VBIV VBI Vaccines Inc

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis summarize 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 condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q 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 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 (“GBM”). 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, 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 (“FDA”), European Medicines Agency (“EMA”), United Kingdom Medicines and Healthcare products Regulatory Agency (“MHRA”), 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 immuno-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 as many as 2.2 million chronically infected people in the 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 no cure available for HBV infection and while public health initiatives highlight 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 30% of all adults aged 19 years and older.

In April 2022, the Centers for Disease Control and Prevention (“CDC”) Advisory Committee on Immunization Practices (“ACIP”) implemented a change to the adult HBV vaccine recommendations. As incorporated in the CDC’s 2022 Adult Immunization Schedule and as published in the April 1, 2022, CDC Morbidity and Mortality Weekly Report, adults aged 19 to 59 years are now universally recommended to be vaccinated against HBV infection. Additionally, while adults aged 60 years and older with risk factors for HBV infection are still recommended to receive HBV vaccinations, adults aged 60 years and older without known risk factors for HBV may now also receive HBV vaccinations.

In addition to our approved vaccine, PreHevbrio [Hepatitis B Vaccine (Recombinant)], there are four other vaccines approved in the U.S. for the prevention of HBV infection in adults: Engerix-B^® and Twinrix^®, manufactured by GlaxoSmithKline Biologicals S.A. (“GSK”), Recombivax HB^®, manufactured by Merck &. Co. (“Merck”), and Heplisav-B^®, manufactured by Dynavax Technologies Corporation (“Dynavax”).

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”) have included:

Glioblastoma (“GBM”)

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. Median overall survival for recurrent GBM is even lower, at about 8 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.

¹Approved for use in the U.S. and Canada, under the brand name PreHevbrio, for the prevention of infection caused by all known subtypes of HBV in adults 18 years of age and older.

² Approved for use in the European Union (“EU”) / European Economic Area (“EEA”) and the UK, under the brand name PreHevbri, for active immunization against infection caused by all known subtypes of the HBV in adults. It can be expected that hepatitis D will also be prevented by immunization with PreHevbri as hepatitis D (caused by the delta agent) does not occur in the absence of HBV infection.

³Approved for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection).

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 aged 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 was a notable milestone as many insurance plans and institutions require an ACIP recommendation before a vaccine can be reimbursed or is made available to patients. Additionally, PreHevbrio was included in the 2023 annual update of the CDC Adult Immunization Schedule, as detailed in the CDC publication on February 10, 2023. VBI launched PreHevbrio in the U.S. at the end of the first quarter of 2022, and revenue generation began in the second quarter of 2022. 

Commercial and regulatory activity for VBI’s 3-antigen HBV vaccine outside of the U.S. include:

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 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 aged 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. 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 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 Ib 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 Ia 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 clinical and preclinical data for all three candidates continue to support the potential of the eVLP platform against coronaviruses. On September 29, 2022, we announced that we initiated the first clinical study of VBI’s multivalent coronavirus candidate, VBI-2901, designed to increase breadth of protection against COVID-19 and related coronaviruses. Interim data from this study are expected mid-year 2023. 

The VBI-2900 program is supported by a partnership with the Coalition for Epidemic Preparedness Innovations (“CEPI” and the partnership, 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. On December 6, 2022, we and CEPI announced that we expanded the scope of the CEPI Funding Agreement to advance the development of multivalent coronavirus vaccines that could be deployed against COVID-19 as well as a future “Coronavirus X”. 

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 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 with and without an immunomodulatory adjuvant, conducted at multiple study sites in New Zealand, Australia, Thailand, South Korea, Hong Kong Special Administrative Region of China, and China.

The data from the Phase Ib/IIa for 33 evaluable patients across all study arms suggested: (1) VBI-2601 was well tolerated at all dose levels with and without the adjuvant with no significant adverse events identified; (2) VBI-2601 induced both B cell (antibody) and T cell responses in chronically-infected HBV patients, (3) VBI-2601 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) 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 in combination with BRII-835 (VIR-2218), an investigational small interfering ribonucleic acid (“siRNA”) targeting HBV, for the treatment of chronic HBV infection. 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. The study is being conducted at clinical sites in Australia, Taiwan, Hong Kong Special Administrative Region of China, South Korea, New Zealand, Singapore, and Thailand. VBI’s partner, Brii Bio, is the study sponsor. A total of 50 adult, non-cirrhotic patients who received NRTI therapy for at least 12 months were randomized and dosed across three cohorts:

On February 15, 2023, we announced interim data from the Phase II combination study. The data, which was featured in an oral presentation at the 32^nd Conference of the Asian Pacific Association for the Study of the Liver (“APASL”) on February 18, 2023, demonstrated that the combination therapy was generally well-tolerated, restored strong anti-HBsAg antibody responses, and led to improved HBsAg-specific T-cell responses, when compared to BRII-835 alone. Notably:

Additional data from the study are expected to be announced around the end of the year. 

On January 5, 2022, we announced that the first patient was dosed in a second Phase IIa/IIb clinical study evaluating VBI-2601. This Phase II study assesses VBI-2601 as an add-on therapy to the standard-of-care in China nucleos(t)ide reverse transcriptase inhibitor (“NRTI”) and pegylated interferon therapy (PEG-IFN-α,). Interim topline clinical data from part one of this Phase IIa/IIb clinical study are expected in the second 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 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 two-arm study that enrolled 20 first-recurrent GBM patients to receive 10 µg of VBI-1901 in combination with either GM-CSF or GSK proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 is provided pursuant to a Clinical Collaboration and Support Study Agreement with GSK, which we entered into 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 arm was completed in October 2020.

Data from the Phase IIa portion of the study was announced throughout 2020, 2021, and 2022, with the latest data presented in November 2022 at the 2022 Society for Neuro-Oncology (SNO) Annual Meeting. 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 and 40% (n=4/10) in the VBI-1901 + AS01 study arm; (3) 2 patients with partial tumor responses, one of whom remained on protocol for over two years and had achieved a 93% tumor reduction relative to baseline at initiation of treatment at the start of the study, and 10 stable disease observations across all 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.

On June 22, 2022, we announced that the FDA granted Orphan Drug Designation for VBI-1901 for the treatment of GBM.

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 to support an accelerated approval application 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 mid-year 2023.

On October 12, 2022, we announced a collaboration with Agenus Inc. to evaluate VBI-1901 in combination with anti-PD-1 balstilimab in a Phase II study as part of the INSIGhT adaptive platform trial in patients with primary GBM. Subject to approval from regulatory bodies, we expect enrollment to initiate in the VBI-1901 study arm in INSIGhT in the third quarter of 2023. 

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 “original 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.

On October 18, 2022, the Company amended and restated the original Ferring License Agreement (the “Amended and Restated Ferring License Agreement”), which amends and restates certain of the terms relating to the manufacture and marketing of HBsAg products, which includes, among others, updates to the definition of net sales, and a reduction in the fixed royalty rate on net sales of HBsAg products (“Product”) from seven percent (7%) to three and a half percent (3.5%) in consideration for the grant of the license to utilize genetically engineered CHO cells encoding the hepatitis B antigen and certain information related to the manufacture of hepatitis B vaccines. In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac’s obligations under the Amended and Restated Ferring License Agreement, or if the Amended and Restated Ferring License Agreement is assigned to a third party, guarantor for SciVac’s obligations that have accrued up until the date of such assignment. 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 original Ferring License Agreement) of Product. Under the original 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 original 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 Amended and Restated Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods.

Under a license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that will expire in the U.S. in 2023 and expired in other countries in 2021. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV vaccine. During the three months ended March 31, 2023, we did not make any milestone payments.

Recent Developments

Organizational Changes

On April 4, 2023, the Company announced that it intends to reduce its internal workforce by 30-35%, which began in April and is expected to be largely completed by the end of June 2023. As a result of this and other reductions in spend, the Company expects its operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared with the second half of 2022. However, there is no assurance that the planned reduction in workforce and other expenses will result in the expected overall reduction of our operating expenses.  

Reverse Stock Split

The Company effected a 1-for-30 reverse stock split (the “Reverse Stock Split”) of its issued and outstanding common shares effective as of April 12, 2023, pursuant to which every 30 of the Company’s issued and outstanding common shares were automatically converted into one common share without any change in the par value per share. All share and per share amounts, including common shares underlying stock options, restricted stock units, and warrants, and applicable exercise prices, have been retroactively adjusted for all periods presented herein to give effect to the Reverse Stock Split as required in accordance with U.S. GAAP. Per the requirements of the Business Corporations Act (British Columbia), under which the Company is regulated, if fractional shares held by registered shareholders were to be converted into whole shares, each fractional share remaining after the completion of the Reverse Stock Split that was less than half of a share was cancelled and each fractional share that was at least half of a share was rounded up to one whole share. No shareholders received cash in lieu of fractional shares.

Nasdaq Minimum Listing Requirements  

On April 26, 2023, the Company received a letter from the Listing Qualifications Department of Nasdaq stating that for the last 10 consecutive business days, from April 12, 2023 to April 25, 2023, the closing bid price of the Company’s common shares had been at or greater than $1.00 per share and accordingly, the Company had regained compliance with Nasdaq Listing Rule 5550(a)(2) and that the matter was now closed.  

Financial Operations Overview 

At present, our operations are focused on: 

VBI’s revenue generating activities have been the sale of our 3-antigen HBV vaccine, under the brand name PreHevbrio in the U.S., PreHevbri in the UK, and in Israel under the name Sci-B-Vac. In addition, we have sold our 3-antigen HBV vaccine through named patient programs in countries where our 3-antigen HBV vaccine was not approved, though those markets have generated a limited number of sales. 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 shares, 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, 2023, VBI had an accumulated deficit of approximately $517.4 million, stockholders’ equity of approximately $45 million and cash of $40.4 million. Cash outflows from operating activities were $21.7 million for the three months ended March 31, 2023. 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 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, 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 from this uncertainty.

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 $27.8 million for the three months ended March 31, 2023, 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 and clinical studies, and as we continue the commercialization of PreHevbrio in the U.S. and Canada, and PreHevbri in Europe. 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 Nasdaq, and the Canadian securities regulators. We have also incurred and will continue to incur regulatory compliance costs and general and administrative costs related to our clinical regulatory operations and commercialization of our marketed product and product candidates.

Overall Performance 

We had net losses of $27,751 and $21,254 for the three months ended March 31, 2023, and 2022, respectively. We had an accumulated deficit of $517,360 at March 31, 2023. We had $ 40,392 of cash and working capital of $ 22,263 as of March 31, 2023.

Revenues, net

Revenues, net consist of product sales of PreHevbrio in the U.S., PreHevbri in the UK as part of our partnership with Valneva, and sales of Sci-B-Vac in Israel, as well as R&D services revenue recognized as part of the License Agreement with Brii Bio and other R&D services.

In the U.S., beginning in the second quarter of 2022, PreHevbrio was sold to a limited number of wholesalers and specialty distributors; and beginning in the first quarter of 2023, PreHevbri was sold to our partner Valneva in the UK (collectively, our “Customers”). We expect to continue to expand our market share in 2023. Revenues from product sales are recognized when we have satisfied our performance obligations, which is the transfer of control of our product upon delivery to the Customer. Our standard credit terms are short-term, and we expect to receive payment in less than one year, there is no significant financing component on the related receivables. Taxes collected from Customers relating to product sales and remitted to governmental authorities are excluded from revenues.

In Israel, Sci-B-Vac is sold through procurement requests from four health funds (“HMOs”) (collectively, the “Sci-B-Vac Customers”).

Overall, product revenue, net, reflects our best estimates of the amount of consideration to which we are entitled based on the terms of the contract. The amount of variable consideration is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. If our estimates differ significantly from actuals, we will record adjustments that would affect product revenue, net in the period of adjustment.

Pursuant to the License Agreement with Brii Bio, we provide R&D services to Brii Bio as part of the development of VBI-2601.

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.

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 manufacturing salaries.

Research and Development Expenses

R&D expenses, net of government grants and funding arrangements, consist primarily of costs incurred for the advancement of our lead programs, including: our 3-antigen HBV vaccine; VBI-2601, our hepatitis B immunotherapeutic candidate; VBI-1901, our GBM vaccine immunotherapeutic candidate; VBI-2900, our coronavirus vaccine program; and VBI-1501, our CMV vaccine candidate. These costs include:

We expense R&D costs when we incur them.

Sales, General and Administrative (“SG&A”) Expenses

SG&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 sales, 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. SG&A expenses are expensed when incurred.

Interest Expense, Net

Interest expense is associated with our long-term debt as discussed in Note 9 of the notes to the condensed consolidated financial statements.

In line with our announcement on April 4, 2023, as a result of headcount and other cost reductions, we expect our operating expenses from normal business will decrease beginning in the third quarter of 2023.

Revenues, net

Revenues, net for the three months ended March 31, 2023, were $485 as compared to $126 for the three months ended March 31, 2022. Revenues for the three months ended March 31, 2023 increased by $359 or 285% due to an increase in product revenue as a result of the launch of PreHebvrio in the U.S. during the three months ended March 31, 2022 with revenue generation starting during the three months ended June 30, 2022, and sale of PreHevbri to our UK partner Valneva during the three months ended March 31, 2023, offset by lower sales in the Israeli market.

Cost of Revenues

Cost of revenues for the three months ended March 31, 2023 was $3,559 as compared to $2,754 for the three months ended March 31, 2022. The increase in the cost of revenues of $805 or 29% is due to increased product sales, direct labor costs, and inventory related costs incurred in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Research and Development Expenses

R&D expenses for the three months ended March 31, 2023 were $3,151 as compared to $2,362 for the three months ended March 31, 2022. R&D expenses were offset by $2,402 for the three months ended March 31, 2023 and $2,838 for the three months ended March 31, 2022 due to government grants and funding arrangements. The increase in R&D expenses of $789 or 33%, is mainly a result of the increase in R&D expenses related to continued development of our vaccine candidates, specifically VBI-2901, as the clinical trial began in the third quarter of 2022 and is ongoing having achieved full enrollment during the three months ending March 31, 2023. For the three months ended March 31, 2022, both the VBI-2902 and VBI-2905 clinical trials were ongoing, however, they were in the monitoring phase with the patient testing portion mostly completed.

Sales, General and Administrative Expenses

SG&A expenses, net of government grants and funding arrangements, for the three months ended March 31, 2023 were $13,284 as compared to $10,930 for the three months ended March 31, 2022. SG&A expenses were offset by $183 for the three months ended March 31, 2023 and $308 for the three months ended March 31, 2022 due to government grants and funding arrangements. The SG&A expense increase of $2,354 or 22%, is mainly a result of the increase in commercial activities related to PreHevbrio, most notably the deployment of our full commercial field teams in the middle of the three months ended March 30, 2022, and the continued development of our distribution infrastructure, following FDA regulatory approval of PreHevbrio in late 2021. Additional increase in costs include 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, 2023 was $19,509 as compared to $15,920 for the three months ended March 31, 2022. The $3,589 increase in the net loss from operations resulted from the items discussed above. As a result of the headcount reductions and other reductions in spend as announced on April 4, 2023, we expect our operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared to the second half of 2022.

Interest Expense, Net

Interest expense, net for the three months ended March 31, 2023 was $1,429 as compared to $940 for the three months ended March 31, 2022. The increase in interest expense, net of $489 or 52% is due to an increase in long-term debt of $20,000 beginning mid-September 2022 and increased interest payments on our long-term debt due to higher interest rates applied during the three months ended March 31, 2023.

Foreign Exchange Loss

The foreign exchange loss for the three months ended March 31, 2023 was $6,813 compared to $4,394 for the three months ended March 31, 2022. 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.

Net Loss

Net loss for the three months ended March 31, 2023 was $27,751 compared to $21,254 for the three months ended March 31, 2022 and was a result of the items discussed above.

As of March 31, 2023, we had cash of $40,392 as compared to $62,629 as of December 31, 2022. As of March 31, 2023, we had working capital of $22,263 as compared to working capital of $40,748 at December 31, 2022. Working capital is calculated by subtracting current liabilities from current assets.

Net Cash Used in Operating Activities

The Company incurred net losses of $27,751 and $21,254 in the three months ended March 31, 2023 and 2022, respectively. The Company used $21,656 and $19,925 in cash for operating activities during the three months ended March 31, 2023 and 2022, respectively. The increase in cash outflows is largely a result of an increase in net loss, offset by the change in operating working capital, most notably in other current assets and accounts payable.

Net Cash Used in Investing Activities

Net cash flows used by investing activities was $534 for the three months ended March 31, 2023 compared to cash used in investing activities of $515 for the three months ended March 31, 2022. The cash outflow in both periods is a result of routine property and equipment purchases.

Net Cash Provided by Financing Activities

Net cash flows provided by financing activities was $0 for the three months ended March 31, 2023 compared to cash flows provided by financing activities of $12 during the three months ended March 31, 2022.

Sources of Liquidity 

Jefferies Open Market Sale Agreement

On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which we may offer and sell our 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”). The ATM Program replaced the Open Market Sale Agreements previously entered into with Jefferies on July 31, 2020 and September 3, 2021, pursuant to each of which we could offer and sell our common shares having an aggregate price of up to $125,000 from time to time, through “at the market” equity offering programs. Prior to termination, $27,022 of our common shares remained available for sale pursuant to the first ATM program, and $125,000 of our common shares remained available for sale pursuant to the second ATM program. $125,000 of our common shares remain available for sale pursuant to the current ATM program, established August 2022, as we did not make any sales under the ATM Program during the three months ended March 31, 2023.

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 K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. 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 $43.80 per share until the original 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 45,662 common shares at a conversion price of $43.80 per share.

On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.

On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in up to four tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants to the Second Amendment, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.

On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The second tranche of term loans of up to $15,000 will be available from April 1, 2023, through June 30, 2023, subject to the achievement of certain clinical milestones and compliance with a liquidity requirement which requires the Company to have sufficient cash on hand to funds its operations for at least nine months (the “Liquidity Requirement”). The third tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain of the milestones for the second tranche of term loans were achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The fourth tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.

Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $2,000 of the term loans shall be convertible into 45,662 common shares at a conversion price of $43.80 per share and $5,000 of the term loans shall be convertible into 159,734 common shares at a conversion price of $31.302 per share (“K2HV conversion feature”).

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08. If the full remaining $50,000 available in the K2HV tranches is advanced pursuant to the Second Amendment, up to an additional 72,680 common shares will be issuable pursuant to the Second Amendment Warrant. The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.

The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).

Upon receipt of additional funds, issuable pursuant to the second, third and fourth tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the second tranche, third tranche and fourth tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.

The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at March 31, 2023, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00% or (b) prime rate plus 4.00%. The interest rate as of March 31, 2023 was 12.00%. The Company is required to pay only interest until September 14, 2026.

CEPI Partnership

On March 9, 2021, we 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. On December 6, 2022, we and CEPI entered into the CEPI Amendment to expand the scope of the CEPI Funding Agreement. The CEPI Amendment, among others, (i) expands the definition of “Project Vaccine” to include additional multivalent vaccine constructs within the VBI-2900 program, (ii) removes certain pricing restrictions previously allocated to high-income countries in the CEPI Funding Agreement, (iii) updates the proposed volume commitment percentage contributions by us to CEPI for a Project Vaccine, and (iv) adds certain commercial benefits and related adjustments for CEPI following the pandemic period, including royalties paid to CEPI, in the event that CEPI provides funding for Phase III clinical studies of the Project Vaccine. Since inception of the CEPI Funding Agreement we received $19,327, of which there is a balance remaining of $6,154 in other current liabilities on the 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, 2022 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, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and pipeline candidates. As of March 31, 2023, VBI had an accumulated deficit of $517,360 and stockholders’ equity of $45,022.

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 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, 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 from this uncertainty. 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 and maintain regulatory approvals, and, subject to such approvals, commercially launch and sell 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, 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, 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, as amended by the CEPI Amendment, we will receive up to $33,018 in funding to support the development of the Company’s coronavirus vaccine program. 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, 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 COVID-19 pandemic, its ongoing effects, the continuing armed conflict between Russia and Ukraine, and inflation among others, have 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, 2023, 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 developing and commercializing novel pharmaceutical and biologic 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 World Health Organization recently determined that COVID-19 no longer fit the definition of a public health emergency and the U.S. government has announced its plan to let the declaration of a public health emergency associated with COVID-19 expire on May 11, 2023. COVID-19 is expected to remain a serious endemic threat for an indefinite future period and may continue to adversely affect the global economy. The impact of the COVID-19 pandemic, and its ongoing effects, 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.

In addition, we began the reduction of our internal workforce by 30-35% in April and expect to be largely completed by the end of June 2023. As a result of this and other reductions in spend, although we expect our operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared with the second half of 2022, there is no assurance that the planned reduction in workforce and other expenses will result in the expected overall reduction of our operating expenses.

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, 2023. 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 2022 10-K for the year ended December 31, 2022, as well as in our consolidated financial statements and the footnotes thereto, included in the 2022 Form 10-K.

Recent Accounting Pronouncements

See Note 3 of Notes to the Condensed Consolidated Financial Statements in this Form 10-Q.