SLGL Sol Gel Technologies Ltd

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Exhibit 99.1

Sol-Gel Technologies Reports Second Quarter 2023 Financial Results and

Provides Corporate Update

NESS ZIONA, Israel, August 10, 2023 -- Sol-Gel Technologies, Ltd. (NASDAQ: SLGL) (“Sol-Gel”), a dermatology company leveraging innovative approaches to develop pioneering treatments for patients with severe skin conditions, and with two approved large-category dermatology products, EPSOLAY and TWYNEO, today announced financial results for the second quarter ended June 30, 2023 and provided a corporate update.

“We were pleased to announce another TWYNEO and EPSOLAY partnership during the quarter which generated non-dilutive revenue for our shareholders. We are delighted to partner these first products developed by Sol-Gel with Searchlight Pharma in Canada, a leading commercial territory, over a fifteen-year term that is renewable for subsequent five-year periods,” stated Alon Seri Levy, Ph.D., Chief Executive Officer of Sol-Gel.  “Based on current discussions we expect more international licenses will follow in the future, while coverage and demand for both products in the U.S. may be approaching a plateau due to the genericization of both the acne and rosacea markets.”

Dr. Seri Levy continued, “We are on track with our plans to initiate the pivotal Phase 3 trial for SGT-610 (patidegib), our recently acquired, Breakthrough-designated, Orphan Drug candidate with a market potential of over $300 million for the prevention of basal cell carcinoma in subjects having Gorlin syndrome, in late 2023.  The recent clinical setback in a Phase 2b trial of a competing product with a similar indication but a different mechanism of action, presents Sol-Gel with the opportunity to be a durable market leader in Gorlin syndrome, if our own Phase III program succeeds.  The potential of SGT-610 taken together with lower-than-expected future royalty streams from EPSOLAY and TWYNEO in the U.S., have led Sol-Gel to focus on this candidate in the near-term and delay the planned clinical study for SGT-210,” he concluded.

Q2 2023 and Recent Corporate Developments

 

Financial Results for the Quarter Ended June 30, 2023

 

Total revenue in the first half of the year was $0.9 million, which primarily consisted of licensing revenues from both Galderma and Searchlight. In the first quarter, wholesaler ordering patterns were disrupted ahead of Galderma’s implementation of a new enterprise resource planning system, which impacted its standard forecasting procedures and its quarterly assessment of rebate accruals. As a result, previously reported revenue for the first quarter and revenues for the second quarter were revised as reflected in the income statement presented below. 

Research and development expenses were $5.3 million compared to $2.4 million for the same period in 2022. The increase of $2.9 million was primarily attributed to an increase of $1.1 million related to the continuing development of SGT-610, an increase of $0.8 million related to professional expenses associated with a development stage generic candidate and an increase of $1.0 million related to manufacturing expenses associated with our branded products.

General and administrative expenses were $1.8 million in 2023 compared to $1.6 million for the same period in 2022. The increase of $0.2 million was mainly attributed to an increase in professional expenses.

Sol-Gel reported a net loss of $6.0 million for the second quarter of 2023 and a loss of $0.22 per basic and diluted share, compared to a net loss of $0.1 million and a loss of $0.01 per basic and diluted share for the same period in 2022.

As of June 30, 2023, Sol-Gel had $29.1 million in cash, cash equivalents and deposits, and $17.9 million in marketable securities for a total balance of $47.0 million. The balance as of June 30, 2023 includes $10 million received in April 2023 as part of the $22.8 million raised in the recent financing. The Company expects that its cash resources will enable funding of operational and capital expenditure requirements into the second half of 2025.

About Gorlin Syndrome and SGT-610

 

SGT-610, a hedgehog signaling pathway blocker, has the potential to be the first ever treatment for Gorlin syndrome, if approved. Gorlin syndrome, an autosomal dominant genetic disorder affecting approximately 1 in 27,000-31,000 people in the U.S., is mostly caused by inheritance of one defective copy of the tumor suppressor patched homolog 1 (PTCH1) gene. Normally, the PTCH1 gene blocks the smoothened, frizzle class receptor (SMO) gene, turning off the hedgehog signaling pathway when it is not needed. Mutations in the PTCH1 gene may cause a loss of PTCH1 function, release of SMO, and may allow basal cell carcinoma (BCC) tumor cells to divide uncontrollably. Patidegib, the active substance in SGT-610, is designed to block the SMO signal, thus, allowing cells to function normally and reducing the production of new tumors.

 

About TWYNEO

 

TWYNEO (tretinoin and benzoyl peroxide) Cream, 0.1%/3% is used for the topical treatment of acne vulgaris in adults and pediatric patients 9 years of age and older.

 

TWYNEO utilizes a proprietary, patented technology where tretinoin and BPO are encapsulated within silica-based microcapsules to create a barrier between the medication and the skin. The patented microencapsulation technology in TWYNEO Cream segregates and envelopes the active ingredients in silica core shells (microcapsules) so that tretinoin is protected from the oxidizing effects of BPO, allowing the combination of both drugs into one product and gradual release onto the skin.

 

Sol-Gel Technologies received U.S. Food and Drug Administration (“FDA”) approval for TWYNEO Cream on July 27, 2021, and has granted exclusive rights to Galderma to commercialize the treatment in the U.S.

About EPSOLAY

 

EPSOLAY is a topical cream containing encapsulated benzoyl peroxide (BPO), 5%, for the treatment of inflammatory lesions of rosacea in adults. EPSOLAY utilizes a proprietary, patented technology to encapsulate BPO within silica-based microcapsules to create a barrier between the medication and the skin. The silica-based shell is designed to slowly release BPO over time to provide a tolerable and effective treatment.

 

Sol-Gel Technologies received FDA approval for EPSOLAY Cream on April 22, 2022, and has granted exclusive rights to Galderma to commercialize the treatment in the U.S.

About Sol-Gel Technologies

 

Sol-Gel Technologies, Ltd. is a dermatology company focused on identifying, developing and commercializing or partnering drug products for the treatment of skin diseases. Sol-Gel developed TWYNEO which is approved by the FDA for the treatment of acne vulgaris in adults and pediatric patients nine years of age and older; and EPSOLAY, which is approved by the FDA for the treatment of inflammatory lesions of rosacea in adults. Both drugs are exclusively licensed to and commercialized by Galderma in the U.S.

 

The Company’s pipeline includes Orphan Drug candidate, SGT-610 under investigation for the prevention of new basal cell carcinomas in Gorlin syndrome patients, and also includes topical drug candidate SGT-210 under investigation for the treatment of rare skin keratodermas.

 

For additional information, please visit www.sol-gel.com.

 

Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to our expected cash runway; the benefits of and projections of our future financial performance; the timing and success of any clinical studies and obtaining of regulatory approval for our product candidates, including SGT-610; the commercial acceptance, profitability and reimbursement of TWYNEO and EPSOLAY; the benefits we expect to receive under our agreement with Searchlight Pharma; our ability to out-license additional non-U.S. rights for TWYNEO and EPSOLAY; and the potential of SGT-210. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. Forward-looking statements are based on information we have when those statements are made or our management’s current expectations and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, risks relating to the current global macroeconomic climate as well as the following factors: (i) the adequacy of our financial and other resources, particularly in light of our history of recurring losses and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives; (ii) our ability to complete the development of our product candidates; (iii) our ability to find suitable co-development partners; (iv) our ability to obtain and maintain regulatory approvals for our product candidates in our target markets, the potential delay in receiving such regulatory approvals and the possibility of adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained; (v) our collaborators’ ability to commercialize our pharmaceutical product candidates; (vi) our ability to obtain and maintain adequate protection of our intellectual property; (vii) our collaborators’ ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost; (viii) our collaborators’ ability to establish adequate sales, marketing and distribution channels; (ix) acceptance of our product candidates by healthcare professionals and patients; (x) the possibility that we may face third-party claims of intellectual property infringement; (xi) the timing and results of clinical trials that we may conduct or that our competitors and others may conduct relating to our or their products; (xii) intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do; (xiii) potential product liability claims; (xiv) potential adverse federal, state and local government regulation in the United States, Europe or Israel; and (xv) loss or retirement of key executives and research scientists. These and other important factors discussed in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on March 10, 2023, as amended, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Except as required by law, we undertake no obligation to update any forward-looking statements in this press release.

 

For further information, please contact:

 

Investors:

 

Irina Koffler

Investor relations, LifeSci Advisors
ikoffler@lifesciadvisors.com

+1 917 734 7387

Sol-Gel Technologies

 

Gilad Mamlok

Chief Financial Officer

 

SOL-GEL TECHNOLOGIES LTD.

 

CONSOLIDATED BALANCE SHEETS

 

(U.S. dollars in thousands, except share and per share data)

 

SOL-GEL TECHNOLOGIES LTD.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(U.S. dollars in thousands, except share and per share data)

 

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES:
 

a.

Basis of Presentation   The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2023, the consolidated results of operations and the statements of changes in shareholders' equity for the six month periods ended June 30, 2023 and 2022 and the statements of cash flows for the six month period ended June 30, 2023 and 2022.

 

The consolidated results for the six month period ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023.

 

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2022. The comparative balance sheet at December 31, 2022 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP.

 

b.

Loss per share   Basic loss per share is computed on the basis of the net loss for the period divided by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted average number of ordinary shares and of potential ordinary shares outstanding when dilutive. Potential ordinary shares include outstanding stock options and warrants, which are included under the treasury stock method when dilutive.

 

The calculation of diluted loss per share does not include 5,961,999 and 7,120,463 options and warrants for the six and three months ended June 30, 2023 and 3,713,296  and 4,085,416 options and warrants for the six and the three months ended June 30, 2022, respectively, because the effect would be anti-dilutive.

NOTE 4 – COLLABORATION AGREEMENTS:
 

a.

In 2007, the Company granted rights to a third party for use and commercialization of a product for skin protection. Under this agreement, the Company is entitled to royalties during the years 2016 to 2024. Based on current sales, royalties are not material.

 

b.

In 2016 through 2020, the Company entered into several collaboration agreements mainly with one partner (the "Partner") for the development, manufacturing and commercialization of several generic product candidates. Under the agreements, the Partner is obligated to conduct regulatory, scientific, clinical and technical activities necessary to develop the product and prepare and file ANDA, with the FDA and gain regulatory approval. The Company participates in the development of the product candidates, including participation in joint steering committees and is obligated for sourcing the active pharmaceutical ingredient (API) during the development phase.   Upon FDA approval, the Partner has exclusive rights and is required to use diligent efforts to commercialize these products in territories defined under the agreements, including all required sales, marketing and distributing activities associated with the agreements. The Company is entitled to a share of the Partner's gross profits related to the sale of the products, as such term is defined in each of the agreements.

 

These Agreements are considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity.

 

The Company recognizes collaboration revenue when the related sales occur.

 

In November 2021, the Company entered into a new agreement (the "New Agreement") with the Partner, to sell its rights in relation to ten generic collaborative agreements between the parties, including the agreements for two approved generic drug products. Under the New Agreement, the Company has retained collaboration rights to two generic programs related to four generic drug candidates. Following the signing of the New Agreement, the Company is no longer entitled to receive its share in profit  as detailed above, other than with respect to the two generic drug programs related to four generic products.

 

Under the terms of the New Agreement, effective as of November 1, 2021, the Company will unconditionally receive $21,500 over 24 months, in lieu of its share in future gross profits for the two approved generic drug products and its potential gross profits for eight unapproved generic programs. The Company received $1,250 as an upfront payment and $20,250 in eight equal quarterly instalments. The New Agreement also provides that effective as of November 1, 2021, the Company will cease paying any outstanding and future operational costs related to these collaborative agreements.

NOTE 5 – LICENSE AGREEMENTS:

 

a.

In June 2021, the Company entered into two exclusive license agreements with Galderma for the commercialization of Twyneo® and Epsolay® in the United States. Following the FDA approvals for each of the products and under the license agreements, the Company received $7.5 million for Twyneo® and $3.5 million for Epsolay® as regulatory approval milestone payments. The Company is also eligible to receive tiered double-digit royalties ranging from mid-teen to high-teen percentage of net sales as well as up to $9 million in sales milestone payments.

 

According to the agreement, the Company has an option to regain commercialization rights five years following first commercialization.

 

On April 14, 2022, the Company announced that Twyneo® is available for purchase by consumers who obtain a prescription from their physician, See note 1. On June 2, 2022, the Company announced that Epsolay® is available for purchase by consumers who obtain a prescription from their physician, See also note 1. During the six months ended June 30, 2023, the Company recognized $466 as royalties revenues in respect of the license agreement for both products. During the six months ended June 30, 2022, the Company recognized $3.5 million as milestone revenues in respect of the license agreement and the FDA approval of Epsolay®.

 

b.

On June 6, 2023, the Company and Searchlight Pharma Inc. (“Searchlight”), a private Canadian specialty pharmaceutical company, signed on an exclusive license agreements for TWYNEO and EPSOLAY for the Canadian market, over a fifteen-year term that is renewable for subsequent five-year periods. Searchlight will be responsible for obtaining and maintaining any regulatory approvals required to market and sell the drugs in Canada, with support from the Company.

 

Under the agreement, the Company will receive up to $11 million in potential upfront payments and regulatory and sales milestones for both drugs, combined. In addition, the Company will be entitled to royalty percentages of all Canadian net sales ranging from low-double-digits to high teens.

 

In June 2023, the Company received $500 as an upfront payment in connection with the license agreement and related support provided to Searchlight for obtaining the regulatory approval in the Canadian market. The Company is also required to support Searchlight during such period if needed based on agreed upon rates. The Company has identified two performance obligations in the license agreement as follows: (i) the license to market the products in Canada; and (ii) continuing support during the regulatory approval process. Accordingly, the Company recognized $380 as license revenue in the period and recorded $120 as contract liability in respect of the support services.

 

NOTE 6 – SHARE CAPITAL:

 

a.

Ordinary shares

 

On January 27, 2023, the Company entered into a securities purchase agreement (hereafter - “Purchase Agreement”) with Armistice Capital, pursuant to which the Company issued to Armistice Capital (i) 2,560,000 ordinary shares of the Company, par value NIS 0.1 per share in a registered direct offering at a price of $5.00 per ordinary share and (ii) in a concurrent private placement unregistered warrants to purchase up to 2,560,000 Ordinary Shares (the "Investor Warrants"). Each of the Investor Warrants are exercisable for one ordinary share, have an exercise price of $5.85 and will become exercisable beginning six months from the date of issuance and will expire on January 27, 2028. The sale of the Ordinary Shares in the Registered Direct Offering was made by means of a shelf registration statement. The Offering closed on January 31, 2023. The gross proceeds from the Offering were approximately $12.8 million.

 

F - 11

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SOL-GEL TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

 

(Unaudited)

 

NOTE 6 – SHARE CAPITAL (continued)

 

Concurrently with the signing of the Purchase Agreement, the Company also entered into a subscription agreement (hereafter -  “Subscription Agreement”) between the Company and M. Arkin Dermatology Ltd., the Controlling Shareholder of the Company, pursuant to which M. Arkin Dermatology Ltd. agreed to purchase 2,000,000 unregistered Ordinary Shares and unregistered warrants to purchase up to 2,000,000 ordinary shares (the “PIPE Warrants” and, together with the Investor Warrants, the “Warrants”) in a concurrent private placement (hereafter-  “Affiliate Private Placement"), at a price equal to the offering price of the Ordinary Shares in the Offering. The Affiliate Private Placement agreement was contingent on certain conditions and was approved by the Company’s shareholders on March, 2023.  The total proceeds of $10,000 were received in April 2023.

 

b.

Options grants

 

1)

During the Six months ended June 30, 2023, the Company granted 749,750 options to employees and executive officers:

i.

In March 2023, the Company granted a total of 53,092 options to several employees to purchase ordinary shares at an exercise price of $4.63 and $5.6 per share.   The options vest over a period of 4 years; one quarter of the options vest on the first anniversary of the vesting commencement date (as described in each agreement) and the rest vest quarterly over the following three years. The options expire on the tenth anniversary of their grant date.

ii.

In March 2023, the Company granted a total of 439,314 options to several Executive Officers to purchase ordinary shares at an exercise price of $5.6 per share.   The options vest over a period of 4 years; one quarter of the options vest on the first anniversary of the vesting commencement date (as described in each agreement) and the rest vest quarterly over the following three years. The options expire on the tenth anniversary of their grant date.

iii.

In March 2023, the board of directors approved and recommended the Company's shareholders to approve a grant of 257,344 options to the Company's CEO to purchase ordinary shares at an exercise price of $5.6 per share. The Company's shareholders approved the grant in July 2023.   The options vest over a period of 4 years; one quarter of the options vest on the first anniversary of the vesting commencement date (as described in each agreement) and the rest vest quarterly over the following three years. The options expire on the tenth anniversary of their grant date.

 

The weighted average fair value of options granted in 2023 was $2.01 The underlying data used for computing the fair value of the options are as follows:

 

		2023
Value of one ordinary share		$	3.8
Dividend yield			0	%
Expected volatility			56	%
Risk-free interest rate			4.1	%
Expected term		7 years

 

F - 12

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SOL-GEL TECHNOLOGIES LTD.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

 

(Unaudited)

 

NOTE 6 – SHARE CAPITAL (continued)

 

c.

Option plan

 

In March 2023, the Company’s Board of Directors approved an increase of the ordinary shares that may be issued under the Company’s Plan by reserving an additional amount of 1,250,000 ordinary shares.

 

NOTE 7 – RELATED PARTIES:
 

a.

Related parties include the controlling shareholder and companies under his control, the board of directors and the executive officers of the Company.

 

b.

As to options and restricted shares granted to directors and executive officers, see note 6.