Entera Bio Ltd. 2022 Form 10-K Summary
Business context and reporting period
Entera Bio Ltd. is an Israeli clinical-stage biopharmaceutical company developing orally delivered peptide and protein therapies using its proprietary absorption-enhancement technology. The filing covers the fiscal year ended December 31, 2022; the source does not provide a separate fourth-quarter income statement.
- Lead candidates are EB613, an oral daily teriparatide mini-tablet for osteoporosis, and EB612, an oral PTH replacement therapy for hypoparathyroidism.
- Entera has no approved products and has generated no product-sales revenue. Revenue has primarily come from research and development services under the Amgen collaboration and other material transfer agreements.
- As of December 31, 2022, Entera had 20 employees and consultants based in Israel and 17 employees distributed across research and development and general and administrative functions.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $134 thousand | $571 thousand | Down 77% |
| Gross profit | $33 thousand | $198 thousand | Down 83% |
| Research and development expense | $5.848 million | $6.771 million | Down 14% |
| General and administrative expense | $7.253 million | $5.690 million | Up 27% |
| Operating loss | $13.017 million | $12.217 million | Up 7% |
| Net loss | $13.071 million | $12.187 million | Up 7% |
| Basic and diluted loss per share | $0.45 | $0.47 | Improved per share despite higher net loss |
| Cash used in operating activities | $12.499 million | $9.063 million | Use increased $3.436 million |
| Cash and cash equivalents at year-end | $12.309 million | $24.892 million | Down $12.583 million |
| Accumulated deficit | $95.497 million | $82.426 million | Increased $13.071 million |
- Gross margin was approximately 25% in 2022 versus approximately 35% in 2021, based on reported revenue and cost of revenue.
- There was no material debt reported. Total liabilities were $1.373 million at year-end, primarily accrued expenses, payables and lease liabilities.
- Financing activities provided only $13 thousand in 2022, compared with $25.381 million in 2021, principally because no shares were sold under an ATM program during 2022.
- Total assets were $13.127 million and shareholders’ equity was $11.754 million at December 31, 2022.
- The company reported approximately $67.1 million of Israeli tax-loss carryforwards and a full valuation allowance against most related deferred tax assets.
Material changes versus the prior comparable period
- Revenue declined by $437 thousand because the third year of Amgen preclinical R&D services was substantially finalized.
- Research and development expense decreased by approximately $0.9 million, primarily following completion of the EB613 Phase 2 trial and lower preclinical activity related to the planned Phase 3 program. These reductions were partly offset by higher materials, production, organizational and employee costs.
- General and administrative expense increased by approximately $1.6 million, driven by higher share-based compensation, one-time payments to former executives, professional fees and directors’ and officers’ insurance.
- Cash used in operations increased substantially, while financing inflows fell from $25.381 million to $13 thousand, resulting in a $12.588 million decline in cash during 2022.
- Entera transitioned from foreign-private-issuer reporting to U.S. domestic issuer reporting beginning January 1, 2022 and adopted U.S. GAAP for its financial statements.
- Management appointed Miranda Toledano as Chief Executive Officer in July 2022 following the departure of Spiros Jamas. The former President of Research and Development, Phillip Schwartz, also departed in 2022.
Clinical progress, outlook and unusual items
- In October 2022, the FDA agreed that a single placebo-controlled Phase 3 study of EB613 could support an NDA under the 505(b)(2) pathway, with total hip bone mineral density as the primary endpoint, 2:1 randomization and approximately 400 EB613-exposed patients for safety and efficacy assessment.
- Entera planned to initiate the EB613 Phase 3 registrational study in the second half of 2023, subject to additional regulatory feedback and financing.
- The company expected to conduct a Phase 1 pharmacokinetic study of a new EB612 formulation in the first half of 2023. Results were expected to inform a potential Phase 2/3 study.
- EB612 has orphan drug designation from both the FDA and EMA for hypoparathyroidism.
- Management stated that year-end cash was expected to fund operations into the third quarter of 2024, including ongoing operations and the EB612 Phase 1 study. This estimate excludes the capital required for the EB613 Phase 3 study and the comparative EB613-versus-Forteo pharmacokinetic study.
- The audit report and financial statements include substantial doubt regarding the company’s ability to continue as a going concern. Entera will require additional equity, debt, licensing or collaboration funding, and financing may be dilutive or unavailable on acceptable terms.
- The Amgen agreement provides potential milestone payments of up to $270 million and tiered royalties, but no milestone or royalty revenue was recognized through December 31, 2022. Aggregate payments received from Amgen for R&D services through year-end were approximately $968 thousand in the business disclosure and approximately $1.4 million including other amounts described in liquidity disclosures.
- Potential contingent obligations include 3% royalties to Oramed on applicable net revenues and royalties or other payments to the Israeli Innovation Authority. The company disclosed approximately $460 thousand of potential IIA royalty obligations before interest and other adjustments as of December 31, 2022.
- Unusual 2022 expense items included one-time payments to former executives and additional share-based compensation associated with executive and director grants and separation arrangements. Total share-based compensation expense was $2.247 million, compared with $1.861 million in 2021.
- Entera disclosed that it had maintained accounts at Silicon Valley Bank before its March 2023 closure and subsequently transferred those deposits to other banks. No material loss was reported from the event.
Principal risks and contingencies
- Funding and going-concern risk are material because current cash does not cover the planned EB613 Phase 3 and comparative pharmacokinetic studies.
- Clinical and regulatory risks include failure to reproduce Phase 2 results, inadequate efficacy or safety in Phase 3, enrollment delays, protocol changes, manufacturing deficiencies and FDA or EMA rejection or delay.
- Entera relies on third-party contract research organizations, clinical sites and manufacturers and lacks commercial-scale manufacturing, sales and distribution infrastructure.
- Competition includes injectable osteoporosis therapies, generic teriparatide, other anabolic treatments and competing hypoparathyroidism products, including TransCon PTH and Eneboparatide.
- Patent protection, freedom to operate, intellectual-property challenges and limitations under Israeli Innovation Authority funding arrangements may affect commercialization and strategic transactions.
- Additional risks include reimbursement and pricing uncertainty, dependence on key personnel, cybersecurity and data privacy exposure, foreign-exchange movements, geopolitical instability in Israel and potential Nasdaq listing compliance issues.
- Entera received a Nasdaq minimum-bid-price deficiency notice in November 2022 but reported regaining compliance on March 23, 2023. Continued compliance is not assured.
Important facts for investors to verify
- Confirm the company’s current cash balance, quarterly cash burn and the timing and terms of any financing completed after December 31, 2022.
- Verify whether EB613 Phase 3 enrollment commenced, its final protocol, funding source, enrollment pace and primary-endpoint design.
- Verify the results and regulatory consequences of the EB612 new-formulation pharmacokinetic study.
- Review the auditor’s going-concern language and management’s assumptions supporting liquidity through the third quarter of 2024.
- Assess potential dilution from the ATM program, outstanding options and warrants, including 5.733 million outstanding options and 697,750 shares underlying traded IPO warrants at year-end.
- Track Amgen collaboration milestones, termination rights, program progress and the likelihood of future milestone or royalty payments.
- Review patent validity, geographic coverage and expiration dates for EB613, EB612 and the oral-delivery platform.
- Confirm Nasdaq listing compliance and any subsequent reverse split, financing or other capital-structure actions.