Entera Bio Ltd. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
Entera Bio is an Israel-based clinical-stage biopharmaceutical company developing orally delivered peptide and protein therapeutics using its proprietary mini-tablet technology. Its principal candidates are EB613 for osteoporosis and EB612 for hypoparathyroidism. The filing covers the unaudited three months ended March 31, 2023, compared with the three months ended March 31, 2022. The company had 18 full-time employees and five part-time consultants as of March 31, 2023.
Key Financial Metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $0 | $68 thousand | Down 100% |
| Gross profit | $0 | $14 thousand | Down $14 thousand |
| Research and development expense | $931 thousand | $1.690 million | Down 45% |
| General and administrative expense | $1.294 million | $2.171 million | Down 40% |
| Operating loss | $2.212 million | $3.835 million | Improved $1.623 million |
| Net loss | $2.190 million | $3.784 million | Improved $1.594 million |
| Basic and diluted loss per share | $0.08 | $0.13 | Improved $0.05 |
| Cash used in operating activities | $1.609 million | $4.792 million | Improved $3.183 million |
| Cash and cash equivalents at period end | $10.691 million | $20.109 million | Down $9.418 million year over year |
Gross and operating margins are not meaningful because the company generated no revenue in Q1 2023. The company remains pre-commercial and has not generated product sales. Financial income, net was $22 thousand in Q1 2023 versus $44 thousand in Q1 2022, primarily reflecting foreign-exchange effects.
At March 31, 2023, total assets were $11.606 million, total liabilities were $1.526 million, and shareholders’ equity was $10.080 million. The filing does not report material debt; liabilities primarily consisted of accounts payable, accrued expenses and operating lease obligations. The company also had $65 thousand of restricted deposits included in other current assets, resulting in cash, cash equivalents and restricted deposits of $10.756 million.
Material Changes Versus the Prior Comparable Period
- Revenue declined to zero from $68 thousand because no Amgen-related preclinical research and development revenue was recognized in Q1 2023.
- Research and development expense decreased by $759 thousand, primarily due to lower materials, production and consulting costs and lower employee compensation, including share-based compensation.
- General and administrative expense decreased by $877 thousand, primarily due to lower employee compensation, professional fees and directors-and-officers insurance costs.
- Net cash used in operating activities decreased by $3.183 million, reflecting the lower operating loss and more favorable working-capital changes, partly offset by lower share-based compensation.
- Cash and cash equivalents declined from $12.309 million at December 31, 2022 to $10.691 million at March 31, 2023. No financing cash flows occurred during either comparable quarter.
- Share-based compensation was $516 thousand in Q1 2023 versus $964 thousand in Q1 2022. In January 2023, the company granted options covering 534,246 shares to non-executive directors.
Guidance, Outlook, Risks and Unusual Items
- Management estimates that available funds can support operations into the third quarter of 2024, including ongoing research and development and completion of the Phase 1 pharmacokinetic study for the new EB612 formulation. This estimate excludes the proposed EB613 Phase 3 and comparative pharmacokinetic studies.
- The company states that there is substantial doubt about its ability to continue as a going concern because of recurring losses, negative operating cash flow and the need for additional financing. The financial statements contain no adjustments for a potential inability to continue as a going concern.
- Additional capital will be required through potential equity or debt financings, strategic collaborations or licensing transactions. The company had not sold shares under its 5-million-share ATM program as of March 31, 2023.
- Following FDA feedback, the company said it would not initiate the EB613 Phase 3 study until it received final guidance regarding evaluation of total hip bone mineral density as the primary endpoint. The study and comparative pharmacokinetic work would require additional funding.
- The company and Amgen terminated their research collaboration and license agreement effective May 2, 2023, after the quarter-end. Neither party incurred a termination penalty or fee. The termination ended a potential source of future milestone and collaboration revenue.
- In April 2023, the company extended its office lease through June 30, 2028, with two early-termination options; the monthly lease fee is $15 thousand.
- In April 2023, the company approved option grants covering an aggregate of 1.231 million shares, including grants subject to shareholder approval.
- Key risks include clinical and regulatory delays, uncertain trial outcomes, dependence on third parties, manufacturing and supply constraints, intellectual-property risks, competition, limited operating history, future financing needs and potential dilution.
- The company reported no material legal proceedings and no material changes to the risk factors disclosed in its 2022 Form 10-K. Management concluded that disclosure controls and procedures were effective as of March 31, 2023.
Important Facts for Investors to Verify
- Confirm the company’s actual cash runway relative to the stated third-quarter 2024 estimate and monitor quarterly operating cash burn.
- Track financing activity, including equity issuance, ATM sales, debt financing and any strategic collaboration or licensing arrangements.
- Verify FDA’s final position on the EB613 Phase 3 design, total hip bone mineral density as a surrogate endpoint and the timing and cost of the proposed study.
- Assess progress, results and funding requirements for the EB612 Phase 1 pharmacokinetic study and any subsequent Phase 2b/3 plans.
- Evaluate the effect of the May 2, 2023 Amgen termination on future revenue, milestone potential, intellectual-property rights and development priorities.
- Monitor dilution from outstanding options and warrants; the filing excludes options and warrants exercisable into 7.117 million shares from diluted loss-per-share calculations because they were anti-dilutive.
- Review the going-concern disclosure and determine whether additional capital can be obtained on acceptable terms before planned clinical programs require funding.