Entera Bio Ltd. 2022 Q2 SEC Filing Summary
Business Context and Reporting Period
Entera Bio Ltd. is an Israel-based biotechnology company developing orally delivered peptide and therapeutic-protein products using its proprietary delivery platform. Lead candidates are EB613 for osteoporosis and EB612 for hypoparathyroidism. The company also licenses its technology and provides research services, including under its collaboration with Amgen.
This unaudited Form 10-Q covers the three and six months ended June 30, 2022, compared with the corresponding 2021 periods. The company had 28,809,922 ordinary shares outstanding as of August 8, 2022.
Financial Condition and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 | ||
|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |
| Revenue | $44 thousand | $109 thousand | $112 thousand | $266 thousand |
| Gross profit | $11 thousand | $10 thousand | $25 thousand | $94 thousand |
| Approximate gross margin | 25% | 9% | 22% | 35% |
| Research and development expense | $1.394 million | $1.227 million | $3.084 million | $2.351 million |
| General and administrative expense | $1.880 million | $1.364 million | $4.052 million | $2.674 million |
| Operating loss | $3.249 million | $2.570 million | $7.084 million | $4.909 million |
| Net loss | $3.185 million | $2.577 million | $6.969 million | $4.873 million |
| Basic and diluted loss per share | $0.11 | $0.10 | $0.24 | $0.21 |
All dollar amounts are in U.S. dollars; financial statement amounts are in thousands unless otherwise indicated. Revenue was generated from Amgen preclinical research and development services and other material transfer agreements; Entera has no approved products and has never generated product-sale revenue.
- Cash and cash equivalents were $17.279 million at June 30, 2022, down from $24.892 million at December 31, 2021.
- Cash, cash equivalents and restricted cash totaled $17.316 million at June 30, 2022.
- Six-month operating cash burn was $7.619 million, compared with $4.442 million in the prior-year period.
- Six-month investing cash outflow was $42 thousand, primarily for property and equipment.
- Six-month financing cash inflow was only $13 thousand, compared with $22.775 million in 2021, when the company raised substantial funds through equity offerings and warrant exercises.
- Accumulated deficit was $89.395 million at June 30, 2022.
- Total liabilities were $1.819 million, consisting primarily of accounts payable, accrued expenses and operating lease obligations. The filing does not disclose outstanding interest-bearing debt.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue declined 60% and six-month revenue declined 58%, reflecting lower collaboration and material-transfer activity.
- Second-quarter operating loss increased 26% to $3.249 million; six-month operating loss increased 44% to $7.084 million.
- Second-quarter net loss increased 24% to $3.185 million; six-month net loss increased 43% to $6.969 million.
- Research and development expense increased 14% in the quarter and 31% year to date, primarily due to EB613 Phase 3 preparation, materials and preclinical activity, and costs associated with the separation of the former R&D president.
- General and administrative expense increased 38% in the quarter and 52% year to date, driven by higher share-based compensation, professional fees and directors’ and officers’ insurance.
- Operating cash use increased by $3.177 million year to date, while financing inflows fell sharply because no shares were sold under the ATM programs during the first six months of 2022.
- Shareholders’ equity decreased from $22.565 million at December 31, 2021 to $17.269 million at June 30, 2022, primarily reflecting the year-to-date net loss partially offset by share-based compensation and option exercises.
Guidance, Outlook, Risks and Unusual Items
Management expects existing cash resources, excluding potential milestone payments, to fund operations through the second quarter of 2023. Management also states that additional capital will be required and that there are no committed external sources of funding. The financial statements include a going-concern disclosure because recurring losses, negative operating cash flow and limited liquidity create substantial doubt about the company’s ability to continue operating without additional financing.
- Entera expected an FDA Type C meeting during the second half of 2022 regarding the proposed Phase 3 registrational study for EB613. The proposed study would enroll approximately 600 postmenopausal women with osteoporosis and evaluate 18 months of treatment followed by a six-month open-label extension.
- The company expected to conduct a pharmacokinetic study of an improved EB612 formulation in the first half of 2023, with results potentially informing a Phase 2b or Phase 3 study.
- Entera was evaluating strategic transactions or partnerships to fund EB613 Phase 3 development and commercialization and was considering additional equity, debt, grant, licensing and collaboration financing.
- The Amgen agreement provides potential milestone payments of up to $270 million and tiered royalties, but no milestone or royalty revenue had been recognized because the applicable conditions and commercial sales had not occurred.
- On June 15, 2022, the company entered into a separation agreement with its former R&D president, including approximately $369,852 of cash separation and accrued-benefit payments and potential acceleration of 68,750 options, subject to shareholder approval.
- After quarter-end, on July 15, 2022, Miranda Toledano was appointed CEO. Her compensation included options to purchase 600,000 shares and potential additional options for 200,000 shares upon a defined funding or strategic-partnership event, subject to shareholder approval.
- After quarter-end, former CEO Spiros Jamas received a $411,667 lump-sum payment and an extension of the exercise period for vested options covering 492,832 shares; 821,386 unvested options were forfeited.
- Key risks include clinical and regulatory uncertainty, FDA acceptance of the proposed EB613 Phase 3 design, dependence on third parties, manufacturing and supply constraints, intellectual-property protection, competition, COVID-19 effects and the need for additional capital.
- The company had no material legal proceedings reported and stated that there were no material changes to previously disclosed risk factors. Management reported effective disclosure controls as of June 30, 2022.
Most Important Facts for Investors to Verify
- Whether Entera secured financing or a strategic partner before its projected cash runway ended in the second quarter of 2023.
- The outcome of the FDA Type C meeting and whether the EB613 Phase 3 design, endpoint and timing were accepted.
- Actual quarterly cash burn and whether spending accelerated as EB613 advanced toward Phase 3.
- Progress, results and regulatory implications of the planned EB612 pharmacokinetic study.
- Status of the Amgen collaboration, including program selections, milestones, termination rights and any future payments.
- Shareholder approval and dilution effects of the executive and employee option grants, including post-quarter CEO compensation.
- Whether the going-concern uncertainty was resolved and whether additional equity financing diluted existing shareholders.