Entera Bio Ltd. 10-Q Summary
Business Context and Reporting Period
Entera Bio Ltd. is an Israel-based clinical-stage biotechnology company developing orally delivered peptide and protein therapeutics. Its lead candidates are EB613 for osteoporosis and EB612 for hypoparathyroidism. The company also licenses its oral delivery platform, including under its collaboration with Amgen. This unaudited Form 10-Q covers the quarter and nine months ended September 30, 2022.
Financial Results and Key Metrics
| U.S. dollars in thousands, except per-share data | Three months ended September 30, 2022 | Three months ended September 30, 2021 | Nine months ended September 30, 2022 | Nine months ended September 30, 2021 |
|---|---|---|---|---|
| Revenue | 8 | 140 | 120 | 406 |
| Gross profit | 2 | 75 | 27 | 169 |
| Gross margin | 25.0% | 53.6% | 22.5% | 41.6% |
| Research and development expense | 1,413 | 1,771 | 4,497 | 4,122 |
| General and administrative expense | 1,460 | 1,535 | 5,512 | 4,208 |
| Operating loss | 2,865 | 3,220 | 9,949 | 8,129 |
| Net loss | 3,067 | 3,214 | 10,036 | 8,087 |
| Basic and diluted loss per share | 0.11 | 0.11 | 0.35 | 0.32 |
Cash and cash equivalents were $14.3 million at September 30, 2022, compared with $24.9 million at December 31, 2021. Total current assets were $15.2 million and total liabilities were $1.2 million. The balance sheet shows no debt financing; liabilities primarily comprised accounts payable, accrued expenses and operating lease obligations.
Net cash used in operating activities was $10.5 million for the first nine months of 2022, compared with $6.6 million in the prior-year period. Net cash used in investing activities was $0.1 million. Financing activities provided $13 thousand, principally from option exercises, compared with $25.4 million in the prior-year period, which included $21.8 million of ATM equity proceeds and $3.5 million from option and warrant exercises.
The accumulated deficit was $92.5 million at September 30, 2022. Share-based compensation was $1.8 million for the first nine months of 2022. The company had 28,809,922 ordinary shares outstanding at September 30, 2022 and November 7, 2022.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue declined 94% to $8 thousand, and nine-month revenue declined 70% to $120 thousand, primarily because third-year preclinical research and development services under the Amgen agreement were finalized.
- Quarterly research and development expense decreased 20% to $1.4 million, reflecting lower preclinical and clinical-trial activity, partly offset by production and materials costs and a one-time payment related to the former head of research and development.
- Nine-month research and development expense increased 9% to $4.5 million due primarily to preparation for the proposed EB613 Phase 3 study, production and materials costs, and employee-related costs.
- Nine-month general and administrative expense increased 31% to $5.5 million, primarily due to share-based compensation, payments related to former executives, legal and professional fees, and directors and officers insurance.
- Nine-month operating loss increased 22% and net loss increased 24%, while operating cash usage increased by $3.9 million.
- The company launched a new SVB ATM program on September 2, 2022, permitting sales of up to 5 million ordinary shares. No shares had been sold under the program as of September 30, 2022.
Guidance, Outlook, Risks and Unusual Items
Management estimates that available funds will support operations through the second quarter of 2023, assuming continued research and development, the EB612 pharmacokinetic study, investments in production and analytics, and preparation to initiate the EB613 Phase 3 trial during the second half of 2023. This estimate excludes potential partnership payments.
The financial statements and management’s discussion state that substantial doubt exists regarding the company’s ability to continue as a going concern. The company expects to require additional capital and is evaluating equity financing, debt financing, grants, licensing transactions and strategic collaborations. If additional funding is unavailable, the company may need to delay, reduce or cease development activities and could be required to curtail or cease operations.
In October 2022, after the quarter-end, the FDA agreed that a single placebo-controlled Phase 3 study could support an EB613 NDA under the 505(b)(2) pathway and that total bone mineral density could serve as the primary endpoint. The company expects to conduct an EB612 pharmacokinetic study in the first half of 2023 to inform the design of a potential pivotal study.
Unusual items included executive and research leadership transitions, separation payments, accelerated or modified stock options, and a reversal of $457 thousand of previously recognized share-based compensation related to the former chief executive officer. The company also recognized a $194 thousand quarterly income tax benefit and a $183 thousand nine-month tax benefit, despite continuing losses.
Key risks include clinical and regulatory uncertainty, the need for substantial additional financing, dilution from future equity offerings, dependence on third-party clinical and manufacturing providers, reliance on the Amgen collaboration, intellectual-property protection, competition, supply-chain execution, retention of personnel and potential effects from COVID-19. The filing reports no material legal proceedings and no material changes to previously disclosed risk factors.
Facts Investors Should Verify
- Whether the company raises capital before its projected second-quarter 2023 liquidity horizon and the resulting dilution or financing terms.
- The timing, design, funding and enrollment of the EB613 Phase 3 trial and the implications of the FDA’s October 2022 guidance.
- The results and regulatory implications of the planned EB612 pharmacokinetic study.
- The pace of cash burn relative to the $14.3 million cash balance and the assumptions supporting management’s liquidity estimate.
- Whether Amgen selects additional programs, continues the collaboration and generates future milestone, research-service or royalty revenue.
- The effect of executive changes, separation payments and stock-option grants on future expenses and share dilution.