Entera Bio Ltd. 2021 Form 10-K Summary
Business context and reporting period
Entera Bio Ltd. is an Israeli clinical-stage biopharmaceutical company developing oral delivery technology for proteins and other large molecules. Its lead candidates are EB613, an oral PTH(1-34) formulation for osteoporosis, and EB612, an oral PTH(1-34) formulation for hypoparathyroidism. The filing covers the fiscal year ended December 31, 2021. Entera reported under U.S. GAAP and transitioned from foreign private issuer status to U.S. domestic issuer reporting beginning January 1, 2022.
The company has no approved products or product-sales revenue. Its revenue is primarily generated from research and development services under its Amgen collaboration and other material transfer agreements.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $571,000 | $365,000 | Up 56% |
| Cost of revenue | $373,000 | $300,000 | Up 24% |
| Gross profit | $198,000 | $65,000 | Up $133,000 |
| Gross margin | 34.7% | 17.8% | Improved |
| Research and development expense | $6.8 million | $6.4 million | Up 6% |
| General and administrative expense | $5.7 million | $4.9 million | Up 17% |
| Operating loss | $12.2 million | $11.2 million | Loss increased 9% |
| Net loss | $12.2 million | $11.2 million | Loss increased 9% |
| Basic and diluted loss per share | $0.47 | $0.67 | Improved per share |
| Net cash used in operations | $9.1 million | $10.6 million | Improved $1.5 million |
| Net cash provided by financing | $25.4 million | $4.1 million | Increased |
| Cash and cash equivalents at year-end | $24.9 million | $8.6 million | Increased $16.3 million |
Gross margin improved to approximately 35%, but the company remained deeply unprofitable because operating expenses substantially exceeded revenue. The filing does not identify material conventional debt; liabilities were primarily accounts payable, accrued expenses, lease liabilities and employee-related obligations. Total liabilities were $3.4 million at December 31, 2021, compared with $2.2 million in 2020.
Cash and cash equivalents were $24.9 million at year-end, or $25.0 million including restricted cash. Current assets were $25.3 million versus current liabilities of $3.2 million. Financing included approximately $21.8 million of net ATM proceeds and $3.6 million from warrant and option exercises. The company reported an accumulated deficit of $82.4 million.
Material changes versus the prior comparable period
- Revenue increased 56%, primarily from higher Amgen-related research and development services.
- Research and development expense increased by $0.4 million, reflecting higher materials and production costs and preclinical work preparing for EB613 Phase 3 development, partly offset by lower completed Phase 2 clinical-trial and consulting costs.
- General and administrative expense increased by $0.8 million, mainly due to higher executive share-based compensation, legal and accounting costs, and directors and officers insurance.
- Operating cash burn improved from $10.6 million to $9.1 million, while equity financing increased substantially and raised year-end cash.
- Shares outstanding increased from 21.1 million at year-end 2020 to 28.8 million at year-end 2021, reflecting ATM issuances, warrant exercises and option exercises.
- Entera selected an improved EB612 formulation in the fourth quarter of 2021 and planned preclinical and human PK/PD work in 2022.
- In December 2021, Entera held an FDA end-of-Phase 2 meeting concerning EB613 and its proposed Phase 3 protocol, including potential use of BMD rather than fracture incidence as the primary endpoint.
Pipeline, outlook, risks and unusual items
For EB613, the completed Phase 2 osteoporosis study enrolled 161 subjects and evaluated daily doses through 2.5 mg for six months. Management reported statistically significant biomarker improvements and increases in lumbar spine, femoral neck and total hip BMD, with no serious drug-related adverse events reported. The company selected the 2.5 mg dose and expected to initiate a Phase 3, potentially pivotal, trial in 2022. The filing contains some inconsistent descriptions of EB613's stage, referring in places to Phase 3 advancement while elsewhere describing Phase 3 as planned or pending initiation.
For EB612, prior Phase 2 studies reported effects on serum calcium, phosphate, vitamin D and urinary calcium, without serious adverse events. Entera planned additional formulation and PK/PD work before initiating a potential Phase 2b/3 trial, subject to funding. Natpara, a competing injectable PTH product, was subject to an FDA recall, and Entera may need to demonstrate clinical superiority or a major contribution to patient care to overcome applicable orphan-drug exclusivity considerations.
The Amgen agreement covers oral formulations for up to three large-molecule programs. Entera may receive up to $270 million in milestone and option payments and tiered royalties ranging from the low to mid-single digits if applicable programs are successfully developed and commercialized. No milestone or royalty revenue was recognized in 2021.
Management stated that existing capital resources were expected to fund operations into the fourth quarter of 2022. Management and the independent registered public accounting firm expressed substantial doubt about the company's ability to continue as a going concern without additional financing. Potential funding sources include equity or debt offerings, ATM sales, government grants, strategic collaborations and licensing transactions. Additional financing may be unavailable or highly dilutive.
- Key risks include clinical-trial failure or delay, regulatory uncertainty regarding the 505(b)(2) pathway and BMD endpoint, safety findings, manufacturing scale-up, reliance on third-party CROs and manufacturers, competition, reimbursement uncertainty and intellectual-property challenges.
- COVID-19 could delay clinical trials, site operations, supply chains and regulatory activities.
- The company relies heavily on third-party manufacturing and does not have commercial sales, marketing or distribution infrastructure.
- IIA grants create potential royalty and repayment obligations and restrictions on transferring technology or manufacturing outside Israel. The company also owes Oramed a 3% royalty on specified net revenues.
- Operating lease commitments totaled $341,000, with $224,000 due within one year and $117,000 due in years one to three.
- Share-based compensation increased to $1.9 million from $0.9 million and was a significant non-cash expense.
Most important facts for investors to verify
- Whether the planned EB613 Phase 3 trial was initiated on schedule, its final protocol, enrollment, endpoint acceptance and funding requirements.
- Whether the FDA will accept BMD as the primary endpoint and permit the proposed regulatory pathway.
- EB612's formulation, clinical-development timing and ability to demonstrate superiority or major contribution relative to Natpara.
- Actual cash burn, financing activity and liquidity runway beyond the fourth quarter of 2022.
- Potential dilution from future ATM sales, equity offerings, options and warrants.
- Progress, termination rights and milestone economics under the Amgen agreement, including whether any milestone or royalty payments become probable.
- Manufacturing readiness, third-party supply capacity and regulatory compliance for later-stage trials.
- Patent scope, remaining patent terms and freedom-to-operate risks for EB613, EB612 and the oral-delivery platform.