war with Hamas, or any future
hostilities that may emerge, PSC patients at Israeli hospitals may elect to either withdraw from the clinical trial or relocate to a different
hospital outside of Israel. Also, the hospital staff at Israeli hospitals available to help with the conduct of the CM-101 trial may become
limited due to the general call-up of reservists to military service in the war with Hamas, or otherwise related to the ongoing hostilities.
We do not anticipate these factors will have any material adverse effect on our ability to complete the PSC clinical trial on time due
to the comparatively low ratio of patients currently being treated at Israeli hospitals relative to the total number of patients enrolled
in the clinical trial globally. Additionally, treatment of patients in the core placebo-controlled component of the trial will soon be
concluded, with treatment only continuing for the open label extension portion of the trial. Even if there were disruptions to Israeli
clinical operations going forward, we believe that the combination of the relatively advanced stage of the trial (patient enrollment has
been completed) and the relatively low number of trial participants remaining in Israel make it unlikely that the trial results or timelines
would be substantially compromised. In addition, we are establishing contingency strategies to mitigate any future risks if there are
breakdowns in communications or normal site operations. Moreover, the planning, management and execution of the CM-101 clinical
trial is led primarily from the US, where our Chief Medical Officer, our Vice President of Global Clinical Operations and most of their
team members are located.
Our commercial insurance does
not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers
the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure that such government coverage
will be maintained or that it will sufficiently cover our potential damages.
It is currently not possible
to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The conflict
is rapidly evolving and could disrupt our operations in Israel and hamper our ability to raise additional funds or sell our securities,
among other outcomes.
In addition, some countries
around the world restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing
business with Israel and Israeli companies if hostilities in Israel or political instability in the region continue or increase. These
restrictions may limit materially our ability to obtain raw materials from these countries or sell our products and provide our services
to companies and customers in these countries. In addition, there have been increased efforts by countries, activists and organizations
to cause companies and consumers to boycott Israeli goods and services. In addition, in January 2024 the International Court of Justice,
or ICJ, issued an interim ruling in a case filed by South Africa against Israel in December 2023, making allegations of
genocide amid and in connection with the war in Gaza, and ordered Israel, among other things, to take measures to prevent genocidal
acts, prevent and punish incitement to genocide, and take steps to provide basic services and humanitarian aid to civilians in Gaza.
There are concerns that companies and businesses will terminate, and may have already terminated, certain commercial relationships with
Israeli companies following the ICJ decision. The foregoing efforts by countries, activists and organizations, particularly if they become
more widespread, as well as the ICJ rulings and future rulings and orders of other tribunals against Israel (if handed), may materially
and adversely impact our ability to sell and provide our products and services outside of Israel.
Furthermore, following Hamas’
attack on Israel and Israel’s security cabinet declaration of war against Hamas, the Houthi movement, which controls parts of Yemen,
launched a number of attacks on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards
Israel or to be partly owned by Israeli businessmen. The Red Sea is a vital maritime route for international trade traveling to or from
Israel. As a result of such disruptions, we may experience in the future delays in supplier deliveries, extended lead times, and increased
cost of freight, increased insurance costs, purchased materials and manufacturing labor costs. The risk of ongoing supply disruptions
may further result in delayed deliveries of our products and may also have adverse impact on economic conditions in Israel.
Finally,
political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and prior
to October 2023, the Israeli government pursued extensive changes to Israel’s judicial system, which sparked extensive political
debate and unrest. In response to such initiative, many individuals, organizations and institutions, both within and outside of Israel,
voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign
investors to invest or transact business in Israel, as well as to increased currency fluctuations, downgrades in credit rating, increased
interest rates, increased volatility in security markets and other changes in macroeconomic conditions. To date, these initiatives have
been substantially put on hold. If such changes to Israel’s judicial system are again pursued by the government and approved by
the parliament, this may have an adverse effect on our business, our results of operations and our ability to raise additional funds,
if deemed necessary by our management and board of directors.
Because
a certain portion of our expenses are incurred in currencies other than the U.S. Dollar, our results of operations may be harmed by currency
fluctuations and inflation.
Our reporting and functional
currency is the United States Dollar, but some portion of our clinical studies and operations expenses are in NIS. As a result, we are
exposed to some currency fluctuation risks. Fluctuation in the exchange rates of foreign currency has an influence on the cost of goods
sold and our financing revenues and expenses. We may, in the future, decide to enter into currency hedging transactions to decrease the
risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above with respect to the U.S. Dollar. These
measures, however, may not adequately protect us from adverse effects.
We
received Israeli government grants for certain of our research and development activities as detailed below. The terms of those grants
require us to satisfy specified conditions in order to transfer outside of Israel the manufacture of products based on know-how funded
by the Israel Innovation Authority or to transfer outside of Israel the know-how itself. If we fail to comply with the requirements of
Israeli law in this regard, we may be required to pay penalties, and it may impair our ability to sell our technology outside of Israel.
Some of our research and development
efforts were financed through grants that were received from the Israel Innovation Authority of the Israeli Ministry of Economy and Industry,
or the IIA (formerly known as the Office of the Chief Scientist). When know-how is developed using IIA grants, the Encouragement of Research,
Development and Technological Innovation in Industry Law 5744-1984, or the Innovation Law, and the regulations thereunder, restrict our
ability to transfer outside of Israel either the manufacture of products based on IIA-funded know-how or the know-how itself. Such restrictions
continue to apply even after financial obligations to the IIA are paid in full. The consideration available to our shareholders in a future
transaction involving the transfer outside of Israel of know-how developed with IIA funding (such as a merger or similar transaction)
may be reduced by any amounts that we are required to pay to the IIA.
Risks Related to our ADSs
We will
need to raise additional capital to fund our operations, which may be unavailable to us on acceptable terms or at all, or may cause dilution
or place significant restrictions on our ability to operate our business.
If our available cash resources are insufficient to satisfy our liquidity requirements, we will be required to raise additional capital
through issuances of equity or convertible debt securities, or seek debt financing or other form of third-party funding.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when needed, our ability to continue to pursue
our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited,
and could have a material adverse effect on our business, financial condition, results of operations and prospects.
The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to
our shareholders would result. If we raise funds by issuing debt securities, those debt securities would have rights, preferences and
privileges senior to those of holders of our ADSs. The terms of debt securities issued or borrowings pursuant to a credit agreement could
impose significant restrictions on our operations. If we raise funds through collaborations or licensing arrangements, we might be required
to relinquish significant rights to our product candidates or grant licenses on terms that are not favorable to us.
The trading
price of the ADSs has been highly volatile, and is expected to continue to be volatile.
The trading price of the ADSs
has been highly volatile, particularly over the last year. For example, on January 3, 2023, the closing price of the ADSs was $2.94 and
on December 12, 2023, the closing price of the ADSs was $0.45. This volatility may affect the price at which you are able to sell ADSs.
Our ADS price is likely to continue to be volatile and subject to significant price and volume fluctuations in response to market and
economic factors that are beyond our control. In addition, while the stock market in general has experienced high volatility, biotechnology
companies in particular have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to operating
performance. Broad market and industry factors may negatively affect the market price of the ADSs, regardless of our actual operating
performance.
We have
not paid dividends in the past and do not expect to pay dividends in the future, and, as a result, any return on investment may be limited
to the value of the ADSs.
We have never paid dividends
and do not anticipate paying dividends in the foreseeable future. The payment of dividends will depend on our earnings, capital requirements,
financial condition, prospects and other factors our board of directors may deem relevant. If we do not pay dividends, the ADSs may be
less valuable because a return on your investment will only occur if our ADS price appreciates and you sell your ADS thereafter. In addition,
the Companies Law imposes restrictions on our ability to declare and pay dividends.
If we continue
to fail to meet all applicable Nasdaq requirements, Nasdaq may delist the ADSs, which could have an adverse impact on the liquidity and
market price of the ADSs.
Our ADSs are listed on Nasdaq.
To continue to be listed on Nasdaq, we are required to satisfy a number of conditions, including our bid price not falling below $1.00
per ADS for 30 consecutive days.
On November 3, 2023, we received a letter
from Nasdaq’s Listing Qualifications Department that for the last 30 consecutive business days, the closing bid price for our ADSs
was below $1.00, which is the minimum closing bid price required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5450(a)(1).
We were provided a compliance period until May 6, 2024, to regain compliance with the minimum closing bid price requirement. The company
has not yet regained compliance with the minimum closing bid price requirement. Nasdaq frequently grants out of-compliance companies another
180-day extension to regain compliance, and the company plans to apply for this additional extension if compliance has not been reestablished
before May 6, 2024.
If we are delisted from Nasdaq,
trading in our securities may be conducted, if available, on the OTC Markets or, if available, via another market. In the event of such
delisting, our shareholders would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the
value of our securities, and our ability to raise future capital through the sale of our securities could be severely limited. In addition,
if our securities were delisted from Nasdaq, our ADSs could be considered a “penny stock” under the U.S. federal securities
laws. Additional regulatory requirements apply to trading by broker-dealers of penny stocks that could result in the loss of an effective
trading market for our securities.
As a foreign
private issuer whose ADSs are listed on the Nasdaq, we intend to follow certain home country corporate governance practices instead of
certain Nasdaq requirements.
As
a foreign private issuer whose ADSs are listed on the Nasdaq, we are permitted to follow certain home country corporate governance practices
instead of certain requirements of the rules of the Nasdaq. For more information
regarding our corporate governance practices and foreign private issuer status, see Item 16G. “Corporate Governance.”
Accordingly, our shareholders
and, indirectly, our ADS holders may not be afforded the same protection as provided under the Nasdaq corporate governance rules. Following
our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the Nasdaq
may provide less protection than is accorded to investors of domestic issuers.
As a foreign
private issuer, we are not subject to U.S. proxy rules and are exempt from certain reports under the Exchange Act.
As of June 30, 2023, we became a foreign private issuer and are not now subject to the
requirements that are imposed upon U.S. domestic issuers by the SEC. As a foreign private issuer, we are exempt from the rules and regulations
under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors, and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. Furthermore, although
under regulations promulgated under the Companies Law, as an Israeli public company listed on the Nasdaq, we are required to disclose
the compensation of our five most highly compensated officers on an individual basis, this disclosure is not as extensive as that required
of U.S. domestic reporting companies. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports
and financial statements with the SEC, as frequently or as promptly as U.S. domestic reporting companies whose securities are registered
under the Exchange Act. These exemptions and leniencies reduce the frequency and scope of information and protections available to you
in comparison to those applicable to a U.S. domestic reporting companies.
If we cease
to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable
to U.S. domestic issuers, and we would incur significant legal, accounting and other expenses that we do not incur as a foreign private
issuer.
We would lose our foreign private
issuer status if a majority of our shares are owned by U.S. residents and a majority of our directors or executive officers are U.S. citizens
or residents or we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. We cannot assure you
that at June 30, 2024, the next determination date of our foreign private issuer status, we will qualify as a foreign private issuer.
If we cease to qualify as a foreign private issuer at this determination date, we will be required to begin reporting as a domestic issuer
on January 1, 2025. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly
higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic
issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. In addition,
we would lose our ability to rely upon exemptions from certain Nasdaq corporate governance requirements that are available to foreign
private issuers.
Holders
of ADSs are not treated as holders of our ordinary shares.
Holders of ADSs are not treated
as holders of our ordinary shares, unless they withdraw the ordinary shares underlying their ADSs in accordance with the deposit agreement
and applicable laws and regulations. The depositary is the holder of the ordinary shares underlying the ADSs. Holders of ADSs therefore
do not have any rights as holders of our ordinary shares, other than the rights that they have pursuant to the deposit agreement.
You may
not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise
your right to vote.
Except as described in the
deposit agreement, holders of the ADSs will not be able to exercise voting rights attaching to the ordinary shares represented by the
ADSs. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify
you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to
be voted on and explain how ADS holders may instruct the depositary how to vote. We cannot guarantee that ADS holders will receive the
voting materials in time to ensure that they can instruct the depositary to vote the ordinary shares underlying their ADSs. For instructions
to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to
the laws of Israel and the provisions of our articles of association or similar documents, to vote or to have its agents vote the ordinary
shares or other deposited securities as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions,
you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do
so.
Otherwise, ADS holders will
not be able to exercise their right to vote, unless they withdraw the ordinary shares underlying the ADSs they hold. However, ADS holders
may not know about the meeting far enough in advance to withdraw those ordinary shares. In any event, the depositary will not exercise
any discretion in voting deposited securities and it will only vote or attempt to vote as instructed. In addition, the depositary and
its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This
means that you may not be able to exercise your right to vote and there may be nothing you can do if your ordinary shares are not voted
as you requested.
Holders
of ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the
books of the depositary. However, the depositary may refuse to deliver ADSs or register transfers of ADSs when the transfer books of the
depositary or our transfer books are closed or at any time if the depositary or we think it advisable to do so. These limitations on transfer
may have a material adverse effect on the value of the ADSs.
We are
entitled to amend the deposit agreement and to change the rights of ADS holders under the terms of such agreement, or to terminate the
deposit agreement, without the prior consent of the ADS holders.
We are entitled to amend the
deposit agreement and to change the rights of the ADS holders under the terms of such agreement without the prior consent of the ADS holders.
We and the depositary may agree to amend the deposit agreement in any way we decide is necessary or advantageous to us or to the depositary.
Amendments may reflect, among other things, operational changes in the ADS program, legal developments affecting ADSs or changes in the
terms of our business relationship with the depositary. If an amendment adds or increases fees or charges, except for taxes and other
governmental charges or expenses of the depositary for registration fees, facsimile costs, delivery charges or similar items, or prejudices
a substantial right of ADS holders, it will not become effective for outstanding ADSs until 30 days after the depositary notifies ADS
holders of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold the ADSs, to agree to
the amendment and to be bound by the ADSs and the deposit agreement as amended. If we make an amendment to the deposit agreement that
is disadvantageous to ADS holders or terminate the deposit agreement, the ADS holders may choose to sell their ADSs or surrender their
ADSs and become direct holders of the underlying ordinary shares, but they will have no right to any compensation whatsoever.
ADS holders
may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes
to the plaintiff(s) in any such action.
The deposit agreement governing
the ADSs representing our ordinary shares provides that, to the fullest extent permitted by law, holders and beneficial owners of ADSs
irrevocably waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to the
ADSs or the deposit agreement.
If this jury trial waiver provision
is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. If we or the depositary
opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances
of that case in accordance with the applicable state and federal law. We believe that a contractual pre-dispute jury trial waiver provision
is generally enforceable, including under the laws of the State of New York, which governs the deposit agreement. In determining whether
to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently
and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs.
If any holders or beneficial
owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs,
including claims under federal securities laws, such holder or beneficial owner may not be entitled to a jury trial with respect to such
claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against
us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would
be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including
results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims,
the judge or justice hearing such claims, and the venue of the hearing.
No condition, stipulation or
provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of
compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.
We
presently anticipate that we will not be classified as a passive foreign investment company, but no assurances can be provided in this
regard.
We would be classified as a passive foreign investment company, or PFIC, for any taxable
year if, after the application of certain look-through rules, either: (i) 75% or more of our gross income for such year is “passive
income” (as defined in the relevant provisions of the Internal Revenue Code of 1986, as amended, or the Code), or (ii) 50% or more
of the value of our assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that
produce or are held for the production of passive income. Passive income generally includes, among other things, rents, dividends, interest,
royalties, gains from the disposition of passive assets, and gains from commodities and securities transactions. For the purposes of this
test, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation
of which we own, directly or indirectly, at least 25% (by value) of the stock. Although the conclusion cannot be free from doubt, we do
not believe that we would be treated as a PFIC for our 2023 taxable year, but no assurances can be made in this regard. If we were
treated as a PFIC, a U.S. holder of the ordinary shares may be subject to adverse U.S. federal income tax consequences, such as taxation
at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed distributions, interest charges on
certain taxes treated as deferred, and additional reporting requirements. U.S. Holders should consult their own tax advisors and should
read the discussion below under “Item 10. Additional Information - E. Taxation - Material U.S. Federal Income Tax Considerations
for U.S. Holders.”
Item 4. Information
on the Company
A. |
History and Development of
the Company |
We were incorporated on November
30, 2011, under the laws of the State of Israel. In March 2021, in connection with the Merger, we changed our name from Anchiano Therapeutics
Ltd. to Chemomab Therapeutics Ltd. Our principal executive offices are located at Kiryat Atidim, Building 7, Tel Aviv, Israel 6158002,
and our phone number is +972-77-331-0156. Our website is: www.chemomab.com.
We use our website as a means
of disclosing material non-public information. Such disclosures will be included on our website in the “Investor Relations”
sections. Accordingly, investors should monitor such sections of our website, in addition to following our press releases, SEC filings
and public conference calls and webcasts. Information contained on, or that can be accessed through, our website does not constitute a
part of this Annual Report and is not incorporated by reference herein. We have included our website address in this Annual Report solely
for informational purposes. Our SEC filings are available to you on the SEC’s website at http://www.sec.gov. This site contains
reports and other information regarding issuers that file electronically with the SEC. The information on that website is not part of
this Annual Report and is not incorporated by reference herein.
Our agent for service of process
in the United States is Chemomab Therapeutics, Inc. which maintains its principal offices at One Kendall Square, Building 1400E, Suite
14-105, Cambridge, MA 02139. Its telephone number is (857) 259-4622.
For a description of our principal
capital expenditures and divestitures, see Item 5. “Operating and Financial Review and Prospects-Liquidity and Capital Resources”
and Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report.
Overview
We are a clinical-stage biotechnology
company focused on the discovery and development of innovative therapeutics for fibrotic and inflammatory diseases with high unmet needs.
Based on the unique and pivotal role of the soluble protein CCL24 in promoting fibrosis and inflammation, we have developed CM-101, a
monoclonal antibody designed to bind and block CCL24 activity. CM-101 has demonstrated the potential to treat multiple severe and life-threatening
fibrotic and inflammatory diseases.
We have pioneered the therapeutic
targeting of CCL24, a chemokine also known as eotaxin-2, which promotes various types of cellular processes that regulate inflammatory
and fibrotic activities through the CCR3 receptor. CCL24 is expressed in various types of cells, including immune cells, endothelial cells
and epithelial cells. We have developed a novel CCL24 inhibiting product candidate with dual anti-fibrotic and anti-inflammatory activity
that modulates the complex interplay of these inflammatory and fibrotic mechanisms, which drive abnormal states of fibrosis and fibrotic
diseases. This innovative approach is being developed for difficult-to-treat rare diseases, also known as orphan indications or diseases,
such as primary sclerosing cholangitis and systemic sclerosis for which patients have no established disease-modifying or standard-of-care
treatment options. We estimate that there are approximately 77 thousand patients suffering from PSC in the United States., European Union
and Japan, representing a more than $1 billion market opportunity, and approximately 170,000 patients suffering from SSc in those same
markets, representing a more than $1.5 billion market opportunity.
CM-101, our lead clinical product
candidate, is a first-in-class humanized monoclonal antibody that attenuates the basic function of CCL24 as a regulator of major inflammatory
and fibrotic pathways. We have demonstrated that CM-101 interferes with the underlying biology of inflammation and fibrosis through a
novel and differentiated mechanism of action. We are currently conducting a Phase 2 clinical study in PSC, a rare obstructive and cholestatic
liver disease, in the United States., Europe and Israel. Patient recruitment for the trial has been completed. The randomized, placebo-controlled
study design includes two doses of CM-101 (10 or 20mg/kg) vs placebo, administered once every three weeks for 15 weeks, as well as an
open label extension in which all patients are eligible to receive CM-101 for an additional 33 weeks. A topline readout of initial trial
results is expected midyear 2024.
The CM-101 SSc clinical program is Phase
2-ready and we have an open IND in the United States for a Phase 2 clinical trial. However, Chemomab has suspended initiation of this
study while we focus our resources on completing the Phase 2 PSC trial. We believe that CM-101 could have disease-modifying potential
in this poorly treated condition. While our primary focus is on these two rare indications, early in the year we reported results from
a completed Phase 2a clinical study in patients with liver fibrosis due to NASH. This trial provided safety and pharmacokinetic
(“PK”) data and information useful for assessing our current subcutaneous formulation of CM-101. Additionally, the trial measured
a number of biomarkers that may be relevant to the activity of CM-101 in other fibro-inflammatory conditions. The initial trial results
showed that the trial met its primary endpoint of safety and tolerability, and that CM-101 demonstrated statistically significant data
consistent and positive activity across secondary endpoints that include a range of liver fibrosis biomarkers and physiologic assessments.
A secondary analysis, that further confirmed and extended these initial results was reported at the 2023 EASL Congress in June 2023.
Fibrosis is the abnormal and
excessive accumulation of collagen and extracellular matrix, the non-cellular component in all tissues and organs, which provides structural
and biochemical support to surrounding cells. When present in excessive amounts, collagen and extracellular matrix lead to scarring and
thickening of connective tissues, affecting tissue properties and potentially leading to organ dysfunction and failure. Fibrosis can occur
in many different tissues, including lung, liver, kidney, muscle, skin, and the gastrointestinal tract, resulting in a wide array of progressive
fibrotic conditions. Fibrosis and inflammation are intrinsically linked. While a healthy inflammatory response is necessary for efficient
tissue repair; after disease or injury, an excessive, uncontrolled inflammatory response can lead to tissue fibrosis that in turn can
further stimulate inflammatory processes in a fibro-inflammatory vicious cycle.
2023 Developments
Completed
Patient Enrollment in CM-101 Phase 2 Primary Sclerosing Cholangitis Trial and Moved Up Expected Topline Readout to Midyear 2024
On
January 3, 2024, Chemomab announced the early completion of patient enrollment
in the Phase 2 SPRING trial assessing CM-101 as a treatment for PSC. Early completion of patient enrollment enabled the company to accelerate
the timeline for its expected readout of topline data from the trial. We now expect to report topline data by midyear 2024, rather than
in the second half of 2024 as previously projected. Chemomab management noted that acceleration of these timelines was enabled by the
enthusiastic response of both clinicians and patients to our PSC clinical trial.
Presented
Data at the ACR Convergence 2023 Conference that Further Supports the Key Role of CCL24 in the Pathogenesis of Systemic Sclerosis
On November 16, 2023, Chemomab
reported that SSc patient data presented at the ACR Convergence 2023 conference showed that high serum levels of our CCL24 target are
associated with more severe manifestations of the disease and that CCL24 activates endothelial cells in specific ways that result in SSc-associated
fibrosis.
Received
FDA Fast Track Designation for CM-101 for the Treatment of Primary Sclerosing Cholangitis
On November 15, 2023, Chemomab
announced that the U.S. Food and Drug Administration (FDA) had granted CM-101 Fast Track designation for the treatment of PSC in adult
patients. Programs with Fast Track designation can benefit from early and more frequent interactions with the FDA during the clinical
development process. Therapeutic candidates with Fast Track designation may also be eligible for priority review and accelerated approval
if supported by clinical data, CM-101 has also received Orphan Drug designation from the FDA and the European Medicines Agency.
Reported
New Data Supporting CM-101’s Anti-Fibrotic/Anti-Inflammatory Activity in Patients with Liver Fibrosis and Highlighting CCL24’s
Unique Association with Key PSC Pathways
On November 13, 2023, Chemomab reported on several
data presentations at AASLD's The Liver Meeting®
2023. One presentation included additional proteomic analyses of data from the company’s Phase 2a liver fibrosis clinical
trial in NASH patients that showed consistent and significant improvements in liver-related pathology pathways after treatment with CM-101.
In a second oral presentation, Chemomab researchers discussed proteomic analyses of PSC patients that provided further evidence that CCL24
is a key driver of the inflammatory and fibrotic processes underlying PSC and other disorders.
Disclosed Receipt of Nasdaq
Notice Regarding Minimum Bid Price Requirement
On November 6, 2023, Chemomab announced that the
company had received notice from the Nasdaq that the company was not currently in compliance with the minimum bid price requirement
for continued listing on the Nasdaq Capital Market. The notice indicated that the company had 180 days to regain compliance. The Notice
had no immediate effect on the listing of the Company's ADSs, which continue to trade on the Nasdaq Capital Market. The company may, if
appropriate, consider implementing available options to regain compliance with the Minimum Bid Price Requirement.
Published
Peer-Reviewed Research Article Demonstrating the Key Role of CCL24 in PSC
On June 28, 2023, the company
reported publication of a peer-reviewed research article in the June issue of the respected journal JCI
Insight. It was produced through collaborations with prominent academic groups and supports the key role of CCL24 in driving the
self-perpetuating fibrosis and inflammation that result in the severe liver damage characterizing PSC. The publication also includes preclinical
studies showing that CM-101, Chemomab's CCL24-neutralizing antibody, is effective in interrupting these fibro-inflammatory processes and
could potentially improve patient outcomes.
New Executive
Appointments
On June 5, 2023, we announced
that Adi Mor, PhD, co-founder and former Chief Executive Officer (CEO), and then Director and Chief Scientific Officer, had been reappointed
to the additional role of CEO, replacing Dale Pfost, PhD. Sigal Fattal, former Chief Financial Officer (CFO) and then Vice President,
Finance, was reappointed to the role of CFO, replacing Donald Marvin. Nissim Darvish, MD, PhD, was appointed Chairman of the Board,
replacing Dr. Pfost. All the appointments were effective June 1, 2023.
Presented
Patient Data at 2023 EULAR Congress Highlighting How Serum CCL24 Levels Can Predict Vascular and Fibrotic Complications of Systemic Sclerosis
(SSc)
On June 3, 2023, in a poster at the 2023 European
Congress of Rheumatology, hosted by the European Alliance of Association for Rheumatology (EULAR), researchers presented patient data
that further elucidated the key role of CCL24 in the pathology and prognosis of SSc and related fibrotic diseases, and supported the rationale
for the potential therapeutic utility of Chemomab's CCL24-neutralizing antibody CM-101 for the treatment of SSc and other fibro-inflammatory
diseases.
Announced FDA Clearance of Investigational
New Drug Application for Phase 2 Clinical Trial of CM-101 in Patients with SSc
On February 21, 2023, Chemomab announced that the
FDA had cleared the company's Investigational New Drug (IND) application to evaluate CM-101 in a Phase 2 clinical trial in adults with
SSc. The CM-101 SSc trial has not yet been initiated.
Reported
Primary and Secondary Analyses of CM-101 Phase 2 Liver Fibrosis Trial in NASH Patients
On January 3, 2023, Chemomab
reported topline results from its Phase 2a trial assessing CM-101 in nonalcoholic steatohepatitis (NASH) patients with liver fibrosis.
The trial met its primary endpoint of safety and tolerability, and CM-101 demonstrated promising activity in secondary endpoints that
included a range of liver fibrosis biomarkers and physiologic assessments measured at baseline and at week 20. Key findings included:
• |
CM-101 continued to appear well tolerated when administered subcutaneously |
|
|
• |
CM-101 administered subcutaneously demonstrated favorable pharmacokinetics and target
engagement profiles |
|
|
• |
CM-101-treated patients showed greater improvements than the placebo group in a number
of liver fibrosis-related biomarkers |
|
|
• |
A majority of CM-101-treated patients showed improvements in more than one liver fibrosis-related
biomarker—almost 60% of CM-101-treated patients responded in at least three biomarkers at week 20, compared to no patients
in the placebo group. |
|
|
• |
A higher proportion of patients in the CM-101-treated group showed improvement in a physiologic
measure of liver stiffness as compared to placebo. |
On June 21, 2023, the company
reported additional results from secondary analyses of this trial. The results were included in a late-breaking poster presentation at
the 2023 EASL Congress. Overall, the data showed
improvements across an additional set of inflammatory and fibrotic biomarkers that are consistent with the clinical results released in
January. Additionally, in NASH patients at greater risk of disease progression, CM-101 treatment resulted in a greater biomarker response
than in NASH patients with lower risk disease or in placebo-treated patients.
Pipeline
Our lead product candidate,
CM-101, is a first-in-class humanized monoclonal antibody targeting CCL24 that is being assessed in two orphan indications: PSC and SSc.
CCL24 has been extensively studied in airway inflammation and, more recently, we have demonstrated in preclinical studies and early clinical
studies that it plays an important role in additional indications, including inflammation and fibrosis of the liver, skin and lung. While
CCL24 is found in low levels in blood and tissue samples from healthy volunteers, elevated levels of both CCL24 and its receptor CCR3
have been found in patients with PSC, SSc and NASH. CCL24 levels have also been correlated to different stages of disease. Based on extensive
preclinical, nonclinical and early clinical studies, we expect that neutralizing CCL24 will result in anti-fibrotic and anti-inflammatory
effects in patients. CM-101 has been granted orphan drug designation by both the FDA and the EMA in its primary indications of PSC and
SSc. In addition, CM-101 was recently granted a Fast Track designation in PSC from the FDA. These designations provide multiple benefits
for these indications, including the potential for accelerated clinical and regulatory pathways as well as exclusive marketing and development
rights for a period of time.
PSC is a rare, chronic cholestatic
liver disease characterized by progressive inflammation, fibrosis, and destruction of the intrahepatic and extrahepatic bile ducts. The
cause of the disease is not known, although a high proportion of PSC patients also have inflammatory bowel disease. Fibrosis and inflammatory
responses induce a progressive spread of the fibrotic condition. Cholestasis is a symptom of liver injury and is characterized as the
interruption of bile flow from hepatocytes to the intestine, which leads to bile acid accumulation in the liver, resulting in oxidative
stress, inflammation, apoptosis and fibrosis. PSC affects approximately 30,000-45,000 patients in the United States. It leads to end-stage
liver disease and cancer, which causes about half of PSC deaths. About half of patients require liver transplantation, but PSC then re-occurs
in about 20% of transplant recipients, Median transplant-free survival is estimated at 10-20 years.
No treatment aside from a liver
transplant has been associated with change of the disease course or significant long-term improvement in the clinical outcome. PSC is
a clear serious unmet medical need with no FDA approved therapeutics and for which the current standard of care is inadequate.
SSc is a rare connective tissue
disease characterized by excessive fibrosis and extracellular matrix accumulation in the skin, lung and other visceral organs. The disease
initiates with an early inflammatory phase involving the immune cell network, as well as endothelial cells. As the disease progresses,
the inflammation increases and fibroblasts and myofibroblasts generate tissue fibrosis, while endothelial cells promote vascular injury,
which can lead to skin fibrosis, interstitial lung disease, myocardial insufficiency, vascular obliteration, distal ulcerations and gangrene.
SSC affects approximately 75,000-100,000 patients in the United States. SSc has the highest mortality rate among the systemic rheumatic
diseases and has high unmet need, as current treatments manage only disease manifestations and there is no disease modifying drug available.
We are primarily focused on
the orphan indications PSC and SSc but believe that CM-101 may have additional applications in other fibrotic-inflammatory disease areas
such as idiopathic pulmonary fibrosis, or IPF and nonalcoholic steatohepatitis, or NASH. CM-101 has shown promising anti-fibrotic and
anti-inflammatory effects in preclinical studies of liver fibrosis and PSC, with significant reductions in fibrotic genes, liver enzymes,
bile acid and cholangiocyte proliferation, all reflecting a potential improvement in disease status. In preclinical studies of SSc, CM-101
reduced inflammatory and fibrotic injury resulting in reductions in dermal thickness, collagen concentration in the skin and the lung,
and immune cell infiltration in the lung.
We have completed two Phase
1a single ascending dose studies with intravenous, or IV, and subcutaneous, or SC, administrations of CM-101 in 40 healthy volunteers.
The drug was shown to be well-tolerated, with a PK profile supporting dosing once every 2-4 weeks. We also completed a Phase 1b multiple
administration ascending dose study in 16 non-alcoholic fatty liver disease (NAFLD) patients, expanding the safety, tolerability, and
pharmacodynamics database with patients with early liver disease. Early evidence of anti-fibrotic activity was also seen in this study.
In the first half of 2023 we
reported topline and secondary results from our Phase 2a randomized, double-blind, placebo-controlled study in patients with liver fibrosis
associated with NASH. The trial met its primary endpoint of safety and tolerability, and CM-101 demonstrated promising activity in secondary
endpoints that included pharmacokinetic and target engagement profiles of the SC formulation, as well as a range of liver fibrosis biomarkers
and physiologic assessments measured at baseline and at week 20.
The trial enrolled 23 NASH
patients with stage F1c, F2 and F3 disease who were randomized to receive either CM-101 or placebo. Patients received eight doses of 5
mg/kg of study drug administered by SC injection once every two weeks, for a treatment period of 16 weeks. Key findings of the CM-101
Phase 2a trial included the following.
• |
CM-101 appeared to be well tolerated when administered
subcutaneously. Most reported adverse events observed were mild, with one unrelated serious adverse event reported. No significant injection
site reactions were reported and no anti-drug antibodies, or ADAs, were detected. |
• |
CM-101 administered subcutaneously demonstrated
favorable pharmacokinetics and target engagement profiles as expected, which were similar to what we have previously reported. |
• |
CM-101-treated patients showed greater improvements
than the placebo group in a number of liver fibrosis-related biomarkers, including ProC-3, ProC-4, ProC-18, TIMP-1 and ELF. |
• |
A majority of CM-101-treated patients showed improvements
in more than one liver fibrosis-related biomarker—almost 60% of CM-101 patients responded in at least three biomarkers at week 20,
compared to no patients in the placebo group. |
• |
A higher proportion of patients in the CM-101-treated
group showed improvement in a physiologic measure of liver stiffness as compared to placebo (reduction of at least one grade of fibrosis
score as assessed by the non-invasive elastography method known as FibroScan®). |
• |
CM-101-treated patients with higher CCL24 levels
at baseline showed greater reductions in fibrosis-related biomarkers than patients with lower levels. Multiple fibrosis-related biomarkers
showed more pronounced reductions in CM-101-treated patients who had higher CCL24 levels at baseline than in patients with lower CCL24
baseline levels, adding to the growing body of evidence validating the role of CCL24 in the pathophysiology of fibrotic liver disease.
|
• |
After completion of the study, the unblinded data showed that patients in the CM-101-treated group had
higher baseline levels of fibrosis compared to placebo patients. The impact of this difference on the results, if any, is unknown.
|
In a secondary analysis reported
in June of 2023, CM-101-treated patients showed improvements in an additional set of biomarkers associated with active fibrosis and inflammation
including AST/ALT ratio, Neutrophil-to-Lymphocyte Ratio (NLR), FIB-4, and PRO-C3. Some of these biomarker scores were further improved
in CM-101-treated patients with higher FibroScan-AST (FAST) scores, which categorize study patients based on the risk of disease progression.
It is noteworthy that as an overall indicator of fibrogenesis and fibrotic disease, PRO-C3 may potentially be viewed as a “bridge”
to PSC and other anti-fibrotic indications.
Liver fibrosis experts working
with Chemomab noted that it is encouraging that consistent positive improvements were seen across a range of fibro-inflammatory biomarkers
in both CM-101 Phase 2a study analyses, and that greater improvement in biomarkers in the higher FAST score-enriched subgroup provides
further evidence of CM-101's potential to have a positive impact on fibrotic diseases such as NASH and PSC, whose pathophysiology may
be associated with the dual fibro-inflammatory mechanism that CM-101 is intended to address
Data from this trial provided
important insights in support of the CM-101 development program, including the favorable safety and tolerability of CM-101 in patients
with serious liver disease, confirmation of early signs of biomarker activity that are relevant for a number of fibro-inflammatory disorders,
and additional tolerability and pharmacokinetic data needed to assess next steps in the development of our current subcutaneous formulation.
Earlier, we also reported positive
clinical data from an investigator-initiated clinical study assessing CM-101 activity and safety in hospitalized patients with severe
lung injury derived from COVID-19. The objective of the study was to evaluate the drug’s safety and activity in hospitalized COVID-19
patients with severe pneumonia, including its impact on biomarkers related to lung inflammation that are also relevant in systemic sclerosis.
The open label, single arm trial enrolled 16 hospitalized adult COVID-19 patients with severe respiratory involvement. All patients were
receiving standard of care therapy. All were treated with a single 10mg/kg intravenous dose of CM-101 on the first day of the study and
followed for 30 days. Administration of CM-101 to this acutely ill patient population appeared to be well tolerated. CM-101 exposures
and target engagement profiles were similar to what our researchers have seen in previous clinical studies of CM-101. Importantly, rapid
reductions in serum biomarkers of lung inflammation, fibrogenesis and neutrophil activity were observed post-treatment with CM-101. Overall,
this study confirmed and extended the safety and tolerability profile of CM-101 and demonstrated clinically relevant changes in biomarkers
associated with lung inflammation and fibrogenesis, further supporting CM-101’s anti-inflammatory and anti-fibrotic effects.
We are currently conducting
a randomized, double-blind, placebo-controlled study of CM-101 in PSC patients and recently announced completion of patient enrollment
in the trial. A topline data readout is expected in midyear 2024. In addition, a Phase 2a clinical trial in SSc has an open IND in the
U.S. Chemomab currently plans to initiate patient enrollment in this trial after assessing the PSC Phase 2 topline clinical data readout
and when financial resources permit.
The Phase 2 SPRING study recently
completed enrollment of the targeted 68 patients with PSC who are treated with CM-101 or placebo for 15 weeks. The trial design includes
2 dose cohorts of CM-101 (10or 20mg/kg) vs placebo as well as an open-label extension of 33 weeks to evaluate the safety, tolerability
and durability of effect over longer treatment durations.
We may also explore CM-101 in other indications,
where the dual activity of CM-101 acting on both inflammation and fibrosis could provide new avenues for treating inflammatory and fibrotic
conditions.
Chemomab was founded in 2011,
based on a novel discovery originating from the Sourasky Medical Center in Tel-Aviv, Israel, where Professor Jacob George first identified
CCL24 as a key regulator of unstable plaque formation in atherosclerotic patients. In our early years, we focused on research directed
at clarifying the role and effectiveness of CCL24 blockade. In 2015, we selected our proprietary lead product candidate, CM-101, and started
product development directed towards human testing.
We have assembled an executive team with highly
relevant experience in inflammation and fibrosis, and biologics drug discovery and clinical development. Adi Mor, Ph.D., our Chief Executive
Officer, Chief Scientific Officer and Co-founder, has 15 years of experience in immunology and has led the CM-101 program from discovery
stage into Phase 2 clinical studies. Matthew Frankel, M.D., our Chief Medical Officer, brings deep experience in clinical development.
Dr. Frankel, who is based in the U.S., has more than 25 years of experience in the discovery and clinical development of novel therapeutics
and has held senior executive roles at both global pharmaceutical and biotechnology companies. Jack Lawler, our Vice President of Global
Development Operations, is highly experienced in managing clinical trials across a wide range ofindications and geographies.
Company strategy
We aim to become a world-leading
company for the treatment of diseases involving inflammation and fibrosis, developing novel therapies across a wide range of indications.
To achieve this, we are focused on the following key strategies:
• |
Advance
our lead product, CM-101, for the treatment of PSC and potentially SSc, through clinical development to approval |
The clinical development plan
of lead product candidate CM-101 was optimized to maximize the clinical information obtained, generating additional important data to
support future advancement to registration trials, and decreasing the overall risk of the CM-101 clinical development program in the lead
indication of PSC and potentially SSc, as well as potentially in additional indications where the scientific rationale is strong.
We expect that the current
PSC trial design will provide important data on the clinical dose response relationship to inform the broader development program and
to identify the optimal dose to advance in later PSC trials, as well as in clinical trials in other indications.
• |
Selectively
evaluate partnership opportunities |
We continuously explore partnership
opportunities to advance CM-101 development in PSC and SSc, and possibly NASH, identifying companies with drugs (either approved or in
development) that could possibly be combined with CM-101, extending the development of CM-101 to new indications beyond PSC and SSc, and
seeking additional significant commercial or drug development capabilities that may accelerate CM-101’s time to market.
• |
Explore
opportunities for CM-101 in additional inflammatory/fibrotic indications |
We continue to evaluate the
potential benefit of CM-101 outside of our current lead indications of PSC and SSc, in order to maximize the product’s potential.
CM-101 has shown anti-fibrotic activity in animal models and human tissue studies of IPF and NASH. We will continue to assess ways to
leverage the dual anti-inflammatory and anti-fibrotic activity of CM-101 in new disease areas and to form additional collaborations with
global medical researchers and drug developers.
• |
Strengthen
our intellectual property portfolio |
We believe that we have developed a strong intellectual
property portfolio and will continue to seek, maintain, and defend our patent rights, whether developed internally or licensed to protect
and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our business
proprietary position in the field of inflammation and fibrosis.
Fibrosis
and inflammation
Tissue damage activates a repair
process that includes acute inflammation followed by either successful complete repair or tissue replacement by fibrosis. However, persistent
and repeated damage can result in continuous activation of the repair process leading to chronic inflammation, progressive tissue fibrosis
and sclerosis.
Fibrosis is an accumulation
of non-functional tissue and can occur in many different tissues, including lung, liver, kidney, muscle, skin and the gastrointestinal
tract, resulting in a number of chronic fibrotic conditions. Liver fibrosis is the process of excessive accumulation of extracellular
matrix proteins, predominantly collagen, which occurs as the result of liver injury. In cases of acute temporary damage, these changes
are transient and liver fibrosis may resolve. In chronic cases, however, the liver damage persists and chronic inflammation and accumulation
of the extracellular matrix eventually lead to cirrhosis. The various fibrotic manifestations in conditions like SSc are still not well
understood. Disease progression is characterized by an early inflammatory onset followed by tissue fibrosis, vascular injury and organ
damage. Fibrosis, and specifically lung fibrosis, is the main cause of disease progression and mortality in SSc, although manifestation
of the disease in other organs can cause patients considerable distress and adversely impact their health and their quality of life.
Fibrosis and inflammation are
intrinsically linked; a healthy inflammatory response is necessary for efficient wound healing; however, a prolonged response can contribute
to the pathogenesis of fibrosis. The inflammatory response during chronic liver injury is a dynamic process with intrahepatic accumulation
of diverse immune cells. Recruitment and infiltration of these cells to the liver and their localization is mainly determined by chemokines
and cytokines that are produced by hepatocytes, immune cells, biliary epithelial cells, and endothelial cells. Notably, activated liver
fibroblasts, the hepatic stellate cells, or HSCs, secrete various chemokines, thereby contributing to the ongoing immune response during
fibrotic liver diseases. Similarly, for SSc, the early inflammatory phase leading to fibrosis in multiple organs of the body includes
activation of the immune cell network of lymphocytes, eosinophils, and monocytes, as well as endothelial and endothelial progenitor cells.
In the advanced SSc phase, fibroblasts and myofibroblasts take the lead to generate tissue fibrosis.
Chemokine
involvement in inflammation and fibrosis
Chemokines are a group of small
signaling proteins thought to be involved in the etiology, or causation, of multiple inflammatory diseases. They are not only implicated
in immune cell recruitment during inflammation, but also contribute to immune surveillance, direct cells to target organs in homeostasis,
and exert pleiotropic, or diverse, effects on non-immune cells, for instance, directly influencing the functionality of fibrogenic cells.
Chemokines and their corresponding chemokine receptors are key players in orchestrating the sequential influx of immune cells into damaged
or diseased organs, driving inflammatory responses to specific triggers.
In the liver, chemokines have
a key role in the development of inflammation and wound healing responses, which can lead to either resolution of liver injury or promote,
if ongoing, maladaptive responses with chronic inflammation, fibrosis, and development of clinically manifest liver disease. Although
the pathophysiology underlying PSC has not yet been fully clarified, animal models of PSC have contributed to dissecting the molecular
basis of this disease and highlighting the role of cytokines and chemokines as important pathogenetic mediators of liver inflammation
and fibrosis. Recently published studies demonstrated that in most of the processes suggested for the onset and development of PSC, chemokines
and chemokine receptors play a key role. Hematopoietic stem cells (HSCs) may be the main producers of cytokines and play an initial
role in the progression of liver fibrosis by attracting different types of immune cells, resulting in further production of cytokines
and liver injury in a vicious disease cycle. Extensive proliferation, trans-differentiation and activation of HSCs result in ongoing chronic
tissue remodeling and severe fibrosis. In addition, chemokines are also involved in promoting polarization of the recruited immune cells.
Therefore, chemokines may participate in PSC by promoting migration of inflammatory and fibrotic cells, by activating inflammatory and
fibrotic cells locally, or by inducing cytokines that promote collagen
and matrix deposition.
Likewise, in SSc pathogenesis,
chemokines foster migration and activation of inflammatory and fibrotic cells, inducing the secretion of cytokines that promote collagen
and matrix deposition in affected organs. Indeed, patients with SSc exhibit increased systemic levels of proinflammatory chemokines and
some of these have also been shown to correlate with limited or diffuse cutaneous disease phenotype and/or to organ-specific pathology
such as lung disease or skin vascular inflammation.
The role
of CCL24
CCL24 is a chemokine that promotes
various types of cellular processes that regulate inflammatory and fibrotic activities through the CCR3 receptor. This chemokine is known
to be expressed by activated T-cells, monocytes, epithelial cells and endothelial cells, as well as by activated fibroblasts. CCL24 induces
chemotaxis and activation of CCR3-expressing cells, including immune cells and fibroblasts.
We have been the driving force
in establishing the role of CCL24 in the pathogenesis of PSC and SSc, however, others have highlighted its contribution to other indications.
For example, published work has shown that both CCL24 and CCR3 are involved in lung and skin inflammation and fibrosis. CCR3 is robustly
expressed on eosinophils and recent data has suggested that eosinophilic inflammation may be involved in the pathogenesis and progression
of SSc. For example, in SSc patients, eosinophil counts, but not total leukocytes, were significantly higher than in patients with other
connective autoimmune diseases. Eosinophil counts correlated positively with both interstitial lung disease severity and the modified
Rodnan skin thickness score, or mRSS.
Notably, CCR3 was shown to
be expressed on oral and dermal fibroblasts where it modulates wound healing and tissue remodeling processes. A recent academic study
also demonstrated overexpression of CCR3 on monocyte populations isolated from SSc patients. CCL24 was shown to be involved in proinflammatory
reactions, specifically contributing to the type 2 immune reaction involving Th2 lymphocytes and M2 macrophages that were shown to be
present in skin lesions of SSc patients. Accordingly, CCL24 was found to play a dominant role in inducing profibrotic effects and to be
overexpressed in fibrotic lungs and bronchoalveolar lavage fluid from patients with idiopathic pulmonary fibrosis, a disease sharing similar
lung dysfunction features with SSc. Furthermore, CCL24 was shown to promote collagen production in human lung fibroblasts and to be constitutively
expressed by dermal fibroblasts.
Prior studies support the role
of CCL24/CCR3 signaling in the pathogenesis of SSc and these findings have been further explored by Chemomab in SSc and for the first
time, in PSC.
CCL24 is a critical mediator
promoting inflammation and fibrosis
Challenges
to drug development in fibrosis and inflammation
Successful treatment of fibrotic
disorders has in large part remained elusive, primarily due to incomplete understanding of the complexity and multi-mechanism contributions
to disease progression. This has complicated preclinical investigations for new products and new targets, with animal models having limited
resemblance to human disease. Additionally, preclinical animal data is often of short treatment duration and does not capture the effects
of treating chronic fibrotic indications. This is particularly applicable to complex, orphan indications like SSc, where there is still
no approved standard of care or proven target mechanism. Most drug approvals in this space have been focused on fibrosis of the lungs
i.e., idiopathic pulmonary fibrosis, or IPF, interstitial lung disease, or ILD, and pulmonary arterial hypertension, or PAH.
Most approved anti-fibrotic
products target extracellular components, given their biological accessibility, and inhibition of receptors and ligands preventing downstream
signaling is considered to be a potentially effective option for alleviating fibrosis. PDGF and TGF-β are commonly studied targets
in fibrosis and there are two approved products that target these pathways, pirfenidone and nintedanib. Both pirfenidone and nintedanib
are approved for the treatment of IPF, with nintedanib also recently approved for treatment of systemic sclerosis associated interstitial
lung disease and chronic fibrosing interstitial lung diseases. Due to the strong associations between inflammation and fibrosis, companies
have devoted efforts to anti-inflammatory drugs with the hope that reduction in inflammation will attenuate fibrosis. For example, companies
have targeted TNF-α, a commonly explored anti-inflammatory mechanism in fibrotic indications. Despite the success of targeting cytokines,
inflammatory factors and immune cells in pure inflammatory autoimmune diseases, such as blocking TNF-α, these results have generally
not been reproduced in studies targeting inflammatory fibrotic indications. Nonetheless, tocilizumab, a monoclonal antibody targeting
IL-6R, was recently approved for the treatment of ILD associated with systemic sclerosis. Treatments that inhibit certain pure anti-fibrotic
pathways, such as nintedanib and pirfenidone, have resulted in limited clinical benefit. We
believe that these results highlight the importance of a dual mechanism that, with adequate selectivity, is designed to target inflammatory
processes and also directly prevent fibrosis resulting in blockage of multiple disease-contributing mechanisms.
Notwithstanding challenges in the field
of fibrosis and inflammation, there is significant and growing industry interest given the associated unmet medical need and the continuing
opportunity to identify better therapeutic targets. For example, in 2024 Gilead acquired Cymabay for its PPAR agonist in Primary biliary
cirrhosis. In 2019 Novartis completed two transactions related to the treatment of NASH, a liver metabolic fibrotic disease. It
acquired IFM Tre for NLRP3 antagonists for a $310 million upfront payment and total potential consideration of $1.5 billion and licensed
an integrin inhibitor from Pliant Therapeutics for an $80 million upfront payment. Additionally, Gilead Sciences licensed two preclinical
programs, one in NASH for a $15 million upfront payment (total potential consideration of $785 million) and the other for TGF-β inhibitors
in fibrosis for an $80 million upfront payment and total potential consideration of $1.4 billion. In 2020, Roche acquired Promedior for
a $390 million upfront payment and total potential consideration of $1 billion in milestones for its Phase 2 product in pulmonary fibrosis,
and Bayer partnered with Recursion Pharmaceuticals to develop and commercialize preclinical-stage small molecule treatments for fibrotic
conditions for a $30 million upfront payment and total potential consideration of $1 billion. Boehringer Ingelheim also acquired Enleofen
Bio in a deal potentially worth $1 billion for its NASH and ILD anti-IL11 platform. More recently, Mediar, a high-profile start-up targeting
novel mechanisms for fibrotic diseases, reported a $105 million Series A financing.
Targeting
chemokines as a treatment for fibrotic indications
We believe that our approach,
selectively targeting fibrotic conditions by attenuating both inflammation and fibrosis, may be an optimal approach for both effectiveness
and reduction of toxicity. As central regulators of initiation and progression of fibrotic disorders, chemokines are an ideal target to
impact both inflammation and fibrosis. Some chemokines are also disease-specific, allowing for potential selectivity.
Chemokine receptors, or CCRs,
have been more extensively studied as drug targets in fibrotic conditions compared to chemokine ligands, however, the therapeutic effects
of CCR inhibitors have generally fallen short in the clinic. Pharmaceutical companies have previously explored the CCL24 ligand receptor,
CCR3, and its other ligands CCL7 and CCL11, with small or large molecule inhibitors. These programs were directed at inhibiting eosinophilic
trafficking in respiratory and allergic inflammation, however, despite promising preclinical data, most programs were discontinued largely
due to poor safety profiles and limited efficacy of the antagonist used. To our knowledge, only Alkahest has an active program that explores
CCR3 inhibition, which is under license from Boehringer Ingelheim and is being developed as a treatment for wet AMD. In contrast, we believe
CCL24 presents a more promising opportunity. Unlike other CCR3 ligands, CCL24 binds only to the CCR3 receptor and is also organ/disease-specific,
which together could provide enhanced selectivity and tolerability. For example, in PSC, CCL24 is elevated in the liver and cholangiocytes
(bile duct epithelia) and immune cells that play a key role in the progression of the disease. Likewise, elevation of CCL24 has
been shown in fibrotic lungs and bronchoalveolar lavage fluid from patients with idiopathic pulmonary fibrosis, a disease sharing similar
lung dysfunction features with SSc and which recently was correlated, by us, with disease severity and lung involvement in a cohort of
SSc patients from the United Kingdom. Furthermore, CCL24 is constitutively expressed by skin and dermal fibroblasts. The
use of an antibody in targeting this chemokine is a novel approach
to targeting fibrosis.
Our expertise and approach
to drug discovery
We are a clinical stage biotechnology
company focused on the discovery and development of novel drugs to address fibrotic indications with unmet medical needs. CCL24 is a key
target promoting fibrosis as it regulates the two main processes that drive fibrosis: fibroblast activation and immune cell migration
and activation. Using our expertise in monoclonal antibody, or mAb, development and deep knowledge of chemokine biology, we are developing
CM-101, a proprietary, first-in-class, fully humanized mAb that through research and studies to date, has been shown to neutralize CCL24
and by so doing inhibits its disease-related functions in both inflammation and fibrosis. This represents an innovative approach to anti-fibrotic
drug discovery and is a key differentiator for us. The ability of CM-101 to directly attenuate fibroblast activation and concurrently
attenuate recruitment of immune cells is novel and could address a wide range of hard-to-treat fibrotic diseases.
Our ongoing collaborations
are complementary to both preclinical and clinical aspects of research and development. We have created an extensive panel of in vitro,
ex vivo and in vivo assays which we have used to further the understanding of fibrotic processes together with the role of CCL24 in various
diseases and the effects of its neutralization by CM-101. These assays have allowed us to sequentially explore target validation and proof
of mechanism in disease relevant human and animal samples that we believe helps de-risk the translation of CM-101 into the clinic.
Target
expression and engagement
We regularly collaborate with
leading academic centers around the world to investigate the role of CCL24 and CM-101 in various indications. For example, we work with
The Royal Free Hospital, or RFH, in London, and Birmingham University in Birmingham, United Kingdom to access liver biopsy and serum samples
from patients with PSC. Using immunohistochemistry and florescence microscopy to stain CCL24 and CCR3, it explores the expression patterns
of these targets in disease relevant human samples and compares them to healthy volunteers. Similarly, we have tested biopsies of SSc
patients through a collaboration with the University of Florence in Italy and serum samples of SSc patients through a collaboration with
Leeds University in the UK.
Proof of
mechanism
We explore fibroblast activation
and immune cell recruitment in response to CM-101 treatment through inhouse ex vivo and in vitro assays. We have executed multiple validated
genetic and treatment-based disease models in fibrotic and inflammatory indications in which we have investigated CM-101’s effects.
Additionally, as part of a collaboration with Nordic Biosciences, Copenhagen, Denmark, we have gained access to proprietary tools and
expertise to explore the effects of CM-101 on key fibrogenesis and fibrolysis biomarkers. Nordic Biosciences is a world-leading extracellular
matrix specialist and continues to contribute additional analyses to our clinical samples.
We have
created a broad array of biological assays to explore CCL24 and CM-101
We may explore next-generation
biologic products, and, based on our wide database of patient samples and extensive knowledge and experience in fibrosis, may identify
targets that could complement CCL24 inhibition. Next-generation assets could therefore be dual targeting and would be screened through
the panel of assays available to us that evaluate target expression in fibrotic tissues as well as the anti-fibrotic activity of potential
candidates. Similar to CM-101, this process would establish proof-of-biological-mechanism in both animal models and human tissue prior
to commencing product development and initiating
clinical studies.
Our pipeline
CM-101
in PSC and SSc
Our lead product, CM-101, is
a first-in-class humanized monoclonal antibody targeting CCL24 that is being developed initially for the treatment of PSC and SSc, with
potential future opportunities in other fibrotic-inflammatory indications. We have completed two Phase 1a studies of CM-101 in healthy
volunteers as well as a Phase 1b safety, tolerability and proof-of-mechanism study in NAFLD patients and a Phase 2a liver fibrosis biomarker
study in NASH patients with liver fibrosis, which was reported in 2023. Topline results showed favorable safety and tolerability profiles
for CM-101 in patients with serious liver disease, confirmed early signs of biomarker activity that are also relevant for a number of
fibro-inflammatory disorders, and reinforced tolerability and pharmacokinetic data relevant to the development of our current subcutaneous
formulation.
A Phase 2 study in PSC is now
ongoing in Europe, the U.S. and Israel. We recently announced the completion of patient enrollment in this trial and acceleration
of the expected readout of the topline results to midyear 2024. A global Phase 2 study in SSc that will assess the clinical and biological
effects of CM-101 in this patient population has an open U.S. IND and is Phase 2-ready. Chemomab currently plans to initiate patient enrollment
in the SSc trial following the successful completion of the PSC Phase 2 study and as resources permit.
Primary
Sclerosing Cholangitis
PSC is a progressive, rare,
and chronic cholestatic liver disorder that is characterized by thickening, inflammation, and fibrosis of the intra- and extra-hepatic
bile ducts. This generally leads to cholestasis, liver damage, cirrhosis, and eventually liver failure. The exact cause of PSC remains
mostly unknown; however, immune system dysregulation, genes, viruses, and bacteria may be involved. PSC is commonly associated with inflammatory
bowel disease, or IBD. Approximately three in every four individuals with PSC also have ulcerative colitis. Most individuals affected
with PSC are adults with an average age of 40 years at diagnosis; however, it may also occur in children. Disease progression, symptoms,
and severity may vary greatly between individuals. Patients in the initial stages of PSC are generally asymptomatic or have only mild
symptoms.
Abdominal discomfort, fatigue,
and pruritus, or itching, are common initial symptoms of PSC that can be severe and debilitating. The initial step in diagnosing PSC is
to evaluate liver enzyme levels through blood tests. Physicians will then confirm a diagnosis with cholangiography ultrasound and, in
rare cases, a liver biopsy. As the disease progresses, bile flow from the liver is obstructed and is subsequently absorbed into the bloodstream
leading to the yellowing of the mucous membranes, whites of the eyes, and skin. Furthermore, individuals may also experience abdominal
pain, malaise, light-colored stools, nausea, dark urine, weight loss, and/or hepatomegaly or splenomegaly. PSC patients have a 40-fold
increased risk of liver cancer and a 400-fold increased risk of cholangiocarcinoma, and the disease may lead to other conditions including
osteoporosis, bacterial cholangitis, portal hypertension, bleeding, as well as vitamin deficiencies.
There are currently no specific
medical therapies that can alter or cure the course of the disease; instead, available treatments are directed towards slowing the progression
of PSC and treating symptoms. In certain individuals, endoscopic surgery may be performed to enlarge the narrowed bile ducts and to remove
blockages. Complications due to vitamin deficiencies can be prevented with the help of vitamin supplements, while infections and inflammation
can be controlled by using antibiotics. Cholestyramine and UCDA can be effective in managing itching and can be used with or without antihistamines.
Patients with advanced symptoms such as end-stage liver disease, recurrent bacterial cholangitis and intractable pruritus, will often
undergo liver transplantation, however, in 20-25% of cases, PSC will recur even after liver transplantation. The median survival is 10-12
years without intervention.
Systemic
Sclerosis
SSc is an autoimmune inflammatory
condition that results in widespread fibrosis and vascular abnormalities affecting the skin, lungs, gastrointestinal tract, heart and
kidneys. Other key features of SSc include thickening and hardening of the skin, autoantibody production and abnormal nail fold capillaries.
The underlying mechanisms that cause SSc are complex and for the most part unknown but most likely involve a combination of factors including
the immune system, genetics, and environmental triggers. Various pathways are involved in the pathogenesis of SSc including cytokines
that injure blood vessels, growth factors that stimulate collagen, integrin signaling, morphogen pathways, and co-stimulatory pathways.
SSc is generally diagnosed between the age of 30 and 50 years and is more prevalent in women.
Given that SSc can affect many
different parts of the body there are a multitude of different symptoms of the disease. The most widely observed symptoms include fatigue,
arthralgia, and myalgia. However, the earliest sign is often the Raynaud phenomenon in which the body’s normal response to cold
or emotional stress is exaggerated, resulting in abnormal spasms in arterioles. Cutaneous features include sclerosis of the skin, particularly
the face and hands. Gastrointestinal symptoms of the upper tract include acid reflux and of the lower tract include bloating, nausea and
incontinence. Cardiopulmonary presentations include interstitial lung disease, pulmonary arterial hypertension and cardiac scleroderma.
Renal and ocular symptoms can also present and 20% of SSc patients have an overlapping diagnosis with other connective tissue diseases
and can develop arthritis, lupus or myositis. SSc is subdivided into two main types related to the distribution of skin involvement: diffuse
cutaneous (two-thirds of cases) and limited cutaneous. Diffuse SSc, or dcSSc, is rapidly progressive with more significant organ involvement.
There is no cure for SSc. Established
treatments can help with symptoms and may modify the disease outcome only if given early in the disease course. Prescribed medications,
used off-label, primarily focus on suppressing inflammation with NSAIDs and dilating abnormal or constricted blood vessels with losartan,
sildenafil, iloprost and SSRIs, or selective serotonin reuptake inhibitors, as well as treatments to manage individual organ involvement.
The only three drugs that are approved for the treatment of SSc symptoms are bosentan by Actelion Pharmaceuticals, approved in Europe
for the prevention of digital ulcer development, nintedanib by Boehringer Ingelheim, and tocilizumab by Roche, approved in the United
States, Europe and Japan for the treatment of SSc associated interstitial lung disease. The clinical course of SSc is determined by the
extent of vascular and fibrosis complications and has the highest mortality rate among the systemic rheumatic diseases. Forty percent
of patients die within 10 years of disease onset, with pulmonary involvement being the leading cause of death.
Our
CM-101may have disease-modifying potential
The dual anti-fibrotic and
anti-inflammatory activity of CM-101 enables the targeting of a wide range of pathogenic mechanisms and may afford patients a new treatment
that may have a more impactful effect on disease progression.
Targeting
CCL24 offers a dual activity approach
In order to understand CCL24’s
role in disease pathophysiology, we have collected data on CCL24 levels from patients with multiple fibrotic-inflammatory indications,
including those with PSC, SSc and NASH. PSC patients’ liver biopsies and SSc skin samples were stained for CCL24 and its receptor,
CCR3. Blood samples taken from PSC and SSc patients were used to further evaluate the role of the CCL24-CCR3 axis exploring levels of
circulating CCL24 and CCR3. To explore the influence of CCL24 on disease status, CCL24 serum levels were correlated with fibrotic biomarkers
and disease severity markers.
CCL24 levels
in liver biopsies from PSC patients
PSC pathology generally initiates
with bile duct damage leading to cholestasis, bile duct inflammation and fibrosis and finally to substantial liver damage. We assessed
the accumulation and cellular localization of CCL24 in livers of PSC patients focusing on CCL24 levels in the periductal damaged zone
that is most relevant to disease pathology. CCL24 was mainly found in inflammatory cells in the liver of PSC patients. Due to the robust
liver inflammatory insult in PSC, reflected by massive accumulation of resident and recruited immune cells in the periductal space, CCL24
positive staining was extensive. Specific and robust CCL24 staining was also shown in cholangiocytes, the epithelial cells of the bile
ducts. Activated myofibroblasts that surround the bile ducts, whether they originate from hepatic stellate cells or portal fibroblasts,
are the main drivers of the excess extracellular matrix accumulation in this area, comprising the unique “onion ring” shape
seen in PSC liver sections. The collective expression pattern shows high CCL24 levels in areas that are most affected in PSC and highlights
its central role in PSC related liver pathology.
Elevated
CCL24 staining in liver biopsies from PSC patients
CCR24 levels
association with PSC related pathways
To further elucidate the involvement
of CCL24 in PSC and its association with disease-related pathways, sera from healthy controls (n=30) and from patients with PSC (n=45)
were analyzed using the Olink proximity extension assay (PEA) of 3072 proteins. Serum proteomics data were analyzed according to three
comparisons: (1) healthy controls vs. patients with PSC, (2) fibrosis severity in patients, defined by ELF score (9.8 cutoff), and (3)
serum levels of CCL24 in patients.
Differentially expressed proteins
(DEPs) from each of the three comparisons were interpreted using Ingenuity Pathway Analysis (IPA), to identify dysregulated canonical
biological pathways, upstream regulators, and toxicity-functions. The enriched canonical pathways, upstream regulators and toxicity-functions
overlapped between the three comparisons (disease, fibrosis and CCL24), suggesting that there are biological mechanisms related to PSC
and its progression also related to CCL24 expression levels. Overlapping canonical pathways included HSC activation pathway, immune cell
trafficking pathways (granulocyte and agranulocyte adhesion and diapedesis) and inflammation pathways (Th1 and Th2 activation, Th1 activation
and pathogen induced cytokine storm). In patients with PSC, those that had high levels of CCL24 also showed significantly higher
average expression of these pathways.
PSC-related mechanisms are
upregulated in patients with high CCL24 levels. (A) Analysis over-view: sera from patients with PSC and HC were analyzed by the Olink
Explore 3072 proteomic platform, and differentially expressed proteins (DEPs) were compared by disease, fibrosis or CCL24. (B) Score plots
of principal component analysis of proteome profiles in HC and Patients with PSC with low or high ELF scores. (C) Correlation of CCL24
to representative proteins associated with inflammation/chemotaxis (CCL7 or CXCL10), in HC (n = 30) or patients with PSC with ALP >
1.5 ULN (n = 34). (D-I) Ingenuity Pathway Analysis of canonical pathways, upstream regulators and liver-related toxicity functions. Venn
diagrams show top 30 significant canonical pathways (D), top 20 significant upstream regulators (F), and significant liver-related toxicities
(H). The average ex-pression of protein lists of specific canonical pathways (E), upstream regulators (G) and liver-related toxicities
(I) is presented for HC and patients with low and high CCL24 serum levels. Boxes rep-resent interquartile ranges with medians (n = 20-30).
*, p < 0.05; **, p < 0.01; ****, P < 0.0001.
CCL24 levels
correlate with ELF score
CCR3 levels
in circulating PBMCs in PSC patients
Chronic liver inflammation
is driven in most hepatic injuries by several different immune cell populations originating from either resident hepatic immune cells
or recruited cells from the circulation to the damaged site. In collaboration with the Kaplan Medical Center, Israel, we explored systemic
changes of CCR3, given that this could impact cell recruitment to the PSC damaged liver. Peripheral blood mononuclear cells (PBMCs) from
ten PSC patients and healthy controls were stained for expression of CCR3 and demonstrated that levels were significantly higher in PSC
patient samples compared to healthy donors.
CCL24 and
CCR3 levels in skin biopsies from SSc patients
We analyzed skin samples from
diffuse SSc patients and healthy volunteers and the SSc samples showed elevations in CCL24 and CCR3. Specifically, higher accumulation
of CCL24 on immune cells skin infiltration was shown in the SSc samples and CCR3 was evident in skin fibroblasts, immune cells and endothelial
cells. These elevations led to a CCL24-mediated robust activation of CCR3 expressing cells, which enhances the recruitment of immune cells
and fibroblasts to the diseased organ.
SSc patients
showed elevated levels of CCL24 in skin tissue
SSc patients
showed elevated levels of CCR3 in skin tissue
CCL24
levels in serum samples from SSc patients and correlation with fibrotic biomarkers
Our researchers analyzed SSc
serum samples that showed that CCL24 levels were significantly increased in SSc patients compared with healthy individuals. Notably, in
diffuse SSc patients, CCL24 levels were fourfold higher than in healthy control patients. Additionally, the levels of CCL24 were
correlated with a biomarker of SSc severity, anti-topoisomerase, an autoantibody seen in diffuse SSc patients.
CCL24 levels in serum samples
from SSc patients and association with disease manifestations and mortality
The relationship between
serum CCL24 levels and disease characteristics in a comprehensive real-life cohort of patients with SSc (n=213) was further studied.
The study highlights the association between higher CCL24 levels with critical clinical variables linked to the most severe forms of SSc.
Specifically, these variables include male gender, anti-Scl70 positivity, severity of skin fibrosis, presence of ILD, presence of digital
ulcers and lung microvascular impairment as measured by DLco. In a longitudinal setting, high serum CCL24 was predictive of lung deterioration.
Accordingly, a higher baseline CCL24 level was associated with SSc-related mortality.
Comparison of baseline serum
CCL24 levels based on the occurrence of rapid ILD progression (A) and the relationship between baseline serum CCL24 levels and the relative
change in FVC over the following 12 months (B).
Cumulative incidence curves
comparing SSc-related and other-cause mortality in SSc patients with High and Low baseline CCL24 Status
Preclinical
Efficacy of CM-101 in models of PSC
Preclinical experiments in
models of PSC
• |
Human hepatic stellate cells demonstrated reduced
transition to myofibroblasts following incubation of CM-101 with CCL24. |
• |
Human hepatic stellate cells showed reduced motility
towards CCL24 following treatment with CM-101. |
• |
CM-101 demonstrated in vivo activity on liver
fibrosis and cholangiocyte proliferation induced by bile duct ligation in the Sprague Dawley rat model. |
• |
CM-101 (D8-a murine surrogate of CM-101) inhibits
the progression of liver fibrosis and bile duct damage in a chronic cholangitis cholestasis model using the hepatobiliary toxin ANIT.
|
• |
CM-101 (D8) reduces bile duct epithelial cell
(cholangiocyte) proliferation, collagen deposition, macrophage infiltration, liver enzymes, bile acid and circulating inflammatory monocytes
in an experimental cholangitis model in MDR2 knockout mice. |
• |
CM-101 reduces liver enzymes, fibrosis, collagen,
and fibrotic gene expression in a TAA-induced liver fibrosis model in rats. |
• |
CM-101 (D8) prevented fibrosis and inflammation
in a TAA-induced liver fibrosis model in mice. |
Results from the multi-drug
resistant 2, or MDR2, knock out mouse model that reflects sclerosing cholangitis and the thioacetamide (TAA) rat model reflecting liver
fibrosis are described below.
CM-101 demonstrates anti-cholestatic, anti-inflammatory, and anti-fibrotic activity in MDR2 knock out mouse model in vivo
Mice with targeted disruption
of the MDR2 transporter gene develop chronic and progressive hepatic sclerosing cholangitis that closely resembles PSC and therefore this
model has been extensively used to study the pathogenesis and progression of PSC. Using MDR2 knockout mice (six weeks of age), we tested
the ability of CM-101 (D8) to attenuate PSC related symptoms. Mice (n=15/group) received either vehicle control, or CM-101 10 mg/kg SC
twice weekly during weeks 6-12 following established disease and were sacrificed at the end of week 12. In this study mice were tested
for changes in alkaline phosphatase, or ALP, bile acid levels, collagen deposition (histology, Sirius red), macrophage presence in the
liver and cholangiocyte proliferation. We observed a significant decrease in all three core pathologies that play a role in PSC: inflammation,
fibrosis and cholangiocyte proliferation after CM-101 (D8) treatment compared to non-active treatment. Reduction in the serum markers
that represent the cholestatic state, ALP and bile acid, was also observed.
CM-101
reduces liver fibrosis, inflammation and bile duct epithelial proliferation in MDR2 knockout model
CM-101
demonstrates in vivo activity in a thioacetamide induced liver fibrosis model in rats using a therapeutic model
To assess the potential efficacy
of CM-101 on liver fibrosis, we used the TAA-induced liver fibrosis model. Liver fibrosis was induced by intraperitoneal administration
of TAA at a dose of 250 mg/kg twice weekly for eight weeks. Rats (n=10/group) received either vehicle control or CM-101 2.5 mg/kg IV twice
weekly during weeks four to eight following established fibrosis and were sacrificed at week eight. After eight weeks of TAA treatment,
all vehicle-treated animals had developed liver fibrosis, as confirmed by Sirius-red-stained liver histology.
CM-101 reduces
fibrosis in rat livers
Plasma ALP, ALT, and AST levels
decreased in the CM-101 study arm. Liver collagen content and fibrotic areas were significantly reduced in the CM-101 treated group compared
to non-active treatment. CM-101 was also shown to reduce fibrotic markers in the TAA treated rats.
Efficacy of CM-101 in
models of SSc
Preclinical experiments in models of SSc
• |
CM-101 reduces SSc serum-induced dermal fibroblast
activation and transition to myofibroblasts and interferes with endothelial cell activation. |
• |
CM-101 treatment attenuated skin fibrotic remodeling
in the bleomycin (BLM)-induced dermal fibrosis mouse model. |
• |
CM-101 attenuated lung fibrosis and inflammation
in the bleomycin (BLM)-induced pulmonary fibrosis mouse model. |
Results from the bleomycin
(BLM)-induced dermal and lung fibrosis mouse models are discussed below in more detail.
CM-101
treatment attenuates skin fibrotic remodeling in the bleomycin (BLM)-induced dermal fibrosis mouse model
The activity of CM-101 (D8) in SSc was tested in
the dermal bleomycin model. Treatment started after the onset of fibrotic signs, eight days following the first BLM injection. Histological
assessment of skin lesions stained with H&E and Masson’s trichrome revealed significant elevation of dermal thickness and collagen
deposition following 21 days of BLM administration. This elevation was significantly reduced when mice were treated with 2.5 mg/kg CM-101
with significant reductions in both skin thickness and collagen deposition compared with the mouse group treated with BLM alone.
CM-101 treatment
attenuates skin fibrotic remodeling in the bleomycin-induced dermal fibrosis mouse model
Another feature that characterizes
the BLM model and is representative of human SSc is the development of bronchoalveolar inflammation. To evaluate the effect of CM-101
on lung inflammation, we collected bronchoalveolar lavage, or, BAL, fluid, and assessed the number of white blood cells, or WBC, and mononuclear
cells. Treatment with BLM for 21 days significantly increased WBC and mononuclear cells in BAL fluid and the number of WBC and mononuclear
cells was decreased significantly following CM-101 treatment compared with the group that was administered only BLM. This data supports
the anti-inflammatory effect of CM-101 in SSc.
CM-101
inhibits lung fibrosis in the BLM-induced pulmonary fibrosis mouse model
We also tested CM-101 in the
experimental lung SSc model where mice were given a single intratracheal administration of BLM followed by either CM-101, non-active treatments
(PBS or control immunoglobulin G (IgG)) or the approved anti-fibrosis drugs, pirfenidone and nintedanib. CM-101 had a significant anti-fibrotic
and anti-inflammatory effect in the experimental BLM-induced lung fibrosis model as compared with non-active treatment-treated animals.
BLM animals treated with non-active treatments showed massive immune cell infiltration, extensive fibrosis and severe tissue injury. CM-101-treated
mice exhibited significantly reduced levels of lung fibrosis similar to levels in healthy animals and showed superior effects compared
to the approved fibrosis drugs pirfenidone and nintedanib.
CM-101 attenuates
lung fibrosis and collagen deposition in the bleomycin (BLM)-induced pulmonary fibrosis mouse model
Preclinical
safety and toxicology of CM-101
Preclinical safety evaluation
of CM-101 included tissue cross reactivity, assessment of the effect of CM-101 on pro-inflammatory cytokine secretion ex-vivo, and in
vivo GLP toxicology studies in mice and non-human primates. No safety concerns were observed in these preclinical assessments.
Immunogenicity may be triggered
following administration of humanized monoclonal antibodies, an effect that is frequently seen with approved mAbs. To date, no meaningful
ADA effects were identified in three completed clinical studies, which supports a preliminary conclusion that CM-101 may have low immunogenic
potential.
As summarized below, there were no safety concerns
related to CM-101 in any of the other preclinical safety experiments.
Summary of key preclinical safety
experiments
Preclinical findings |
|
Observation |
Ex vivo |
|
|
Antibody dependent cell-cytotoxic (ADCC) and complement dependent cell-cytotoxic (CDC)
activity was tested in PBMCs from healthy volunteers.
|
|
CM-101 did not have Fc-related effector functions such as ADCC and CDC.
|
Cytokine release was assessed in human whole blood from healthy volunteers.
|
|
CM-101 did not induce pro-inflammatory cytokine secretion.
|
Tissue cross reactivity was evaluated from healthy human tissues.
|
|
CM-101 does not bind non-specifically to healthy tissues, and therefore is expected
to only bind to its target, circulating CCL24.
|
In vivo
|
|
|
GLP repeated dose 4-week toxicity study of CM-101 (IV) in mice.
|
|
1. No obvious treatment related adverse reactions.
2. No gross or microscopic pathological findings.
3. No cases of treatment related mortality were observed.
4. No significant elevation was seen in IL1β, IL2, IL4, IL5, IL10, GM-CSF, IFN and TNFα.
|
GLP repeated dose (up to 50 mg/kg) 6-month toxicity study of CM-101 (SC) in Cynomolgus
Monkey.
|
|
1. No obvious treatment related adverse reactions.
2. No clinical signs or injection site reactions.
3. No cases of treatment related mortality were observed.
4. Blood and urine tests were found to be within normal ranges for monkeys.
5. No treatment-related organ weight changes and no treatment-related necropsy findings.
6. No treatment-related histopathology findings.
7. Three samples from treated animals were confirmed ADA positive but there was no obvious correlation
between positive ADA results and CM-101 serum concentrations or systemic exposure. |
Preclinical
proof of mechanism studies for CM-101
We conducted a series of in
vitro and in vivo studies to demonstrate the proposed mechanism of action and provide proof-of-concept for administering CM-101 in the
clinic for target indications.
Affinity,
selectivity, and binding kinetics
We evaluated the kinetic binding
parameters of CM-101 to human CCL24, as well as the specificity of CM-101 binding to other chemokines using commercial binding assays.
CM-101 demonstrated a strong and stable, high affinity binding to CCL24.
CM-101 reduced CCL24 dependent
CCR3 activation
In an in
vitro assay, CM-101 was shown to robustly attenuate the ability of CCL24 to induce activation of the CCR3 receptor following pre-incubation
of CCL24 with CM-101.
Clinical
Development of CM-101
Completed clinical studies
The CM-101 Phase 1 program
included two Phase 1a single administration, or SAD, studies, using IV and SC administration with doses ranging from 0.75-10 mg/kg, in
healthy volunteers and a Phase 1b multiple administration (MAD) study (5 administrations) in NAFLD patients with normal liver function,
testing 2.5 mg/kg IV and 5 mg/kg SC. In the Phase 1 studies 42 subjects have received at least one CM-101 dose, the majority by IV infusion
(12/42 subjects received SC).
Safety
The first Phase 1a study, which
was a single-center, randomized double-blind, placebo-controlled, single-dose, dose-escalation study, included four escalating dose groups
of eight subjects each. In each dose group subjects were randomized in a 3:1 ratio to receive a single IV infusion of either CM-101 (n=6)
or placebo (n=2). A total of 24 subjects were enrolled into the study and randomized to the treatment groups (0.75 mg/ kg, 2.5 mg/kg,
5.0 mg/kg, 10 mg/kg) and eight subjects received a placebo. All 32 subjects completed the study as planned. Single, IV doses of CM-101
were well tolerated up to the highest dose level (10 mg/ kg) in healthy subjects. No severe or serious adverse events, or AEs, occurred
during the study and all CM-101 related AEs were mild, with one moderate AE reported in the placebo group (myalgia).
The second Phase 1a study was
also a single-center, randomized double-blind, placebo-controlled, single-dose study, but evaluated only one dose group. Subjects were
randomized in a 3:1 ratio to receive a single SC injection of either CM-101 5 mg/kg (n=6) or matching placebo (n=2). A total of eight
subjects were enrolled into the study and randomized; all eight subjects completed the study as planned. Single SC administration of 5
mg/kg of CM-101 was well tolerated with no severe or serious AEs occurring during the study. A total of 6 AEs were reported in two subjects
treated with CM-101; only one AE was classified as related to CM-101 (change in diastolic blood pressure) and that AE was classified as
mild in intensity.
In both Phase 1a studies, all
AEs reported were resolved; no subjects discontinued the study prematurely due to AEs, and no concomitant medications were required for
treatment of any drug-related AEs. No clinically significant changes in laboratory tests (hematology, chemistry or urinalysis), vital
signs, ECG, physical examination or infusion site examination were observed. In the first Phase 1a study with CM-101 delivered by IV administration,
the effect on cytokine secretion was tested pre-treatment and one hour, eight
hours and 24 hours post drug administration. Serum levels of a panel of cytokines including IL-6, IFNγ, GM-CSF, TNF-α, IL-2,
IL-4, IL-8 and IL-10 showed no significant change at all tested CM-101 doses and timepoints. These findings suggest that single CM-101
administration does not cause immune activation nor cytokine secretion. Additionally, none of the subjects in either of the Phase 1a studies
tested positive for anti-drug antibodies (ADA).
The multiple administration
randomized, placebo-controlled, Phase 1b study in NAFLD patients with normal liver function tests evaluated two dose levels. The first
dose level of 2.5 mg/kg CM-101 was administered as an IV infusion and the second dose level of 5 mg/kg was administered as an SC injection.
Both dose levels involved five drug administrations over 12 weeks (Q3W), providing 15 weeks of treatment coverage. At both dose levels,
subjects were randomized in a 3:1 ratio to receive either CM-101 (n=6 per cohort) (2.5 mg/kg IV or 5 mg/kg SC) or matching placebo (n=2
per cohort). Five repeated IV and SC CM-101 administrations were well tolerated and there were no deaths, or severe or serious drug related
AEs reported throughout the study. Only mild to moderate AEs were reported in the CM-101 treatment groups of which only two AEs were classified
as possibly related to CM-101. No injection site reactions or clinically significant trends in laboratory tests (hematology, chemistry,
or urinalysis), vital signs, ECG or physical examination were observed. One patient experienced a non-drug-related SAE. This patient was
a 61-year-old female that was subsequently diagnosed with a non-treatment related meningioma. The tumor was treated surgically, and the
patient was discontinued from the study.
Pharmacokinetics with single-dose
administration
PK analysis was conducted for
the Phase 1 studies and the quantification of CM-101 in plasma samples was performed using a validated ELISA-based assay by Eurofins (UK).
Following IV infusion in healthy volunteers, CM-101 exhibited a biphasic serum concentration vs. time curve (rapid distribution phase
and slow elimination phase) which is typical for monoclonal antibodies. Target-mediated drug disposition (TMDD), or presence of ADAs,
was not evident in the analyzed concentration vs. time curves of CM-101, which exhibited linear terminal slope without apparent TMDD kinetics
or other concentration-dependent changes of the elimination kinetics. Comparison of the PK data of 5 mg/kg CM-101 using IV administration
against SC administration indicates consistent distribution and elimination behavior of CM-101.
At either IV or SC administration,
the values of the PK parameters obtained in the non-compartmental and compartmental analysis of CM-101 concentration vs. time data appear
to be typical for monoclonal antibodies that undergo FcRn-mediated recycling. The terminal half-life of CM-101 was long for both SC and
IV formulations, which supports administration of CM-101 at a frequency of once every 2-4 weeks.
Pharmacokinetics with multiple-dose
administration
PK analysis of the data from
the Phase 1b study was conducted to evaluate CM-101 following multiple IV infusion of 2.5 mg/kg or 5 mg/kg SC injections of CM-101 in
NAFLD patients. Following repeated IV infusions (2.5 mg/kg Q3W) and SC injection (5 mg/kg Q3W), CM-101 exhibited a long terminal half-life,
similar to the terminal half-life seen in the single dose studies. CM-101 accumulated over time, resulting in significant systemic exposure
over time and potentially reaching a steady state.
Overall, CM-101 reached steady
state conditions more slowly following SC injection, as compared to IV infusion. The inter-patient variability in CM-101 serum concentrations
was higher for SC dosing injection, as compared to IV. The trough CM-101 serum concentrations after repeated 5 mg/kg SC injections were
proportionally higher than those after 2.5 mg/kg IV infusions, considering the difference in administration modes. Comparison of the PK
data of CM-101 in the Phase 1b to the Phase 1a studies indicates a consistency in PK behavior of CM-101.
Pharmacodynamics and target
engagement of CM-101
Serum was taken from patients
in all three Phase 1 studies at different times and the levels of both CCL24 and CM-101 were measured. Total CCL24 levels represent CM-101’s
engagement to its target. Total CCL24 levels were increased following administration of the drug, which indicates that CM-101 is effective
in target engagement, as the higher levels of CCL24 correlated significantly with greater doses of CM-101, and such levels decreased gradually
from the peak of CM-101 administration. These findings demonstrate that CM-101 effectively binds to CCL24 in the circulation, which reflects
a strong drug-target interaction.
In the Phase 1b study, CM-101
treatment of 2.5mg/kg IV attained the highest levels of total CCL24 by the third administration, maintaining these levels until the end
of treatment. CM-101 5mg/kg administered by SC injection reached the highest levels of CCL24 by the fourth treatment and maintained these
levels until the end of treatment. The matching placebo did not have any effect on CCL24 levels.
As exemplified in the in-vitro
studies, binding of CCL24 by CM-101 attenuates the binding of CCL24 to its cognate CCR3 receptor, thereby reducing its downstream activation.
Altogether, CCL24 levels following treatment with CM-101 provide strong evidence for target engagement and pharmacodynamic response of
CM-101 in healthy volunteers and patients.
Phase 1b exploratory endpoints
Fibrotic biomarkers were analyzed
as part of the Phase 1b study in NAFLD patients with normal liver function. Circulating fibrotic biomarkers were tested in serum pre-
and post-treatment. The analysis included data from patients that presented with more active disease, reflected by baseline elastography
(FibroScan) score >4 kPa. Tissue inhibitor of metalloproteinases-1 (TIMP-1) and tissue inhibitor of metalloproteinases-2 (TIMP-2),
considered well established fibrotic biomarkers, were evaluated, and showed that CM-101 treatment led to reductions of both markers by
week 15. The growth factor PDGF-AA, known as a pro-fibrotic secreted factor, was also reduced in CM-101 treated patients. Conversely,
in the placebo group TIMP-1, TIMP-2 and PDGF-AA all increased.
Evaluation of the fibrogenesis
and fibrolysis/inflammatory biomarkers, Pro-C3, Pro-C4 and C3M measured in serum, conducted by Nordic Bioscience, Copenhagen, Denmark,
were also used as sensitive indicators of the liver’s fibrotic state. In accordance with reduced liver stiffness, Pro-C3, Pro-C4
and C3M were all reduced in the CM-101 treated groups. No reductions were identified in the placebo control group.
Changes in liver stiffness,
a measurement of liver fibrosis, were also evaluated using FibroScan measurements taken at screening and end of treatment (EoT) following
15 weeks of treatment coverage. 80% of CM-101 treated patients had significant decreases in FibroScan measurements, unlike placebo patients
where there was no significant change from baseline.
Results of investigator-initiated clinical study
of CM-101 in patients with COVID-19-derived lung damage
On November 9, 2022, encouraging
clinical data from an investigator-initiated clinical study assessing CM-101 activity and safety in hospitalized patients with severe
lung injury derived from COVID-19 infection was presented at the 2022 Union Conference, an international conference on lung health. A
key rationale for the study is that some of the mechanisms underlying lung inflammation resulting from COVID-19 infection are similar
to those seen in systemic sclerosis and other chronic diseases involving lung inflammation and fibrosis.
The objective was to evaluate
the safety and activity of CM-101 in hospitalized COVID-19 patients with severe pneumonia, including its impact on biomarkers related
to lung inflammation that are also relevant in SSc. The
open label, single arm trial enrolled 16 hospitalized adult COVID-19 patients with severe respiratory involvement. All patients were receiving
standard of care therapy. All were treated with a single 10mg/kg intravenous dose of CM-101 on the first day of the study and followed
for 30 days.
Administration of CM-101 to
this acutely ill patient population appeared well tolerated. CM-101 exposures and target engagement profiles were similar to what our
researchers have seen in previous clinical studies of CM-101.
Importantly, rapid reductions
in serum biomarkers of lung inflammation, fibrogenesis and neutrophil activity were observed post-treatment with CM-101. Overall,
this study confirmed and extended the safety and tolerability profile of CM-101 and demonstrated clinically relevant changes in biomarkers
associated with lung inflammation and fibrogenesis, further supporting CM-101’s anti-inflammatory and anti-fibrotic effects.
Moreover, we believe that these
results add to the data suggesting that CM-101 has the potential to attenuate lung inflammation and fibrosis, further strengthening the
rationale for treating SSc patients with this drug. These new clinical data also contribute to a growing body of evidence demonstrating
CM-101’s anti-fibrotic and anti-inflammatory effects in varied organs including the lung, liver and skin.
Primary endpoints for the study
were safety and tolerability. Secondary endpoints included the evaluation of the pharmacokinetic and target engagement profile of the
SC formulation as well as changes in relevant biomarkers that may provide further mechanistic understanding of CM-101 effects on liver
fibrosis. This trial was primarily designed to assess a subcutaneous formulation of CM-101 and to evaluate the drug’s impact on
liver fibrosis biomarkers relevant to both NASH and fibro-inflammatory conditions that represent the focus for Chemomab, such as PSC and
SSc.
The randomized, placebo-controlled
trial enrolled 23 NASH patients with stage F1c, F2 and F3 disease who were randomized to receive either CM-101 or placebo. Patients received
eight doses of 5 mg/kg of study drug administered by subcutaneous injection once every two weeks, for a treatment period of 16 weeks.
Key findings of the CM-101 Phase 2a trial included the following.
• |
CM-101 appeared to be well tolerated when administered subcutaneously. Most reported adverse events observed
were mild, with one unrelated serious adverse event reported. No significant injection site reactions were reported and no anti-drug antibodies
were detected. |
• |
CM-101 administered subcutaneously demonstrated favorable pharmacokinetics and target engagement profiles
as expected and were similar to what we have previously reported. |
• |
CM-101-treated patients showed greater improvements than the placebo group in a number of liver fibrosis-related
biomarkers, including ProC-3, ProC-4, ProC-18, TIMP-1 and ELF. |
• |
A majority of CM-101-treated patients showed improvements in more than one liver fibrosis-related biomarker—almost
60% of CM-101 patients responded in at least three biomarkers at week 20, compared to no patients in the placebo group. |
• |
A higher proportion of patients in the CM-101-treated group showed improvement in a physiologic measure
of liver stiffness as compared to placebo (reduction of at least one grade of fibrosis score as assessed by the non-invasive elastography
method known as FibroScan®). |
• |
CM-101-treated patients with higher CCL24 levels at baseline showed greater reductions in fibrosis-related
biomarkers than patients with lower levels. Multiple fibrosis-related biomarkers showed more pronounced reductions in CM-101-treated patients
who had higher CCL24 levels at baseline than in patients with lower CCL24 levels at baseline, adding to the growing body of evidence validating
the role of CCL24 in the pathophysiology of fibrotic liver disease. |
• |
After completion of the study, the unblinded data showed that patients in the CM-101-treated group had
higher baseline levels of fibrosis compared to placebo patients. The impact of this difference on the results, if any, is unknown.
|
Secondary analysis results
of Phase 2a study in patients with liver fibrosis derived from NASH
In June 2023, at the 2023 EASL
Congress, Chemomab researchers reported topline results
from secondary analyses of the Phase 2a liver fibrosis trial assessing CM-101, in patients with NASH. The results were included in a late-breaking
poster presentation.
Overall, the data showed improvements
across an additional set of inflammatory and fibrotic biomarkers that are consistent with the positive clinical results Chemomab released
in January of 2023. Additionally, in NASH patients at greater risk of disease progression, CM-101 treatment resulted in a greater biomarker
response than in NASH patients with lower risk disease or in placebo-treated patients.
The new analyses assessed
additional biomarkers and also used the FibroScan-AST (FAST) score to categorize study patients based on progressive disease risk, thereby
enabling the evaluation of CM-101 activity in the main target population of patients with more active disease. FAST is a validated
score composed of non-invasive FibroScan® and
AST measurements that is used to identify patients with a high risk of NASH progression. The results showed that:
• |
FAST scores were improved in a higher proportion of CM-101-treated patients than in placebo
patients. |
• |
CM-101-treated patients with higher FAST scores demonstrated greater improvements in
key fibro-inflammatory biomarkers, such as Pro-C3, than patients with lower FAST scores or placebo patients.
|
• |
CM-101-treated patients with higher FAST scores showed improvements in several fibro-inflammatory
biomarkers generally comparable to those achieved in several recent successful NASH clinical trials. |
Additionally, in these secondary
analyses, CM-101-treated patients showed improvements in an additional set of biomarkers associated with active fibrosis and inflammation:
• |
FIB-4, an index for determining NASH status that includes age, platelet count, AST and ALT levels, was improved in CM-101-treated
patients vs. placebo patients. |
• |
AST/ALT ratio, a liver enzyme ratio, was improved in CM-101-treated patients vs. placebo patients.
|
• |
Neutrophil-to-Lymphocyte Ratio (NLR), an indicator of inflammation, was improved in CM-101-treated patients vs. placebo patients,
and NLR was further improved in groups with higher FAST scores. |
• |
PRO-C3, which captures active fibrogenesis and correlates with fibrotic disease severity, was improved in CM-101-treated patients
vs. placebo patients and was further improved in groups with higher FAST scores. As an overall indicator of fibrogenesis and fibrotic
disease, PRO-C3 is also considered a potential "bridge" to PSC and other anti-fibrotic indications.
|
We believe the that the data
analyses from this trial provide important insights in support of the CM-101 development program, including the favorable safety and tolerability
of CM-101 in patients with serious liver disease, confirmation of early signs of biomarker activity that are relevant for a number of
fibro-inflammatory disorders, and support of the tolerability and pharmacokinetic data needed to assess next steps in the development
of our current subcutaneous formulation.
Other clinical
development activities for CM-101
In 2022, we reported positive
clinical data from an investigator-initiated clinical study assessing CM-101 activity and safety in hospitalized patients with severe
lung injury derived from COVID-19. The objective of the study was to evaluate the drug’s safety and activity in hospitalized COVID-19
patients with severe pneumonia, including its impact on biomarkers related to lung inflammation that are also relevant in systemic sclerosis.
The open label, single arm trial enrolled 16 hospitalized adult COVID-19 patients with severe respiratory involvement. All patients were
receiving standard of care therapy. All were treated with a single 10mg/kg intravenous dose of CM-101 on the first day of the study and
followed for 30 days. Administration of CM-101 to this acutely ill patient population appeared to be well tolerated. CM-101 exposures
and target engagement profiles were similar to what our researchers have seen in previous clinical studies of CM-101. Importantly, rapid
reductions in serum biomarkers of lung inflammation, fibrogenesis and neutrophil activity were observed post-treatment with CM-101. Overall,
this study confirmed and extended the safety and tolerability profile of CM-101 and demonstrated clinically relevant changes in biomarkers
associated with lung inflammation and fibrogenesis, further supporting CM-101’s anti-inflammatory and anti-fibrotic effects.
Together, these promising results
provide initial support for CM-101’s anti-fibrotic and anti-inflammatory mechanisms in humans and support further testing of CM-101
in PSC and SSc patients.
Current and planned clinical
studies for PSC and SSc
We have completed patient enrollment
and are currently treating enrolled patients in a CM-101 Phase 2 PSC study at multiple sites in Israel, the U.S, and Europe. We also gave
a Phase 2-ready SSc clinical trial with an open U.S. IND that is ready for initiation of patient enrollment following the successful completion
of the PSC study and available resources.
The ongoing Phase 2 trial in
PSC is a randomized, double-blind, placebo-controlled, study designed to evaluate the safety and efficacy of CM-101 in adult subjects
with PSC. Participants must have a serum alkaline phosphatase, or ALP, level of at least 1.5 times the upper limit of normal (x 1.5 ULN).
Subjects with concomitant inflammatory bowel disease (IBD) are eligible for recruitment if their disease is stable and there is an absence
of high-grade dysplasia in colonic biopsies within 18 months of randomization. Subjects are randomized to receive 10 mg/kg or 20mg/kg
of CM-101 IV, or placebo, in a 2:1 ratio. Patients receive a dose of investigational product once every three weeks for a total of five
administrations resulting in a total coverage of 15 weeks during the double-blind portion of the study. The study design also includes
a 33-week long open-label extension period during which all participants receive either 10 mg/kg or 20 mg/kg of CM-101 via IV administration
every three weeks.
The primary endpoint for the
study is safety and tolerability. Secondary endpoints include evaluations of changes from baseline in serum ALP levels and the fibrotic
marker enhanced liver function, or ELF, score at week 15. ALP is a liver enzyme that is elevated in cholestasis and the ELF score is a
biochemical test panel made up of serum markers that are indicators of the extracellular matrix. Additional secondary endpoints include
evaluations of changes from baseline in other liver enzymes and additional fibrotic markers, including AST, ALT, Pro-C3 and Pro-C5, as
well as PK, PD and ADA parameters.
The planned Phase 2 study in
SSc would enable an expedited path to proof-of-concept data and further elucidation of different CM-101 mechanisms of action in treating
SSc skin, lung and vascular damage. The U.S. FDA cleared our IND application to commence the Phase 2 SSc trial, which could be initiated
following successful completion of the Phase 2 PSC clinical study and available resources.
Competition
The development and commercialization
of new drug products is highly competitive across major pharmaceutical companies, specialty pharmaceutical companies and biotechnology
companies worldwide. We face competition with respect to our current product and expect to face competition with respect to any product
candidates that we may develop or commercialize in the future. Specifically, there are a number of companies developing treatments for
fibrotic/inflammatory diseases, including multiple major pharmaceutical and biotechnology companies with substantially greater resources
than us. We are a small biotech company with limited resources compared to the major pharmaceutical companies, however, we believe that
the unique CM-101 platform together with our knowledge and experience in inflammatory-fibrotic research provides us with competitive advantages.
Therapeutic options for PSC
and SSc are limited and despite significant biopharmaceutical industry investment, the FDA has not approved any disease modifying therapies
for the treatment of PSC or SSc. Liver transplant is currently the only treatment shown to improve clinical outcomes for PSC patients
while SSc patients are being treated with drugs that were approved for different manifestations of the disease like interstitial lung
disease (nintedanib, Boehringer Ingelheim and tocilizumab, Hoffmann-La Roche).
We are assessing CM-101, a
first-in-class monoclonal antibody that interferes directly with both inflammation and fibrosis, into clinical development for the treatment
of PSC and SSc. There are a number of large biopharmaceutical and biotechnology companies that are currently pursuing the development
of products for the treatment of fibrotic indications like PSC and SSc, such as, Mitsubishi Tanabe Pharma, Horizon Therapeutics, Pliant
Therapeutics, and others. However, we know of no other companies currently in clinical development with a monoclonal antibody that
targets CCL24.
Although the approach is novel
with respect to targeting both inflammation and fibrosis, we will need to compete with products further advanced in the pipeline towards
market approval. Investigational products, include:
There are currently no FDA-approved
therapies for the treatment of PSC. Companies currently developing product candidates in Phase 3 clinical studies include Dr. Falk Pharma,
targeting cholestasis and liver metabolism (Dr. Falk; norUrso), rather than anti-fibrotic and anti-inflammatory manifestations of PSC.
Other companies with clinical candidates in earlier stages of development include Mirum Pharmaceuticals and Pliant Inc. As shown in the
table below, most competitors are targeting the metabolic or symptomatic aspects of PSC. Only the Chemomab and Pliant compounds have disease
modifying potential, and we believe that our unique dual anti-fibrotic and anti-inflammatory activity gives CM-101 at potential advantage.
Unlike Most PSC Competitors,
CM-101’s Unique Dual Activity Has Disease-Modifying Potential
There are currently two FDA
approved products for the treatment of clinical manifestations of SSc--nintedanib, marketed by Boehringer Ingelheim GmbH and tocilizumab,
marketed by Hoffmann-La Roche for the treatment of interstitial lung disease. Companies currently developing product candidates in SSc
in early clinical stage include Horizon, Mitsubishi Tanabe, GS Johnson & Johnson, Vicore, Sanofi, Merck and others.
The availability of reimbursement
from government and other third-party payors will affect the pricing and competitiveness of CM-101 and any future products. More advanced
competitors also may obtain regulatory approval for their products more rapidly than us, which could result in competitors establishing
a strong market position.
Intellectual Property
Overview
We strive to protect and enhance
the proprietary technology, inventions, and improvements that are commercially important to the development of our business, including
seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade
secrets relating to our proprietary technology platform and know-how, continuing technological innovation and in-licensing opportunities
to develop, strengthen, and maintain our proprietary position in the field of inflammation and fibrosis that may present areas of opportunity
for the development of our business. We may also rely on regulatory protection afforded through data exclusivity, market exclusivity,
and patent term extensions, where available.
Our commercial success may
depend in part on our ability to: obtain and maintain patent and other proprietary protection for commercially important technology, inventions
and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate without
infringing the valid enforceable patents and proprietary rights of third parties. Our ability to prevent third parties from making, using,
selling, offering to sell, or importing our products may depend on the extent to which we have rights under valid and enforceable licenses,
patents, or trade secrets that cover these activities. In certain cases, enforcement of these rights may depend on third party licensors.
With respect to both licensed and company-owned intellectual property rights, we cannot be sure that patents will be granted with respect
to any of our pending patent applications or with respect to any patent applications that may be filed by us in the future, nor can we
be sure that any of our existing patents or any patents that may be granted to us in the future will be commercially useful in protecting
our commercial products and methods of manufacturing the same.
As of the date of this Annual
Report on Form 20-F, we owned or licensed seven pending or issued US patents and patent applications as well as patents and patent applications
in other jurisdictions. The first patent family has been issued in each of the United States, Europe (validated in France, Germany and
the United Kingdom) and Israel to the Tel Aviv Souraski Medical Center, whose rights have been licensed to Chemomab on an exclusive basis.
A composition of matter patent was issued in United States and certain corresponding foreign jurisdictions. To date, three additional
patent families were filed concerning the use of anti CCL24 antibodies in specific indications, dosing regimens, and routes of administration.
We will seek United States and foreign patent protection for a variety of additional technologies, including: research compounds and methods,
candidate compounds and antibodies for modulating the activity of CCL24, methods for treating diseases of interest, and methods for treating
our products. We will seek additional protection, in part, through confidentiality and proprietary information agreements.
Company
Owned Intellectual Property
We own multiple families of
patent applications that pertain to anti-CCL24 monoclonal antibody compositions capable of blocking CCL24 activity and methods for treating
or preventing diseases associated with inflammation and fibrosis. Certain applications in these families relate to our CM-101 antibody,
backup variants, various unit dosages, dosing regimens, and other routes of administration. Patents that are or will be issued from these
submissions will expire between the years 2035 to 2041, subject to possible patent term adjustments and/or extensions.
In addition to the above, we
have established expertise and development capabilities focused in the areas of preclinical research and development, manufacturing and
manufacturing process development, quality control, quality assurance, regulatory affairs, and clinical study design and implementation.
We believe that our focus and expertise will help us develop products based on our proprietary intellectual property.
Licensed
IP
As mentioned above, we have
obtained an exclusive license from the Tel Aviv Souraski Medical Center for one patent, which is expected to expire in 2029. This patent
was issued in each of the United States, Europe and Israel, and pertains to anti CCL24 inhibitors (specifically, anti CCL24 antibodies)
and methods of using such inhibitors for treating inflammatory, autoimmune and cardiovascular diseases.
Trade Secret
Protection
We may rely, in some circumstances, on trade
secrets to protect our technology. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality
agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve the integrity and confidentiality
of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information
technology systems.
Material
Agreements
Tel-Aviv Souraski Medical
Center (TASMC) License Agreement
In December 2011, we entered
into a license agreement, or the TASMC Agreement, with the Medical Research, Infrastructure, Health Services Fund of the Tel Aviv Souraski
Medical Center., or TASMC, for the research, development and commercialization of the CCL24 platform and CCR3 blockade platform (CM-101),
which license includes patent rights covering the foregoing platforms and related know how and products. Under the terms of the TASMC
Agreement, we are responsible for the research, development, manufacturing and commercialization of CM-101. This license was granted on
an exclusive basis and we were also granted rights to sublicense the instant license to third parties pursuant to certain terms described
therein.
In accordance with the TASMC
Agreement, we paid TASMC a non-refundable and non-creditable payment in four milestone installments, related to TASMC’s past patent
maintenance and prosecution costs.
Certain additional terms of the TASMC Agreement
include:
• |
We will be required to pay TASMC non-refundable
and non-creditable milestone payments of up to (i) $300,000 upon the submission of an NDA, BLA or equivalent for each of the licensed
products to the FDA and to equivalent European and Asian foreign regulatory agencies, and (ii) $600,000 upon the grant by the FDA or equivalent
European and/or Asian regulatory agencies of their marketing approval for each licensed product; |
• |
In the event of an “exit,” as such
term is defined therein, we must pay TASMC an exit fee of 1% of the transaction consideration (which shall be capped at $3 million);
|
• |
In the event we sublicense a licensed product,
we must pay TASMC a sublicense fee of 10% of all attributed income, in addition to a low-single digit percentage tiered royalty payment
of our earned royalties. |
Unless terminated earlier,
the TASMC Agreement will expire upon the later of the expiration of the last-to-expire valid patent claim and any extension granted prior
thereto. The termination of the TASMC Agreement will not preclude TASMC from receiving sublicense payments or royalties. In addition to
the foregoing, the TASMC Agreement includes customary termination provisions.
CMC Collaboration Agreement
In June 2015, we entered into
a collaboration agreement, or the CMC Agreement, with CMC ICOS Biologics, Inc. (acquired by AGC Biologics in 2018), or CMC, which, under
the terms thereof, granted the us certain licenses to use proprietary rights, materials and know-how of CMC for purposes of research and
development of CM-101 as well as commercialization thereof. Pursuant to the terms of the CMC Agreement, we received (i) a worldwide, non-exclusive,
non-transferable, non-sublicensable license for research purposes, or the Research License, and (ii) an option, or the Option License,
to a worldwide, non-exclusive, non-transferable, sublicensable license for commercialization purposes, subject to a fee schedule in addition
to that described below.
In accordance with the terms
of the CMC Agreement, we agreed to pay in exchange for the foregoing license payments to CMC upon the achievement of certain pre-determined
clinical and regulatory events, an amount stipulated in the CMC Agreement, aggregating a six-digit number. Additionally, for any product
that is commercialized pursuant to the CMC Agreement, we are required to pay CMC a royalty payment based on annual aggregate worldwide
net sales thresholds for such products. In the event CMC exclusively manufactures our products, CMC agrees to waive the foregoing royalty.
Unless terminated earlier pursuant
to the customary termination provisions set forth in the CMC Agreement, the Research License will expire upon the conclusion of the term
as defined therein, and the Option License will expire upon the later of (a) the tenth anniversary following our obtainment of regulatory
approval, or (b) the last to expire of the patent rights and country-by-country basis.
Manufacturing
Our product candidate, CM-101,
is a monoclonal antibody amenable to standard formulation technologies. We have developed the biological process and manufactured kilogram
quantities through processes similar to the manufacturing processes that will be required to provide drug product for the Phase 2 clinical
studies. The manufacturing process of the drug substance used for such product candidates is robust, well established and requires the
use of readily available starting materials. The biological route is amenable to large-scale production and does not require unconventional
equipment or handling during the manufacturing process. We have obtained an adequate supply chain of the drug substance for CM-101 from
our contract manufacturing organization, or CMO, to satisfy both our clinical and preclinical requirements for this year. We rely on a
sole supplier for the manufacture of CM-101. Our manufacturer has the capabilities to support late stage clinical studies as well as product
launch and marketing.
We do not own or operate facilities for
clinical drug manufacturing, storage, distribution or quality testing. Currently, all of our clinical manufacturing is outsourced to third-party
manufacturers. As our development programs expand and we build new process efficiencies, we expect to continually evaluate this strategy
with the objective of satisfying demand for our clinical studies and, if approved, the manufacture, sale and distribution of commercial
products.
Commercialization
We intend to develop and, if
approved by the FDA, to commercialize our product candidates alone or in collaboration with others. We may work in combination with one
or more large pharmaceutical partners for certain indications, where specialist capabilities are needed. We intend to enter into distribution
or licensing arrangements for global or regional commercialization rights. We will, however, continuously review our partnering strategy
in the light of new clinical data and market understanding.
Regulatory Matters
The Food and Drug Administration, or FDA,
and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements
upon companies involved in the clinical development, manufacture, marketing and distribution of drugs, such as those that we are developing.
These agencies and other federal, state and local entities regulate, among other things, the research and development, testing, manufacture,
quality control, safety, effectiveness, labelling, storage, record keeping, approval, advertising and promotion, distribution, post-approval
monitoring and reporting, sampling and export and import of our product candidates.
United
States government regulation of drug products
Drugs in the United States
are subject to rigorous regulation under the Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations. The FDA also regulates
biological products under the FDCA and the Public Health Service Act, or PHSA. If we advance clinical development of a biologic candidate
in the future, these development activities will be subject to additional regulatory requirements specific to biologics. The process of
obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations
requires the expenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements
at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative
or judicial sanctions, such as the FDA’s refusal to approve a pending New Drug Application, or NDA, withdrawal of an approval, imposition
of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution,
injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the
FDA before a drug or biologic may be marketed in the United States generally involves the following:
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completion of preclinical laboratory tests, animal
studies and formulation studies in compliance with the FDA’s Good Laboratory Practice, or GLP, regulations; |
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submission to the FDA of an Investigational New
Drug application, or IND, which must become effective before human clinical studies may begin; |
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approval by an Institutional Review Board, or
IRB, at each clinical site before each study may be initiated; |
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performance of adequate and well-controlled human
clinical studies in accordance with Good Clinical Practice, or GCP requirements to establish the safety and efficacy of the proposed drug
product for each indication; |
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completion of all manufacturing requirements to
ensure robust manufacturing process, and product quality and safety as per Good Manufacturing Practice, or cGMP guidelines; |
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completion of non-clinical reproductive studies,
as applicable, prior to late stage clinical studies and NDA or Biologics License Application, or BLA, submission; |
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development of an appropriate pediatric plan for
clinical testing or exclusion, pre- or post-approval, as applicable; |
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submission to the FDA of an NDA or BLA;
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satisfactory completion of an FDA advisory committee
review, if applicable; |
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satisfactory completion of an FDA inspection of
the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements and to assure that
the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; |
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satisfactory completion of FDA audits of clinical
study sites to assure compliance with GCPs and the integrity of the clinical data; |
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payment of user fees and securing FDA approval
of the NDA; |
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FDA review and approval of an NDA or BLA; and
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compliance with any post-approval requirements,
including the potential requirement to implement a Risk Evaluation and Mitigation Strategies, or REMS, and the potential requirement to
conduct post-approval studies. |
Preclinical
studies
Preclinical studies include
laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess potential safety and efficacy.
An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available
clinical data or literature, among other things, to the FDA as part of an IND. Some preclinical testing may continue even after the IND
is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns
or questions related to one or more proposed clinical studies and places the clinical study on a clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. As a result, submission of an IND may not
result in the FDA allowing clinical studies to initiate.
Clinical
studies
Clinical studies involve the
administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP
requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation
in any clinical study. Clinical studies are conducted under protocols detailing, among other things, the objectives of the study, the
parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical study and any
subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating
in the clinical study must review and approve the plan for any clinical study before it initiates at that institution. Information about
certain clinical studies must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination
on their www.clinicaltrials.gov website.
Human clinical studies are
typically conducted in three sequential phases, which may overlap or be combined. A fourth, or post-approval, phase may include additional
clinical studies. These phases generally include the following:
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Phase
1: The drug or biologic is initially introduced into healthy human subjects or patients with the target disease or condition and
tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of
its effectiveness. For some products for severe or life-threatening diseases, especially if the product may be too toxic to administer
to healthy humans, the initial clinical trials may be conducted in individuals having a specific disease for which use the tested product
is indicated. |
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Phase
2: The drug or biologic is administered is administered to a limited patient population to identify possible adverse effects and
safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and
optimal dosage. |
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Phase
3: The drug or biologic is administered to an expanded patient population, generally at geographically dispersed clinical study
sites, in well-controlled clinical studies to generate enough data to statistically evaluate the efficacy and safety of the product for
approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
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Phase
4: Phase 4 clinical trials are studies required of, or agreed to by, a sponsor that are conducted after the FDA has approved a
product for marketing. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic
indication and to document a clinical benefit in the case of drugs approved under accelerated approval regulations. If the FDA approves
a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from
these clinical trials to meet all or part of any Phase 4 clinical trial requirement. Failure to promptly conduct Phase 4 clinical trials
where necessary could result in withdrawal of approval for products approved under accelerated approval regulations. |
Progress reports detailing
the results of the clinical studies must be submitted at least annually to the FDA and more frequently if serious adverse events occur.
Phase 1, Phase 2 and Phase 3 studies may not be completed successfully within any specified period, or at all. Furthermore, the FDA or
the sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are
being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical study at its institution
if the clinical study is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected
serious harm to patients.
Marketing
approval
Assuming successful completion
of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to
the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an
NDA or BLA requesting approval to market the product for one or more indications. In most cases, the submission of an NDA or BLA is subject
to a substantial application user fee. Under the Prescription Drug User Fee Act, or PDUFA, guidelines that are currently in effect, the
FDA has a goal of ten months from the date of “filing” of a standard NDA, for a new molecular entity to review and act on
the submission. This review typically takes twelve months from the date the NDA or BLA is submitted to FDA because the FDA has approximately
two months to make a “filing” decision.
In addition, under the Pediatric
Research Equity Act of 2003, or PREA, as amended and reauthorized, certain NDAs/BLAs or supplements thereof must contain data that are
adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations, and
to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may, on its
own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of
the product for use in adults, or full or partial waivers from the pediatric data requirements. An Agreed Initial Pediatric Study Plan
requesting a waiver from the requirement to conduct clinical studies may be submitted to the FDA.
The FDA also may require submission
of a REMS plan to ensure that the benefits of the drug outweigh its risks. The REMS plan could include medication guides, physician communication
plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries, or other risk
minimization tools.
The FDA conducts a preliminary
review of all NDAs/BLAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently
complete to permit substantive review. The FDA may request additional information rather than accept an NDA/BLA for filing. In this event,
the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the
FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA reviews
an NDA/BLA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured,
processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.
The FDA may refer an application
for a novel drug to an advisory committee. An advisory committee is a panel of independent experts, including clinicians and other scientific
experts, which reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.
The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the
FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless
it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent
production of the product within required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical
study sites to assure compliance with GCP requirements.
After evaluating the NDA/BLA
and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing
facilities and clinical study sites, the FDA may issue an approval letter, or, in some cases, a complete response letter. A complete response
letter generally contains a statement of specific conditions that must be met in order to secure final approval of the NDA/BLA and may
require additional clinical or preclinical testing in order for the FDA to reconsider the application. Even with submission of this additional
information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If and when those
conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications.
Even if the FDA approves a
product, it may limit the approved indications for use of the product, require that contraindications, warnings or precautions be included
in the product labeling, require that post-approval studies, including Phase 4 clinical studies, be conducted to further assess a drug’s
safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions,
including distribution and use restrictions or other risk management mechanisms under a REMS, which can materially affect the potential
market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing
studies or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing
changes, and additional labeling claims, are subject to further testing requirements
and FDA review and approval.
FDA Expedited
Development and Review Programs
The FDA has various programs,
including fast track designation, priority review, accelerated approval,
and breakthrough therapy designation, which are intended to expedite or simplify the process for the development and FDA review of drugs
that are intended for the treatment of serious or life-threatening diseases or conditions and demonstrate the potential to address unmet
medical needs. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.
The FDA has a fast track designation
program that is intended to expedite or facilitate the process for reviewing new drug products that meet certain criteria. Specifically,
new drugs are eligible for fast track designation if they are intended to treat a serious or life-threatening disease or condition and
demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may
consider for review sections of the NDA/BLA on a rolling basis before the complete application is submitted, if the sponsor provides a
schedule for the submission of the sections of the NDA/BLA, the FDA agrees to accept sections of the NDA/BLA and determines that the schedule
is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA/BLA. In November 2023, the
Company announced that the FDA had awarded Fast Track status to CM-101 for the treatment of PSC in adult patients.
Any product submitted to the
FDA for approval, including a product with a fast track designation, may also be eligible for other types of FDA programs intended to
expedite development and review, such as priority review and accelerated approval. A product is eligible for priority review if it has
the potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the
treatment, diagnosis, or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to
the evaluation of an application for a new drug designated for priority review in an effort to facilitate the review.
In addition, a product may
be eligible for accelerated approval. Drug products intended to treat serious or life-threatening diseases or conditions may be eligible
for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict
clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity,
or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require
a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on irreversible
morbidity or mortality, or other clinical endpoint and to submit promotional materials for preapproval and pre-use review, which could
adversely impact the timing of the commercial launch of the product. In addition, the drug may be subject to accelerated withdrawal procedures.
On December 29, 2022, the Consolidated Appropriations Act, 2023, including the Food and Drug Omnibus Reform Act (FDORA), was signed into
law. FDORA made several changes to the FDA’s authorities and its regulatory framework, including, among other changes, reforms to
the accelerated approval pathway, such as requiring the FDA to specify conditions for post-approval study requirements and setting forth
procedures for the FDA to withdraw a product on an expedited basis for non-compliance with post-approval requirements.
The Food and Drug Administration
Safety and Innovation Act established a category of drugs referred to as “breakthrough therapies” that may be eligible to
receive breakthrough therapy designation. A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy”
if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or
condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies
on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation
includes all of the fast track program features, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation
is a distinct status from both accelerated approval and priority review, which can also be granted to the same drug if relevant criteria
are met. If a product is designated as breakthrough therapy, the FDA will
work to expedite the development and review of such drug.
In addition, the FDA may review
new drug applications under the Oncology Center of Excellence Real-Time Oncology Review (“RTOR”), which, according to the
FDA, aims to explore a more efficient review process to ensure that safe and effective treatments are available to patients as early as
possible, while maintaining and improving review quality. Drugs considered for review under RTOR must be likely to demonstrate substantial
improvements over available therapy, which may include drugs previously granted breakthrough therapy designation for the same or other
indications, and must have straight-forward study designs and endpoints that can be easily interpreted. RTOR allows the FDA to review
much of the data in an NDA/BLA earlier, before the applicant formally submits the complete application. This analysis of the pre-submission
package gives the FDA and applicants an early opportunity to address data quality and potential review issues and allows the FDA to provide
early feedback regarding the most effective way to analyze data to properly address key regulatory questions.
Fast track designation, priority review,
accelerated approval, and breakthrough therapy designation do not change the standards for approval but may expedite the development or
approval process. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets
the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
Orphan
drug designation and exclusivity
Under the Orphan Drug Act,
the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally
meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation
that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be
recovered from sales of the product). A company must request orphan product designation before submitting an NDA. If the request is granted,
the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage
in or shorten the duration of the regulatory review and approval process. As of the current date, we have obtained orphan drug designation
for three indications, PSC, SSc and IPF.
If a product with orphan status receives the first
FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease
or condition for which it was designated, the product generally will be receiving orphan product exclusivity. Orphan product exclusivity
means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain
limited circumstances. If a drug or drug product designated as an orphan product ultimately receives marketing approval for an indication
broader than what was designated in its orphan product application, it may not be entitled to exclusivity. Orphan exclusivity will not
bar approval of another product under certain circumstances, including if a subsequent product with the same active ingredient for the
same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a
major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. Further, the FDA
may approve more than one product for the same orphan indication or disease as long as the products contain different active ingredients.
Moreover, competitors may receive approval of different products for the indication for which the orphan product has exclusivity or obtain
approval for the same product but for a different indication for which the orphan product has exclusivity.
In Catalyst
Pharms., Inc. v. Becerra, 14 F.4th 1299 (11th Cir. 2021), the court disagreed with the FDA’s longstanding position that the
orphan drug exclusivity only applies to the approved use or indication within an eligible disease. This decision created uncertainty in
the application of the orphan drug exclusivity. On January 24, 2023, the FDA published a notice in the Federal Register to clarify that
while the agency complies with the court’s order in Catalyst,
FDA intends to continue to apply its longstanding interpretation of the regulations to matters outside of the scope of the Catalyst
order – that is, the agency will continue tying the scope of orphan-drug exclusivity to the uses or indications for which a drug
is approved, which permits other sponsors to obtain approval of a drug for new uses or indications within the same orphan designated disease
or condition that have not yet been approved. It is unclear how future litigation, legislation, agency decisions, and administrative actions
will impact the scope of the orphan drug exclusivity.
United
States marketing exclusivity
Market exclusivity provisions
under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent
marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity. A drug is
a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule
or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an Abbreviated
New Drug Application, or ANDA, or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does
not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four
years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity
for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were
conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, new indications,
dosages or strengths of an existing drug. This three-year exclusivity covers only the conditions of use associated with the new clinical
investigations and does not prohibit the FDA from approving ANDAs for the original non-modified version of the drug. Five-year and three-year
exclusivity will not delay the submission or approval of a full NDA. However, an applicant submitting a full NDA would be required to
conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical studies necessary to
demonstrate safety and effectiveness.
Abbreviated Licensure Pathway
of Biological Products as Biosimilars or Interchangeable Biosimilars
The Patient Protection and Affordable Care Act (Affordable
Care Act or ACA), signed into law in 2010, includes the Biologics Price Competition and Innovation Act of 2009 (BPCIA), which created
an abbreviated approval pathway for biological products shown to be highly similar to an FDA-licensed reference biological product. The
BPCIA attempts to minimize duplicative testing, and thereby lower development costs and increase patient access to affordable treatments.
An application for licensure of a biosimilar product must include information demonstrating biosimilarity based upon the following, unless
the FDA determines otherwise:
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Analytical studies demonstrating that the proposed
biosimilar product is highly similar to the approved product notwithstanding minor differences in clinically inactive components;
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Animal studies (including the assessment of toxicity); and |
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A clinical trial or trials (including the assessment
of immunogenicity and pharmacokinetic or pharmacodynamic) sufficient to demonstrate safety, purity and potency in one or more conditions
for which the reference product is licensed and intended to be used. |
In addition, an application must include information
demonstrating that:
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The proposed biosimilar product and reference
product utilize the same mechanism of action for the condition(s) of use prescribed, recommended or suggested in the proposed labeling,
but only to the extent the mechanism(s) of action are known for the reference product; |
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The condition or conditions of use prescribed,
recommended or suggested in the labeling for the proposed biosimilar product have been previously approved for the reference product;
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The route of administration, the dosage form and the strength of the
proposed biosimilar product are the same as those for the reference product; and |
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The facility in which the biological product is manufactured, processed,
packed or held meets standards designed to assure that the biological product continues to be safe, pure and potent. |
Biosimilarity means that the
biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components, and
that there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity
and potency of the product. In addition, the law provides for a designation of “interchangeability” between the reference
and biosimilar products, whereby the biosimilar may be substituted for the reference product without the intervention of the healthcare
provider who prescribed the reference product. The higher standard of interchangeability must be demonstrated by information sufficient
to show that:
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The proposed product is biosimilar to the reference product;
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The proposed product is expected to produce the
same clinical result as the reference product in any given patient; and |
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For a product that is administered more than once
to an individual, the risk to the patient in terms of safety or diminished efficacy of alternating or switching between the biosimilar
and the reference product is no greater than the risk of using the reference product without such alternation or switch. |
FDA approval is required before
a biosimilar may be marketed in the United States. However, complexities associated with the large and intricate structures of biological
products and the process by which such products are manufactured pose significant hurdles to the FDA’s implementation of the law
that are still being worked out by the FDA. For example, the FDA has discretion over the kind and amount of scientific evidence—laboratory,
preclinical and/or clinical—required to demonstrate biosimilarity to a licensed biological product.
The FDA intends to consider
the totality of the evidence provided by a sponsor to support a demonstration of biosimilarity and recommends that sponsors use a stepwise
approach in the development of their biosimilar products. Biosimilar product applications thus may not be required to duplicate the entirety
of preclinical and clinical testing used to establish the underlying safety and effectiveness of the reference product. However, the FDA
may refuse to approve a biosimilar application if there is insufficient information to show that the active ingredients are the same or
to demonstrate that any impurities or differences in active ingredients do not affect the safety, purity or potency of the biosimilar
product. In addition, as with BLAs, biosimilar product applications will not be approved unless the product is manufactured in facilities
designed to assure and preserve the biological product’s safety, purity and potency.
The submission of a biosimilar
application does not guarantee that the FDA will accept the application for filing and review, as the FDA may refuse to accept applications
that it finds are insufficiently complete. The FDA will treat a biosimilar application or supplement as incomplete if, among other reasons,
any applicable user fees assessed under the Biosimilar User Fee Act of 2012 have not been paid. In addition, the FDA may accept an application
for filing but deny approval on the basis that the sponsor has not demonstrated biosimilarity, in which case the sponsor may choose to
conduct further analytical, preclinical or clinical studies and submit a BLA for licensure as a new biological product.
The timing of final FDA approval
of a biosimilar for commercial distribution depends on a variety of factors, including whether the manufacturer of the branded product
is entitled to one or more statutory exclusivity periods, during which time the FDA is prohibited from approving any products that are
biosimilar to the branded product. The FDA cannot approve a biosimilar application for twelve years from the date of first licensure of
the reference product.
Additionally, a biosimilar
product sponsor may not submit an application for four years from the date of first licensure of the reference product. A reference product
may also be entitled to exclusivity under other statutory provisions. For example, a reference product designated for a rare disease or
condition (an orphan drug) may be entitled to seven years of exclusivity, in which case no product that is biosimilar to the reference
product may be approved until either the end of the twelve-year period provided under the biosimilarity statute or the end of the seven-year
orphan drug exclusivity period, whichever occurs later. In certain circumstances, a regulatory exclusivity period can extend beyond the
life of a patent, and thus block biosimilarity applications from being approved on or after the patent expiration date. In addition, the
FDA may under certain circumstances extend the exclusivity period for the reference product by an additional six months if the FDA requests,
and the manufacturer undertakes, studies on the effect of its product in children, a so-called pediatric extension.
Pediatric exclusivity is another
type of regulatory market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing regulatory
exclusivity periods. This six-month exclusivity may be granted based on the voluntary completion of a pediatric study in accordance with
an FDA-issued “Written Request” for such a study.
Post-approval
requirements
Drugs and biologics manufactured
or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things,
requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting
of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other
labeling claims are subject to prior FDA review and approval. There are continuing, annual user fee requirements for any marketed products
and the establishments where such products are manufactured, as well as new application fees for supplemental applications with clinical
data.
The FDA may impose a number
of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including
Phase 4 clinical studies, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.
In addition, drug and biologic
manufacturers and other entities involved in the manufacture and distribution of approved drugs and biologics are required to register
their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies
for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval
before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP requirements and impose
reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval of a drug
or biologic is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or
if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse
events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may
result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical studies
to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include,
among other things:
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Restrictions on the marketing or manufacturing
of the product, complete withdrawal of the product from the market or product recalls; |
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Fines, warning letters or holds on post-approval
clinical studies; |
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Refusal of the FDA to approve pending NDAs or
BLAs or supplements to approved NDAs or BLAs, or suspension or revocation of product approvals; |
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Product seizure or detention, or refusal to permit
the import or export of products; and |
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Injunctions or the imposition of civil or criminal
penalties. |
The FDA strictly regulates
marketing, labeling, advertising and promotion of products that are placed on the market. Drugs and biologics may be promoted by a manufacturer
and any third parties acting on behalf of a manufacturer only for the approved indications and in a manner consistent with the approved
label for the product. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses,
and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
Other healthcare
laws
Healthcare providers, physicians,
and third party payors play a primary role in the recommendation and prescription of drug products for which we obtain marketing approval.
Arrangements with third party payors, healthcare providers and physicians, in connection with the clinical research, sales, marketing
and promotion of products, once approved, and related activities, may expose a pharmaceutical manufacturer to broadly applicable fraud
and abuse and other healthcare laws and regulations. In the United States, these laws include, without limitation, state and federal anti-kickback,
physician self-referral prohibitions, false claims, physician transparency, and patient data privacy and security laws and regulations,
including but not limited to those described below:
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The federal Anti-Kickback Statute, or AKS, which
makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf) to knowingly and willfully
solicit, receive, offer or pay any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly,
in cash or in kind, that is intended to induce or reward, referrals including the purchase recommendation, order or prescription of a
particular drug for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. A person
or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA; |
• |
The federal civil and criminal false claims laws,
including the FCA, which can be enforced through “qui tam” or “whistleblower” actions, and civil monetary penalty
laws, which impose criminal and civil penalties against individuals or entities for, among other things, knowingly presenting, or causing
to be presented, claims for payment or approval from Medicare, Medicaid, or other federal health care programs that are false or fraudulent;
knowingly making or causing a false statement material to a false or fraudulent claim or an obligation to pay or transmit money or property
to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing such an obligation. Similar to the
AKS and Stark Law, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order
to have committed a violation; |
• |
The federal Health Insurance Portability and Accountability
Act of 1996, or HIPAA, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting
to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations,
or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of
the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material
fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services
relating to healthcare matters; |
• |
HIPAA, as amended by the Health Information Technology
for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose requirements on certain
covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform
services for them that involve the creation, use, receipt, maintenance or disclosure of individually identifiable health information,
relating to the privacy, security and transmission of individually identifiable health information; |
• |
The federal Physician Payments Sunshine Act, created
under Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively,
the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biologics and medical supplies for which payment
is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the Centers for Medicare
and Medicaid Services, or CMS, under the Open Payments Program, information related to payments or other transfers of value made to physicians
(defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician healthcare professionals (such
as physician assistants and nurse practitioners, among others), and teaching hospitals, as well as ownership and investment interests
held by physicians and their immediate family members; and |
• |
Analogous state and foreign laws and regulations,
such as state and foreign anti-kickback, physician self-referral prohibitions, false claims, consumer protection and unfair competition
laws which may apply to pharmaceutical business practices, including but not limited to, research, distribution, sales and marketing arrangements
as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers;
state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare
providers and other potential referral sources; state laws that require drug manufacturers to file reports with states regarding pricing
and marketing information, such as the tracking and reporting of gifts, compensations and other remuneration and items of value provided
to healthcare professionals and entities; state and local laws requiring the registration of pharmaceutical sales representatives; and
state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each
other in significant ways and may not have the same effect, thus complicating compliance efforts. |
Because of the breadth of these
laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that some of a pharmaceutical
manufacturer’s business activities could be subject to challenge under one or more of such laws. Efforts to ensure that business
arrangements comply with applicable healthcare laws involve substantial costs. It is possible that governmental and enforcement authorities
will conclude that a pharmaceutical manufacturer’s business practices do not comply with current or future statutes, regulations
or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against
a pharmaceutical manufacturer, and it is not successful in defending itself or asserting its rights, those actions could have a significant
impact on its business, including the imposition of significant civil, criminal and administrative penalties, damages, disgorgement, imprisonment,
monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, reporting obligations
and oversight if we become subject to integrity and oversight agreements to resolve allegations of non-compliance, contractual damages,
reputational harm, diminished profits and future earnings, and curtailment of operations, any of which could adversely affect a pharmaceutical
manufacturer’s ability to operate its business and the results of operations. In addition, commercialization of any drug product
outside the United States will also likely be subject to foreign equivalents of the healthcare laws mentioned above, among other foreign
laws.
Prescription
drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug promotion,
including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction with their
first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the United States Prescription Drug
Marketing Act, or PDMA, a part of the FDCA. In addition, Title II of the Federal Drug Quality and Security Act of 2013, known as the Drug
Supply Chain Security Act, or DSCSA, has imposed new “track and trace” requirements on the distribution of prescription drug
products by manufacturers, distributors, and other entities in the drug supply chain. The DSCSA requires product identifiers (i.e., serialization)
on prescription drug products in order to eventually establish an electronic interoperable prescription product system to identify and
trace certain prescription drugs distributed in the United States and preempts existing state drug pedigree laws and regulations on this
topic. The DSCSA also establishes new requirements for the licensing of wholesale distributors and third-party logistic providers. The
FDA is in the process of finalizing regulations addressing national standards for the licensure of wholesale distributors and third-party
logistics providers.
In the United States, numerous
federal and state laws and regulations, including state data breach notification laws, state health information privacy laws, and federal
and state consumer protection laws, govern the collection, use, disclosure, and protection of health-related and other personal information.
For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018, or the CCPA, which came into
effect on January 1, 2020 and provides new data privacy rights for consumers and new operational requirements for companies, which
may increase our compliance costs and potential liability. The CCPA gives California residents expanded rights to access and delete their
personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information
is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected
to increase data breach litigation. While there is currently an exception for protected health information that is subject to HIPAA and
clinical study regulations, as currently written, the CCPA may impact certain of our business activities. The CCPA could mark the beginning
of a trend toward more stringent state privacy legislation in the United States, which could increase our potential liability and adversely
affect our business.
In the event we decide to conduct clinical
studies or continue to enroll subjects in our ongoing or future clinical studies, we may be subject to additional privacy restrictions.
The collection, use, storage, disclosure, transfer, or other processing of personal data regarding individuals in the European Economic
Area, or EEA, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective
on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including
requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates,
providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality
of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR
also imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States, and permits
data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million
or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations
to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations
of the GDPR. In addition, the GDPR includes restrictions on cross-border data transfers. The GDPR may increase our responsibility and
liability with respect to personal data that we process where such processing is subject to the GDPR, and we may be required to put in
place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Compliance with the
GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices,
and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection
with our European activities. Further, the United Kingdom’s decision to leave the EU, often referred to as Brexit, has created uncertainty
with regard to data protection regulation in the United Kingdom and transfers of personal data to the UK and from the UK to both the EEA
and countries outside the UK/EEA. For the time being, transfers of personal data from the EU to the UK are covered by an adequacy decision
of the EU Commission, and the UK has recently implemented its own regime for safeguarding transfers from the UK to countries outside the
UK/EEA which sit alongside the new EU safeguards which were brought in during 2021. However, both the adequacy decision and the
UK regime remain vulnerable to withdrawal or legal challenge. Further both the new UK and EU personal data transfer regimes remain
relatively untested and therefore impose risk that a transfer of personal data and/or its subsequent processing would be held unlawful
and give rise to liabilities from administrative fines and/or damages claims from data subjects.
Current
and future healthcare reform legislation
In both the United States and
certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system. In particular,
in 2010 the ACA was enacted, which, among other things, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid
Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed
care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives
to programs that increase the federal government’s comparative effectiveness research.
In
addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on
Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021,
was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This
includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in 2013, and, due to subsequent
legislative amendments, will remain in effect through 2031, with the exception of a temporary suspension implemented under various COVID-19
relief legislation from May 1, 2020, through March 31, 2022. Under current legislation, the actual reduction in Medicare payments can
vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. The American Taxpayer Relief Act of 2012 further reduced
Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period
for the government to recover overpayments to providers from three to five years. The Bipartisan Budget Act of 2018, also amended
the ACA, effective January 1, 2019, by increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate
in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”.
Additionally, there has been
heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription
drugs and biologics. In August 2022, Congress passed the Inflation Reduction Act of 2022, which includes prescription drug provisions
that have significant implications for the pharmaceutical industry and Medicare beneficiaries, including allowing the federal government
to negotiate a maximum fair price for certain high-priced single source Medicare drugs, imposing penalties and excise tax for manufacturers
that fail to comply with the drug price negotiation requirements, requiring inflation rebates for all Medicare Part B and Part D drugs,
with limited exceptions, if their drug prices increase faster than inflation, and redesigning Medicare Part D to reduce out-of-pocket
prescription drug costs for beneficiaries, among other changes. The impact of these legislative, executive, and administrative actions
and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a
whole is unclear. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate
revenue, attain profitability, or commercialize any of the product candidates for which we receive approval. At the state level, legislatures
have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or
patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures
and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Legislative and regulatory
proposals, and enactment of laws, at the foreign, federal and state levels, directed at containing or lowering the cost of healthcare,
will continue into the future.
Rest of
World Regulation
For
other countries outside of the European Union and the United States, such as countries in Eastern Europe, Latin America or Asia, the requirements
governing product development, the conduct of clinical studies, manufacturing, distribution, marketing approval, product licensing, pricing
and reimbursement vary from country to country. Additionally, clinical studies must be conducted in accordance with GCP requirements and
the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable
foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product
recalls, seizure of products, operating restrictions and criminal prosecution.
Additionally, to the extent
that any of our product candidates, once approved, are sold in a foreign country, we may be subject to applicable post-marketing requirements,
including safety surveillance, anti-fraud and abuse laws and implementation of corporate compliance programs and reporting of payments
or other transfers of value to healthcare professionals.
Coverage
and reimbursement
Successful commercialization
of new drug products depends in part on the extent to which reimbursement for those drug products will be available from government health
administration authorities, private health insurers, and other organizations. Government authorities and third-party payors, such as private
health insurers and health maintenance organizations, decide which drug products they will pay for and establish reimbursement levels.
The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford a
drug product. Sales of drug products depend substantially, both domestically and abroad, on the extent to which the costs of drugs products
are paid for by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government
health administration authorities, private health coverage insurers and other third-party payors.
A primary trend in the United States healthcare
industry and elsewhere is cost containment. Government authorities and third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular drug products. In many countries, the prices of drug products are subject to varying
price control mechanisms as part of national health systems. In general, the prices of drug products under such systems are substantially
lower than in the United States. Other countries allow companies to fix their own prices for drug products but monitor and control company
profits. Accordingly, in markets outside the United States, the reimbursement for drug products may be reduced compared with the United
States.
In the United States, the principal
decisions about reimbursement for new drug products are typically made by CMS, an agency within the U.S. Department of Health and Human
Services. CMS decides whether and to what extent a new drug product will be covered and reimbursed under Medicare, and private payors
tend to follow CMS to a substantial degree. However, no uniform policy of coverage and reimbursement for drug products exists among third-party
payors and coverage and reimbursement levels for drug products can differ significantly from payor to payor.
The
Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, established the Medicare Part D program
to provide a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription
drug plans offered by private entities that provide coverage of outpatient prescription drugs. While all Medicare drug plans must give
at least a standard level of coverage set by Medicare, Part D prescription drug plan sponsors are not required to pay for all covered
Part D drugs, and each Part D prescription drug plan can develop its own drug formulary that identifies which drugs it will
cover and at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category
and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D
prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs
of prescription drugs may increase demand for drugs for which we obtain marketing approval. Any negotiated prices for any of our products
covered by a Part D prescription drug plan will likely be lower than the prices it might otherwise obtain. Moreover, while the MMA
applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations
in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from
non-governmental payors.
For a drug product to receive
federal reimbursement under the Medicaid or Medicare Part B programs or to be sold directly to United States government agencies,
the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program. The required 340B discount
on a given product is calculated based on the average manufacturer price, or AMP, and Medicaid rebate amounts reported by the manufacturer.
As of 2010, the ACA expanded the types of entities eligible to receive discounted 340B pricing, although under the current state of the
law these newly eligible entities (with the exception of children’s hospitals) will not be eligible to receive discounted 340B pricing
on orphan drugs. As 340B drug pricing is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula
and AMP definition described above could cause the required 340B discount to increase. If third-party payors do not consider our drugs
to be cost-effective compared to other available therapies, they may not cover our drugs after approval as a benefit under their plans
or, if they do, the level of payment may not be sufficient to allow us to sell our drugs on a profitable basis.
These laws, and state and federal
healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding
and otherwise affect the prices we may obtain for any product candidates for which we may obtain regulatory approval or the frequency
with which any such product candidate is prescribed or used.
Outside of the United States,
the pricing of pharmaceutical products and medical devices is subject to governmental control in many countries. For example, in the European
Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only
after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost effectiveness
of a particular therapy to currently available therapies or so-called health technology assessments, in order to obtain reimbursement
or pricing approval. Other countries may allow companies to fix their own prices for products, but monitor and control product volumes
and issue guidance to physicians to limit prescriptions. Efforts to control prices and utilization of pharmaceutical products and medical
devices will likely continue as countries attempt to manage healthcare expenditures.
Employees and Human Capital
Resources
As of December 31, 2023, we
had 20 full-time employees/consultants, including 7 with Ph.D. or M.D. degrees and including 13 who are engaged in research and development
activities. We are dependent on our management and scientific personnel, and it is crucial that we continue to attract and retain valuable
employees. To facilitate attraction and retention, we strive to make ourselves an inclusive and safe workplace, with opportunities for
our employees to grow and develop in their careers, supported by strong compensation and benefits programs. None of our employees are
represented by labor unions or covered by collective bargaining agreements.
Corporate Information and History
We were incorporated on November
30, 2011, under the laws of the State of Israel. In March 2021, in connection with the Merger, we changed our name from Anchiano Therapeutics
Ltd. to Chemomab Therapeutics Ltd. Our principal executive offices are located at Kiryat Atidim, Building 7, Tel Aviv, Israel 6158002,
and our phone number is +972-77-331-0156. Our website is: www.chemomab.com. The
information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report.
Available Information
Our investor relations website
is https://investors.chemomab.com/. We promptly make available
on our investor relations website, free of charge, the reports that we file or furnish with the SEC, corporate governance information
(including our Code of Business Conduct and Ethics) and all press releases. The SEC maintains a website at www.sec.gov that contains reports,
proxy and information statements and other information regarding Chemomab and other issuers that file electronically with the SEC.
Item 4A.
Unresolved Staff Comments
None.
Item 5. Operating
and Financial Review and Prospects
You
should read the following discussion together with the consolidated financial statements and related notes included elsewhere in this
Annual Report. The statements contained in this discussion regarding industry outlook, our expectations regarding our future performance,
planned investments in our expansion into additional geographies, research and development, sales and marketing and general and administrative
functions as well as other non-historical statements contained in this discussion are forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item
3.D. entitled “Risk factors” and “Special note regarding forward-looking statements” included elsewhere in this
Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Overview
We are a clinical-stage
biotechnology company focused on the discovery and development of innovative therapeutics for fibrotic and inflammatory diseases with
high unmet needs. Based on the unique and pivotal role of the soluble protein CCL24 in promoting fibrosis and inflammation, we developed
CM-101, a monoclonal antibody designed to bind and block CCL24 activity. We believe CM-101 has demonstrated the potential to treat multiple
severe and life-threatening fibrotic and inflammatory diseases.
We have pioneered the therapeutic
targeting of CCL24, a chemokine that promotes various types of cellular processes that regulate inflammatory and fibrotic activities through
the CCR3 receptor. The chemokine is expressed in various types of cells, including immune cells, endothelial cells and epithelial cells.
We have developed a novel CCL24 inhibiting product candidate with dual anti-fibrotic and anti-inflammatory activity that modulates the
complex interplay of both of these inflammatory and fibrotic mechanisms, which drive abnormal states of fibrosis and clinical fibrotic
diseases. This innovative approach is being developed for difficult to treat rare diseases, also known as orphan indications or diseases,
such as PSC and SSc, for which patients have no established disease-modifying treatment options. We estimate that there are approximately
77 thousand patients suffering from PSC in the U.S., EU and Japan, representing over a $1 billion market opportunity, and approximately
170 thousand patients suffering from SSc in those same markets, representing over a $1.5 billion market opportunity.
CM-101, our lead clinical
product candidate, is a first-in-class humanized monoclonal antibody that attenuates the basic function of the soluble chemokine CCL24,
also known as eotaxin-2, as a regulator of major inflammatory and fibrotic pathways. We have demonstrated that CM-101 interferes with
the underlying biology of inflammation and fibrosis through a novel and differentiated mechanism of action. Based on these findings, we
are actively advancing CM-101 in Phase 2 clinical studies directed toward two distinct clinical indications that include patients with
liver or skin, and/or lung fibrosis. We are currently conducting a Phase 2 clinical study in PSC, a rare obstructive and cholestatic liver
disease. The study completed recruitment of patients in the U.S., Europe and Israel and topline results are expected around mid 2024.
A. Components
of Operating Results
Revenues
To date, we have not generated
any revenue from product sales and do not expect to generate any revenue from product sales in the near future. If development efforts
for our product candidates are successful and result in our receipt of necessary regulatory approvals, or if our development efforts otherwise
lead to any commercialized products or additional license agreements with third parties, then we may generate revenue in the future from
product sales.
Research
and Development Expenses, net
Research and development expenses
consist primarily of costs incurred in connection with the development of our product candidates. These expenses include:
• |
expenses incurred under agreements with clinical
research organizations and contract manufacturing organizations, as well as investigative sites and consultants that conduct our clinical
trials, preclinical studies and other scientific development services; |
• |
manufacturing scale-up expenses and the cost of
acquiring and manufacturing preclinical and clinical trial materials; |
• |
employee-related expenses, including salaries,
related benefits, travel and share-based compensation expenses for employees engaged in research and development functions, as well as
external costs, such as fees paid to outside consultants engaged in such activities; |
|
license maintenance fees and milestone fees incurred
in connection with various license agreements; |
• |
costs related to compliance with regulatory requirements;
and |
• |
depreciation and other expenses. |
We recognize external development
costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
We do not allocate employee
costs or facility expenses, including depreciation or other indirect costs, to specific programs because these resources are deployed
across multiple programs and, as such, the related costs are not separately classified. We use internal resources primarily to oversee
our research, as well as for managing our preclinical development, process development, manufacturing and clinical development activities.
Our employees work across multiple programs; therefore, we do not track the related expenses by program.
Research
and development activities are fundamental to our business. Product candidates in later stages of clinical development generally have
higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage
clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years
as we continue to advance the development of our product candidates. We also expect to incur additional expenses related to milestone
and royalty payments payable to third parties with whom we have entered into license agreements.
General and Administrative
Expenses
General and administrative
expenses consist primarily of salaries and related benefits, share-based compensation expenses for personnel in executive and administrative
functions, insurance and professional fees for legal, consulting, accounting and audit services.
We anticipate that our general
and administrative expenses will increase in the future due to increased headcount and professional fees to support our continued research
activities and development of our product candidates. We also anticipate that we will continue to incur accounting, audit, legal, regulatory,
compliance, director and officer insurance costs, as well as investor and public relations expenses associated with being a public company.
Additionally, once we believe that regulatory approval of a product candidate appears likely, we will begin to incur a material increase
in payroll and related expenses as a result of preparation for commercial operations, particularly in respect of sales and marketing.
Financing
Expenses, Net
Financing expenses, net consist
primarily of income or expenses related to revaluation of foreign currencies and interest income on our bank deposits.
Results of Operations
The following table summarizes
our results of operations for the years ended December 31, 2023 2022 and 2021:
|
|
Year ended December 31,
|
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
(in
thousands) |
|
Operating Expenses: |
|
|
|
Research and development |
|
$ |
18,381 |
|
|
$ |
16,977 |
|
|
$ |
6,334 |
|
General and administrative |
|
|
7,078 |
|
|
|
11,556 |
|
|
|
6,033 |
|
Total operating expenses |
|
|
25,459 |
|
|
|
28,533 |
|
|
|
12,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing (income) expense, net |
|
|
(1,238 |
) |
|
|
(353 |
) |
|
|
111 |
|
Loss before taxes |
|
|
24,221 |
|
|
|
28,180 |
|
|
|
12,478 |
|
Taxes on income (benefit) |
|
|
- |
|
|
|
(534 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
24,221 |
|
|
$ |
7,646 |
|
|
$ |
2,478 |
|
Our results of operations have
varied in the past and can be expected to vary in the future due to numerous factors. We believe that period-to-period comparisons of
our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.
Year ended December
31, 2023, Compared to the Year Ended December 31, 2022
Research and development expenses
Research and development expenses increased
by approximately $1.4 million, or 8.3%, to approximately $18.4 million for the year ended December 31, 2023, compared to approximately
$17 million for the year ended December 31, 2022. The increase resulted primarily from a continued investment in the clinical programs
of the Company.
General and administrative
expenses
General and administrative expenses decreased by approximately $4.5 million, or 38.8%,
to approximately $7.1 million for the year ended December 31, 2023, compared to approximately $11.6 million for the year ended December
31, 2022. The decrease was primarily due to a decrease in headcount, professional fees, insurance expenses and share-based compensation.
Financing (income) expense, net
Financing income, net, increased by approximately $885 thousand,
or 250%, to net income of $1,238 thousand for the year ended December 31, 2023, compared to a net income of $353 thousand for the year
ended December 31, 2022. Financing income, net for the year ended December 31, 2023, was primarily related interest income on deposits
offset by foreign currency exchange rate differences.
Taxes on Income
The tax benefit in 2022 is related to a tax return of Chemomab
Therapeutics Inc., a wholly owned subsidiary of ours, derived by carryback of net operating losses.
Year ended December 31, 2022, Compared to the
Year Ended December 31, 2021
Research and development expenses
Research and development expenses increased by approximately $10.7
million, or 168%, to approximately $17.0 million for the year ended December 31, 2022, compared to approximately $6.3 million for the
year ended December 31, 2021. The increase resulted primarily from an increase in headcount and payments to consultants and subcontractors
for clinical and pre-clinical activities.
General and administrative expenses
General and administrative expenses increased by approximately $5.6 million, or 92%,
to approximately $11.6 million for the year ended December 31, 2022, compared to approximately $6.0 million for the year ended December
31, 2021. This increase was primarily due to an increase in headcount and professional fees and insurance expenses and share-based compensation.
Financing (income) expense, net
Financing expenses, net, increased by approximately $464 thousand,
or 418%, to net income of $353 thousand for the year ended December 31, 2022, compared to a net loss of $111 thousand for the year ended
December 31, 2021. Financing expense, net for the year ended December 31, 2022, was primarily related to foreign currency exchange rate
differences, offset by interest income on deposits. Financing income, net for 2021 was primarily related to interest income on deposits,
offset by foreign currency exchange rate differences.
Taxes on Income
Tax benefit, net, for the year ended December
31, 2022, was $534 thousand. The tax benefit is related to a tax return of Chemomab Therapeutics Inc., a wholly owned subsidiary of the
Company, derived by carryback of net operating losses. Chemomab Therapeutics Inc. received $351 thousand in December 2022 on account of
previous years and expects to receive the remainder $183 thousand in 2023.
Cash Flows
The following table summarizes
our cash flows for the years ended December 31, 2023, 2022 and 2021:
|
|
Year ended December 31,
|
|
|
Increase/(decrease) |
|
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
% |
|
|
|
(in thousands) |
|
|
|
|
Net cash used in operating activities |
|
$ |
(23,611 |
) |
|
$ |
(20,370 |
) |
|
$ |
(12,374 |
) |
|
$ |
(3,241 |
) |
|
|
16 |
% |
Net cash provided by (used in) investing activities
|
|
|
15,879 |
|
|
|
19,533 |
|
|
|
(45,186 |
) |
|
|
(3,654 |
) |
|
|
(19) |
% |
Net cash provided by (used in) financing activities
|
|
|
3,504 |
|
|
|
(808 |
) |
|
|
61,074 |
|
|
|
4,312 |
|
|
|
534 |
% |
Net increase (decrease) in
cash, cash equivalents and restricted cash |
|
$ |
(4,228 |
) |
|
$ |
(1,645 |
) |
|
$ |
3,514 |
|
|
$ |
(2,584 |
) |
|
|
157 |
% |
Year ended December
31, 2023, Compared to the Year Ended December 31, 2022
Operating activities
Net cash used in operating activities for the year ended December
31, 2023, was approximately $23.6 million and included net loss of $24.2 million, partially offset by net cash used by changes in operating
assets and liabilities of approximately $0.9 million and non-cash charges of $1.6 million, which mainly included share-based compensation
expenses.
Net cash used in operating activities for the year ended December
31, 2022, was approximately $20.4 million and included net loss of $27.6 million, partially offset by net cash provided by changes in
operating assets and liabilities of $4 million and non-cash charges of $3.3 million, which mainly included share-based compensation expenses.
Investing activities
Net cash provided by investing activities for the year ended December
31, 2023, was approximately $15.9 million, which was primarily related to funds received from bank deposits.
Net cash provided in investing activities for the year ended December
31, 2022, was $19.5 million, which was primarily related to funds received from bank deposits.
Financing activities
Net cash provided by financing activities for the year ended December
31, 2023, was approximately $3.5 million, consisting of $2.9 million of proceeds from the sale of ADSs, $0.6 million of proceeds from
the sale of treasury shares.
Net cash used by financing activities for the year ended December
31, 2022, was $0.8 million, consisting of $0.3 million of proceeds from the sale of ADSs, $0.14 million proceeds from the exercise of
stock options offset by repurchases of shares in the amount of $1.2 million.
Year ended December 31, 2022, Compared to the
Year Ended December 31, 2021
Operating activities
Net cash used in operating activities for the year ended December
31, 2022, was approximately $20.4 million and included net loss of $27.6 million, partially offset by net cash used by changes in operating
assets and liabilities of approximately $4.0 million and non-cash charges of $3.3 million, which mainly included share-based compensation
expenses.
Net cash used in operating activities for the year ended December 31, 2021, was approximately $12.4 million and included net loss of $12.5
million, partially offset by net cash provided by changes in operating assets and liabilities of $1.9 million and non-cash charges of
$2.0 million, which mainly included share-based compensation expenses.
Investing activities
Net cash provided by investing activities for the year ended December
31, 2022, was approximately $19.5 million, which was primarily related to investment in short-term deposits offset by purchasing of fixed
assets.
Net cash used in investing activities for the year ended December
31, 2021, was $45.2 million, which was primarily related to purchase of fixed assets and investment in bank deposits.
Financing activities
Net cash used in financing activities for the year ended December
31, 2022, was approximately $0.8 million, consisting of $0.3 million of proceeds from the sale of ADSs, $0.1 million of proceeds from
the exercise of stock options offset by the repurchase of shares in the amount of $1.2 million.
Net cash provided by financing activities for the year ended December
31, 2021, was $61.1 million, consisting of $58.7 million of proceeds from the sale of ADSs, primarily from the Private Placement (as defined
and described below) and issuances under the Sales Agreement with Cantor, and $2.4 million of cash acquired in the Merger.
Funding
Requirements
We expect our expenses to increase
substantially as we advance the clinical trials of our product candidate. In addition, we expect to continue to incur additional costs
associated with operating as a public company.
We believe that our existing
cash, cash equivalents and bank deposits will enable us to fund our operating expenses and capital expenditure requirements through March
31, 2025. We have based these estimates on assumptions that may prove to be wrong, and we could expend our capital resources sooner than
we expect. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses
related to product manufacturing, sales, marketing and distribution.
Until such time, if ever, that
we generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through the sales of our securities
and through other outside funding sources. Debt financing and preferred equity financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends. If we raise additional funds through government and other third-party funding, collaboration agreements, strategic
alliances, licensing arrangements or marketing and distribution arrangements, then we may have to relinquish valuable rights to our technologies,
future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are
unable to raise additional funds through equity or debt financings when needed, then we may be required to delay, limit, reduce or terminate
our product development or future commercialization efforts or grant rights to develop and market products or product candidates that
we would otherwise prefer to develop and market.
B. Liquidity
and Capital Resources
In connection with the Merger,
on March 15, 2021, we entered into Securities Purchase Agreements with certain investors, pursuant to which we agreed to sell approximately
$45.5 million of the ADSs in a private placement transaction (the Private Placement). The Private Placement closed on March 22, 2021,
at which time we sold 2,619,270 ADSs together with warrants to purchase up to 261,929 ADSs at an exercise price of $17.35 per ADS. The
warrants expire five years from the date of issuance, and, if exercised in full, will provide proceeds of approximately $4.5 million.
On April 30, 2021, we entered into the Sales
Agreement with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, we may offer and sell, from time to time, ADSs having
an aggregate offering price of up to $75 million through Cantor (the ATM Facility). Sales of ADSs, if any, under the Sales Agreement will
be issued and sold pursuant to our Registration Statement on Form S-3 which was declared effective on May 17, 2021, and will be made in
sales deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act. Pursuant
to the Sales Agreement, Cantor has agreed to act as sales agent on a best efforts basis and use commercially reasonable efforts to sell
on our behalf all of the ADSs we requested to be sold in accordance with the Sales Agreement, consistent with Cantor’s normal trading
and sales practices, on mutually agreed terms.
On April 25, 2022, we filed
a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of ADSs in connection with the reactivation of the
ATM Facility and pursuant to General Instruction I.B.6 of Form S-3, which, subject to certain exceptions, limits the amount of securities
we are able to offer and sell under such registration statement during any twelve month period to one-third of our unaffiliated public
float.
During the year ended December
31, 2022, we sold 130,505 ADSs at an average price of USD 2.11 per ADS, through the ATM facility, resulting in gross proceeds
of $275,000.
During the year ended December
31, 2023, we sold 2,572,900 ADSs at an average price of USD 1.22 per ADS, through the ATM facility, resulting in gross proceeds of $3.145
million.
During the year ended December
31, 2023, we sold 582,023 ADSs which were held in treasury for consideration of approximately $580 thousand.
As shown in the accompanying consolidated
financial statements, we have incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit
as of December 31, 2023, of $88.7 million. We have financed operations to date primarily through public and private placements of equity
securities. We anticipate that we will continue to incur net losses for the foreseeable future. We believe that our existing cash, cash
equivalents and bank deposits will be sufficient to fund our projected cash needs through March 31, 2025. To meet future capital needs
we would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing
may not be available to us on favorable terms or at all. Our failure to obtain sufficient funds on commercially acceptable terms when
needed would have a material adverse effect on our business, results of operations and financial condition.
Current
Outlook
We estimate that our current
liquidity resources will allow us to execute our business plans through March 31, 2025.
Developing drugs, conducting
preclinical and clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive, and we will
need to raise substantial additional funds to achieve our strategic objectives. We will require significant additional financing in the
future to fund our operations, including if and when we progress into clinical trials of our product candidates, obtain regulatory approval
for one or more of our product candidates, obtain commercial manufacturing capabilities and commercialize one or more of our product candidates.
Our future capital requirements will depend on many factors, including, but not limited to:
• |
the progress and costs of our preclinical and
clinical trials and other research and development activities; |
• |
the scope, prioritization and number of our preclinical
and clinical trials and other research and development programs; |
• |
the amount of revenues and contributions we receive
under future licensing, collaboration, development and commercialization arrangements with respect to our product candidates; |
• |
the costs of development and expansion of our
operational infrastructure; |
• |
the costs and timing of obtaining regulatory approval
for one or more of our product candidates; |
• |
our ability, or that of our collaborators, to
achieve development milestones, marketing approval and other events or developments under potential future licensing agreements;
|
• |
the costs of filing, prosecuting, enforcing and
defending patent claims and other intellectual property rights; |
• |
the costs and timing of securing manufacturing
arrangements for clinical or commercial production; |
• |
the costs of contracting with third parties to
provide sales and marketing capabilities for us or establishing such capabilities ourselves; |
• |
the costs of acquiring or undertaking development
and commercialization efforts for any future products, product candidates or technology; |
• |
the magnitude of our general and administrative
expenses; and |
• |
any additional costs that we may incur under future
in- and out-licensing arrangements relating to one or more of our product candidates. |
Until we can generate significant
recurring revenues, we expect to satisfy our future cash needs through capital raising or by out-licensing and/or co-developing applications
of one or more of our product candidates. We cannot be certain that additional funding will be available to us on acceptable terms, if
at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or
commercialization efforts with respect to, one or more of our product candidates and make the necessary change to our operations to reduce
the level of our expenditures in line with available resources.
We are a development-stage
company and it is not possible for us to predict with any degree of accuracy the outcome of our research and development efforts. As such,
it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events
that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information
to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends,
uncertainties, demands, commitments and events are described in this item.
C. Research
and Development, Patents and Licenses
For information concerning
our research and development policies and a description of the amount spent during each of the last three fiscal years on company-sponsored
research and development activities, see “Item 5. Operating and Financial Review and Prospects—Results of Operations.”
D. Trend
Information
Other than as disclosed elsewhere
in this Annual Report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2023
to December 31, 2023 that are reasonably likely to have a material adverse effect on our revenue, profitability, liquidity or capital
resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial
condition.
E. Critical
Accounting Estimates
Our financial statements are
prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of our financial statements
and related disclosures in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base
our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates
under different assumptions or conditions.
While
our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements, we believe that the
following accounting estimates are those that include a higher degree of judgment or complexity and are reasonably likely to have a material
impact on our financial condition or results of operations and are therefore considered critical accounting estimates.
Share-Based Compensation
We apply Accounting Standard
Codification (ASC) 718-10, “Share-Based Payment,” which requires the measurement and recognition of compensation expenses
for all share-based payment awards made to employees and directors, including employee options under our option plans based on estimated
fair values.
ASC 718-10 requires that we
estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The fair value of the award
is recognized as an expense over the requisite service periods in our statements of comprehensive loss. We recognize share-based award
forfeitures as they occur, rather than estimate by applying a forfeiture rate.
In June 2018, the Financial
Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-07, “Compensation-Stock Compensation (Topic 718):
Improvements to Nonemployee Share-Based Payment Accounting”, which simplifies the accounting for nonemployee share-based payment
transactions by aligning the measurement and classification guidance, with certain exceptions, to that for share-based payment awards
to employees. The amendments expand the scope of the accounting standard for share-based payment awards to include share-based payment
awards granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes
the guidance related to equity-based payments to non-employees. We adopted these amendments on January 1, 2019.
We recognize compensation expenses
for the fair value of non-employee awards over the requisite service period of each award.
We estimate the fair value
of options granted as equity awards using a Black-Scholes options pricing model. The option-pricing model requires a number of assumptions,
of which the most significant are share price, expected volatility and the expected option term (the time from the grant date until the
options are exercised or expire). We determine the fair value per share of the underlying stock by taking into consideration our most
recent sales of stock, as well as additional factors that we deem relevant. Our board determined the fair value of ordinary shares based
on valuations performed using the Option Pricing Method subject to relevant facts and circumstances. We have historically been a private
company and lack company-specific historical and implied volatility information of our stock. Expected volatility is estimated based on
volatility of similar companies in the biotechnology sector. Historically, we have not paid dividends and have no foreseeable plans to
issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. The expected
option term is calculated for options granted to employees and directors using the “simplified” method. Grants to non-employees
are based on the contractual term. Changes in the determination of each of the inputs can affect the fair value of the options granted
and our results of operations.
Item
6. Directors, Senior Management and Employees
A. |
Directors and Senior Management
|
The following table sets forth the
name and position of each of our executive officers and directors as of March 28, 2024:
Name |
|
Age |
|
Position |
Executive Officers:
|
|
|
|
|
Adi Mor |
|
42 |
|
Director, Chief Executive Officer and Chief Scientific
Officer |
Sigal Fattal
|
|
53 |
|
Chief Financial Officer |
Matthew Frankel |
|
55 |
|
Chief Medical Officer |
Non-Employee Directors:
|
|
|
|
|
Nissim Darvish†(2)(3)
|
|
58 |
|
Chairman of the Board |
Alan Moses†(1) |
|
75 |
|
Director |
Claude Nicaise†(1) |
|
70 |
|
Director |
Neil Cohen†(2)(3) |
|
59 |
|
Director |
Jill Quigley†(1) |
|
48 |
|
Director |
† Independent Director
(1) |
Member of Audit Committee |
|
|
(2) |
Member of Compensation Committee |
|
|
(3) |
Member of Corporate Governance and Nominating
Committee |
Executive Officers
Dr.
Adi Mor is the co-founder of Chemomab Ltd., the wholly-owned subsidiary of the Company, and served as Chemomab Ltd.’s Chief
Executive Officer, Chief Scientific Officer and a member of Chemomab Ltd.’s board of directors from its formation in 2011 until
the Chemomab Ltd.–- Anchiano Therapeutics Ltd. merger that was consummated on March 16, 2021 (the “Merger”). Dr. Mor
previously served as Chief Executive Officer of the Company through October 25, 2021. Dr. Mor has in-depth knowledge in immunology focusing
on rare diseases and broad experience in designing, developing and patenting a novel class of monoclonal antibodies to treat inflammatory
and fibrotic diseases. Dr. Mor received her Ph.D. in immunology from Tel Aviv University in the Department of Neurobiochemistry in Israel
and is the lead author of numerous scientific journal publications regarding immunology and inflammatory disorders.
Sigal Fattal previously
served as Chemomab Ltd.’s interim Chief Financial Officer from October 2020 until the Merger and continued in that capacity for
the Company following the Merger until November 8, 2021, following which she became the Company’s VP of Finance. Prior to joining
Chemomab Ltd., from March 2017 to December 2019, Ms. Fattal served as Chief Financial Officer at BiomX (NYSE American: PHGE), a clinical
stage microbiome product discovery company. Prior to joining BiomX, Ms. Fattal served as Chief Financial Officer at Evogene (Nasdaq and
TASE: EVGN), a computational biology company, from 2013 to 2016. Prior to that time, Ms. Fattal served in multiple financial and operational
executive roles in various companies. Ms. Fattal also currently serves as co-founder of Simbiz, which was founded in September 2020 and
which offers one-stop-shop corporate services to startup companies. Ms. Fattal is a certified CPA (Isr.), and holds a BA in Accounting
and Economics, and an MBA, both from Tel Aviv University.
Dr.
Matthew B. Frankel has 20 years of experience in the pharmaceutical industry, encompassing clinical development and medical affairs.
From 2018 until November 2022, Dr. Frankel served as Vice President, Clinical Development and Medical Affairs, Specialty Pharma at Boehringer-Ingelheim
Pharmaceuticals, Inc. Prior to that, he served as the Vice President & Head, Immunology and Dermatology Medical Unit at Novartis Pharmaceuticals
Corporation from 2016 to 2018. From 2012 to 2016, Dr. Frankel served as the Executive Medical Director of Sandoz and from 2010 through
2012 held the role of Global Medical Director, Clinical Development at Reata Pharmaceuticals (RETA). From 2003 through 2010, he held various
senior roles across different companies in the research field. Dr. Frankel received his undergraduate degree from Vassar College, his
MD from the University of California, Los Angeles School of Medicine, and his MBA from the J. L. Kellogg Graduate School of Management.
Directors
Nissim
Darvish, M.D., Ph.D. has served on our Board since March 16, 2021 and as chairman of the Board since June 2023. Dr. Darvish is
a General Partner at Eliraz Ventures, a venture capital fund. Dr. Darvish currently serves as a director of several private companies.
Prior to his current position, Dr. Darvish served as a Venture Partner at OrbiMed Israel and as a member of the boards of directors of
9 Meters Biopharma Inc. and Medigus Ltd. Previously, Dr. Darvish was employed at Pitango Venture Capital, where he was a General Partner
managing life sciences investments. He was also the founder and CEO of Impulse Dynamics, where he oversaw a $250 million realization event.
Dr. Darvish obtained his M.D. and Ph.D. in Biophysics and Physiology from the Technion in Israel, and subsequently conducted his post-doctoral
research at NIH. He has published over 100 patents and authored over 20 publications.
Alan
Moses, MD, FACP has served on our Board since March 16, 2021. Dr. Moses is board certified by the ABIM with subspecialty certification
in Endocrinology and Metabolism and is a Fellow of the American College of Physicians. Dr. Moses currently serves on the board of directors
of BioFabUSA, a position he has held since 2018. Prior to that time, from 2008 to 2018, Dr. Moses served as the Global Chief Medical Officer
of Novo Nordisk A/S (CPH: NOVO-B), a company he joined in 2004. Dr. Moses served as a Professor of Medicine at Harvard Medical School
from 2002 to 2006, and in collaboration with MIT, he co-founded and co-directed the Clinical Investigator Training Program, which focused
on training physician-scientists in translational research. Dr. Moses previously served as the Senior Vice President and Chief Medical
Officer of the Joslin Diabetes Center from 1998 to 2004. Dr. Moses holds a BS from Duke University, North Carolina and an MD from Washington
University School of Medicine, Missouri.
Claude
Nicaise, MD has served on our Board since March 16, 2021. Dr. Nicaise is a physician with extensive U.S. and international
experience in clinical drug development, strategic management, worldwide regulatory strategy, pharmaceuticals, biotechnology, including
clinical cancer research, infectious diseases and neuroscience. Dr. Nicaise is the owner and founder of Clinical Regulatory Services,
which provides consulting services to the life science and biotechnology industry in support of all aspects of clinical and regulatory
development. Since 2015, Dr. Nicaise has served on the board of directors and as the Chairman of the Compensation Committee of Sarepta
Therapeutics, Inc. (NASDAQ: SRPT). Dr Nicaise has also served on the board of directors of Mynoryx Therapeutics since 2017. Prior to that
time, from 2008 to 2014, Dr. Nicaise served as the Senior Vice President of Alexion Pharmaceuticals Inc. (NASDAQ: ALXN), and between 1984
and 2008, he held numerous senior management roles at Bristol Myers Squibb (NYSE: BMY). Dr. Nicaise holds an MD and a degree in Internal
Medicine, Clinical Oncology, from Brussels University, Belgium.
Neil
Cohen has served as a member of our Board since April 2020 and served as our interim Chief Executive Officer from October
2020 until the consummation of the Merger. Mr. Cohen has served as the Chairman and Chief Executive Officer of Castel Partners Ltd. since
January 2012. In 1994, he co-founded Israel Seed Partners, a leading venture capital firm, and managed the firm until 2019. Mr. Cohen
has invested in and served on the boards of directors of many private technology companies, including a large number which were acquired
or completed successful initial public offerings, including Compugen (Nasdaq: CGEN), Shopping.com (Nasdaq: SHOP, acquired by EBAY), Broadlight
(acquired by Broadcom, Nasdaq: AVGO) and Cyota (acquired by RSA). He is a venture partner at SKY, an Israeli middle-market private equity
firm, Hetz Ventures Management Ltd., an early-stage Israeli venture capital fund, and Shavit Capital. Mr. Cohen was previously the Business
Editor of The Jerusalem Post and began his career in the private equity group at N M Rothschild & Sons Limited in London. Mr. Cohen
received a B.A. and M.A. in Oriental Studies, with first class honors, from Oxford University.
Jill M. Quigley
has served as a member of our Board since June 2022. Since September 2023 Ms. Quigley serves as CEO of a stealth biotech company. Since
December 2020, Ms. Quigley has served as a member of the board of directors of Terns Pharmaceuticals, Inc. (Nasdaq: TERN), including her
role as chairperson of its audit committee. From November 2018 until December 2021, Ms. Quigley served as Chief Operating Officer of Passage
BIO, Inc. (Nasdaq: PASG). Previously, she served as the Interim Chief Executive Officer and General Counsel of Nutrinia, Inc., from January
2016 to November 2018. From July 2012 to January 2016, Ms. Quigley served in various roles at Shire plc, most recently as Senior Legal
Counsel. Ms. Quigley received her undergraduate degree in Communications, Legal Institutions, Economics & Governance (CLEG) from American
University and J.D. from Rutgers School of Law.
Directors. Under the Companies Law, the compensation of our directors requires the approval of our compensation committee, the
subsequent approval of the board of directors and, unless exempted under regulations promulgated under the Companies Law, the approval
of the shareholders at a general meeting. If the compensation of our directors is inconsistent with our stated compensation policy, then,
those provisions that must be included in the compensation policy according to the Companies Law must have been considered by the compensation
committee and board of directors, and shareholder approval by a simple majority will also be required, provided that:
• |
at least a majority of the shares held by all
shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting,
are voted in favor of the compensation package, excluding abstentions; or |
|
|
• |
the total number of shares of non-controlling
shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed
two percent (2%) of the aggregate voting rights in the Company. |
Executive Officers other than the Chief Executive Officer. The Companies Law requires the approval of the compensation of a public
company’s executive officers (other than the chief executive officer) in the following order: (1) the compensation committee, (2)
the company’s board of directors, and (3) if such compensation arrangement is inconsistent with the company’s stated compensation
policy, the company’s shareholders (by a special majority vote as discussed above with respect to the approval of director compensation).
However, if the shareholders of the company do not approve a compensation arrangement with such executive officer that is inconsistent
with the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’
decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.
An amendment to an existing
arrangement with an office holder (who is not a director) requires only the approval of the compensation committee, if the compensation
committee determines that the amendment is not material in comparison to the existing arrangement. However, under the Companies Law, an
amendment to an existing arrangement with an office holder (who is not a director) who is subordinate to the chief executive officer will
not require the approval of the compensation committee, if (1) the amendment is approved by the chief executive officer, (2) the company’s
compensation policy provides that a non-material amendment to the terms of service of an office holder (other than the chief executive
officer) may be approved by the chief executive officer and (3) the engagement terms are consistent with the company’s compensation
policy.
Chief
Executive Officer. Under the Companies Law, the compensation of a public company’s chief executive officer is required to
be approved by: (1) the company’s compensation committee; (2) the company’s board of directors, and (3) the company’s
shareholders (by a special majority vote as discussed above with respect to the approval of director compensation). However, if the shareholders
of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors
may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons
for their decision. The approval of each of the compensation committee and the board of directors should be in accordance with the company’s
stated compensation policy; however, in special circumstances, they may approve compensation terms of a chief executive officer that are
inconsistent with such policy provided that they have considered those provisions that must be included in the compensation policy according
to the Companies Law and that shareholder approval is obtained (by a special majority vote as discussed above with respect to the approval
of director compensation). In addition, the compensation committee may waive the shareholder approval requirement with regards to the
approval of the engagement terms of a candidate for the chief executive officer position, if they determine that the compensation arrangement
is consistent with the company’s compensation policy and that the chief executive officer candidate did not have a prior business
relationship with the company or a controlling shareholder of the company and that subjecting the approval of the engagement to a shareholder
vote would impede the company’s ability to employ the chief executive officer candidate.
Compensation of Directors and
Executive Officers
The aggregate compensation
paid by us and our subsidiaries to our directors and executive officers, including share-based compensation expenses recorded in our financial
statements, for the year ended December 31, 2023, was approximately $4.4 million (including $1.3 million in share-based compensation).
This amount includes deferred or contingent compensation accrued for such year (and excludes deferred or contingent amounts accrued for
during the year ended December 31, 2022 and paid during the year ended December 31, 2023). This amount includes approximately $0.2 million
set aside or accrued to provide pension, severance, retirement or similar benefits or expenses, but does not include business travel,
relocation, professional and business association dues and expenses reimbursed to our directors and executive officers.
During the year ended
December 31, 2023, our directors and officers were granted options to purchase an aggregate of 12,656,020 ordinary shares (equal to 632,801
ADSs), at a weighted average exercise price of $1.4 per share.
The following is a summary of the
salary expenses, bonus and social benefit costs of our five most highly compensated executive officers in 2023, or the “Covered
Executives”. All amounts reported reflect the cost to us as recognized in our financial statements for the year ended December 31,
2023.
• |
Adi Mor, Chief Executive Officer, Chief Scientific
Officer and Director. Compensation expenses recorded in 2023 were $0.33 million in salary expenses. |
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• |
Dale Pfost, former Chief Executive Officer and Chairman
of the Board (1). Compensation expenses recorded in 2023 were $0.7 million in salary expenses and $16 thousand in social benefits.
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• |
Donald Marvin, former Chief Financial Officer, Chief
Operating Officer and Executive Vice President (2). Compensation expenses recorded in 2023 were $0.6 million in salary expenses
and $32 thousand in social benefits. |
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|
• |
Sigal Fattal, Chief Financial
Officer. Compensation expenses recorded in 2023 were $0.3 million in salary expenses and $22 thousand in social benefits.
|
|
|
•
|
Matthew Frankel, Chief Medical Officer. Compensation expenses recorded
in 2023 were $0.8 million in salary expenses and $50 thousand in social benefits.
(1) Dale Pfost resigned from his positions as Chief Executive Officer and Chairman of the Board on June
1, 2023. The salary amount includes severance.
(2) Donald Marvin resigned from his positions as Chief Financial Officer, Chief Operating Officer and Executive
Vice President on June 1, 2023. The salary amount includes severance. |
The salary expenses summarized above include the gross salary paid to the Covered
Executives, severance and bonus. The benefit costs include the social benefits paid by us on behalf of the Covered Executives, contributions
made by us to an insurance policy, pension fund or 401(K) fund.
We recorded equity-based compensation
expenses in our financial statements for the year ended December 31, 2023, of $1.3 million.
All equity-based compensation
grants to our Covered Executives were made in accordance with the parameters of our compensation policy and were approved by our compensation
committee and board of directors. Assumptions and key variables used in the calculation of such amounts are described in Note 8 to our
audited consolidated financial statements included in Item 18 of this Annual Report.
Additionally, we annually pay to each of our
non-employee directors a cash retainer of $40,000 (or $65,000 for the Chairperson) with an additional annual payment for service on board
committees as follows: $15,500 for the chairperson of the audit committee and $7,625 for the other committee members. $11,000 for the
chairperson of the compensation committee and $5,500 for the other committee members. $9,000 for the chairperson of the corporate governance
and nominating committee or any other board committee and $4,500 for the other committee members.
In addition, upon election, non-employee directors (other
than the Chairperson), will be granted equity awards equal to 0.1% of our share capital on a fully diluted basis, under our incentive
plan, which will vest on a monthly basis over a period of three years. In addition, each non-employee director will be granted equity
awards under our incentive plan (provided the director is still in office) equal to 0.06% of our share capital on a fully diluted basis,
which will vest on the first anniversary of the date on which such options were granted, subject to such director’s continued service
through such date.
The non-employee Chairperson, on election, will be granted an equity award equal to
0.2% of our share capital on a fully diluted basis, under our incentive plan, which will vest on a monthly basis over a period of three
years. In addition, the non-employee Chairperson will be granted equity awards under our incentive plan (provided the Chairperson is still
in office) equal to 0.1% of our share capital on a fully diluted basis, which will vest on the first anniversary of the date on which
such options were granted, subject to such Chairperson continued service through such date.
Equity Incentive Plans
We maintain (i) the 2011 Share Option Plan
(the “2011 Plan”), (ii) the 2017 Plan and (iii) the 2015 Plan, which was assumed by our company from the Subsidiary upon the
effectiveness of the Merger. At that time, outstanding options under the 2015 Plan became exercisable for such number of ADSs of our company
(formerly known as Anchiano Therapeutics Ltd.) as was determined based on the exchange ratio in the Merger Agreement, with a reciprocal
adjustment to exercise price. As of December 31, 2023, a total of 1,422,153 ADSs were reserved for issuance under the 2015 Plan, of which
172,276 ADSs had been issued pursuant to previous exercises options, and 341,322 ADSs were issuable under outstanding options. Of
such outstanding options, options to purchase 319,708 ADSs had vested and were exercisable as of that date, with a weighted average exercise
price of $5.98 per ADS.
As of December 31, 2023, a total of 1,153,069
of ADSs were reserved for issuance under the 2017 Plan, of which 1,152,333 ADSs were issuable under outstanding options. Of
such outstanding options, options to purchase 184,474 ADSs had vested and were exercisable as of that date, with a weighted average exercise
price of $3.91 per ADS. No ADSs had been issued pursuant to previous exercises options.
2011 Plan
On December 19, 2011, our board
of directors adopted the 2011 Plan to allocate options to purchase our ordinary shares to our directors, officers, employees and consultants,
and those of our affiliated companies (as such term is defined under the 2011 Plan), or the Grantees. The 2011 Plan is administered by
our board of directors or a committee that was designated by our board of directors for such purpose (the “Administrator”).
Under the 2011 Plan, we may
grant options to purchase ordinary shares (“Options”), under four tracks: (i) Approved 102 capital gains Options through a
trustee, which was approved by the Israeli Tax Authority in accordance with Section 102(a) of the Israeli Income Tax Ordinance (“ITO”),
and granted under the tax track set forth in Section 102(b)(2) of the ITO, or the Approved 102 Capital Gains Options. The holding period
under this tax track is 24 months from the date of allocation of Options to the trustee or such period as may be determined in any amendment
of Section 102 of the ITO, or any applicable tax ruling or guidelines; (ii) Approved 102 Earned Income Options through a trustee, granted
under the tax track set forth is Section 102(b)(1) of the ITO, or the Approved 102 Earned Income Options. The holding period under this
tax track is 12 months from the date of allocation of Options to the trustee or such period as may be determined in any amendment of Section
102 of the ITO; (iii) Unapproved 102 Options (the Options will not be allocated through a trustee and will not be subject to a holding
period), or the Unapproved 102 Options; and (iv) 3(i) Options (the Options will not be subject to a holding period). These Options shall
be subject to taxation pursuant to Section 3(i) of the ITO, or Section 3(i).
Options pursuant to the first
three tax tracks (under Section 102 of the ITO) can be granted to our employees and directors and the grant of Options under Section 3(i)
can be granted to our consultants and controlling shareholders (a controlling shareholder is defined under the Section 102 of the ITO
is a person who holds, directly or indirectly, alone or together with a “relative,” (i) the right to at least 10% of the company’s
issued capital or 10% of the voting power; (ii) the right to hold at least 10% of the company’s issued capital or 10% of the voting
power, or the right to purchase such rights; (iii) the right to receive at least 10% of the company’s profits; or (iv) the right
to appoint a company’s director). Grantees who are not Israeli residents may be granted options that are subject to the applicable
tax laws in their respective jurisdictions.
We determine, in our sole discretion,
under which of the first three tax tracks above the Options are granted and we notify the Grantee in a grant letter, as to the elected
tax track. As mentioned above, consultants and controlling shareholders can only be granted Section 3(i) Options.
The number of ordinary shares
authorized to be issued under the 2011 Plan will be proportionately adjusted for any increase or decrease in the number of ordinary shares
issued as a result of a distribution of bonus shares, change in our capitalization (split, combination, reclassification of the shares
or other capital change), or issuance of rights to purchase ordinary shares or payment of a dividend. We will not allocate fractions of
ordinary shares and the number of ordinary shares shall be rounded up to the closest number of ordinary shares.
Unless otherwise determined
by the Administrator, the exercise price of an Option granted under the 2011 Plan will be the average of the market price of our ordinary
shares during the 22 business days prior to the date on which our board of directors authorized the grant of Options; provided, however,
that such exercise price cannot be lower than the market price at the close of the trading day at which it was granted by our board of
directors. The exercise price will be specified in the grant letter every Grantee received from us in which the Grantee notifies of the
decision to grant him/her Options under the 2011 Plan.
Unless otherwise determined
by the Administrator, the Options granted under the 2011 Plan will become vested and may be exercised in 16 equal portions of 6.25% of
the total number of Options, at the end of each quarter following the day the Options were granted. Unless otherwise determined by our
board of directors, the Options may be exercised for ten years following the date of grant, unless terminated earlier, and as long as
the Grantee is employed by us (or by an affiliated company), or provides service to us (or an affiliated company).
The Administrator may, in its
absolute discretion, accelerate the time at which Options granted under the 2011 Plan or any portion of which will vest.
Unless otherwise determined
by the Administrator, in the event that the Grantee’s employment was terminated, not for Cause (as defined in the 2011 Plan), the
Grantee may exercise that portion of the Options that had vested as of the date of such termination until the end of the specified term
in the grant letter or the 2011 Plan. The portion of the Options that had not vested at such date, will be forfeited and can be re-granted
according to the terms of the 2011 Plan.
2015 Plan
In November 2015, the Subsidiary’s
board of directors adopted, and its shareholders subsequently approved, the 2015 Plan. The 2015 Plan provides for the grant of options,
restricted shares, restricted share units and other share-based awards to the Subsidiary’s (following the Merger, the Company’s)
and its subsidiaries’ and affiliates’ directors, employees, officers, consultants, advisors, and any other person whose services
are considered valuable to us or our affiliates. Any such grants are intended to incentivize the foregoing persons to continue as service
providers, to increase their efforts on our behalf or on behalf of our subsidiaries or affiliates, and to promote the success of our business.
The 2015 Plan is administered
by our board of directors or by a committee designated by the board of directors, which determines, subject to Israeli law, the grantees
of awards and the terms of the grant, including, exercise prices, vesting schedules, acceleration of vesting and the other matters necessary
in the administration of the 2015 Plan. The 2015 Plan enables us to issue awards under various tax regimes, including, without limitation,
pursuant to Section 102 of the Israeli Income Tax Ordinance, or the Ordinance, and under Section 3(i) of the Ordinance and Section 422
of the United States Internal Revenue Code of 1986, as amended, or the Code.
The 2015 Plan provides that
options granted to our employees, directors and officers who are not controlling shareholders and who are considered Israeli residents
are intended to qualify for special tax treatment under the “capital gain track” provisions of Section 102(b) of the Ordinance.
Our Israeli non-employee service providers and controlling shareholders may only be granted options under Section 3(i) of the Ordinance,
which does not provide for similar tax benefits.
Options granted under the 2015
Plan to U.S. residents may qualify as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified.
The exercise price for “incentive stock options” must not be less than the fair market value on the date on which an option
is granted, or 110% of the fair market value if the option holder holds more than 10% of our share capital.
Options and other awards granted
under the 2015 Plan generally vest over four years commencing on the date of grant, such that 25% vests on the first anniversary of the
date of grant and an additional 6.25% vests at the end of each subsequent calendar quarter over the course of the next three years, provided
that the participant remains continuously employed or engaged by us.
Options, other than certain
incentive share options, that are not exercised within ten years from the grant date expire, unless otherwise determined by our board
of directors or our designated committee, as applicable. Share options that qualify as “incentive stock options” and are granted
to a person holding more than 10% of our voting power will expire within five years from the date of the grant. In the event of the death
of a grantee while employed by or performing service for us or our subsidiary or within three months after the date of the employee’s
termination, or the termination of a grantee’s employment or services for reasons of disability, the grantee, or in the case of
death, his or her legal successor, may exercise options or other awards that have vested prior to termination within a period of one year
from the date of disability or death. If we terminate a grantee’s employment or service for cause, all of the grantee’s vested
and unvested options or other awards will expire on the date of termination. If a grantee’s employment or service is terminated
for any other reason, the grantee may generally exercise his or her vested options or other award within three months of the date of termination.
Any expired or unvested options return to the pool and become available for reissuance. From time to time, we may consider issuing options
with slightly different terms or accelerating, extending or otherwise modifying options in accordance with applicable law and regulation
and the terms of the 2015 Plan.
In the event of a merger or
consolidation, or a sale of all, or substantially all, of our shares or assets or other transaction having a similar effect on us, then
without the consent of the option holder, our board of directors or our designated committee, as applicable, may, but is not required,
to (i) cause any outstanding award to be assumed or an equivalent award to be substituted by such successor corporation, or (ii) in case
the successor corporation does not assume or substitute the award (a) provide the grantee with the option to exercise the award as to
all or part of the shares or (b) cancel the options and pay in cash an amount determined by the board of directors or the committee as
fair in the circumstances. Notwithstanding the foregoing, our board of directors or our designated committee may upon such event amend,
modify or terminate the terms of any award, including conferring the right to purchase any other security or asset that the board of directors
or the committee shall deem, in good faith, appropriate.
The 2015 plan was assumed by
our company from the Subsidiary upon the effectiveness of the Merger.
2017 Plan
On February 22, 2017, our board of directors
adopted the 2017 Plan to allocate a variety of share-based awards to our directors, officers, employees, consultants, advisors and service
providers, and those of our affiliates (companies that control us, are controlled by us or are under common control with us) (the “Participants”).
The 2017 Plan is currently administered by our board of directors and may be administered by a committee designated by our board of directors
for such purpose.
Under the 2017 Plan, we may
grant options to purchase ordinary shares or ADSs, restricted shares or ADSs, restricted share units and other awards based on our ordinary
shares, all of which are referred to as Awards. We may grant Awards under the same four tracks as described above with respect to the
2011 Plan, subject to the same conditions as apply for the 2011 Plan. In addition, we may grant incentive stock options and nonqualified
stock options to Participants who are residents of the United States, and we may grant awards to Participants who are residents of other
countries that comply with the laws of those jurisdictions.
The number of ordinary shares
authorized to be issued under the 2017 Plan will be proportionately adjusted for any increase or decrease in the number of ordinary shares
issued as a result of a distribution of bonus shares, change in our capitalization (split, combination, reclassification of the shares
or other capital change), issuance of rights to purchase ordinary shares or payment of a dividend. We will not allocate fractions of ordinary
shares and the number of ordinary shares shall be rounded down to the closest number of ordinary shares.
Corporate Governance Practices
As an Israeli company, we
are subject to various corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the
Companies Law, companies with securities traded on certain U.S. stock exchanges, including Nasdaq, may, subject to certain conditions,
“opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the
composition of the audit committee and compensation committee of the board of directors (other than the gender diversification rule under
the Companies Law, which requires the appointment of a director from the other gender if at the time a director is appointed all members
of the board of directors are of the same gender). In accordance with these regulations, we elected to “opt out” from those
requirements of the Companies Law. Under these regulations, the exemptions from such Companies Law requirements will continue to be available
to us so long as: (i) we do not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our
ADSs are traded on a U.S. stock exchange, Nasdaq, and (iii) we comply with the director independence requirements and the audit committee
and compensation committee composition requirements under U.S. laws (including applicable rules of Nasdaq) applicable to U.S. domestic
issuers.
We are a “foreign private
issuer” (as such term is defined in Rule 3b-4 under the Exchange Act). As a foreign private issuer, we are permitted to comply with
Israeli corporate governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements
we are not following and the equivalent Israeli requirement. As a foreign private issuer, we are exempt under the Exchange Act from, among
other things, the rules prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders
are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we
are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act. For more information regarding our corporate governance practices
and foreign private issuer status, see Item 16G. “Corporate Governance.”
Board of Directors
Under the Israeli Companies Law, 5759-1999
(the “Companies Law”), our board of directors is responsible for setting our general policies and supervising the performance
of management. Our board of directors may exercise all powers and may take all actions that are not specifically granted by the Companies
Law or our articles of association to our shareholders or to management. Our executive officers are responsible for our day-to-day management
and have individual responsibilities established by our board of directors.
Under the Companies
Law, the chief executive officer of a public company, or a relative of the chief executive officer, may not serve as the chairperson of
the board of directors of such public company, and the chairperson of the board of directors of a public company, or a relative of the
chairperson, may not be vested with authorities of the chief executive officer of such public company without obtaining shareholder approval
pursuant to special majority requirements set forth in the Companies Law.
Our board of directors is currently composed of six (6) members. Our board of
directors consists of three classes of directors (as illustrated below), each serving staggered three-year terms. Upon expiration of the
term of a class of directors, directors in that class will be elected for a three-year term at the Annual General Meeting of shareholders
in the year in which that term expires. Each director’s term continues until the election and qualification of his or her successor,
or his or her earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the
three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board
of directors into three classes with staggered three-year terms may delay or prevent a change of management or a change of control of
our company.
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Class I consists of Nissim Darvish and Jill Quigley, each with a term
expiring at the 2025 annual meeting of shareholders. |
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Class II consists of Neil Cohen and Claude Nicaise, each with a term
expiring at the 2026 annual meeting of shareholders. |
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Class III consists of Adi Mor and Alan Moses,
each with a term expiring at the 2024 annual meeting of shareholders. |
Our directors are appointed
by a simple majority vote of holders of our ordinary shares, participating and voting at an annual general meeting of our shareholders,
provided that (i) in the event of a contested election, the method of calculation of the votes and the manner in which the resolutions
will be presented to our shareholders at the general meeting will be determined by our board of directors in its discretion, and (ii)
in the event that our board of directors does not or is unable to make a determination on such matter, then the directors will be elected
by a plurality of the voting power represented at the general meeting in person or by proxy and voting on the election of directors.
Each director will hold office
until the annual general meeting of our shareholders for the year in which such director’s term expires, unless the tenure of such
director expires earlier pursuant to the Companies Law or unless such director is removed from office as described below.
Under our Articles of Association,
the approval of the holders of at least 65% of the total voting power of our shareholders is generally required to remove any of our directors
from office or any amendment to this provision shall require the approval of at least 65% of the total voting power of our shareholders
to remove any of our directors from office. In addition, vacancies on our board of directors may only be filled by a vote of a simple
majority of the directors then in office. A director so appointed will hold office until the next annual general meeting of our shareholders
for the election of the class of directors in respect of which the vacancy was created, or in the case of a vacancy due to the number
of directors being less than the minimum number of directors stated in our Articles of Association, the new director filling the vacancy
will serve until the next annual general meeting of our shareholders for the election of the class of directors to which such director
was assigned by our board of directors.
Chairperson
of the Board
Our Articles of Association
provide that the Chairperson of our board of directors is appointed by the members of our board of directors from among them. Under the
Companies Law, the chief executive officer of a public company, or a relative of the chief executive officer, may not serve as the chairperson
of the board of directors of such public company, and the chairperson of the board of directors of a public company, or a relative of
the chairperson, may not be vested with authorities of the chief executive officer of such public company without shareholder approval
consisting of a majority vote of the shares present and voting at a shareholders meeting, and in addition, either:
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at least a majority of the shares of non-controlling
shareholders and shareholders that do not have a personal interest in the approval voted at the meeting are voted in favor (disregarding
abstentions); or |
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the total number of shares of non-controlling
shareholders and shareholders who do not have a personal interest in such appointment that re voted against such appointment does not
exceed two percent (2%) of the aggregate voting rights in the company. |
The shareholders’ approval
can be effective for a period of up to five years following an initial public offering, and subsequently, for additional periods of up
to three years.
In addition, a person who
is subordinated, directly or indirectly, to the chief executive officer may not serve as the chairperson of the board of directors; the
chairperson of the board of directors may not be vested with authorities that are granted to persons who are subordinated to the chief
executive officer; and the chairperson of the board of directors may not serve in any other position in the company or in a controlled
subsidiary, but may serve as a director or chairperson of a controlled subsidiary.
External
Directors
Under the Companies Law, companies
incorporated under the laws of the State of Israel that are “public companies,” including companies with shares listed on
Nasdaq, are required to appoint at least two external directors. Pursuant to regulations promulgated under the Companies Law, companies
with shares traded on certain U.S. stock exchanges, including Nasdaq, which do
not have a “controlling shareholder,” may, subject to certain conditions, “opt out” from the Companies Law requirements
to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee
of the board of directors. In accordance with these regulations, we have elected to “opt out” from the Companies Law requirement
to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee
of our board of directors.
Committees of our Board of
Directors
Audit Committee
Under the Companies Law, the Exchange Act and Nasdaq
rules, we are required to establish an audit committee, and we have a separately-designated standing audit committee established in accordance
with section 3(a)(58)(A) of the Exchange Act.
The responsibilities of an audit committee under
the Companies Law include identifying and addressing flaws in the business management of the company, reviewing and approving related
party transactions, establishing whistleblower procedures, overseeing the company’s internal audit system and the performance of
its internal auditor, and assessing the scope of the work and recommending the fees of the company’s independent accounting firm.
In addition, the audit committee is required to determine whether certain related party actions and transactions are “material”
or “extraordinary” for the purpose of the requisite approval procedures under the Companies Law and to establish procedures
for considering proposed transactions with a controlling shareholder.
In accordance with U.S. law and Nasdaq requirements,
our audit committee is also responsible for the appointment, compensation and oversight of the work of our independent auditors and for
assisting our board of directors in monitoring our financial statements, the effectiveness of our internal controls and our compliance
with legal and regulatory requirements.
Under the Companies Law and related regulations,
the audit committee must consist of at least three directors who meet certain independence criteria. Under the Nasdaq rules, we are required
to maintain an audit committee consisting of at least three independent directors, all of whom are financially literate and one of whom
has accounting or related financial management expertise. Each of the members of the audit committee is required to be “independent”
as such term is defined in Rule 10A-3(b)(1) under the Exchange Act.
The members of the audit committee are Jill Quigley,
Alan Moses and Claude Nicaise. Jill Quigley is the chairperson of the audit committee and is a financial expert under the rules of the
SEC. Our board of directors has concluded that each member of the audit committee is independent under the rules and regulations of Nasdaq
and the SEC.
Compensation
Committee
Under both the Companies Law and Nasdaq rules, we are required to establish a compensation
committee.
The responsibilities of a compensation committee
under the Companies Law include recommending to the board of directors, for ultimate shareholder approval by a special majority, a policy
governing the compensation of directors and officers based on specified criteria, reviewing modifications to and implementing such compensation
policy from time to time, and approving the actual compensation terms of directors and officers prior to approval by the board of directors.
In accordance with U.S. law and Nasdaq requirements,
our compensation committee is also responsible for the appointment, compensation and oversight of the work of any compensation consultant,
independent legal counsel and other advisors retained by the compensation committee.
The Companies Law and related regulations require
the appointment of a compensation committee that complies with the requirements of Nasdaq. Under Nasdaq rules, we are required to maintain
a compensation committee consisting of at least two independent directors; each of the members of the compensation committee is required
to be independent under Nasdaq rules relating to compensation committee members, which are different from the general test for independence
of board and committee members. The members of the compensation committee are Nissim Darvish and Neil Cohen. Nissim Darvish is the chairperson
of the compensation committee. Our board of directors has determined that each member of the compensation committee is independent within
the meaning of the independent director guidelines of Nasdaq and under Rule 10C-1 under the Exchange Act.
Compensation Policy under
the Companies Law
In general, under the Companies
Law, a public company must have a compensation policy approved by the board of directors after receiving and considering the recommendations
of the compensation committee. In addition, our compensation policy must be approved at least once every three years, first, by our board
of directors, upon the recommendation of our compensation committee, and second, by a simple majority of the ordinary shares present,
in person or by proxy, and voting (excluding abstentions) at a general meeting of shareholders, provided that either:
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such majority includes at least a majority of
the shares held by shareholders who are not controlling shareholders and shareholders who do not have a personal interest in such compensation
policy; or |
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the total number of shares of non-controlling
shareholders and shareholders who do not have a personal interest in the compensation policy and who vote against the policy does not
exceed two percent (2%) of the aggregate voting rights in the Company. |
Under special circumstances,
the board of directors may approve the compensation policy despite the objection of the shareholders on the condition that the compensation
committee and then the board of directors decide, on the basis of detailed grounds and after discussing again the compensation policy,
that approval of the compensation policy, despite the objection of shareholders, is for the benefit of the company.
If a company that initially
offers its securities to the public, like us, adopts a compensation policy in advance of its initial public offering, and describes it
in its prospectus for such offering, then such compensation policy shall be deemed a validly adopted policy in accordance with the Companies
Law requirements described above. Furthermore, if the compensation policy is established in accordance with the aforementioned relief,
then it will remain in effect for a term of five years from the date such company becomes a public company.
The compensation policy must
be based on certain considerations, include certain provisions and reference certain matters as set forth in the Companies Law. The compensation
policy must serve as the basis for decisions concerning the financial terms of employment or engagement of office holders, including exculpation,
insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy
must be determined and later reevaluated according to certain factors, including: the advancement of the company’s objectives, business
plan and long-term strategy; the creation of appropriate incentives for office holders, while considering, among other things, the company’s
risk management policy; the size and the nature of the company’s operations; and with respect to variable compensation, the contribution
of the office holder towards the achievement of the company’s long-term goals and the maximization of its profits, all with a long-term
objective and according to the position of the office holder. The compensation policy must furthermore consider the following additional
factors:
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the education, skills, experience, expertise and
accomplishments of the relevant office holder; |
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the office holder’s position and responsibilities;
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prior compensation agreements with the office
holder; |
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the ratio between the cost of the terms of employment
of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors
who provide services to the company, in particular the ratio between such cost to the average and median salary of such employees of the
company, as well as the impact of disparities between them on the work relationships in the company; |
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if the terms of employment include variable components
- the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on
the value of non-cash variable equity-based components; and |
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if the terms of employment include severance compensation
- the term of employment or office of the office holder, the terms of the office holder’s compensation during such period, the company’s
performance during such period, the office holder’s individual contribution to the achievement of the company goals and the maximization
of its profits and the circumstances under which he or she is leaving the company. |
The compensation policy must
also include, among other things:
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with regards to variable components: |
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with the exception of office holders who report
to the chief executive officer, a means of determining the variable components on the basis of long-term performance and measurable criteria;
provided that the company may determine that an immaterial part of the variable components of the compensation package of an office holder
shall be awarded based on non-measurable criteria, or if such amount is not higher than three months’ salary per annum, taking into
account such office holder’s contribution to the company; |
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the ratio between variable and fixed components,
as well as the limit of the values of variable components at the time of their payment, or in the case of equity-based compensation, at
the time of grant; |
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a condition under which the office holder will
return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of the office holder’s
terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated
in the company’s financial statements; |
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the minimum holding or vesting period of variable
equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives;
and |
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a limit to retirement grants. |
Our compensation policy is
designed to promote retention and motivation of directors and executive officers, incentivize superior individual excellence, align the
interests of our directors and executive officers with our long-term performance and provide a risk management tool. To that end, a portion
of our executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s
individual performance. On the other hand, our compensation policy includes measures designed to reduce the executive officer’s
incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation,
limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods and performance
based vesting for equity-based compensation.
Our compensation policy also
addresses our executive officers’ individual characteristics (such as their respective position, education, scope of responsibilities
and contribution to the attainment of our goals) as the basis for compensation variation among our executive officers and considers the
internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy,
the compensation that may be granted to an executive officer may include: base salary, annual bonuses and other cash bonuses (such as
a signing bonus and special bonuses with respect to any special achievements, such as outstanding personal achievement, outstanding personal
effort or outstanding company performance), equity-based compensation, benefits and retirement and termination of service arrangements.
All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary.
An annual cash bonus may be
awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may
be granted to our executive officers other than our Chief Executive Officer will be based on performance objectives and a discretionary
evaluation of the executive officer’s overall performance by our Chief Executive Officer and subject to minimum thresholds. The
annual cash bonus that may be granted to executive officers other than our Chief Executive Officer may alternatively be based entirely
on a discretionary evaluation. Furthermore, our Chief Executive Officer will be entitled to approve performance objectives for executive
officers who report to her.
The measurable performance
objectives of our Chief Executive Officer will be determined annually by our compensation committee and board of directors. A non-material
portion of the Chief Executive Officer’s annual cash bonus, as provided in our compensation policy, may be based on a discretionary
evaluation of the Chief Executive Officer’s overall performance by the compensation committee and the board of directors.
The equity-based compensation
under our compensation policy for our executive officers (including members of our board of directors) is designed in a manner consistent
with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the
alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen
the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation
in the form of share options or other equity-based awards, such as restricted shares and restricted share units, in accordance with our
equity incentive plan then in place. The equity-based compensation shall be granted from time to time and be individually determined and
awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities
of the executive officer.
In addition, our compensation
policy contains compensation recovery provisions which allow us under certain conditions to recover bonuses paid in excess, enable our
Chief Executive Officer to approve an immaterial change in the terms of employment of an executive officer who reports directly to her
(provided that the changes of the terms of employment are in accordance with our compensation policy) and allow us to exculpate, indemnify
and insure our executive officers and directors to the maximum extent permitted by Israeli law subject to certain limitations set forth
therein.
Our compensation policy also
provides for compensation to the members of our board of directors either (i) in accordance with the amounts provided in the Companies
Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief
for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time, or (ii)
in accordance with the amounts determined in our compensation policy.
Our compensation policy was
approved by our board of directors and shareholders and became effective on July 19, 2021.
Corporate Governance and Nominating
Committee
We have established a Corporate Governance and
Nominating Committee, responsible for making recommendations to the board of directors regarding candidates for directorships and the
size and composition of the board. In addition, the committee is responsible for overseeing our corporate governance guidelines and reporting
and making recommendations to the board concerning corporate governance matters. Under the Companies Law, nominations for director may
also, under certain circumstances, be made by shareholders in accordance with the conditions prescribed by applicable law and our articles
of association. The members of the Corporate Governance and Nominating Committee are Neil Cohen and Nissim Darvish. Neil Cohen is the
chairperson of the Corporate Governance and Nominating Committee. Our board of directors has determined that each member of the Corporate
Governance and Nominating Committee is independent within the meaning of the independent director guidelines of Nasdaq.
Internal Auditor
Under the Companies Law, the board of directors
is required to appoint an internal auditor recommended by the audit committee. The role of the internal auditor is to examine, among other
things, whether the company’s actions comply with applicable law and proper business procedures. The internal auditor may not be
an interested party, a director or an officer of the company, or a relative of any of the foregoing, nor may the internal auditor be our
independent accountant or a representative thereof. Yisrael Gewirtz of Grant Thornton Israel currently serves as our internal auditor.
Approval of Related Party Transactions
under Israeli Law
Fiduciary
duties of directors and Executive Officers
An office holder’s fiduciary
duties consist of a duty of care and a duty of loyalty. The duty of care requires an office holder to act with the level of care with
which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care includes, among
other things, a duty to use reasonable means, in light of the circumstances, to obtain:
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information on the business advisability of a
given action brought for his, her or its approval or performed by virtue of his, her or its position; and |
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all other important information pertaining to
such action. |
The duty of loyalty requires
that an office holder act in good faith and in the best interests of the company, and includes, among other things, the duty to:
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refrain from any act involving a conflict of interest
between the performance of his, her or its duties in the company and his, her or its other duties or personal affairs; |
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refrain from any activity that is competitive
with the business of the company; |
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refrain from exploiting any business opportunity
of the company for the purpose of gaining a personal advantage for himself, herself or itself or others; and |
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disclose to the company any information or documents
relating to the company’s affairs which the office holder received as a result of his, her or its position as an office holder.
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Under the Companies Law, a
company may approve an act specified above which would otherwise constitute a breach of the office holder’s duty of loyalty, provided
that the office holder acted in good faith, neither the act nor its approval harms the company, and the office holder discloses his, her
or its personal interest a sufficient time before the approval of such act. Any such approval is subject to the terms of the Companies
Law setting forth, among other things, the appropriate bodies of the company required to provide such approval and the methods of obtaining
such approval.
Disclosure
of Personal Interests of an Office Holder and Approval of Certain Transactions
The Companies Law requires
that an office holder promptly disclose to the board of directors any personal interest that such office holder may have and all related
material information known to such office holder concerning any existing or proposed transaction with the company. A personal interest
includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of
a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which
such person has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from
one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder
holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person
for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
If it is determined that an
office holder has a personal interest in a non-extraordinary transaction, meaning any transaction that is in the ordinary course of business,
on market terms or that is not likely to have a material impact on the company’s profitability, assets or liabilities, approval
by the board of directors is required for the transaction unless the company’s articles of association provide for a different method
of approval. Any such transaction that is adverse to the company’s interests may not be approved by the board of directors.
Approval first by the company’s
audit committee and subsequently by the board of directors is required for an extraordinary transaction (meaning any transaction that
is not in the ordinary course of business, not on market terms or that is likely to have a material impact on the company’s profitability,
assets or liabilities) in which an office holder has a personal interest.
A director and any other office
holder who has a personal interest in a transaction which is considered at a meeting of the board of directors or the audit committee
may generally (unless it is with respect to a transaction which is not an extraordinary transaction) not be present at such a meeting
or vote on that matter unless a majority of the directors or members of the audit committee, as applicable, have a personal interest in
the matter. If a majority of the members of the audit committee or the board of directors have a personal interest in the matter, then
all of the directors may participate in deliberations of the audit committee or board of directors, as applicable, with respect to such
transaction and vote on the approval thereof and, in such case, shareholder approval is also required.
Certain disclosure and approval
requirements apply under Israeli law to certain transactions with controlling shareholders, certain transactions in which a controlling
shareholder has a personal interest and certain arrangements regarding the terms of service or employment of a controlling shareholder.
For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, including
any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company.
Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder.
For a description of the approvals
required under Israeli law for compensation arrangements of officers and directors, see “-Compensation of Directors and Executive
Officers.”
Shareholder
Duties
Pursuant to the Companies
Law, a shareholder has a duty to act in good faith and in a customary manner toward the company and other shareholders and to refrain
from abusing his or her power with respect to the company, including, among other things, in voting at a general meeting and at shareholder
class meetings with respect to the following matters:
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an amendment to the company’s articles of
association; |
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an increase of the company’s authorized
share capital; |
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a merger; or |
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interested party transactions that require shareholder
approval. |
In addition, a shareholder
has a general duty to refrain from discriminating against other shareholders.
Certain shareholders also
have a duty of fairness toward the company. These shareholders include any controlling shareholder, any shareholder who knows that it
has the power to determine the outcome of a shareholder vote and any shareholder who has the power to appoint or to prevent the appointment
of an office holder of the company or exercise any other rights available to it under the company’s articles of association with
respect to the company. The Companies Law does not define the substance of this duty of fairness, except to state that the remedies generally
available upon a breach of contract will also apply in the event of a breach of the duty of fairness.
Exculpation,
Insurance and Indemnification of Office Holders
Under the Companies Law, a
company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office
holder in advance from liability to the company, in whole or in part, for damages caused to the company as a result of a breach of duty
of care but only if a provision authorizing such exculpation is included in its articles of association. Our Articles of Association include
such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution
to shareholders.
An Israeli company may indemnify
an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance
of an event or following an event, provided a provision authorizing such indemnification is contained in its articles of association:
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a financial liability imposed on him or her in
favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an
undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited
to events which, in the opinion of the board of directors, can be foreseen based on the company’s activities when the undertaking
to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances,
and such undertaking shall detail the above mentioned events and amount or criteria; |
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reasonable litigation expenses, including legal
fees, incurred by the office holder (1) as a result of an investigation or proceeding instituted against him or her by an authority authorized
to conduct such investigation or proceeding, provided that
(i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability,
such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation
or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal
intent; and (2) in connection with a monetary sanction; |
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reasonable litigation expenses, including legal
fees, incurred by the office holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or
by a third-party or in connection with criminal proceedings in which the office holder was acquitted or as a result of a conviction for
an offense that does not require proof of criminal intent; and |
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expenses, including reasonable litigation expenses
and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain
compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions
of the Israeli Securities Law. |
An Israeli company may insure
an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the
company’s articles of association:
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a breach of the duty of loyalty to the company,
to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
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a breach of the duty of care to the company or
to a third-party, including a breach arising out of the negligent conduct of the office holder; |
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a financial liability imposed on the office holder
in favor of a third-party; |
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a financial liability imposed on the office holder
in favor of a third-party harmed by a breach in an administrative proceeding; and |
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expenses, including reasonable litigation expenses
and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her, pursuant to certain
provisions of the Israeli Securities Law. |
An Israeli company may not
indemnify or insure an office holder against any of the following:
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a breach of the duty of loyalty, except to the
extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
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a breach of the duty of care committed intentionally
or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
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an act or omission committed with intent to derive
illegal personal benefit; or |
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a fine, monetary sanction or forfeit levied against
the office holder. |
Under the Companies Law, exculpation,
indemnification and insurance of office holders must be approved by the compensation committee and the board of directors (and, with respect
to directors and the chief executive officer, by the shareholders). However, under regulations promulgated under the Companies Law, the
insurance of office holders does not require shareholder approval and may be approved by only the compensation committee if the engagement
terms are determined in accordance with the company’s compensation policy, which was approved by the shareholders by the same special
majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is
not likely to materially impact the company’s profitability, assets or obligations.
Our Articles of Association
allow us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including
any omission) which was performed by virtue of being an office holder. Our office holders are currently covered by a directors and officers’
liability insurance policy.
We have entered into indemnification
agreements with each of our directors and executive officers exculpating them in advance, to the fullest extent permitted by law, from
liability to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent
permitted by law. This indemnification is limited to events determined as foreseeable by the board of directors based on our activities,
and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances.
In the opinion of the SEC,
indemnification of directors and office holders for liabilities arising under the Securities Act, however, is against public policy and
therefore unenforceable.
As of December 31, 2023, we
had 20 full-time employees/consultants, including 7 with Ph.D. or M.D. degrees and including 13 who are engaged in research and development
activities. We are dependent on our management and scientific personnel, and it is crucial that we continue to attract and retain valuable
employees. To facilitate attraction and retention, we strive to make ourselves an inclusive and safe workplace, with opportunities for
our employees to grow and develop in their careers, supported by strong compensation and benefits programs. None of our employees are
represented by labor unions or covered by collective bargaining agreements.
For
information regarding the share ownership of directors and officers, see Item 7.A. “Major Shareholders and Related Party Transactions-Major
Shareholders.” For information as to our equity incentive plans, see Item 6.B. “Director, Senior Management and Employees-Compensation-
Equity incentive plans.”
F. |
Disclosure of a Registrant’s
Action to Recover Erroneously Awarded Compensation |
Not applicable.