Entera Bio Ltd. 2023 Q2 Form 10-Q Summary
Business Context and Reporting Period
Entera Bio is a clinical-stage biopharmaceutical company developing orally delivered peptide and protein therapeutics. Its lead candidates are EB613 for osteoporosis and EB612 for hypoparathyroidism. The filing covers the quarter and six months ended June 30, 2023; financial statements are unaudited and presented in U.S. dollars in thousands unless otherwise stated.
As of June 30, 2023, the company had 28,813,952 ordinary shares outstanding and was classified as a smaller reporting company and emerging growth company.
Financial Results and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0; prior year $44 | $0; prior year $112 |
| Research and development expense | $1,209; down 13% | $2,140; down 31% |
| General and administrative expense | $1,135; down 40% | $2,429; down 40% |
| Operating loss | $2,330; prior year $3,249 | $4,542; prior year $7,084 |
| Net loss | $2,325, or $0.08 per share | $4,515, or $0.16 per share |
| Net cash used in operating activities | Not separately provided | $3,168; prior year $7,619 |
Gross margin was not meaningful because the company reported no revenue. The company has not generated product sales and expects no product-candidate revenue unless and until regulatory approval and commercialization occur.
Cash and cash equivalents were $9.135 million at June 30, 2023, compared with $12.309 million at December 31, 2022. Including restricted deposits, total cash, cash equivalents and restricted deposits were $9.201 million. Total liabilities were $2.213 million, primarily accrued expenses, accounts payable and operating lease liabilities; the filing does not report conventional borrowings or debt.
Total assets were $10.445 million and shareholders’ equity was $8.232 million at June 30, 2023. The accumulated deficit was $100.012 million. Net cash used in investing activities was $12 thousand, while financing activities provided $5 thousand, primarily from the ATM program.
Material Changes Versus the Prior Comparable Period
- Revenue declined to zero from $44 thousand for the quarter and from $112 thousand for the first six months, following completion and termination of the Amgen collaboration.
- Quarterly net loss decreased 27% to $2.325 million; six-month net loss decreased 35% to $4.515 million.
- Research and development expense declined primarily because of lower preclinical activity, lower share-based compensation and the absence of a prior-year separation payment. Current-quarter materials and production costs increased in preparation for the potential EB613 Phase 3 trial.
- General and administrative expense decreased because of lower employee compensation, professional fees, consulting costs and directors-and-officers insurance.
- Operating cash use improved by $4.451 million year over year, reflecting lower operating losses and improved working capital, partly offset by lower share-based compensation.
- The company amended its office lease, extending the term through June 2028, subject to early termination options. The present value of operating lease liabilities was $456 thousand at June 30, 2023.
- Entera and Amgen mutually terminated their research collaboration and license agreement on May 2, 2023, without termination penalties or fees. The company recognized no Amgen-related revenue in 2023.
Guidance, Outlook, Risks and Unusual Items
Management estimates that existing cash resources will fund current operations, including research and development and completion of the EB612 Phase 1 pharmacokinetic study, into the third quarter of 2024. This estimate excludes the proposed EB613 Phase 3 pivotal study and related comparative pharmacokinetic study against Forteo.
Entera is continuing discussions with the FDA regarding the EB613 Phase 3 design and the FNIH BQP/SABRE framework. The company plans to await final qualification criteria and guidance on statistical evaluation of the bone-mineral-density endpoint before initiating the study. Additional funding will be required for these studies.
The company began an EB612 pharmacokinetic study in May 2023 and expected to begin reporting results in the second half of 2023. Management expects research and development expenses and losses to remain significant and potentially increase as programs advance.
The filing states that recurring losses, negative operating cash flows and limited liquidity raise substantial doubt about the company’s ability to continue as a going concern. Management is evaluating equity offerings, debt financing and strategic collaborations, but no committed external funding source exists. Failure to obtain capital could delay, reduce or terminate development programs or operations.
- Clinical and regulatory development may be delayed, may require additional studies or may fail to produce approvable products.
- Positive preclinical or early clinical results may not predict later-stage outcomes.
- The proposed EB613 Phase 3 study is subject to FDA discussions, final endpoint guidance and additional financing.
- The company relies on third parties for clinical trials, manufacturing and supply of clinical materials.
- Additional equity financing could dilute existing shareholders; strategic transactions could require relinquishing valuable technology or commercialization rights.
- Israeli Innovation Authority grants may require royalties of 3% of qualifying revenue and could result in additional payments if manufacturing or funded know-how is transferred outside Israel.
- The company’s IPO warrants expired on July 2, 2023, after the reporting date.
Most Important Facts for Investors to Verify
- Whether the company obtains sufficient financing before cash resources are exhausted and whether the going-concern uncertainty is resolved.
- The timing, final design and funding of the EB613 Phase 3 and comparative pharmacokinetic studies.
- Results and regulatory implications of the EB612 pharmacokinetic study.
- Progress toward FDA alignment under the FNIH BQP/SABRE pathway and the acceptability of bone mineral density as the pivotal endpoint.
- The effect of the Amgen termination on future collaboration revenue and business-development prospects.
- Potential dilution from the existing ATM program or future equity financing, as well as the impact of outstanding options and warrants.