Business Context and Reporting Period
Entera Bio Ltd. filed its Annual Report on Form 20-F for the fiscal year ended December 31, 2019. The Israeli clinical-stage biopharmaceutical company develops orally delivered large-molecule therapeutics, principally EB613 for osteoporosis and EB612 for hypoparathyroidism. The company has no approved products and has not generated product-sale revenue. Financial statements are presented in U.S. dollars under IFRS.
Key Financial Metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | $0.236 million | $0.500 million | Down 53.0% |
| Cost of revenue | $0.210 million | $0 | New in 2019 |
| Research and development expense | $7.199 million | $8.518 million | Down 15.5% |
| General and administrative expense | $4.281 million | $2.843 million | Up 50.6% |
| Operating loss | $11.454 million | $10.861 million | Up 5.5% |
| Net comprehensive loss | $10.795 million | $10.304 million | Up 4.7% |
| Basic loss per share | $0.89 | $1.30 | Improved, partly due to share issuance |
| Cash used in operating activities | $8.919 million | $9.796 million | Improved by $0.877 million |
| Cash and cash equivalents at year-end | $15.185 million | $7.506 million | Up $7.679 million |
Revenue consisted entirely of amounts recognized under the Amgen collaboration: 2019 revenue reflected preclinical research and development services, while 2018 revenue primarily reflected recognition of the technology license. The company has no product revenue.
2019 financial income of $0.659 million was primarily attributable to changes in the fair value of warrant liabilities. This non-cash, market-driven item reduced the reported net loss. Share-based compensation expense was $1.483 million.
At December 31, 2019, total assets were $16.703 million, total liabilities were $4.784 million, shareholders’ equity was $11.919 million, and working capital was $11.044 million. The company had no convertible loans or preferred shares outstanding. Current liabilities included $2.444 million of warrant liabilities.
Material Changes Versus the Prior Comparable Period
- R&D expense declined because significant 2018 manufacturing and materials costs were not repeated, partially offset by higher consulting costs related to the EB613 IND preparation and Phase 2 trial.
- G&A expense increased primarily because of higher compensation, directors’ fees, insurance costs, and the hiring of a new CEO.
- Operating loss and net loss increased despite lower R&D spending, primarily because of higher G&A expense and lower collaboration revenue.
- Operating cash burn improved by $0.877 million, while financing cash inflows increased to $12.652 million, principally from the December 2019 private placement.
- Cash increased by $7.679 million, including $3.946 million of investing cash inflows from the withdrawal of short-term bank deposits.
- The company adopted IFRS 16 on January 1, 2019, recording right-of-use assets of $0.260 million and lease liabilities of approximately $0.299 million at year-end. Prior periods were not restated.
- Shares outstanding increased from 11.460 million at December 31, 2018 to 17.865 million at December 31, 2019, primarily reflecting financing activity and option exercises. The filing separately reports 18.202 million shares outstanding as of March 15, 2020.
Guidance, Outlook, Risks and Unusual Items
- Management expected existing cash resources to fund operations into the second quarter of 2021, but stated that substantial additional capital is required to complete development and obtain regulatory approval. Management and the independent auditor each expressed substantial doubt about the company’s ability to continue as a going concern.
- The company expects continued substantial losses and higher R&D costs as EB613 and EB612 advance. It has no committed external funding source and may seek equity, debt, grants, collaborations, or licensing transactions.
- EB613 entered a Phase 2 dose-ranging trial in July 2019 targeting approximately 160 osteoporosis patients. Enrollment was temporarily suspended in March 2020 because of COVID-19; 97 patients were enrolled at the time of the filing’s subsequent-event disclosures. A Phase 3 trial of approximately 600–700 patients was contemplated for 2021 or 2022, subject to Phase 2 results, regulatory agreement, COVID-19 effects, and available funding.
- EB612 completed a Phase 2 PK/PD program in 2019. Management reported positive pharmacodynamic results and no treatment-emergent serious adverse events, but a larger Phase 2b/3 trial remains subject to additional formulation work and funding.
- The Amgen agreement provides potential milestone payments of up to $270 million and tiered royalties in the low-to-mid single digits, but no milestone or royalty revenue had been recognized through year-end 2019. These amounts are contingent and should not be treated as committed funding.
- COVID-19 could delay patient enrollment, clinical data collection, research activities, regulatory timelines, manufacturing, supply chains, and collaboration obligations, potentially increasing cash needs.
- The company completed a private placement between December 2019 and February 2020 for aggregate gross proceeds of $14.3 million, issuing 6.048 million ordinary shares and warrants to purchase up to 3.301 million additional shares. The financing included participation by related parties and created registration obligations; failure to meet those obligations could result in liquidated damages of 1% per month of applicable purchase price.
- Emisphere Technologies has notified Entera that it believes it is the exclusive owner of certain U.S. and foreign patent rights acquired from Oramed. No legal proceeding had been initiated as of the filing date, but an adverse outcome could impair the company’s intellectual property position and require redesign or licensing.
- The company’s principal risks include clinical and regulatory failure, dependence on third-party manufacturers and clinical research organizations, limited operating history, competition from Forteo, Natpara and other therapies, intellectual-property disputes, foreign-exchange exposure, dilution from future financing, and potential Nasdaq listing-compliance issues.
Important Facts for Investors to Verify
- Whether additional financing was obtained after March 15, 2020 and whether it was sufficient to extend the stated second-quarter 2021 cash runway.
- The final enrollment, data quality, timing, and results of the EB613 Phase 2 trial following the COVID-19-related suspension.
- Whether the FDA accepted the proposed EB613 regulatory pathway, including use of BMD as a Phase 3 endpoint and the 505(b)(2) pathway.
- Whether and when Entera initiated the planned EB613 Phase 3 and EB612 Phase 2b/3 programs.
- The status of the Amgen collaboration, including program selection, research payments, milestones, options, termination rights, and any recognized revenue.
- The status and potential financial impact of the Emisphere patent ownership claim.
- The company’s registration-statement compliance under the 2019 private placement and any related liquidated damages.
- Fully diluted share count, including outstanding options, IPO warrants, investor warrants, broker warrants, and other potential dilution.
- Subsequent changes in cash, warrant liabilities, operating burn, Nasdaq compliance, and going-concern disclosures.