Business context and reporting period
Sol-Gel Technologies Ltd. filed an annual Form 20-F for the fiscal year ended December 31, 2022, prepared under U.S. GAAP and audited by Kesselman & Kesselman, which issued an unqualified opinion. Although the request metadata says “2022 Q4,” this filing reports full-year results; it does not provide a clear standalone fourth-quarter financial summary.
The Israeli dermatology company’s FDA-approved products, Twyneo for acne and Epsolay for papulopustular rosacea, were commercialized in the United States by Galderma. Sol-Gel also had investigational candidates SGT-210 and, acquired after year-end, SGT-610, plus generic-product collaborations.
Key financial metrics
Amounts below are in U.S. dollars; financial-statement figures are in millions unless otherwise noted.
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $3.883 | $31.272 |
| Research and development expense | $12.682 | $20.381 |
| General and administrative expense | $7.445 | $8.451 |
| Operating loss | $16.244 | Operating income $2.964 |
| Net loss (income) | $14.923 | Net income $3.221 |
| Basic and diluted loss per share | $0.65 | Basic and diluted earnings per share $0.14 |
| Net cash used in operating activities | $9.484 | $7.691 |
Revenue was primarily license revenue in 2022; the filing reports $3.883 million in total revenue, including Galderma-related milestone and royalty revenue. Sol-Gel reported no collaboration revenue in 2022. It reported no material interest-bearing debt; liabilities were principally payables, employee obligations and operating leases.
At December 31, 2022, cash and cash equivalents were $12.448 million, bank deposits $12.500 million and marketable securities $8.678 million, totaling $33.626 million in these liquid assets. Current assets were $43.055 million and current liabilities $3.329 million (approximately 12.9x current-asset coverage). Total assets were $46.628 million, total liabilities $4.415 million and shareholders’ equity $42.213 million. Accumulated deficit was $193.065 million.
Cash flows in 2022 were: operating activities, $(9.484) million; investing activities, positive $1.699 million; and financing activities, positive $0.015 million. Cash and cash equivalents declined by $7.637 million during the year. The company reported an accumulated deficit and recurring losses, and stated that it expects continued operating losses.
Material changes versus the prior comparable period
- Revenue fell about 87.6%, from $31.272 million in 2021 to $3.883 million in 2022. The main reason was the nonrecurring 2021 sale of rights to ten generic collaboration programs to Padagis, which generated approximately $20.4 million of 2021 revenue.
- Sol-Gel moved from $3.221 million net income in 2021 to a $14.923 million net loss in 2022, as revenue declined despite lower operating expenses.
- R&D expense declined by $7.699 million, mainly due to lower professional expenses relating to Twyneo and Epsolay. G&A expense declined by $1.006 million, mainly due to lower commercialization expenses for those products.
- Operating cash use increased by $1.793 million year over year. Liquid assets were $33.626 million at year-end 2022, compared with $43.242 million in cash, deposits and marketable securities at year-end 2021.
Outlook, management commentary and risks
- Funding and runway: Management said year-end 2022 cash resources, together with proceeds from the January 2023 registered offering and concurrent private placement, were expected to fund operations and capital needs into the second half of 2025. The affiliate placement was subject to disinterested shareholder approval; the filing cautions that cash needs could exceed estimates and additional financing may be required.
- Commercial dependence: Galderma holds exclusive U.S. commercialization rights for Twyneo and Epsolay. Sol-Gel is eligible for tiered mid-teen to high-teen royalties and up to $9 million in sales milestones, but revenue depends on Galderma’s commercial performance and the filing gives no sales forecast.
- Pipeline milestones: After year-end, Sol-Gel acquired SGT-610 (patidegib) for Gorlin syndrome. Management expected to start a Phase 3 trial in the second half of 2023 and reported expected results by the end of 2025. SGT-210’s Phase 1 study was initiated in December 2022.
- SGT-610 acquisition obligations: Sol-Gel paid $4 million upfront; $0.7 million of principal remained unpaid as of the report’s issuance. Further obligations include up to $6 million in development and NDA-acceptance milestones, up to $64 million in commercial milestones (rising to $89 million above $500 million in sales), and royalties that increase from single-digit to double-digit rates above that sales threshold.
- January 2023 financing: The registered direct offering generated approximately $12.8 million gross. A concurrent $10 million affiliate private placement was conditional on shareholder approval; the filing described aggregate expected gross proceeds of approximately $22.8 million.
- Key risks: recurring losses and uncertain liquidity; clinical-trial and regulatory uncertainty; dependence on Galderma and other third parties; manufacturing and supply constraints; competition and reimbursement or pricing pressure; intellectual-property and product-safety risks; and political, security, currency and operating risks in Israel. Management said internal control over financial reporting was effective as of December 31, 2022; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether the affiliate private placement received shareholder approval and the resulting proceeds, dilution and warrant terms.
- Galderma’s U.S. sales performance for Twyneo and Epsolay, and the royalties and milestones actually earned.
- Whether SGT-610’s Phase 3 trial began as planned, its funding needs, and progress toward the stated end-2025 results timeline.
- Cash burn and liquid-asset levels against management’s second-half-2025 runway estimate, including the impact of acquisition payments and future clinical costs.
- Reconciliation of the $3.883 million reported 2022 revenue with the specifically described Galderma milestone and royalty amounts; the filing text does not clearly reconcile the components.