Entera Bio Ltd. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Entera Bio is a clinical-stage biopharmaceutical company developing orally delivered large-molecule therapeutics. Its lead candidates are EB613 for osteoporosis and EB612 for hypoparathyroidism, based on its proprietary oral delivery platform. The company also conducts research under its collaboration with Amgen. This unaudited report covers the three months ended March 31, 2022, with comparisons to the three months ended March 31, 2021.
Financial position and operating metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $68 thousand | $157 thousand | Down 57% |
| Gross profit | $14 thousand | $84 thousand | Down 83% |
| Gross margin | Approximately 21% | Approximately 54% | Down approximately 33 percentage points |
| Research and development expense | $1.690 million | $1.124 million | Up 50% |
| General and administrative expense | $2.171 million | $1.309 million | Up 66% |
| Operating loss | $3.835 million | $2.339 million | Up 64% |
| Net loss | $3.784 million | $2.296 million | Up 65% |
| Basic and diluted loss per share | $0.13 | $0.10 | Higher loss per share |
| Cash used in operating activities | $4.792 million | $2.321 million | Use increased $2.471 million |
Cash and cash equivalents were $20.109 million at March 31, 2022, compared with $24.892 million at December 31, 2021. Including restricted deposits, total cash, cash equivalents and restricted cash were $20.149 million. Total assets were $22.312 million and total liabilities were $2.567 million. The filing reports no material debt; liabilities primarily consisted of accounts payable, accrued expenses and operating lease obligations.
Shareholders’ equity was $19.745 million at March 31, 2022, down from $22.565 million at year-end 2021, primarily reflecting the quarterly net loss partially offset by $964 thousand of share-based compensation. The accumulated deficit was $86.210 million. No financing cash proceeds were received in Q1 2022, compared with $10.109 million of financing cash inflows in Q1 2021, principally from ATM share sales and option and warrant exercises.
Material changes versus the prior comparable period
- Revenue decreased $89 thousand, primarily reflecting lower research and development service revenue under the Amgen collaboration and other material transfer agreements.
- Research and development expense increased $566 thousand. The increase was primarily related to materials, production costs and preclinical activity supporting preparation for the EB613 Phase 3 clinical trial, partly offset by lower expenses associated with the completed EB613 Phase 2 trial.
- General and administrative expense increased $862 thousand, mainly due to higher share-based compensation for non-executive directors, professional fees and directors’ and officers’ insurance costs.
- Operating cash use more than doubled, increasing from $2.321 million to $4.792 million.
- Share count remained 28,804,411 issued and outstanding shares at both December 31, 2021 and March 31, 2022. The filing reports 6,238,605 potentially issuable shares from options, restricted share units and warrants excluded from diluted loss per share because they were antidilutive.
Guidance, outlook, risks and unusual items
Management expects existing capital resources to fund operations into the fourth quarter of 2022, excluding potential milestone payments. Management also states that substantial doubt exists regarding the company’s ability to continue as a going concern because of recurring losses, negative operating cash flows and the need for additional financing. The financial statements were prepared on a going-concern basis. If additional funding cannot be obtained, the company may need to delay, reduce or cease operations.
Management is evaluating equity offerings, debt financing, government grants, strategic collaborations and licensing transactions. The prior ATM program was completed, and further sales under the current ATM program require a new domestic-issuer registration statement because the company transitioned from foreign private issuer status beginning January 1, 2022. There is no assurance that additional financing will be available on favorable terms or at all.
EB613 is being advanced toward a potentially pivotal Phase 3 program following discussions with the FDA. EB612’s improved formulation was being evaluated in preclinical and human PK/PD studies during 2022, with a future Phase 2b/3 trial contemplated. The company has no approved products and has never generated product-sales revenue.
Key risks include clinical and regulatory failure, uncertainty regarding FDA requirements and the 505(b)(2) pathway, dependence on third-party clinical and manufacturing providers, competition from injectable and other osteoporosis therapies, intellectual-property risks, financing and dilution risk, possible delays or disruptions from COVID-19, and the inability to realize Amgen milestones or future collaboration revenue. The filing states that no material changes occurred in the risk factors from the 2021 Annual Report and that the company is not party to material legal proceedings.
Unusual or notable items include $964 thousand of share-based compensation in the quarter and new option grants to directors, executives and a service provider. On April 28, 2022, the company granted options to purchase 220,000 ordinary shares at an exercise price of $2.57 per share.
Important facts for investors to verify
- Whether the company secured sufficient financing after March 31, 2022 to address the stated going-concern uncertainty and extend its cash runway beyond the fourth quarter of 2022.
- The actual timing, design, cost and FDA requirements for the planned EB613 Phase 3 program.
- The development status, study design and funding requirements for EB612 and the GLP-2 program.
- Whether the company filed and obtained effectiveness for a new domestic-issuer registration statement supporting future ATM or other equity offerings.
- The amount and timing of any Amgen milestone, option or royalty payments; no milestone or royalty revenue had been recognized as of March 31, 2022.
- The potential dilution from outstanding options, restricted share units and warrants, including the April 2022 option grant.
- The consistency of the filing’s descriptions of EB613’s development stage, which refer both to Phase 2 history and advancement toward a Phase 3 clinical trial.