Item
1. Condensed Consolidated Financial Statements
VBI
Vaccines Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets
(in
thousands, except share amounts)
See
accompanying Notes to Condensed Consolidated Financial Statements
VBI
Vaccines Inc. and Subsidiaries
Condensed
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(in
thousands, except share and per share amounts)
See
accompanying Notes to Condensed Consolidated Financial Statements
VBI
Vaccines Inc. and Subsidiaries
Condensed
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in
thousands, except share amounts)
See
accompanying Notes to Condensed Consolidated Financial Statements
VBI
Vaccines Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
(in
thousands)
See
accompanying Notes to Condensed Consolidated Financial Statements
VBI
Vaccines Inc. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(in
thousands, except share and per share amounts)
1.
NATURE OF BUSINESS AND CONTINUATION OF BUSINESS
Corporate
Overview
VBI
Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9,
1965.
The
Company and its wholly-owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s
wholly-owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies,
Inc. a Canadian company and the wholly-owned subsidiary of VBI US (“VBI Cda”); and SciVac Ltd. an Israeli company (“SciVac”);
SciVac Hong Kong Limited (“SciVac HK”) and VBI Vaccines B.V a Netherlands company (“VBI BV”), are collectively
referred to as the “Company”, “we”, “us”, “our”, or “VBI”.
The
Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal
office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot,
Israel and research facilities located in Ottawa, Ontario, Canada.
Principal
Operations
VBI
Vaccines Inc. (“VBI”) is a commercial stage biopharmaceutical company driven by immunology in the pursuit of prevention and
treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped
VLP (“eVLP”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed
to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases,
including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive
cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa,
Canada, and a research and manufacturing site in Rehovot, Israel.
The
ongoing COVID-19 pandemic has materially negatively affected and continues to affect the global economy, and there is continued severe
uncertainty about the duration and intensity of the impacts of the pandemic. As a result, the Company’s business and results of
operations have also been adversely affected and could continue to be adversely affected by COVID-19 which has necessitated restricting
the number of personnel in the Company’s research laboratories and manufacturing facility at any given point in time, and has slowed
recruitment to clinical trials. The extent to which the COVID-19 pandemic will continue to impact our business will depend on future
developments, which are highly uncertain and cannot be predicted. We do not yet know the full extent of potential delays or impacts on
our business, our clinical studies, our research programs, the recoverability of our assets, and our manufacturing; however, the COVID-19
pandemic may continue to disrupt or delay our business operations, including with respect to efforts relating to potential business
development transactions, and it could continue to disrupt the marketplace which could have an adverse effect on our operations.
Liquidity
and Going Concern
The
Company has a limited operating history and faces a number of risks, including but not limited to, uncertainties regarding the success
of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance
on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with
the development and commercialization of its products.
The
Company had an accumulated deficit of $397,560
as of March 31, 2022 and cash outflows from
operating activities of $19,925
for the three months ended March 31, 2022.
The
Company will require significant additional funds to conduct clinical and non-clinical trials, commercially launch our products, and
achieve regulatory approvals. The Company plans to finance near term future operations with existing cash and cash equivalent reserves.
Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, structured asset financings,
government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if
any. There is no assurance the Company will manage to obtain these sources of financing, if required. The above conditions raise substantial
doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not
include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and
classifications of liabilities that may result should the Company be unable to continue as a going concern.
Financial
instruments recognized in the condensed consolidated balance sheet consist of cash and cash equivalents, short-term investments, accounts
receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its
current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not
hold any derivative financial instruments.
The
carrying amounts of the Company’s other long-term assets approximate their respective fair values.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Consolidation
The
Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements
have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly,
certain information and footnote disclosures normally included in the financial statements prepared in accordance with United States
of America generally accepted accounting principles (“U.S. GAAP”), have been condensed or omitted pursuant to such rules
and regulations. The December 31, 2021 consolidated balance sheet in this document was derived from the audited consolidated financial
statements. The condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q (this “Form
10-Q”) does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements
and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 10-K”),
as filed with the SEC on March 7, 2022.
The
condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI
Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in
the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been
reclassified to conform to the current presentation.
In
the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring
nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative
of results to be expected for the full year or for any future periods.
Significant
Accounting Policies
The
significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2021
10-K, and there have been no changes to the Company’s significant accounting policies during the three months ended March 31, 2022,
other than the polices discussed below.
3.
NEW ACCOUNTING PRONOUNCEMENTS
Recently
Adopted Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and
Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities
and equity, including certain convertible instruments and contracts on an entity’s own equity. Specifically, the new standard has
removed the separation models required for convertible debt with cash conversion features and convertible instruments with beneficial
conversion features. It has also removed certain settlement conditions that are currently required for equity contracts to qualify for
the derivative scope exception and simplifies the diluted earnings per share calculation for convertible instruments.
On
January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and recognized a cumulative effect of initially
applying the ASU as an adjustment to the January 1, 2022 opening balance of accumulated deficit. Our conversion option that was previously
bifurcated and recorded as a debt discount and additional paid-in capital has now been combined as a single instrument classified as
a liability. The Company eliminated the beneficial conversion feature from additional paid-in capital; eliminated the interest accretion
on the beneficial conversion feature through December 31, 2021 from the opening balance of accumulated deficit; and eliminated the corresponding
debt discount. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported
under the accounting standards in effect for those periods.
Accordingly,
the cumulative effect of the changes made on our January 1, 2022 condensed consolidated balance sheet for the adoption
of the ASU was as follows:
SCHEDULE
OF CUMULATIVE EFFECT OF CHANGES ON CONSOLIDATED BALANCE SHEETS
| |
Balance
as at December 31, 2021 | | |
Adjustments
from adoption of ASU 2020-06 | | |
Balance
as at January 1, 2022 | |
Liabilities | |
| | | |
| | | |
| | |
Long-term
debt, net of debt discount | |
$ | 28,441 | | |
$ | 681 | | |
$ | 29,122 | |
Stockholders’
equity | |
| | | |
| | | |
| | |
Additional
paid-in capital | |
$ | 81,583 | | |
$ | (2,746 | ) | |
$ | 78,837 | |
Accumulated
deficit | |
$ | (378,371 | ) | |
$ | 2,065 | | |
$ | (376,306 | ) |
Recently
Issued Accounting Standards, not yet Adopted
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments (“2016-13”). The amendments in ASU 2016-13, among other things,
require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience,
current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking
information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted,
although the inputs to those techniques will change to reflect the full amount of expected credit losses. ASU 2016-13 will be effective
for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This ASU will be implemented
through a modified retrospective method of transition. The Company is currently evaluating
the potential impact of ASU 2016-13 on its condensed consolidated financial statements.
4.
INVENTORY, NET
Inventory
consists of the following:
SCHEDULE OF INVENTORY
| |
March
31, 2022 | | |
December
31, 2021 | |
Finished
goods | |
$ | 305 | | |
$ | - | |
Work-in-process | |
| 866 | | |
| 645 | |
Raw
materials | |
| 2,886 | | |
| 1,931 | |
Total | |
$ | 4,057 | | |
$ | 2,576 | |
5.
OTHER CURRENT ASSETS
Other
current assets consisted of the following:
SCHEDULE OF OTHER CURRENT ASSETS
| |
March
31, 2022 | | |
December
31, 2021 | |
Government
receivables | |
$ | 2,769 | | |
$ | 1,438 | |
Other
current assets | |
| 1,915 | | |
| 2,195 | |
Total | |
$ | 4,684 | | |
$ | 3,633 | |
6.
INTANGIBLE ASSETS AND GOODWILL
SCHEDULE
OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION
| |
| | |
March
31, 2022 | |
| |
Gross Carrying
Amount | | |
Accumulated
Amortization | | |
Cumulative
Impairment Charge | | |
Cumulative
Currency Translation | | |
Net
Book Value | |
Patents | |
$ | 669 | | |
$ | (678 | ) | |
$ | - | | |
$ | 47 | | |
$ | 38 | |
IPR&D
assets | |
| 61,500 | | |
| - | | |
| (300 | ) | |
| 1,980 | | |
| 63,180 | |
| |
$ | 62,169 | | |
$ | (678 | ) | |
$ | (300 | ) | |
$ | 2,027 | | |
$ | 63,218 | |
| |
| | |
December
31, 2021 | |
| |
Gross
Carrying Amount | | |
Accumulated
Amortization | | |
Cumulative
Impairment Charge | | |
Cumulative
Currency Translation | | |
Net
Book Value | |
Patents | |
$ | 669 | | |
$ | (660 | ) | |
$ | - | | |
$ | 47 | | |
$ | 56 | |
IPR&D
assets | |
| 61,500 | | |
| - | | |
| (300 | ) | |
| 835 | | |
| 62,035 | |
| |
$ | 62,169 | | |
$ | (660 | ) | |
$ | (300 | ) | |
$ | 882 | | |
$ | 62,091 | |
The
Company amortizes intangible assets with finite lives on a straight-line basis over their estimated useful lives.
The
change in carrying value for IPR&D assets from December 31, 2021 relates to currency translation adjustments which increased by $1,145
for the three months ended March 31, 2022.
SCHEDULE OF GOODWILL
| |
| | |
March
31, 2022 | |
| |
Gross Carrying Amount | | |
Cumulative Impairment
Charge | | |
Cumulative
Currency Translation | | |
Net
Book Value | |
Goodwill | |
$ | 8,714 | | |
$ | (6,292 | ) | |
$ | (119 | ) | |
$ | 2,303 | |
| |
| | |
December
31, 2021 | |
| |
Gross
Carrying Amount | | |
Cumulative Impairment
Charge | | |
Cumulative
Currency Translation | | |
Net
Book Value | |
Goodwill | |
$ | 8,714 | | |
$ | (6,292 | ) | |
$ | (161 | ) | |
$ | 2,261 | |
The
change in carrying value for goodwill from December 31, 2021 relates to currency translation adjustments which increased by $42 for the
three months period ended March 31, 2022.
7.
OTHER CURRENT LIABILITIES
Other
current liabilities consisted of the following:
SCHEDULE OF OTHER CURRENT LIABILITIES
| |
March
31, 2022 | | |
December
31, 2021 | |
Accrued
research and development expenses (including clinical trial accrued expenses) | |
$ | 7,334 | | |
$ | 8,196 | |
Accrued
professional fees | |
| 3,906 | | |
| 2,294 | |
Payroll
and employee-related costs | |
| 2,495 | | |
| 4,805 | |
Deferred
funding | |
| 8,657 | | |
| 10,183 | |
Other
current liabilities | |
| 1,341 | | |
| 1,463 | |
Total | |
$ | 23,733 | | |
$ | 26,941 | |
8.
LOSS PER SHARE OF COMMON SHARES
Basic
loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding
during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such
as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive.
In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains
the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their
effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 10, Stockholders’ Equity
and Additional Paid-in Capital.
The
following potentially dilutive securities outstanding at March 31, 2022 and 2021 have been excluded from the computation of diluted weighted
average shares outstanding, as they would be antidilutive:
SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING
| |
March
31, 2022 | | |
March
31, 2021 | |
Warrants | |
| 1,384,469 | | |
| 3,163,172 | |
Stock
options and restricted stock units | |
| 23,390,983 | | |
| 18,139,335 | |
K2
conversion feature | |
| 1,369,863 | | |
| 1,369,863 | |
Total | |
| 26,145,315 | | |
| 22,672,370 | |
9.
LONG-TERM DEBT
As
of March 31, 2022, and December 31, 2021, the long-term debt is as follows:
SCHEDULE OF LONG-TERM DEBT
| |
March
31, 2022 | | |
December
31, 2021 | |
Long-term
debt, net of debt discount of $2,692 ($3,783 at December 31, 2021) | |
$ | 29,532 | | |
$ | 28,441 | |
Less:
current portion, net of debt discount of $396 ($0 at December 31, 2021) | |
| 4,744 | | |
| - | |
Long-term
debt | |
$ | 24,788 | | |
$ | 28,441 | |
On
May 22, 2020, the Company (along with its subsidiary VBI Cda) entered into the Loan and Guaranty Agreement (the “Loan Agreement”)
with K2 HealthVentures LLC and any other lender from time-to-time party thereto (the “Lenders”) pursuant to which we received
the first tranche secured term loan of $20,000
(the “First Tranche Term Loan”).
The
Lenders originally agreed to make available the following additional tranches subject to the following conditions and upon the submission
of a loan request by the Company: (1) up to $10,000
available
between January 1, 2021 and April 30, 2021 upon achievement of certain milestones (the “Second Tranche Term Loan”), (2) $10,000
available
between the closing date and December 31, 2021, subject to achievement of a certain U.S. Food and Drug Administration (“FDA”)
approval (the “Third Tranche Term Loan”), and (3) a final tranche of up to $10,000
that
could be made available any time prior to June 30, 2022, subject to the advance of the Third Tranche Term Loan, satisfactory review by
the administrative agent of our financial and operating plan, and approval by the Lenders’ investment committee. The Company
obtained FDA approval on November 30, 2021 but elected not to draw down the Third Tranche Term Loan. As the Third Tranche Term Loan availability
period has passed, the final tranche will not be made available. Pursuant to the Loan Agreement, the Lenders originally had the ability
to convert, at the Lenders’ option, up to $4,000
of
the secured term loan into common shares of the Company at a conversion price of $1.46
per
share (“K2 conversion feature”) until the maturity date of June
1, 2024.
On February 3, 2021, pursuant to the Loan Agreement,
the Lenders, converted $2,000
of the secured term loan into 1,369,863
common shares at a conversion price of $1.46.
The Lenders have the ability to convert an additional $2,000
at the Lenders’ option.
On
May 17, 2021, the Company entered into the First Amendment with the Lenders to: (1) increase the Second Tranche Term Loan from $10,000
to $12,000; (2) extend the availability period of the Second Tranche Term Loan beyond April 30, 2021, subject to certain conditions;
(3) amend the Second Tranche Term Loan interest rate equal to the greater of (a) 7.75% and (b) prime rate plus 4.50%; and (4) extend
the date as of which amortization of the loans under the Loan Agreement shall begin from July 1, 2022 to January 1, 2023.
In
connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 625,000 common shares
(the “Original K2 Warrant”) at an exercise price of $1.12 (the “Warrant Price”). On May 17, 2021, in connection
with the First Amendment, the Company issued the Lenders an amended and restated warrant to purchase an additional 312,500 common shares
for a total of 937,500 common shares (the “Restated K2 Warrant”) with the same Warrant Price of $1.12. The Restated K2 Warrant
may be exercised either for cash or on a cashless “net exercise” basis and expires on May 22, 2030.
The
total proceeds attributed to the Original K2 Warrant was $1,181
based on the relative fair value of the Original
K2 Warrant as compared to the sum of the fair values of the Original K2 Warrant, K2 conversion feature and debt. The effective conversion
price of the K2 conversion feature of $1.52
was determined to be less than the fair value of the underlying
common stock at the date of commitment, resulting in a beneficial conversion feature (“BCF”) at that date. The intrinsic
value of the BCF was $2,577
and recorded to additional paid-in capital. The
Original K2 Warrant and the K2 conversion feature resulted in the debt being issued at a discount. The Company also incurred $1,021
of debt issuance costs and is required to make
a final payment equal to 6.95%
of the aggregate original secured term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans
in accordance with the Loan Agreement, resulting in an additional discount of $1,390
related to the First Tranche Term Loan. The total
initial debt discount was $6,169.
As discussed in Note 3, upon adoption of ASU 2020-06, effective January 1, 2022, the BCF was eliminated from additional paid-in capital
and the debt discount.
The
Second Tranche Term Loan, issued pursuant to the Loan Agreement as amended by the First Amendment, resulted in the Company incurring
an additional $20
of debt issuance costs, $150
of third-party costs and being required to make
a final payment of $834,
which is equal to 6.95%
of the Second Tranche Term Loan.
The
Company accounted for the First Amendment as a debt modification and as a result the debt discount was increased by $1,721.
This amount represents: (1) the incremental fair
value of the Restated K2 Warrant of $867;
(2) the increased final payment of $834
related to the Second Tranche Term Loan; and
(3) debt issuance costs of $20.
The third-party costs were expensed in general and
administration in the condensed consolidated statement of operations and comprehensive loss.
The
total principal amount of the loan under the Loan Agreement, as amended by the First Amendment, outstanding at March 31, 2022, including
the $2,224 final payment discussed above, is $32,224. The principal amount of the loan made under the Loan Agreement prior to the First
Amendment accrues interest at an annual rate equal to the greater of (a) 8.25% or (b) prime rate plus 5.00%. The principal amount of
the Second Tranche Term Loan made under the Loan Agreement, as amended by the First Amendment, accrues interest at an annual rate equal
to the greater of (a) 7.75% or (b) prime rate plus 4.50%. The interest rate as of March 31, 2022 was 8.50% for the First Tranche Term
Loan and 8.00% for the Second Tranche Term Loan. The Company is required to pay only interest until January 1, 2023. The effective interest
rate on the loan of $30,000, excluding the final payment, is 13.75%.
Upon
the occurrence of an Event of Default, and during the continuance of an Event of Default, the applicable rate of interest, described
above, will be increased by 5.00% per annum. The secured term loan maturity date is June 1, 2024, and the Loan Agreement includes both
financial and non-financial covenants. The Company was in compliance with these covenants as of March 31, 2022.
The
obligations under the Loan Agreement, as amended by the First Amendment, are secured on a senior basis by a lien on substantially all
of the assets of the Company and its subsidiaries other than intellectual property. The subsidiaries of the Company, other than VBI Cda
and SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement
also contains customary events of default.
The
total debt discount related to the Loan Agreement, as amended by the First Amendment, with K2 HealthVentures LLC is $7,209 (subsequent
to adjustments made as a result of the implementation of ASU 2020-06). As of March 31, 2022, and December 31, 2021, the unamortized debt
discount was $2,692 and $3,783 respectively. The debt discount is being charged to interest expense, net of interest income in the condensed
consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.
At
March 31, 2022 and December 31, 2021, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy,
is estimated to be $30,292 and $30,406, respectively.
Interest
expense, net of interest income recorded in the three months ended March 31, 2022 and 2021 was as follows:
SCHEDULE OF INTEREST EXPENSE
| |
2022 | | |
2021 | |
| |
Three
months ended March 31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Interest
expense | |
$ | 607 | | |
$ | 389 | |
Amortization
of debt discount | |
| 410 | | |
| 1,611 | |
Interest
income | |
| (77 | ) | |
| (188 | ) |
Total | |
$ | 940 | | |
$ | 1,812 | |
The
following table summarizes the future principal payments due under long-term debt:
SCHEDULE OF FUTURE PRINCIPAL OF LONG-TERM DEBT
| |
Principal
payments on Loan Agreement and final payment | |
Remaining
2022 | |
$ | - | |
2023 | |
| 19,573 | |
2024 | |
| 12,651 | |
Total | |
$ | 32,224 | |
10.
STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL
Stock
option plans
The
Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates,
in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates
the number of options, exercise price and vesting period of the new options.
2006
VBI US Stock Option Plan
The
2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors
which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting
period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan
(as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of March 31, 2022, there were
889,763 options outstanding under the 2006 Plan.
2014
Equity Incentive Plan
On
May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The
2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined
below) and no further options will be issued under the 2014 Plan. As of March 31, 2022, there were 521,242
options outstanding under the 2014 Plan.
2016
VBI Equity Incentive Plan
The
2016 Plan is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based
compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis
at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant
equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer
incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include
a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”),
performance share units (“PSUs”), shares of restricted stock or other such award as may be permitted under the 2016 Plan.
As of March 31, 2022, there were 21,952,188 options outstanding and 27,790 RSUs unvested under the 2016 Plan.
The
aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled 996,806 at March 31, 2022.
Activity
related to stock options is as follows:
SCHEDULE OF STOCK OPTIONS ACTIVITY
| |
Number
of Stock Options | | |
Weighted
Average Exercise Price | |
Balance
outstanding at December 31, 2021 | |
| 18,534,379 | | |
$ | 2.63 | |
| |
| | | |
| | |
Granted | |
| 4,990,000 | | |
| 1.53 | |
Exercised | |
| (7,221 | ) | |
| 1.65 | |
Forfeited | |
| (153,965 | ) | |
| 2.80 | |
| |
| | | |
| | |
Balance
outstanding at March 31, 2022 | |
| 23,363,193 | | |
$ | 2.40 | |
| |
| | | |
| | |
Exercisable
at March 31, 2022 | |
| 12,284,144 | | |
$ | 2.54 | |
Information
relating to RSUs is as follow:
SCHEDULE OF RESTRICTED STOCK UNITS
| |
Number
of Stock Awards | | |
Weighted
Average Fair Value at Grant Date | |
Unvested
shares outstanding at December 31, 2021 | |
| 39,329 | | |
$ | 1.47 | |
| |
| | | |
| | |
Vested | |
| (11,539 | ) | |
| 1.51 | |
| |
| | | |
| | |
Unvested
shares outstanding at March 31, 2022 | |
| 27,790 | | |
$ | 1.46 | |
In
determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value
of options granted by applying the following weighted average assumptions:
SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK-SCHOLES OPTION PRICING ASSUMPTIONS
| |
2022 | | |
2021 | |
Volatility | |
| 93.17 | % | |
| 97.13 | % |
Risk
free interest rate | |
| 1.71 | % | |
| 0.54 | % |
Expected
term in years | |
| 5.83 | | |
| 5.85 | |
Expected
dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Weighted
average fair value per option | |
$ | 1.15 | | |
$ | 2.40 | |
The
fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted
for when they occur. The total stock-based compensation expense recorded in the three months ended March 31, 2022 and 2021 was as follows:
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE
| |
Three
months ended March
31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Research
and development | |
$ | 510 | | |
$ | 428 | |
General
and administrative | |
| 1,966 | | |
| 1,690 | |
Cost
of revenues | |
| 26 | | |
| 21 | |
Total | |
$ | 2,502 | | |
$ | 2,139 | |
11.
REVENUES AND DEFERRED REVENUE
Revenue
comprises the following:
SCHEDULE OF REVENUE COMPRISED
| |
Three
months ended March
31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Product
revenues | |
$ | 91 | | |
$ | 167 | |
R&D
service revenues | |
| 35 | | |
| 134 | |
Total | |
$ | 126 | | |
$ | 301 | |
The
following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates,
that are unsatisfied at March 31, 2022:
SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS
| |
Total | | |
Current portion
to March
31, 2023 | | |
Remaining portion thereafter | |
Product
revenues | |
$ | 469 | | |
$ | - | | |
$ | 469 | |
R&D
service revenues | |
| 2,348 | | |
| 649 | | |
| 1,699 | |
Total | |
$ | 2,817 | | |
$ | 649 | | |
$ | 2,168 | |
The
following table presents changes in the deferred revenue balance for the three months ended March 31, 2022:
SUMMARY OF CHANGES IN DEFERRED REVENUE
Balance
at December 31, 2021 | |
$ | 2,803 | |
| |
| | |
Recognition
of deferred revenue | |
| (25 | ) |
Currency
translation | |
| 39 | |
| |
| | |
Balance
at March 31, 2022 | |
$ | 2,817 | |
| |
| | |
Short
Term | |
$ | 649 | |
Long
Term | |
$ | 2,168 | |
Collaboration
and License Agreement – Brii Bio
On
December 4, 2018, the Company entered into a Collaboration and License Agreement (the “License Agreement”) with Brii
Biosciences Limited (“Brii Bio”), amended on April 8, 2021, whereby:
|
● |
the
Company and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in the licensed
territory, which consists of China, Hong Kong, Taiwan and Macau (collectively, the “Licensed Territory”), and to conduct
a Phase Ib/IIa collaboration clinical trial for the purpose of comparing VBI-2601 (BRII-179), which is a recombinant protein-based
immunotherapeutic developed by VBI for use in treating chronic HBV, with a novel composition developed jointly with Brii Bio (either
being the “Licensed Product”); |
|
|
|
|
● |
the
Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be
required to obtain and maintain marketing approval for the Licensed Product, for the treatment of HBV in the Licensed Territory
and to commercialize and promote the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory;
and |
|
|
|
|
● |
Brii Bio granted the Company an exclusive royalty-free
license under Brii Bio’s technology and Brii Bio’s interest in any joint technology developed during the collaboration
to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV in the countries of the world other
than the Licensed Territory. |
On December 20, 2021, the Company and Brii Bio
further amended the License Agreement (the “Second Amendment”) subject to the following additional terms and conditions:
|
● |
the
Company and Brii Bio agreed to conduct an additional Phase II combination clinical trial of VBI-2601 (BRII-179), both with and without
IFN-α, and BRII-835 (VIR-2218) (“Combo Clinical Trial”); and |
|
● |
Brii
Bio granted the Company a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the
Combo Clinical Trial solely for use in the development, manufacture or commercialization of the Licensed Product in combination with
an siRNA in the countries of the world other than the Licensed Territory. |
Pursuant
to the License Agreement, as amended, the Company is responsible for the R&D Services and Brii Bio is responsible for costs relating
to the clinical trials for the Licensed Territory.
The Company and Brii Bio will jointly own
all right, title and interest in the joint know-how development and the patents claiming joint inventions made pursuant to the Second
Amendment.
As
part of the initial consideration of the License
Agreement consisted of an $11,000
non-refundable upfront payment. As part of the
License Agreement, the Company and Brii Bio entered into a stock purchase agreement. Under the terms of the stock purchase agreement,
the Company issued to Brii Bio 2,295,082
shares of its common stock valued at $3,626
(based on the Company’s common stock price
on December 4, 2018). The remaining $7,374,
deemed to be the initial transaction price, was allocated to two performance obligations: i) the VBI-2601 (BRII-179) license and ii)
R&D services. The R&D services were allocated $4,737
of the transaction price using an estimated selling
price based on an expected cost plus a margin approach and the remaining transaction price of $2,637
was allocated to the VBI-2601 (BRII-179) license
using the residual method.
There
was no additional consideration contemplated in the Second Amendment.
In
addition, the Company is also eligible to receive an additional $117,500 in potential regulatory and sales milestone payments, along
with royalties on commercial sales in the Licensed Territory. Milestone payments that are not within the control of the Company or the
licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore,
no variable consideration was included in the initial transaction price and no such amounts have been recognized to date.
The
R&D Services will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method
represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred. As of March 31,
2022, R&D services related to Brii Bio that remain unsatisfied are $2,148, out of the $2,817 total deferred revenue.
Upon
termination of the Collaboration and License Agreement prior to the end of the term, there is no obligation for refund and any amounts
in deferred revenue related to unsatisfied performance obligations will be immediately recognized.
12.
COLLABORATION ARRANGEMENTS
GlaxoSmithKline
Biologicals S.A. (“GSK”)
On
September 10, 2019, the Company entered into a Clinical Collaboration Agreement (“Collaboration Agreement”) pursuant to which
we will investigate the use of GSK’s proprietary AS01B adjuvant system in our ongoing study of VBI-1901. As a result
of the Collaboration Agreement, a second study arm was added to Part B of the ongoing Phase Ib/IIa clinical study to accommodate the
AS01B adjuvant.
This
relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope
of ASC Topic 606. Costs associated with the second study arm will be expensed as incurred in Research and Development expenses; costs
for the three months ended March 31, 2022 and 2021 are $135 and $256, respectively.
National
Research Council of Canada (“NRC”)
On
March 31, 2020, the Company announced a collaboration with the NRC, Canada’s largest federal research and development organization,
to develop a pan-coronavirus vaccine candidate, targeting COVID-19, SARS, and MERS. The NRC and the Company are collaborating to evaluate
and select promising coronavirus vaccine candidates. The collaboration combines the Company’s viral vaccine expertise, eVLP technology
platform, and modified coronavirus antigens with the NRC’s proprietary SARS-CoV-2 antigens and assay development capabilities to
select the most immunogenic vaccine candidate for further development.
On
December 21, 2020, the Company signed an amendment to the collaboration agreement with the NRC to broaden the scope of collaboration
to include certain pre-clinical evaluations, bioprocess optimization, technology transfer, and the performance of additional scale up
work.
On
July 8, 2021, the Company signed a second amendment to the collaboration agreement with the NRC to broaden the scope of the collaboration
to include developing a vaccine against the Beta variant of SARS-CoV-2.
On
August 27, 2021, the Company signed a third amendment to the collaboration agreement with the NRC further broaden the scope to include
certain stable cell line work for our vaccine candidate against the Beta variant of SARS-CoV-2.
On
November 15, 2021, we signed a fourth amendment to the collaboration agreement with the NRC to further broaden the scope to include additional
animal studies and PRNT analysis for our vaccine candidate against the Beta variant of SARS-CoV-2.
On
February 8, 2022, we signed a fifth amendment to the collaboration agreement with the NRC to further broaden the scope to include additional
assays of new variants against SARS-CoV-2.
On
April 28, 2022, we signed a sixth amendment to the collaboration agreement with the NRC to further broaden the scope to include generation
and testing of stable pools of cells expressing SARS-CoV-2 spike protein.
The
expiry date of the collaboration agreement, as amended, is October 31, 2022.
This
relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope
of ASC Topic 606. Costs associated with the collaboration will be expensed as incurred in Research and Development expenses; costs for
the three months ended March 31, 2022 and 2021 are $280 and $158,
respectively.
CEPI
On
March 9, 2021, the Company and CEPI announced the CEPI Funding Agreement, to develop eVLP vaccine candidates against SARS-COV-2 variants,
including the Beta variant, also known as the B.1.351 variant and as 501Y.V2, first identified in South Africa. CEPI agreed to provide
up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of the spike protein
from the Beta variant strain, through Phase I clinical development. This funding will also support preclinical expansion of additional
multivalent vaccine candidates designed to evaluate the potential breadth of our eVLP technology. The preclinical expansion is intended
to develop clinic-ready vaccine candidates capable of addressing emerging variants.
Under
the terms of the CEPI Funding Agreement, among other things, the Company and CEPI agreed on the importance of global equitable access
to any vaccines produced pursuant to the CEPI Funding Agreement. Any such vaccines, if approved, are expected to be procured and allocated
through global mechanisms as part of the Access to COVID-19 Tools (ACT) Accelerator, an international initiative launched by the WHO,
Gavi the Vaccine Alliance, CEPI, and other global non-governmental organizations and governmental leaders in 2021.
This
relationship is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope
of ASC Topic 606.
Costs
associated with the collaboration are expensed as incurred in Research and Development and General and Administrative expenses; costs
for the three months ended March 31, 2022 and 2021 are $1,693
and $157,
respectively. Such expenses, including administrative expenses, for the three months ended March 31, 2022 and 2021 were reduced by the
same amount. Since inception of the CEPI Funding Agreement in 2021, the Company received $18,363
from CEPI and the Company had $8,657
recorded as deferred funding, recorded in other
current liabilities on the condensed consolidated balance sheet.
Brii
Biosciences Limited
On
December 4, 2018, we entered into the Collaboration and License Agreement with Brii Bio, which was amended on April 8, 2021, as described
in Note 11.
As
described in Note 11, the Company and Brii Bio entered into the Second Amendment on December 20, 2021. The Combo Clinical Trial collaboration
is considered a collaborative relationship and not a customer relationship and is therefore accounted for outside the scope of ASC Topic
606. Costs associated with the Combo Clinical Trial collaboration will be expensed as incurred in Research and Development expenses;
costs for the three months ended March 31, 2022, were $24.
13.
GOVERNMENT GRANTS
Grants
recognized in research and development expenses in the condensed consolidated statement of operations and comprehensive loss are
as follows:
Industrial
Research Assistance Program (“IRAP”)
On
July 3, 2020, the Company and the NRC as represented by its IRAP signed a contribution agreement whereby the NRC agreed to contribute
up to CAD $1,000 for the transfer and scale-up of the technical production process for our prophylactic coronavirus vaccine program.
For
the three months ended March 31, 2022 the Company recognized $0, respectively, as a reduction in expenses. As of March 31, 2022, the
Company had $44 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.
For
the three months ended March 31, 2021, the Company recognized $0, respectively as a reduction in expenses.
Strategic
Innovation Fund (“SIF”)
On
September 16, 2020, the Company and Her Majesty the Queen in Right of Canada as represented by the Minister of Industry (“ISED”)
signed a contribution agreement (the “Contribution Agreement”) for a contribution from SIF whereby ISED agreed to contribute
up to CAD $55,976
to support the development of the Company’s
coronavirus vaccine program, through Phase II clinical studies, for a period commencing on April 15, 2020 and ending on or before the
first quarter of 2022 (the “Project Completion Date”). On March 28, 2022, the Company and ISED signed an amendment to the
Contribution Agreement, the main purpose of which was to extend the collaboration and move the Project Completion Date from March 31,
2022 to December 31, 2023.
For
the three months ended March 31, 2022, the Company recognized $1,453, respectively, as a reduction in expenses. As of March 31, 2022,
the Company had $753 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance
sheet.
For
the three months ended March 31, 2021, the Company recognized $2,688, respectively as a reduction in expenses.
14.
COMMITMENTS AND CONTINGENCIES
Legal
Proceedings
From
time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business.
Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred
and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely
outcome.
On
September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac
as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac
discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing
its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects
from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated
with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($591,782). The second claim is a civil
action brought by two minors and their parents against SciVac and the Israel Ministry of Health alleging, among other things, that SciVac
marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence
establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim
seeks damages for past and future losses and expenses as well as punitive damages.
SciVac
believes these matters to be without merit and intends to defend these claims vigorously.
The
District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination
of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent
preliminary hearings held on May 13, 2020, December 3, 2020 and September 30, 2021. The next preliminary hearing is scheduled to be held
on June 9, 2022.
Operating
leases
The
Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are classified
as operating leases. The office facility lease agreement in the United States expires on October
31, 2024, with no option to extend. Our
manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027.
A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional
years. The
lease agreement for our research facility in Canada, which comprises office and laboratory space, has a term ending on December 31, 2022
with an option to extend the term for one additional period of three years. A lease for additional office space at our research facility
commenced on October 1, 2020 with a term ending April 30, 2023.
During
the three months ended March 31, 2022, the Company entered into new lease agreements and recognized a ROU asset of $795.
There are no residual value guarantees,
no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities
and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.
SUMMARY OF LEASE COST AND OTHER INFORMATION
Lease
cost: | |
| | |
Operating
lease costs: | |
| | |
Three
months ended March 31, 2022 | |
$ | 341 | |
Three
months ended March 31, 2021 | |
| 343 | |
Other
information: | |
| | |
Weighted
average remaining lease term | |
| 3.39
years | |
Weighted
average discount rate | |
| 12.0 | % |
Operating
lease costs are included G&A expenses in the statement of operations and comprehensive loss.
The
following table summarizes future undiscounted cash payments reconciled to the lease liabilities:
SCHEDULE OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES
| |
| | |
Remaining
2022 | |
$ | 1,027 | |
2023 | |
| 1,242 | |
2024 | |
| 1,127 | |
2025 | |
| 633 | |
2026 | |
| 633 | |
2027 | |
| 186 | |
Total | |
$ | 4,848 | |
Effect
of discounting | |
| 989 | |
Total
lease liability | |
$ | 3,859 | |
Less:
current portion | |
| 938 | |
Lease
liability, net of current portion | |
$ | 2,921 | |
15.
SEGMENT INFORMATION
The
Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates
the performance of the Company and allocates resources based on the information provided by the Company’s internal management system
at a consolidated level. The Company has determined that it has only one operating segment.
Revenues
from external customers are attributed to geographic areas based on location of the contracting customers:
SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS
| |
Three
Months Ended March
31 | |
| |
2022 | | |
2021 | |
| |
| | |
| |
Israel | |
$ | 95 | | |
$ | 169 | |
China
/ Hong Kong | |
| 25 | | |
| 128 | |
Europe | |
| 6 | | |
| 4 | |
Total | |
$ | 126 | | |
$ | 301 | |
There
was no revenue attributed to our country of domicile, Canada, for the three months ended March 31, 2022 and 2021.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis summarizes the significant factors affecting our operating results, financial condition, liquidity,
and cash flows as of and for the periods presented below. The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in
this Form 10-K. In addition to historical information, this discussion and analysis here and throughout this Form 10-K contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these
forward-looking statements.
Overview
VBI
Vaccines Inc. (“VBI”) is a commercial stage biopharmaceutical company driven by immunology in the pursuit of powerful prevention
and treatment of disease. Through our innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped
VLP (“eVLP”) platform technology, we develop vaccine candidates that mimic the natural presentation of viruses, designed
to elicit the innate power of the human immune system. We are committed to targeting and overcoming significant infectious diseases,
including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive
cancers including glioblastoma. We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research
and manufacturing site in Rehovot, Israel.
Product
Pipeline
VBI’s
pipeline is comprised of vaccine and immunotherapeutic programs developed by virus-like particle technologies to target two distinct,
but often related, disease areas – infectious disease and oncology. We prioritize the development of programs for disease
targets that are challenging, underserved, and where the human immune system, when powered and stimulated appropriately, can be a formidable
opponent.
VLP
vaccines are a type of sub-unit vaccine, in which only the portions of viruses critical for eliciting an immune response are presented
to the body. Because of their structural similarity to viruses presented in nature, including their particulate nature and repetitive
structure, virus-like particles (VLPs) can stimulate potent immune responses. VLPs can be customized to present any protein antigen,
including multiple antibody and T cell targets, making them, we believe, ideal technologies for the development of both prophylactic
and therapeutic vaccines. However, only a few antigenic proteins self-assemble into VLPs, which limit the number of potential targets.
Notably, HBV antigens are among those that are able to spontaneously form orderly VLP structures. Our eVLP platform technology expands
the list of potentially-viable target indications for VLPs by providing a stable core (Gag Protein) and lipid bilayer (the “envelope”).
It is a flexible platform that enables the synthetic manufacture of an “enveloped” VLP, or “eVLP”, which looks
structurally and morphologically similar to the virus, with no infectious material.
Our
product pipeline includes an approved vaccine and multiple late- and early-stage investigational programs. The investigational programs
are in various stages of clinical development and the scientific information included about these therapeutics is preliminary and investigative.
The investigational programs have not been approved by the United States Food and Drug Administration, European Medicines Agency’s,
United Kingdom Medicines and Healthcare products Regulatory Agency, Health Canada, or any other health authority and no conclusion can
or should be drawn regarding the safety or efficacy of these investigational programs.
In
addition to our existing pipeline programs, we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that
we believe complement our pipeline, as well as technologies that may supplement our efforts in both immune-oncology and infectious
disease.
Key
Targeted Disease Areas
Hepatitis
B Virus (“HBV”)
HBV
infection can cause liver inflammation, fibrosis, and liver injury, resulting in potentially life-threatening conditions through acute
illness and chronic disease, including liver failure, cirrhosis, and cancer. HBV remains a significant public health burden with an estimated
2.2 million chronically-infected people in the United States (“U.S.”) alone. Worldwide, this number is estimated to be as
high as 350 million, with approximately 800,000 deaths resulting from the consequences of HBV infection each year.
Despite
the highly infectious nature of HBV, due to its often asymptomatic nature, it is estimated that as many as 67% of chronically-infected
adults in the U.S. are unaware of their infection status. There is not yet a cure available for HBV infection, but while public health
initiative name immunization as the most effective strategy for the prevention of HBV infections, the U.S. adult HBV vaccination rates
remain persistently low at only about 25% of all adults age 19 years and older.
In
November 2021, the Centers for Disease Control and Prevention (CDC) Advisory Committee on Immunization Practices (ACIP) unanimously voted
to change the adult HBV vaccine recommendations. As incorporated in the CDC’s 2022 Adult Immunization Schedule, adults age 19 to
59 years are now universally recommended to be vaccinated against HBV infection. No change was made for adults age 60 years and older
– those with an additional risk factor or another indication are recommended for HBV vaccination.
COVID-19
and Other Coronaviruses
Coronaviruses
are a large family of enveloped viruses that cause respiratory illness of varying severities. Only seven coronaviruses are known to cause
disease in humans, four of which most frequently cause symptoms typically associated with the common cold. Three of the seven coronaviruses,
however, have more serious outcomes in people. These more pathogenic coronaviruses are (1) SARS-CoV-2, a novel coronavirus identified
as the cause of COVID-19; (2) MERS-CoV, identified in 2012 as the cause of Middle East Respiratory Syndrome (“MERS”); and
(3) SARS-CoV, identified in 2002 as the cause of Severe Acute Respiratory Syndrome (“SARS”).
The
virus that causes COVID-19 continues to evolve and several SARS-CoV-2 variants have emerged and certain of these variants have been identified
as having a significant public health impact. To date, notable Variants of Concern (“VOC”) include:
|
● |
Alpha
(B.1.1.7) – First identified as in the United Kingdom (“UK”), VOC in December 2020 |
|
● |
Beta
(B.1.351) – First identified in South Africa, VOC in December 2020 |
|
● |
Gamma
(P.1) – First identified in Brazil, VOC in January 2021 |
|
● |
Delta
(B.1.617.2) – First identified in India, VOC in May 2021 |
|
● |
Omicron
(B.1.1.529) – First identified in South Africa, VOC in November 2021 |
Glioblastoma
(“GBM”)
Glioblastoma
(“GBM”) is among the most common and aggressive malignant primary brain tumors in humans. In the U.S. alone, about 12,000
new GBM cases are diagnosed each year. The current standard of care for GBM is surgical resection, followed by radiation and chemotherapy.
Even with intensive treatment, GBM progresses rapidly and has a high mortality rate, with median overall survival for primary GBM of
about 14 months.
Cytomegalovirus
(“CMV”)
CMV
is a common virus that is a member of the herpes family. It infects one in every two people in many developed countries. Most CMV infections
are “silent”, meaning the majority of people who are infected exhibit no signs or symptoms. Despite its typically asymptomatic
nature in older children and adults, CMV may cause severe infections in newborn children (congenital CMV) and may also cause serious
infections in people with weakened immune systems, such as solid organ or bone marrow transplant recipients. Congenital CMV infection
can be treated – but not cured – and there are currently no approved vaccines available for the prevention of infection in
either the congenital or the transplant setting.
Zika
Zika
is a mosquito-borne virus that is spread primarily through the bite of an infected Aedes species mosquito, but can also be transmitted
sexually, during pregnancy, or during childbirth. Acute infections are typically mild, but Zika has been associated with a number of
neurological complications in newborns. The first formal description of Zika virus was published in 1952, but it was not until 2007 that
the first Zika outbreak in humans was recorded. Over the past decade, Zika has begun to spread globally, and between January 2014 and
February 2016, 33 countries reported circulation of the Zika virus, including in North America. There is currently no vaccine to prevent
Zika infection.
Pipeline
Programs
The
table below is an overview of our commercial vaccine and our investigational programs as of May 2, 2022:
Indication |
|
Program |
|
Technology |
|
Current
Status |
Approved
Vaccine
●
Hepatitis B |
|
PreHevbrio1,2,3
Hepatitis
B Vaccine |
|
VLP |
|
Registration/Commercial |
|
|
(Recombinant) |
|
|
|
|
Prophylactic
Candidates |
|
|
|
|
|
|
●
Cytomegalovirus |
|
VBI-1501 |
|
eVLP |
|
Phase
I Completed |
●
COVID-19 (Ancestral) |
|
VBI-2902 |
|
eVLP |
|
Ongoing
Phase Ia |
●
COVID-19 (Beta variant) |
|
VBI-2905 |
|
eVLP |
|
Ongoing
Phase Ib |
|
|
|
|
|
|
|
●
Pan-coronavirus (Multivalent) |
|
VBI-2901 |
|
eVLP |
|
Pre-Clinical |
●
Coronaviruses (Multivalent) |
|
Undisclosed |
|
eVLP |
|
Pre-Clinical |
●
Zika |
|
VBI-2501 |
|
eVLP |
|
Pre-Clinical |
|
|
|
|
|
|
|
Therapeutic
Candidates |
|
|
|
|
|
|
●
Hepatitis B |
|
VBI-2601 |
|
VLP |
|
Ongoing
Phase II |
●
Glioblastoma |
|
VBI-1901 |
|
eVLP |
|
Ongoing
Phase I/IIa |
●
Other CMV-Associated Cancers |
|
Undisclosed |
|
eVLP |
|
Preclinical |
1Approved
for use in the U.S. for the prevention of infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older
2Approved
for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection)
3Approved for use in the European Union/European
Economic Area, under the brand name PreHevbri, for active immunization against infection caused by all known subtypes of the hepatitis
B virus (HBV) in adults.
A
summary of our marketed product, lead pipeline programs and recent developments follows.
Marketed
Product
PreHevbrio
(Hepatitis B Vaccine [Recombinant])
PreHevbrio (Hepatitis B Vaccine [Recombinant])
was approved by the FDA on November 30, 2021 for the prevention of infection caused by all known subtypes of HBV in adults age 18 years
and older. PreHevbrio contains the S, pre-S2, and pre-S1 HBV surface antigens, and is the only approved 3-antigen HBV vaccine for adults
in the U.S. On February 23, 2022, following discussion at the CDC’s ACIP meeting, PreHevbrio joined the list of recommended products
for prophylactic adult vaccination against HBV infection. The inclusion of PreHevbrio in the ACIP recommendation was reflected in
a CDC publication on April 1, 2022, and is a notable milestone as many insurance plans and institutions require an ACIP recommendation
before a vaccine is able to be reimbursed or is made available to patients. Additionally, PreHevbrio will be included in the next annual
update of the CDC Adult Immunization Schedule in 2023, which will summarize changes throughout the coming year. VBI launched PreHevbrio
in the U.S. at the end of the first quarter of 2022, with revenue generation expected to begin in the second quarter of 2022.
Commercial
and regulatory activity for VBI’s 3-antigen HBV vaccine outside of the U.S. include:
|
● |
European Union (“EU”): On May 2, 2022, we announced
that the European Commission (the “EC”) granted Marketing Authorization for PreHevbri [Hepatitis B vaccine (recombinant, adsorbed)], following
the February 2022 positive opinion granted by EMA’s Committee for Medicinal Products for Human Use (“CHMP”). The
European Commission’s centralized marketing authorization is valid in all EU Member States as well as in the European Economic
Area (EEA) countries (Iceland, Liechtenstein, and Norway). VBI expects to make PreHevbri available in certain European countries
beginning at the end of 2022. |
|
● |
Israel: Approved and commercially available under the brand
name Sci-B-Vac®, for active immunization against HBV infection. |
|
● |
United Kingdom (“UK”): The MAA for VBI’s 3-antigen
HBV vaccine is under review by the MHRA as part of the EC Decision Reliance Procedure (“ECDRP”), the process for
which was initiated upon receipt of positive CHMP opinion. |
|
● |
Canada: On December 9, 2021, we completed the filing of a New Drug Submission (“NDS”) to Health Canada for our 3-antigen hepatitis B vaccine candidate. Discussions are underway with regulatory agencies to determine the brand name for our 3-antigen HBV vaccine in Canada. |
Prophylactic
Investigational Candidates
VBI-2900:
Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)
In
response to the ongoing SARS-CoV-2 (COVID-19) pandemic, VBI initiated development of a prophylactic coronavirus vaccine program. Coronaviruses
are enveloped viruses by nature which make them a prime target for VBI’s flexible eVLP platform technology.
On
August 26, 2020, we announced data from three pre-clinical studies conducted to enable selection of optimized clinical candidates for
our coronavirus vaccine program. As a result of these studies, VBI selected two vaccine candidates, with the goal of bringing forward
candidates that add meaningful clinical and medical benefit to those already approved: (1) VBI-2901, a multivalent pan-coronavirus vaccine
candidate expressing the SARS-CoV-2, SARS, and MERS spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing an optimized
“prefusion” form of the SARS-CoV-2 spike protein.
In
March 2021, a Phase I study of VBI-2902 was initiated and on June 29, 2021 we announced initial positive data from the Phase Ia portion
of this study that evaluated one- and two-dose regimens of 5µg of VBI-2902 in 61 healthy adults age 18-54 years. After two doses,
VBI-2902 induced neutralization titers in 100% of participants, with 4.3x higher geometric mean titer (“GMT”) than that of
the convalescent serum panel (n=25), and peak antibody binding GMT of 1:4,047. The study supports the assessment of a one-dose booster
regimen in seropositive individuals and two-dose regimens in seronegative individuals. VBI-2902 was also well tolerated with no safety
signals observed.
In response to the increased circulation of SARS-CoV-2
variants, the Phase Ib portion of the ongoing Phase I study was initiated in September 2021 to assess VBI-2905, our eVLP vaccine candidate
directed against the SARS-CoV-2 Beta variant. On April 5, 2022, we announced new data from the Phase 1b study (n=53). A single-dose booster
of VBI-2905 increased the geometric mean titer (GMT) of neutralizing antibodies directed against the Beta variant 3.8-fold, at day 28,
in participants who had previously received two-doses of an mRNA vaccine (ancestral strain) – approximately 2-fold increases were
also seen at day 28 in antibody GMTs against both the ancestral and delta variant. New preclinical data announced at the same time showed
that against a panel of coronavirus variants in mice, reactivity was seen with VBI-2902 against all variants including the ancestral
strain, Delta, Beta, Omicron, Lambda, and RaTG13 (a bat coronavirus that is distant to circulating human strains). In this same panel,
VBI-2901 was able to elicit an even stronger response against all variants tested – as the strains became more divergent from the
ancestral strain, VBI-2901 elicited a greater difference in GMT from VBI-2902, ranging from 2.5-fold higher against the ancestral strain
to 9.0-fold higher against the bat coronavirus. Additionally, a validated pseudoparticle neutralization assay (PNA) benchmarked against
the WHO reference standard demonstrated that VBI-2902 elicited neutralizing antibody responses of 176 IU50/mL in its Phase 1a study –
this international standard measure would predict a greater than 90% efficacy, with two internationally approved vaccines estimated to
have 90% efficacy at 83 and 140 IU50/mL (Gilbert, PB, 2021).
The new clinical
and preclinical data for all three candidates continued to support the potential of the eVLP platform against coronaviruses. The first
clinical study of VBI’s multivalent candidate, designed to increase breadth of protection against COVID-19 and related coronaviruses,
is expected to begin in the summer of 2022.
The
VBI-2900 program is supported by a partnership with CEPI (the “CEPI Funding Agreement”), with contributions of up to $33
million; a partnership with the Strategic Innovation Fund (“SIF”), established by the Government of Canada, with an award
of up to CAD $56 million; contribution of up to CAD $1 million from the Industrial Research Assistance Program (“IRAP”) of
the National Research Council of Canada (“NRC”); and a collaboration with the NRC.
VBI-1501:
Prophylactic CMV Vaccine Candidate
Our
prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B (“gB”) antigen
and is adjuvanted with alum, an adjuvant used in FDA-approved products.
Following
the successful completion of the Phase I study in May 2018, and positive discussions with Health Canada, we announced plans for a Phase
II clinical study evaluating VBI-1501 on December 20, 2018. We received similarly positive guidance from the FDA in July 2019. The Phase
II study is expected to assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with alum. We are currently evaluating
the timing of the Phase II study.
Therapeutic
Investigational Candidates
VBI-2601:
HBV Immunotherapeutic Candidate
VBI-2601
(BRII-179) is our novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic HBV infection.
VBI-2601 (BRII-179) is formulated to induce broad immunity against HBV, including T-cell immunity which plays an important role in controlling
HBV infection.
On
April 12, 2021 and June 23, 2021, we announced data from the completed Phase Ib/IIa clinical study in patients with chronic HBV infection,
which was conducted by our partner Brii Biosciences Limited (“Brii Bio”). The study was a randomized, controlled study designed
to assess the safety, tolerability, antiviral and immunologic activity of VBI-2601. The study was a two-part, dose-escalation study assessing
different dose levels of VBI-2601 (BRII-179) with and without an immunomodulatory adjuvant, conducted at multiple study sites in New
Zealand, Australia, Thailand, South Korea, Hong Kong SAR, and China.
The
data from the Phase Ib/IIa for 33 evaluable patients across all study arms suggest: (1) VBI-2601 (BRII-179) is well tolerated at all
dose levels with and without the adjuvant with no significant adverse events identified; (2) VBI-2601 (BRII-179) induced both B cell
(antibody) and T cell responses in chronically-infected HBV patients, (3) VBI-2601 (BRII-179) induced restimulation of T cell responses
to HBV surface antigens, including S, Pre-S1 and Pre-S2, in greater than 50% of the evaluable patients compared to no detectable response
in the control arm; (4) the T cell responses and antibody responses were comparable across the 20µg and 40µg unadjuvanted
study arms; and (5) T cell response rates between the adjuvanted and unadjuvanted cohorts were also comparable. Based on the acceptable
safety profile and vaccine-induced adaptive immune responses seen in this study, VBI-2601 (BRII-179) has been advanced to Phase II studies.
On
April 21, 2021, we announced that the first patient had been dosed in a Phase II clinical study evaluating VBI-2601 (BRII-179) in combination
with BRII-835 (VIR-2218), an investigational small interfering ribonucleic acid (siRNA) targeting HBV, for the treatment of chronic HBV
infection. To the best of our knowledge, this is the first clinical trial in the field to evaluate the combination of these two HBV mechanisms
of action. The multi-center, randomized, open-label study is designed to evaluate the safety and efficacy of this combination with and
without interferon-alpha as a co-adjuvant. Brii Bio has led the design and implementation of this functional cure proof-of-concept study
with the support of VBI and Vir Biotechnology (“VIR”). The study will be conducted at sites in Australia, China, Taiwan,
Hong Kong SAR, South Korea, New Zealand, Singapore, and Thailand. Interim topline clinical data from this study is expected by
the end of 2022.
On
January 5, 2022, we announced that the first patient was dosed in a second Phase IIa/IIb clinical study evaluating VBI-2601 (BRII-179).
This newly announced Phase II study will assess VBI-2601 as an add-on therapy to the standard-of-care nucleos(t)ide reverse transcriptase
inhibitor (nrtl) and pegylated interferon (PEG-IFN-α,) therapy. Interim topline clinical data from this Phase IIa/IIb
clinical study is expected in the first half of 2023.
VBI-1901:
Glioblastoma (GBM)
Our
cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid
tumors including glioblastoma (“GBM”), breast cancer, and pediatric medulloblastoma.
In
January 2018, we initiated dosing in a two-part, multi-center, open-label Phase I/IIa clinical study of VBI-1901 in 38 patients
with recurrent GBM. Phase I (Part A) of the study was a dose-escalation phase that defined the safety, tolerability, and optimal dose
level of VBI-1901 adjuvanted with granulocyte-macrophage colony-stimulating factor (GM-CSF) in recurrent GBM patients with any number
of prior recurrences. In December 2018, this phase completed enrollment of 18 patients across three dose cohorts, the highest of which
(10 µg) was selected as the optimal dose level to test in the Phase IIa portion (Part B) of the study. Phase IIa
of the study, which initiated enrollment in July 2019, is a subsequent extension of the 10 µg doses level cohort. This phase is
a two-arm study that enrolled 20 first-recurrent GBM patients to receive 10 µg of VBI-1901 in combination with either GM-CSF or
GlaxoSmithKline Biologicals S.A. (“GSK”) proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 is provided
pursuant to a Clinical Collaboration and Support Study Agreement (“Collaboration Agreement”) we entered into with GSK on
September 10, 2019. Enrollment of the 10 patients in the VBI-1901 with GM-CSF arm was completed in March 2020 and enrollment of the 10
patients in the VBI-1901 with AS01 was completed in October 2020.
Data
from the ongoing Phase IIa portion of the study was announced throughout 2020 and 2021, with the latest data presented in December
2021 at the World Vaccine & Immunology Congress. The data from the Phase IIa portion of this study demonstrate: (1) improvement
in 6-month, 12-month, and 18-month overall survival (“OS”) data compared to historical controls; (2) 12-month OS of 60% (n=6/10)
in the VBI-1901 + GM-CSF study arm and 70% (n=7/10) in the VBI-1901 + AS01 study arm, compared to historical controls of ~30%; (3) 18-month
OS of 30% (3/10) in the VBI-1901 + GM-CSF study arm, 18-month OS not yet reached in the VBI-1901 + AS01 study arm; (3) 2 partial tumor
responses, one of which remains on protocol past week 86 with a 93% tumor reduction relative to initiation of treatment at the start
of the study, and 7 stable disease observations across both study arms; and (4) VBI-1901 continues to be safe and well tolerated at all
doses tested, with no safety signals observed.
On
June 8, 2021, we announced that the FDA granted Fast-Track Designation for VBI-1901 formulated with GM-CSF for the treatment of recurrent
GBM patients with first tumor recurrence. The designation was granted based on data from the Phase I/IIa study.
Based
on the data seen to-date, as part of the next phase of development, we anticipate assessing VBI-1901 in randomized, controlled studies
in both primary and recurrent GBM patients. In the recurrent setting, we aim to expand the number of patients in the current trial and
add a control arm, with the potential for accelerated approval based on tumor response rates and improvement in overall survival. Subject
to discussion with the FDA, the amended protocol is expected to initiate enrollment of additional patients in the third quarter of
2022. In the primary setting, we are exploring a randomized, controlled, clinical study with registration potential in patients
first diagnosed with GBM, which, subject to approval from regulatory bodies, is expected to begin in the fourth quarter of 2022.
Third
Party License and Assignment Agreements
We
currently are dependent on licenses from third parties for certain of our key technologies, including the license granted pursuant to
an agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004, as subsequently amended (the “Ferring License
Agreement”) and a license from L’Universite Pierre et Marie Curie, now Sorbonne Université (“UPMC”), Institut
National de la Santé et de la Recherche Médicale (“INSERM”) and L’école Normale Supérieure
de Lyon. Under the Ferring License Agreement, we are committed to pay Ferring royalties equal to 7% of net sales (as defined therein)
of HBsAg “Product” (as defined therein). Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated February
14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net sales (as
defined in the Ferring License Agreement) of Product. Under the Ferring License Agreement and the SciGen Assignment Agreement, we originally
were to pay royalties on a country-by-country basis until the date 10 years after the date of commencement of the first royalty year
in respect of such country. In April 2019, we exercised our option to extend the Ferring License Agreement in respect of all the countries
that still make up the territory for an additional 7 years by making a one-time payment to Ferring of $0.1 million. Royalties under the
Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods.
Under our license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents
that is expected to expire in the United States in 2022 and expired in other countries in 2021. Under this agreement, we are required
to pay UPMC between 0.75% to 1.75% of net sales and certain lump-sum milestone payments. UPMC is also a co-owner of the patent family
covering our VBI-1501 CMV vaccine and we are currently negotiating an agreement with UPMC to cover this patent family. During the three
months ended March 31, 2022, we did not make any milestone payments.
Financial Operations Overview
At
present, our operations are focused on:
● |
commercially launching PreHevbrio in the United States; |
|
|
● |
manufacturing our 3-antigen HBV vaccine at commercial scale to meet demand in the U.S. and Israel, where it is approved, and to prepare for supply in markets where we may obtain marketing authorization; |
|
|
● |
preparing for commercialization of our
3-antigen HBV vaccine in Europe, where we have received regulatory approval under the brand name PreHevbri, and in Canada, where
we may obtain regulatory approval;
|
|
|
● |
supporting the ongoing review of the regulatory
submissions for our 3-antigen HBV vaccine by the MHRA in UK, and Health Canada in Canada;
|
|
|
● |
conducting the Phase I/IIa clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901; |
|
|
● |
preparing for the next phase of development for our GBM vaccine immunotherapeutic candidate, VBI-1901; |
|
|
● |
conducting the Phase I clinical study of our prophylactic COVID-19 vaccine candidates, VBI-2902 and VBI-2905 (Beta variant); |
|
|
● |
preparing for a Phase I/II clinical study of our pan-coronavirus candidate, VBI-2901; |
|
|
● |
continuing our development and scaling-up production processes for our prophylactic coronavirus vaccine candidates using a Contract Development and Manufacturing Organization (“CDMO”) located in Canada; |
|
|
● |
developing VBI-2601 (BRII-179), our protein-based immunotherapeutic candidate for treatment of chronic HBV, in collaboration with Brii Bio; |
|
|
● |
preparation for further development of VBI-1501, our preventative CMV vaccine candidate; |
● |
continuing
the research and development (“R&D”) of our other pipeline candidates, including the exploration and development
of new pipeline candidates; |
|
|
● |
implementing
operational, compliance, financial, and management information systems, including through third party partners, to support our commercialization
activities; |
|
|
● |
maintaining,
expanding, and protecting our intellectual property portfolio; and |
|
|
● |
developing
our internal systems and processes for regulatory
affairs, legal, and compliance. |
VBI’s
revenue generating activities have been the sale of our 3-antigen HBV vaccine in Israel and through named patient programs in countries
where our 3-antigen HBV vaccine is not approved, though those markets have generated a limited number of sales to-date. We have also
generated revenue from various business development transactions and R&D services generating fees. To date, we have financed our
operations primarily with proceeds from sales of our common stock, our long-term debt agreements, and contribution agreements and partnerships
with CEPI and the Government of Canada.
VBI
has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative
cash flows from operations as we carry out planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect
to the advancement of our 3-antigen HBV vaccine and new pipeline candidates. As of March 31, 2022, VBI had an accumulated deficit of
approximately $397.6 million and stockholders’ equity of approximately $129.6 million. Our ability to maintain our
status as an operating company and to realize our investment in our In Process Research & Development (“IPR&D”) assets,
which consist of our CMV and GBM programs, is dependent upon obtaining adequate cash to finance our clinical development, manufacturing,
our administrative overhead and our research and development activities, and ultimately to profitably monetize our IPR&D. We plan
to finance near term future operations with existing cash reserves. We expect that we will need to secure additional financing to finance
our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, structured
asset financings, government or non-governmental organization grants or subsidies, and revenues from potential business development transactions,
if any. There is no assurance we will manage to obtain these sources of financing, if required. These factors raise substantial doubt
about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue
as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going
concern.
We
have incurred operating losses since inception, have not generated significant product sales revenue and have not achieved profitable
operations. We incurred net losses of $21.3 million for three month ended March 31, 2022,
and we expect to continue to incur substantial losses in future periods. We anticipate that we will continue to incur substantial operating
expenses as we continue our research and development, clinical studies and commercialization of PreHevbrio in the United States in the
near term. These include expenses related to the focus of our operations highlighted above.
In
addition, we have incurred and will continue to incur significant expenses as a public company, which subject us to the reporting requirements
of the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of the NASDAQ Capital Market, and the Canadian securities regulators.
Overall
Performance
The
Company had net losses of $21,254 and $17,647 for the three months ended
March 31, 2022 and 2021, respectively. We had an accumulated deficit of $397,560 at March 31, 2022. We had $101,337 of cash
and net working capital of $78,356 as of March 31, 2022.
Revenues
Revenues
consist of product sales of Sci-B-Vac in Israel, and R&D services revenue recognized as part of the License Agreement with Brii Bio
and other R&D services.
In
Israel, Sci-B-Vac is sold through procurement requests from four health funds (“HMOs”) (collectively, the “Sci-B-Vac
Customers”).
Pursuant
to the License Agreement with Brii Bio, we provide R&D services to Brii Bio as part of the development of VBI-2601 (BRII-179).
In
addition, pursuant to an agreement with the Israel Innovation Authority (formerly the Office of the Chief Scientist of Israel), we
are required to make services available for the biotechnology industry in Israel. These services include relevant activities for
development and manufacturing of therapeutic proteins according to international standards and cGMP quality level suitable for
toxicological studies in animals. Service activities include analytics/bio analytics methods for development and process development
of therapeutic proteins starting with a candidate clone through manufacturing. These R&D services are primarily marketed to the
Israeli research community in academia and Israeli biotechnology companies in the life sciences industry lacking the infrastructure
or experience in the development and production of therapeutic proteins to the standards and quality required for clinical trials
for human use. During the three months ended March 31, 2022, we provided services to biotechnology companies including
analytical development.
Cost
of Revenues
Cost
of revenues consist primarily of costs incurred for manufacturing our 3-antigen HBV vaccine which includes cost of materials, consumables,
supplies, contractors, and salaries.
Research
and Development (“R&D”) Expenses
R&D
expenses, net of government grants and funding arrangements, consist primarily of costs incurred for the development of our 3-antigen
HBV vaccine; VBI-1901, our GBM vaccine immunotherapeutic candidate; VBI-1501, our CMV vaccine candidate; VBI-2601 (BRII-179), our hepatitis
B immunotherapeutic candidate; and VBI-2900, our coronavirus vaccine program, which include:
|
● |
the
cost of acquiring, developing, and manufacturing clinical study materials, and other consumables and lab supplies used in our pre-clinical
studies; |
|
|
|
|
● |
expenses
incurred under agreements with contractors or CDMOs or Contract Research Organizations to advance the vaccines into and through completion
of clinical studies; and |
|
|
|
|
● |
employee-related
expenses, including salaries, benefits, travel, and stock-based compensation expense. |
We
expense R&D costs when we incur them.
General
and Administrative (“G&A”) Expenses
G&A
expenses consist principally of commercialization costs, salaries and related costs for executive and other administrative personnel
and consultants, including stock-based compensation, and travel expenses. Other general and administrative expenses include professional
fees for legal, patent protection, consulting and accounting services, travel and conference fees, board of directors meeting costs,
scientific and commercial advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies, information technology
costs and expenses, insurance, and other general expenses. G&A expenses are expensed when incurred.
We
expect that our general and administrative expenses will increase in the future as a result of adding employees and scaling our operations
commensurate with advancing clinical candidates, commercializing products, and continuing to support a public company infrastructure.
These increases will likely include increased costs for insurance, hiring of additional personnel, board committees, outside consultants,
investor relations, lawyers and accountants, among other expenses.
Interest
Expense, Net of Interest Income
Interest
expense is associated with our long-term debt as discussed in Note 9 of the Notes to the Condensed Consolidated Financial
Statements.
Results
of Operations
Three
Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
All
dollar amounts stated below are in thousands, unless otherwise indicated.
|
|
Three months ended March 31 |
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
Change $ |
|
|
Change % |
|
Revenues |
|
$ |
126 |
|
|
$ |
301 |
|
|
$ |
(175 |
) |
|
|
(58 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
2,754 |
|
|
|
2,412 |
|
|
|
342 |
|
|
|
14 |
% |
Research and development |
|
|
2,362 |
|
|
|
6,839 |
|
|
|
(4,477 |
) |
|
|
(65 |
)% |
General and administrative |
|
|
10,930 |
|
|
|
6,747 |
|
|
|
4,183 |
|
|
|
62 |
% |
Total operating expenses |
|
|
16,046 |
|
|
|
15,998 |
|
|
|
48 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(15,920 |
) |
|
|
(15,697 |
) |
|
|
(223 |
) |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of interest income |
|
|
(940 |
) |
|
|
(1,812 |
) |
|
|
872 |
|
|
|
(48 |
)% |
Foreign exchange loss |
|
|
(4,394 |
) |
|
|
(138 |
) |
|
|
(4,256 |
) |
|
|
3,084 |
% |
Loss before income taxes |
|
|
(21,254 |
) |
|
|
(17,647 |
) |
|
|
(3,607 |
) |
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(21,254 |
) |
|
$ |
(17,647 |
) |
|
$ |
(3,607 |
) |
|
|
20 |
% |
Revenues
Revenues
for the three months ended March 31, 2022 were $126 as compared to $301 for the three months ended March 31, 2021. Revenues for the three
months ended March 31, 2022 decreased by $175 or 58% due to a decrease in product revenue as a result of lower sales in the Israeli
market and a decrease in R&D services revenue for VBI-2601, our hepatitis B immunotherapeutic candidate, being developed
in collaboration with Brii Bio, as fewer manufacturing and non-clinical research services were required in the three months ended March
31, 2022 compared to the three months ended March 31, 2021.
Revenue
Composition
| |
2022 | | |
2021 | |
| |
| | |
| |
Product
revenue | |
$ | 91 | | |
$ | 167 | |
R&D
service revenue | |
| 35 | | |
| 134 | |
| |
$ | 126 | | |
$ | 301 | |
Revenues
by Geographic Region
| |
Three
months ended March 31 | | |
| | |
| |
| |
2022 | | |
2021 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Revenue
in Israel | |
$ | 95 | | |
$ | 169 | | |
$ | (74 | ) | |
| (44 | )% |
Revenue
in China/Hong Kong | |
| 25 | | |
| 128 | | |
| (103 | ) | |
| (80 | )% |
Revenue
in Europe | |
| 6 | | |
| 4 | | |
| 2 | | |
| 50 | % |
| |
| | | |
| | | |
| | | |
| | |
Total
Revenue | |
$ | 126 | | |
$ | 301 | | |
$ | (175 | ) | |
| (58 | )% |
Cost
of Revenues
Cost
of revenues for the three months ended March 31, 2022 was $2,754 as compared to $2,412 for the three months ended March 31, 2021. The
increase in the cost of revenues of $342 or 14% is due to increased direct labor costs and manufacturing related costs incurred in the
three months ended March 31, 2022 compared to the three months ended March 31, 2021.
Research
and Development Expenses
R&D expenses for the three months ended March
31, 2022 were $2,362 as compared to $6,839 for the three months ended March 30, 2021.
R&D expenses were offset by $2,838 for the three months ended March 31, 2022 and $2,801 for the three months ended March 31, 2021
due to government grants and funding arrangements. The decrease in R&D expenses of $4,477 or 65%, is mainly a result
of the (1) the decrease in regulatory fees related to PreHevbrio that occurred during the three months ended March 31, 2021 with no similar
regulatory fees that occurred during the three months ended March 31, 2022, and (2) decrease in the costs related to our coronavirus
vaccine program that are not offset by government grants and funding arrangements, specifically VBI-2902, as the clinical trial
of VBI-2902 began during the three months ended March 31, 2021, offset by (3) an increase in R&D expenses related to continued
development of our other vaccine candidates, specifically GBM our vaccine immunotherapeutic candidate, VBI-1901, as we prepare for the
next phase of development.
General
and Administrative Expenses
G&A
expenses for the three months ended March 31, 2022 were $10,930 as compared to $6,747 for
the three months ended March 31, 2021. G&A expenses were offset by $308 for the three months ended March 31, 2022 and $145
for the three months ended March 31, 2021 due to government grants and funding arrangements. The G&A expense increase of $4,183
or 62%, excluding the effect of government grants and funding arrangements, is a result of the increase in pre-commercial and commercial
activities related to our 3-antigen HBV vaccine, such as the development of our commercial and distribution infrastructure, as FDA regulatory
approval of PreHevbrio occurred in late 2021, increased insurance costs, increased professional costs, and increased labor costs.
Loss
from Operations
The
net loss from operations for the three months ended March 31, 2022 was $15,920 as compared to $15,697 for
the three months ended March 31, 2021. The $223 increase in the net loss from
operations resulted from the items discussed above.
Interest
Expense, Net of Interest Income
The
interest expense, net of interest income decreased by $872 for the three months ended March 31, 2022, compared to the three months ended
March 31, 2021, due to the conversion of $2,000 of the secured term loan to common shares, which resulted in $1,161 of additional interest
accretion being recognized in interest expense, net of interest income in the condensed consolidated statement of operations and
comprehensive loss during the three months ended March 31, 2021; offset by an increase in long-term debt of $12,000.
Foreign
Exchange Loss
The
foreign exchange loss for the three months ended March 31, 2022 was $4,394
compared to a foreign exchange loss of $138 for the three months ended March 31, 2021. The change is a result of the changes
in the foreign currency exchange rates (NIS and CAD) in which the foreign currency transactions were denominated for each of those periods,
including the foreign exchange impact of intercompany loans that are translated at period end. Gain or losses are included
in the condensed consolidated statement of operations in 2022.
Net
Loss
Net
loss for the three months ended March 31, 2022 was $21,254 compared to $17,647
for the three months ended March 31, 2021 was a result of the items discussed above.
Liquidity
and Capital Resources
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
$ Change |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
101,337 |
|
|
$ |
121,694 |
|
|
$ |
(20,357 |
) |
|
|
(17 |
)% |
Current Assets |
|
|
112,347 |
|
|
|
130,284 |
|
|
|
(17,937 |
) |
|
|
(14 |
)% |
Current Liabilities |
|
|
33,991 |
|
|
|
32,586 |
|
|
|
1,405 |
|
|
|
4 |
% |
Working Capital |
|
|
78,356 |
|
|
|
97,698 |
|
|
|
(19,342 |
) |
|
|
(20 |
)% |
Accumulated Deficit |
|
|
(397,560 |
) |
|
|
(378,371 |
) |
|
|
(19,189 |
) |
|
|
5 |
% |
As
of March 31, 2022, we had cash of $101,337 as compared to $121,694 as of December 31, 2021. As of March 31, 2022, we had working capital
of $78,356 as compared to working capital of $97,698 at December 31, 2021. Working capital is calculated by subtracting current
liabilities from current assets.
Net
Cash Used in Operating Activities
The
Company incurred net losses of $21,254 and $17,647 in the three months ended March
31, 2022 and 2021, respectively. The Company used $19,925 and $6,644 in cash for
operating activities during the three months ended March 31, 2022 and 2021, respectively.
The increase in cash outflows is largely a result of an increase in net loss, offset by a decrease in operating working capital as we
received $8,285 of cash in advance from the CEPI Funding Agreement during the three months ended March 31, 2021 compared to no cash received
in advance from the CEPI Funding Agreement during the three months ended March 31, 2022.
Net
Cash Used in Investing Activities
Net
cash flows used by investing activities was $515 for the three months ended March 31, 2022 compared to cash used in investing activities
of $556 for the three months ended March 31, 2021.
Net
Cash Provided by Financing Activities
Net cash flows provided by financing activities
was $12 for the three months ended March 31, 2022 compared to cash flows provided by financing activities of $21,624 during the
three months ended March 31, 2021 which was due to common shares issued as part of our ATM Program (as defined below).
Sources
of Liquidity
Jefferies
Open Market Sale Agreement (“ATM”)
On
July 31, 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which
the Company may offer and sell its common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting
as agent or principal (the “ATM Program”). Common shares were offered pursuant to a sales agreement prospectus included in
the Company’s automatic shelf registration on Form S-3 (the “S-3ASR”) filed with the United States Securities and Exchange
Commission (“SEC”) on July 31, 2020. On September 3, 2021, the Company and Jeffries entered in to a second Open Market Sale
Agreement for the sale of common shares having an aggregate price of up to $125,000 from time to time, which the Company could choose
to use when no shares remain available for issuance under the ATM Program, and filed a prospectus supplement to the base prospectus included
in the S-3ASR. The Company is no longer a well-known seasoned issuer, and accordingly, the Company will not make any sales under the
ATM Program or pursuant to the second sales agreement, unless and until a new registration statement and/or a new prospectus is filed.
During the year ended December 31, 2021, the Company issued 9,135,632 common shares under the ATM Program, for total gross proceeds
of $33,293 at an average price of $3.64. The Company incurred $1,117 of share issuance costs related to the common shares issued resulting
in net proceeds of $32,176.
K2
HealthVentures LLC Long Term Debt
On May 22, 2020, the Company (along with its
subsidiary VBI Cda) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2 HealthVentures LLC and any
other lender from time-to-time party thereto (the “Lenders”) pursuant to which we received the first tranche secured term
loan of $20,000 (the “First Tranche Term Loan”). The Lenders originally agreed to make available the following additional
tranches subject to the following conditions and upon the submission of a loan request by the Company: (1) up to $10,000 available between
January 1, 2021 and April 30, 2021 upon achievement of certain milestones (the “Second Tranche Term Loan”), (2) $10,000 available
between the closing date and December 31, 2021, subject to achievement of a certain U.S. Food and Drug Administration (“FDA”)
approval (the “Third Tranche Term Loan”), and (3) a final tranche of up to $10,000 that could be made available any time
prior to June 30, 2022, subject to the advance of the Third Tranche Term Loan, satisfactory review by the administrative agent of our
financial and operating plan, and approval by the Lenders’ investment committee. The Company obtained FDA approval on November
30, 2021 but elected not to draw down the Third Tranche Term Loan. As the Third Tranche Term Loan availability period has passed, the
final tranche will not be made available. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’
option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $1.46 per share (“K2 conversion
feature”) until the maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders, converted
$2,000 of the secured term loan into 1,369,863 common shares at a conversion price of $1.46. The Lenders have the ability to convert
an additional $2,000 at the Lenders’ option.
On
May 17, 2021, the Company entered into the First Amendment with the Lenders to: (1) increase the Second Tranche Term Loan from $10,000
to $12,000; (2) extend the availability period of the Second Tranche Term Loan beyond April 30, 2021, subject to certain conditions;
(3) amend the Second Tranche Term Loan interest rate equal to the greater of (a) 7.75% and (b) prime rate plus 4.50%; and (4) extend
the date as of which amortization of the loans under the Loan Agreement shall begin from July 1, 2022 to January 1, 2023.
In
connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 625,000 common shares
(the “Original K2 Warrant”) at an exercise price of $1.12 (the “Warrant Price”). On May 17, 2021, in connection
with the First Amendment, the Company issued the Lenders an amended and restated warrant to purchase an additional 312,500 common shares
for a total of 937,500 common shares (the “Restated K2 Warrant”) with the same Warrant Price of $1.12. The Restated K2 Warrant
may be exercised either for cash or on a cashless “net exercise” basis and expires on May 22, 2030.
As
a result of the Original K2 Warrant and K2 conversion feature, the debt was issued at a discount of $3.8 million. We also incurred $1.0
million of debt issuance costs and are required to make a final payment equal to 6.95% of the aggregate original secured term loan principal
on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Loan Agreement, resulting
in an additional discount of $1.4 million related to the First Tranche Term Loan. The total initial debt discount was $6.2 million.
The
Second Tranche Term Loan, issued pursuant to the Loan Agreement, as amended by the First Amendment, resulted in the Company incurring
an additional $0.02 million of debt issuance costs, $0.2 million of third-party costs and being required to make a final payment of $0.8
million, which is equal to 6.95% of the Second Tranche Term Loan.
The
total principal amount of the loan under the Loan Agreement, as amended by the First Amendment, outstanding at March 31, 2022, including
the $2.2 million final payment discussed above, is $32.2 million. The principal amount of the loan made under the Loan Agreement prior
to the First Amendment accrues interest at an annual rate equal to the greater of (a) 8.25% or (b) prime rate plus 5.00%. The principal
amount of the Second Tranche Term Loan made under the Loan Agreement, as amended by the First Amendment, accrues interest at an annual
rate equal to the greater of (a) 7.75% or (b) prime rate plus 4.50%. The interest rate as of March 31, 2022 was 8.50% for the
First Tranche Term Loan and 8.00% for the Second Tranche Term Loan. The Company is required to pay only interest until January
1, 2023.
CEPI
Partnership
On
March 9, 2021, the Company and CEPI announced a partnership, the CEPI Funding Agreement, to develop eVLP vaccine candidates against SARS-COV-2
variants, including the Beta variant, also known as the B.1.351 variant and 501Y.V2, first identified in South Africa. CEPI agreed to
provide up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of the spike
protein from the Beta variant, through Phase I clinical development. This funding will also support preclinical expansion of additional
multivalent vaccine candidates designed to evaluate the potential breadth of our eVLP technology. The preclinical expansion is intended
to develop clinic-ready vaccine candidates capable of addressing emerging variants. Since inception of the CEPI Funding Agreement in
2021, the Company received $18,363 from CEPI and the Company had $8,657 recorded as deferred funding, recorded in other current liabilities
on the condensed consolidated balance sheet.
Plan
of Operations and Future Funding Requirements
The
report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31,
2021 contains an explanatory paragraph regarding our ability to continue as a going concern. VBI has incurred significant net losses
and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as
we carry out our planned clinical, regulatory, R&D, sales, and manufacturing activities with respect to the advancement of our 3-antigen
HBV vaccine and pipeline candidates. As of March 31, 2022, VBI had an accumulated deficit of $397,560 and stockholders’
equity of $129,564.
Our
ability to maintain our status as an operating company and to realize our investment in our IPR&D assets is dependent upon obtaining
adequate cash to finance our clinical development, manufacturing, our commercialization activities, our administrative overhead and our
research and development activities. We plan to finance near term future operations with existing cash reserves. We expect that we will
need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity
securities, the issuance of additional debt, structured asset financings, government or non-government grants or subsidies, and revenues
from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing.
The accompanying financial statements have been prepared assuming that we will continue as a going concern; however, the above conditions
raise substantial doubt about our ability to do so. The financial statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we
be unable to continue as a going concern. Our long-term success and ability to continue as a going concern is dependent upon obtaining
sufficient capital to fund the research and development of our products, to bring about their successful commercial release, to generate
revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point
that they would be attractive candidates for acquisition by others in the industry.
We
will require additional funds to conduct clinical and non-clinical trials, achieve regulatory approvals, and, subject to such approvals,
commercially launch our products, and will need to secure additional financing in the future to support our operations and to realize
our investment in our IPR&D assets. We base this belief on assumptions that are subject to change, and we may be required to use
our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend
on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical
development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our products,
product sales outside of Israel, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims
and other intellectual property rights, the number and development requirements of other pipeline candidates that we pursue, and the
costs of commercialization activities, including product marketing, sales, and distribution.
We
expect to finance our future cash needs through public or private equity offerings, debt financings, government grants or non-government
funding, structured asset financings, or business development transactions. Pursuant to the Contribution Agreement, we will receive
up to CAD $55,976 as a government grant to support the development of the Company’s coronavirus vaccine program, though Phase II
clinical studies, and pursuant to the CEPI Funding Agreement, we will receive up to $33,018 in funding to support the development of
the Company’s coronavirus vaccine program, specifically SARS-COV-2 variants. We may need to raise additional funds more quickly
if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we
presently anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are
favorable. Additional equity, debt, structured asset financing, government grants or non-government funding, or business development
transactions may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce
the scope of or eliminate our R&D programs, reduce our planned commercialization efforts or obtain funds through arrangements with
collaborators or others that may require us to relinquish rights to certain pipeline candidates that we might otherwise seek to develop
or commercialize independently.
To
the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution
to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence
of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict
our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business, and other
factors beyond our control. The ongoing COVID-19 pandemic and the armed conflict between Russia and Ukraine has caused an unstable
economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit,
as well as our ability to raise money in the capital markets. Current economic conditions have been, and continue to be, volatile. Continued
instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business.
The
Company’s long-term success and ability to continue as a going concern are dependent upon obtaining sufficient capital to fund
the research and development of its pipeline candidates, to bring about their successful commercial release, to generate revenue and,
ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would
be attractive candidates for acquisition by others in the industry.
To
date, the Company has been able to obtain financing as and when it was needed; however, there is no assurance that financing will
be available in the future, or if it is, that it will be available at acceptable terms.
As
of March 31, 2022, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other
relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes
in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Known
Trends, Events, and Uncertainties
As with other companies that are in the process
of commercializing novel pharmaceutical products, we will need to successfully manage normal business and scientific risks. Research
and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that
we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. The impact of the ongoing COVID-19
pandemic, including the Omicron variant of COVID-19, which appears to be the most transmissible variant to-date, and the subvariant,
BA.2, is currently indeterminable and rapidly evolving, and has adversely affected and may continue to adversely affect our operations
and the global economy. In addition, the consequences of the ongoing conflict between Russia and Ukraine, including related sanctions
and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy,
and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than
as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue
our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.
Other
than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have
a material effect on our financial condition.
Critical
Accounting Policies and Estimates
There
have been no changes to our critical accounting policies during the three months ended March 31, 2022. Critical accounting policies
and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the
Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s
Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K
for the year ended December 31, 2021, as well as in our consolidated financial statements and the footnotes thereto, included in the
Annual Report on Form 10-K.
Recent
Accounting Pronouncements
See
Note 3 of Notes to the Condensed Consolidated Financial Statements.