Item
1. Description of Business.
The
Company
Microbot
is a pre-clinical medical device company specializing in the research, design and development of next generation robotic endoluminal
surgery devices targeting the minimally invasive surgery space. Microbot is primarily focused on leveraging its micro-robotic technologies
with the goal of redefining surgical robotics while improving surgical outcomes for patients.
Microbot’s
current technological platforms, ViRobTM, TipCATTM, LIBERTY® and certain CardioSert assets, are
comprised of proprietary innovative technologies. Using the ViRob platform, Microbot is currently developing the Self-Cleaning
Shunt, or SCSTM, for the treatment of hydrocephalus and Normal Pressure Hydrocephalus, or NPH. Utilizing the LIBERTY and CardioSert
platforms, Microbot is developing the first ever fully disposable robot for various endovascular interventional procedures. In addition,
the Company is focused on the development of a Multi Generation Pipeline Portfolio utilizing all of its proprietary technologies.
Microbot
has a patent portfolio of 47 issued/allowed patents and 29 patent applications pending worldwide.
We
were incorporated on August 2, 1988 in the State of Delaware under the name Cellular Transplants, Inc. The original Certificate of Incorporation
was restated on February 14, 1992 to change our name to CytoTherapeutics, Inc. On May 24, 2000, the Certificate of Incorporation as restated
was further amended to change our name to StemCells, Inc. On November 28, 2016, C&RD Israel Ltd., a wholly-owned subsidiary of ours,
completed its merger with and into Microbot Medical Ltd., or Microbot Israel, an Israeli corporation that then owned our assets and operated
our current business, with Microbot Israel surviving as a wholly-owned subsidiary of ours. We refer to this transaction as the Merger.
On November 28, 2016, in connection with the Merger, we changed our name from “StemCells, Inc.” to Microbot Medical Inc.,
and each outstanding share of Microbot Israel capital stock was converted into the right to receive shares of our common stock. In addition,
all outstanding options to purchase the ordinary shares of Microbot Israel were assumed by us and converted into options to purchase
shares of the common stock of Microbot Medical Inc. On November 29, 2016, our common stock began trading on the Nasdaq Capital Market
under the symbol “MBOT”. Prior to the Merger, we were a biopharmaceutical company that operated in one segment, the research,
development, and commercialization of stem cell therapeutics and related technologies. Substantially all of the material assets relating
to the stem cell business were sold on November 29, 2016.
Technological
Platforms
ViRob
The
ViRob is an autonomous crawling micro-robot which can be controlled remotely or within the body. Its miniature dimensions are expected
to allow it to navigate and crawl in different natural spaces within the human body, including blood vessels, the digestive tract and
the respiratory system as well as artificial spaces such as shunts, catheters, ports, etc. Its unique structure is expected to give it
the ability to move in tight spaces and curved passages as well as the ability to remain within the human body for prolonged time. The
SCS product was developed using the ViRob technology.
TipCAT
The
TipCAT is a disposable self-propelled locomotive device that is specially designed to advance in tubular anatomies. The TipCAT is a mechanism
comprising a series of interconnected balloons at the device’s tip that provides the TipCAT with its forward locomotion capability.
The device can self-propel within natural tubular lumens such as the blood vessels, respiratory and the urinary and GI tracts. A single
channel of air/fluid supply sequentially inflates and deflates a series of balloons creating an inchworm like forward motion. The TipCAT
maintains a standard working channel for treatments. Unlike standard access devices such as guidewires, catheters for vascular access
and endoscopes, the TipCAT does not need to be pushed into the patient’s lumen using external pressure; rather, it will gently
advance itself through the organ’s anatomy. As a result, the TipCAT is designed to be able to reach every part of the lumen under
examination regardless of the topography, be less operator dependent, and greatly reduce the likelihood of damage to lumen structure.
The TipCAT thus offers functionality features equivalent to modern tubular access devices, along with advantages associated with its
physiologically adapted self-propelling mechanism, flexibility, and design.
One
& DoneTM (CardioSert) Technology
On
April 8, 2018, Microbot acquired a patent-protected technology from CardioSert Ltd., a privately-held medical device company based in
Israel that was part of a technological incubator supported by the Israel Innovation Authorities. The CardioSert technology contemplates
a combination of a guidewire and microcatheter, technologies that are broadly used for surgery within a tubular organ or structure such
as a blood vessel or duct. The CardioSert technology features a unique guidewire delivery system with steering and stiffness control
capabilities which when developed is expected to give the physician the ability to control the tip curvature, to adjust tip load to varying
degrees of stiffness in a gradually continuous manner. The CardioSert technology was originally developed to support interventional cardiologists
in crossing chronic total occlusions (CTO) during percutaneous coronary intervention (PCI) procedures and has the potential to be used
in other spaces and applications, such as peripheral intervention, and neurosurgery. Our CardioSert tool is now trademarked as “One
& DoneTM”.
LIBERTY®
On
January 13, 2020, Microbot unveiled what it believes is the world’s first fully disposable robotic system for use in endovascular
interventional procedures, such as cardiovascular, peripheral and neurovascular. The LIBERTY robotic system features a unique compact
design with the capability to be operated remotely, reduce radiation exposure and physical strain to the physician, reduce the risk of
cross contamination, as well as the potential to eliminate the use of multiple consumables when used with its “One & Done”
capabilities, which would be based in part on the CardioSert platform or possibly other guidewire/microcatheter technologies.
LIBERTY
is designed to maneuver guidewires and over-the-wire devices (such as microcatheters) within the body’s vasculature. It eliminates
the need for extensive capital equipment requiring dedicated Cath-lab rooms as well as dedicated staff. In addition, when combined with
CardioSert technology or possibly other guidewire/microcatheter technologies, it is being designed to streamline Cath-lab procedures
with tools that combines guidewire and microcatheter into a single device. With control over tip curvature and stiffness for maneuverability
and access – and without the need for constant tool exchanges – when integrated into the LIBERTY device, the device may drastically
reduce procedure time and costs while enhancing the operator experience.
On
August 17, 2020, Microbot announced the successful conclusion of its feasibility animal study using the LIBERTY robotic system. The study
met all of its end points with no intraoperative adverse events, which supports Microbot’s objectives to allow physicians to conduct
a catheter-based procedure from outside the catheterization laboratory (cath-lab), avoiding radiation exposure, physical strain and the
risk of cross contamination. The study was performed by two leading physicians in the neuro vascular and peripheral vascular intervention
spaces, and the results demonstrated robust navigation capabilities, intuitive usability and accurate deployment of embolic agents, most
of which was conducted remotely from the cath-lab’s control room.
On
December 22, 2021, we entered into a strategic collaboration agreement for technology co-development with Stryker Corporation, acting
through its Neurovascular Division. Pursuant to the agreement, the collaborative development program between Stryker and us aims to integrate
certain of Stryker’s instruments with our LIBERTY Robotic System to address certain neurovascular procedures. The activities contemplated
by the Agreement shall be specified in one or more development plans derived from the terms and conditions set forth in the Agreement.
We
are continuously exploring and evaluating additional innovative guidewire/microcatheter technologies to be integrated and combined with
the LIBERTY robotic platform.
Industry
Overview
CSF
Management
Hydrocephalus
is a medical condition in which there is an abnormal accumulation of cerebrospinal fluid, or CSF, in the brain that can cause increased
intracranial pressure. It is estimated that one in every 500 babies are born with hydrocephalus, and over 1,000,000 people in the United
States currently live with hydrocephalus.
Symptoms
of hydrocephalus vary with age, disease progression and individual tolerance to the condition, but they can include convulsion, tunnel
vision, mental disability or dementia-like symptoms and even death. NPH is a type of hydrocephalus that usually occurs in older adults.
NPH is generally treated as distinct from other types of hydrocephalus because it develops slowly over time. In NPH, the drainage of
CSF is blocked gradually and the excess fluid builds up slowly. This slow accumulation means that the fluid pressure may not be as high
as in other types of hydrocephalus. It is estimated that more than 700,000 Americans have NPH, but less than 20% receive an appropriate
diagnosis.
Hydrocephalus
is most often treated by the surgical insertion of a shunt system. The shunt system diverts the flow of CSF from the brain’s ventricles
(or the lumbar subarachnoid space) to another part of the body where the fluid can be more readily absorbed. Hydrocephalus shunt designs
have changed little since their introduction in the 1950s. A shunt system typically consists of three parts: the distal tubing or shunt
(a flexible and sturdy plastic tube), the ventricular catheter (the proximal catheter), and a valve. The end of the shunt system with
the proximal catheter is placed in the ventricles (within the CSF) and the distal catheter is placed in the site of the body where the
CSF can be drained. A valve is located along the shunt to maintain and regulate the rate of CSF flow. Current systems can be created
from separate components or bought as complete units.
The
treatment of hydrocephalus with existing shunt systems often includes complications. For example, approximately 50% of shunts used in
the pediatric population fail within two years of placement and repeated neurosurgical operations are often required. Ventricular catheter
blockage, or occlusion, is by far the most frequent event that results in shunt failure. Shunt occlusion occurs when there is a partial
or complete blockage of the shunt that causes it to function intermittently or not at all. Such a shunt blockage can be caused by the
accumulation of blood cells, tissue, or bacteria in any part of the shunt system. In the event of shunt occlusion, CSF begins to accumulate
in the brain or lumbar region again and the symptoms of untreated hydrocephalus can reappear until a shunt replacement surgery is performed.
Although
several companies are active in the field of hydrocephalus treatment and the manufacturing of shunt systems and shunt components, Microbot
believes that the majority of those companies are focusing on the development of valves. The development of a “smart shunt”
– a shunt that could provide data to the physician on patient conditions and shunt function with sensor-based controls, or correct
the high failure rate of existing shunt systems – is for the most part at an academic and conceptual level only. Reports of smart
shunt technologies are typically focused on a subset of components with remaining factors left unspecified, such as hardware, control
algorithms or power management. Microbot does not believe that a smart shunt that can prevent functional failures has been developed
to date. Because of the limited innovation in this area, Microbot believes an opportunity exists to provide patients suffering from hydrocephalus
or NPH with a more effective instrument for treating their condition.
An
alternative, short-term solution to hydrocephalus is the implantation of an External Ventricular Drainage, or EVD, an implanted device
used in neurosurgery for the short-term treatment and monitoring of elevated intracranial pressure when the normal flow of CSF inside
the brain is obstructed. If after using an EVD, the underlying hydrocephalus does not eventually resolve, the EVD may then be replaced
with a cerebral shunt, a fully internalized, long-term treatment for hydrocephalus.
EVDs
are also used in other instances when the normal flow of CSF inside the brain is obstructed, such as a result of head trauma, intracerebral
hemorrhage, brain tumors and infection. The EVD serves to divert excess fluids from the brain and allows for the monitoring of intracranial
pressure. An EVD must be placed in a center with full neurosurgical capabilities because immediate neurosurgical intervention may be
needed if a complication of EVD placement, such as bleeding, is encountered. EVD is one of the most commonly used and most important
life-saving procedures in the neurologic ICU, with more than 200,000 neuro-intensive patients requiring EVD insertions annually.
Similar
to shunts, EVDs are also prone to occlusion, mostly due to cellular debris, such as blood clots and/or tissue fragments. Studies have
shown that approximately 1-7% of EVDs require replacement secondary to occlusion. Current solutions for EVD occlusion include irrigation
and replacement, which we believe may be ineffective (in the case of irrigation) or costly (in the case of replacement) and in either
case, put the patient at risk of unintended side effects. Microbot believes that with its portfolio of technologies, and its initial
pre-clinical results, it is well-positioned to explore and expand its offerings as an alternative solution for EVD occlusion.
Minimally
Invasive Robot-Assisted Endovascular Interventions
Minimally
Invasive Surgery, or MIS, refers to surgical procedures performed through tiny incisions instead of a single large opening. Because the
incisions are small, patients tend to have quicker recovery times and experience less trauma than with conventional surgery. The global
MIS surgery is expected to grow from $24 billion in 2020 to $42 billion in 2026, representing a CAGR of 9.85%. MIS involves three major
categories of devices: surgical, monitoring and visualization, and endoscopy. The market for surgical devices, including ablation, electrosurgery
and medical robotic systems, accounts for the largest share of revenue and is also expected to show the highest rate of growth. According
to the Society of Robotic Surgery, the US market growth in endoluminal robotic surgery is projected to be 15-25% by 2025.
Vascular
disease is the most common precursor to ischemic heart disease and stroke, which are two of the leading causes of death worldwide. Advances
in endovascular intervention in recent years have transformed patient survival rates and post-surgical quality of life. It is estimated
that more than three million percutaneous coronary interventions (PCI) and over two million of peripheral vascular interventions are
performed annually worldwide. The incidence of stroke in the US alone is estimated at 900,000 cases annually. Compared to open surgery,
it has the advantages of faster recovery, reduced need for general anesthesia, reduced blood loss and significantly lower mortality.
However, the current practice of endovascular procedures, which virtually has remained unchanged since the introduction of Intervention
four decades ago, is limited by a number of factors, including physical strain and exposure to X-Ray radiation of the operator, and involves
complex maneuvering of intervention tools, such as guidewires and catheters, to reach target areas in the vasculature. Despite recent
advancements in technology and devices, manual procedures are still highly dependent on the technical skills and training of the operator,
what makes the access to expert medical centers and advanced emergent treatments, such as endovascular thrombectomy for acute ischemic
stroke, geographically limited. In addition, we believe that demand for physicians continues to grow faster than supply.
Endovascular
robotic systems are aimed to increase the stability and precision of guidewires and catheters, protecting the physicians from ionizing
radiation and physical strain by removing them from the radiation source, helping in closing shortages of skilled physicians and skill
gaps and enable tele-interventions (e.g. the Hub & Spoke hospital model).
Today,
there are only a few commercially available robotic systems for endovascular interventions. We believe these systems have major drawbacks,
such as limited maneuverability, the requirement to exchange and use multiple expensive surgical tools, being cumbersome to set-up and
operate, and requiring significant capital expenditures.
Navigating
and placing access devices through tortuous and highly delicate brain arteries is a complex procedure that requires high-level surgical
skills with specialist training. In many procedures, surgeons exchange numerous access devices before reaching the target and applying
the therapeutic agent or device, increasing the risk of adverse events and the exposure of both patient and physician to radiation. Adverse
events, such as perforation of brain arteries or the release of embolies from a thrombus or atherosclerotic lesion can have devastating
or even fatal results.
Microbot
believes that with its portfolio of CardioSert and LIBERTY technologies, it is well-positioned to explore and develop such technologies
as neurovascular access devices, with a focus on improving the ease and access and enhancing the safety of endovascular interventions.
Our
Product Pipeline
Self-Cleaning
Shunt
The
SCS device is designed to act as the ventricular catheter portion of a CSF shunt system that is used to treat hydrocephalus and NPH.
It is designed to work as an alternative to any ventricular catheter options currently on the market and to connect to all existing shunt
system valves currently on the market; therefore, the successful commercialization of the SCS is not dependent on any single shunt system.
Initially, Microbot expects the SCS device to be an aftermarket purchase that would be deployed to modify existing products by the end
user. Microbot believes that the use of its SCS device will be able to reduce, and potentially eliminate, shunt occlusions, and by doing
so, Microbot believes its SCS has the potential to become the gold standard ventricular shunt in the treatment of hydrocephalus and NPH.
The
SCS device embeds an internal robotic cleaning mechanism in the lumen, or inside space, of the ventricular catheter which prevents cell
accumulation and tissue ingrowth into the catheter. The SCS device consists of a silicone tube with a perforated titanium tip, which
connects to a standard shunt valve at its distal end. The internal cleaning mechanism is embedded in the lumen of the titanium tip. Once
activated, the cleaning mechanism keeps tissue from entering the catheter perforations while maintaining the CSF flow in the ventricular
catheter.
The
internal cleaning mechanism of the SCS device is activated by means of an induced magnetic field, which is currently designed to be externally
generated by the patient through a user-friendly headset that transmits the magnetic field at a pre-determined frequency and operating
sequence protocol. The magnetic field that is created by the headset is then captured by a flexible coil and circuit board that is placed
just under the patient’s scalp in the location where the valve is located. The circuit board assembly converts the magnetic field
into the power necessary to activate the cleaning mechanism within the proximal part of the ventricular catheter.
Microbot
has completed the development of an SCS prototype and is currently continuing the safety testing, general proof of concept testing and
performance testing for the device, which Microbot began in mid-2013. In May 2018, Microbot announced the results of two pre-clinical
studies assessing the SCS, an in-vitro study and a small animal study. The in-vitro study, which was performed at Wayne State University
by Dr. Carolyn Harris, supports the SCS’s potential as a viable technology for preventing occlusion in shunts used to treat hydrocephalus.
The first stage animal study designed to assess the safety profile of the SCS, which was performed by James Patterson McAllister, PhD,
a Professor of Neurosurgery at Washington University School of Medicine in St. Louis, met the primary goal to determine the safety of
the SCS device that aims to prevent obstruction in CSF catheters. Following the completion of the first stage initial studies, Microbot
commenced a follow-up study to further evaluate the safety of the SCS. The follow-up study was also conducted by leading hydrocephalus
experts at Washington University. The study, included a larger sample size compared to the initial studies and the primary and secondary
endpoints were to validate the safety of the activated SCS in-vivo (animal) models. In that in-vivo study the major finding was that
the SCS system is as safe to use as currently marketed devices. The study also mentions, that in the animal model, contact of the shunt
with the choroid plexus is impossible to avoid and that it may lead to shunt obstruction due to hemorrhage of this highly vascular structure.
In
parallel with the in-vivo study, Microbot also contracted with Envigo CRS Israel, a leading provider of non-clinical contract research
services, to conduct an in-vitro study designed to evaluate the operational performance of the SCS. Human brain glioblastoma cells were
used in order to assess performance of the SCSTM in a test system with accelerated cell growth, accumulation and obstruction
rates. In 2018, Microbot and Envigo conducted an in-vitro trial that its final conclusion was:
While
significant cell growth and accumulation were seen in the non-operating SCS™ group after 30 days, the shunt openings remained clear
in the constantly operating SCS™ group, with little to no cell attachment on the robotic cleaning mechanism (the ViRob™ system)
and on the shunt openings.
The
SCS™ was further validated in a broader follow-up in-vitro study which commenced in July 2019 and concluded on August 14, 2019
and clearly demonstrated that the SCS™ prevented shunt occlusions under the parameters of that study. This follow-up study was
also conducted by Envigo CRS Israel using Human brain glioblastoma cells Specifically, the study demonstrated:
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Significant
cell growth and accumulation in a non-operating SCS™ as well as in a standard of care ventricular catheters (control group). |
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A
significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating regimes of the SCS™,
with little cell attachment on the ViRob mechanism. |
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The
effectiveness of the SCS™ device in preventing cells blockage as compare to standard of care surgical ventricular catheters. |
To
further investigate the efficacy of the SCS™, Microbot conducted a follow-up in-vitro study at Wayne State University. The study
included a larger sample size compared to the initial study and the primary and secondary end points aimed to validate the efficacy of
the SCS in comparison to commercially available devices. After careful analysis of the results the final conclusion was that the data
from this study did not reveal statistically significant differences between the study’s groups.
Microbot
used the findings of the second stage of the animal study combined with additional experimental data that was acquired in the past year
for initial regulatory FDA pre-submissions.
On
January 27, 2021, we announced the completion of successful discussions with the FDA, for the SCSTM. After review of Microbot
existing pre-clinical data, the FDA’s feedback will allow us to apply for the EFS (Early Feasibility Study) without further animal
studies.
We
expect to continue to work with the FDA towards finalizing the SCSTM design, and to incorporate their feedback prior to submitting
the IDE to seek authorization to begin the EFS clinical trial. While there can be no assurance that the FDA will approve the EFS study,
the agency’s recent feedback indicates that the agency will be receptive to allowing a first-in-human study to proceed based on
existing data. After completing the EFS, we would then seek FDA input on the device design as finalized through the EFS process in a
subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline for the submission of the IDE for First-in-Human
clinical trial under the EFS is expected to commence in the first quarter of 2023.
In
spite of the above, there is still a possibility that Microbot may conduct clinical trials if they are requested by the FDA or if Microbot
decides that the data from such trials would improve the marketability of the product candidate.
The
proposed indication for use of the SCS™ device would be for the treatment of hydrocephalus and/or NPH as a component of commercially
available shunt systems. It continues to be possible that the FDA could require us to conduct a human clinical study to support the safety
and efficacy of the SCS and that such clinical data would need to be part of the future regulatory submission to authorize marketing
of the medical device in the U.S.
TipCAT
A
TipCAT prototype was shown to self-propel and self-navigate in curved plastic pipes and curved ex-vivo colon. In addition, in its first
feasibility study, the prototype device was tested in a live animal experiment and successfully self-propelled through segments of the
animal’s colon, with no post-procedural damage. All tests were conducted at AMIT (Alfred Mann Institute of Technology at the Technion),
prior to the licensing of TipCAT by Microbot.
Currently,
Microbot is not pursuing the development of the TipCAT as a colonoscopy tool due to its focus on the neurosurgical and endovascular intervention
spaces, and as such it is currently exploring the use of the TipCAT for minimally invasive neurosurgical and endovascular applications
to complement its other technologies.
LIBERTY
The
LIBERTY robotic system features a unique compact design with the capability to be operated remotely, reduce radiation exposure and physical
strain to the physician, reduce the risk of cross contamination, as well as the potential to eliminate the use of multiple consumables
when used with the One & DoneTM tool or possibly other guidewire/microcatheter technologies. LIBERTY is being designed
to have the following attributes:
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Compact
size - Eliminates the need for large capital equipment in dedicated cath-lab rooms with dedicated staff. |
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Fully
disposable - To our knowledge, the first and only fully disposable, robotic system for endovascular procedures. |
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Streamlines
Cath-lab procedures - Compatible with Microbot’s unique One & DoneTM tool or possibly other guidewire/microcatheter
technologies, that combines guidewire and microcatheter into a single device. The “One & Done” tool, when integrated
into the system, is expected to provide full control over tip curvature and stiffness for maneuverability and access without the
need for constant tool exchanges, while enhancing the operator experience. |
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State
of the art maneuverability - Provides linear, rotational and tip control of its One & DoneTM tool when integrated
into the system, as well as linear motion for an additional “over the wire” device. |
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Compatibility
with a wide range of commercially-available guidewires, microcatheters and guide-catheters. |
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Enhanced
operator safety and comfort - Reduces exposure to ionizing radiation and the need for heavy lead vests otherwise to be worn during
procedures, as well as reducing the exposure to Hospital Acquired Infections (HAI). |
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Ease
of use - LIBERTY’s intuitive remote controls simplify advanced procedures while shortening the physician’s learning curve. |
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Telemedicine
compatible - Capable of tele-catheterization, carried out remotely by highly trained specialists. |
We
are continuing our feasibility animal trials with respect to the LIBERTY device, with a planned pre-submission to the FDA as early as
the first quarter of 2022, and planned submission to the FDA in the first half of 2023.
Strategy
Microbot’s
goal is to generate sales of its products, once they have received regulatory approval, by establishing SCS, LIBERTY and additional devices
from its technological platforms, as the standard-of-care in the eyes of doctors, surgeons, patients and medical facilities, as well
as getting the support of payors and insurance companies. Microbot believes that it can achieve this objective by working with hospitals
to demonstrate the key benefits of its products. Microbot’s strategy includes the following key elements:
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Continue
to refine existing product candidates and develop additional micro-robotic solutions. As Microbot prepares to bring its initial
product candidates through pre-clinical and clinical trials, if necessary, and eventually to market, it continues to focus on improving
its product candidates to respond to clinical data and patient and physician feedback. Microbot also expects to continue to innovate
in the micro-robotics field by continuing to find ways of using its technology to solve unmet needs, with the overarching goal of
providing a safer, more effective and more efficient surgical environment for patients and physicians. |
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Establish
and leverage relationships with key institutions and leading clinicians. Microbot’s objective will be to maintain clinical
focus with leading hospitals and clinics so as to establish the SCS, LIBERTY, as well as other future products, as the standard of
care in such institutions for their respective procedures. Microbot also expects to identify key clinicians with the relevant specialties
(for instance, neurosurgery or interventional radiology) with the expectation that such clinical focus will accelerate the adoption
of its candidate products. |
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Continuously
invest in research and development. Microbot’s most significant expense has historically been research and development,
and Microbot expects that this will continue in the foreseeable future, including expenses it expects to incur to improve on its
prototype products in order to respond to clinical data, to develop additional applications using its technologies and to develop
future product candidates. |
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Explore
partnerships for the introduction of Microbot’s products. Microbot intends to focus its marketing and sales efforts initially
on pursuing collaborations with global medical device companies that have established sales and distribution networks. Microbot will
seek to enter collaborations and partnerships with strategic players that offer synergies with Microbot’s product candidates
and expertise. |
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Seek
additional IP and technologies to complement and strengthen Microbot’s current IP portfolio. Microbot intends to continue
exploring new technologies, IP and know-how to add to its current portfolio through licensing, mergers and/or acquisitions and to
allow Microbot to enter new spaces and strengthen its overall product portfolio. |
SCS
Opportunities
The
SCS is designed to prevent shunt occlusions in hydrocephalus and NPH patients who have undergone or are undergoing the surgical insertion
of a shunt system. For purposes of its marketing strategy, Microbot has split the market for shunt systems into two sub-markets:
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Primary
shunt placement; and |
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Shunt
replacement. |
Microbot’s
SCS device is universal (meaning that it is designed to be attachable to any valve on the market); therefore, Microbot’s initial
go-to-market strategy is the development of strategic partnerships with leading global medical device companies with ready sales and
distribution channels. Outside of a strategic partnership, it is most likely that Microbot’s SCS product will be initially used
in shunt replacement surgeries to replace occluded ventricular catheters. Accordingly, Microbot intends to establish key hospital and
clinic relationships that will allow it to diffuse the technology among experts and other stakeholders. Microbot is also planning to
apply for the SCS device to be covered under the current reimbursement codes in the United States for use in hydrocephalus and NPH shunt
procedures.
TipCAT
Opportunities
Microbot
is currently exploring the use of the TipCAT for minimally invasive neurological and endovascular applications.
One
& DoneTM (CardioSert) Opportunities
Microbot
is currently exploring the integration of the One & DoneTM technology into the LIBERTY endovascular robotic system for
a range of potential applications in the cardiovascular, peripheral vascular and neurovascular spaces.
LIBERTY
Opportunities
The
LIBERTY endovascular robotic system is being designed to remotely maneuver guidewires, microcatheters and over-the-wire devices within
the body’s vasculature. The device is being designed to be the size of a hand-held personal device and to be fully disposable
and affordable. We are aiming LIBERTY to be capable of supporting whole-endovascular procedures by providing solutions which would be
based in part on the One & DoneTM proprietary technology or possibly other guidewire/microcatheter technologies. With
control over tip curvature and stiffness for maneuverability and access – and without the need for constant tool exchanges –
the One & DoneTM tool, when integrated into the system, is expected to drastically reduce the procedure time and costs,
while enhancing the operator experience. We believe LIBERTY’s addressable markets are the Interventional Cardiology, Interventional
Radiology and Interventional Neuroradiology markets.
The
unique characteristics of LIBERTY – compact, mobile, disposable and remotely controlled - open the opportunity of expanding telerobotic
interventions to patients with limited access to life-saving procedures, such as mechanical thrombectomy in ischemic stroke.
Competition
SCS
Competitive Landscape
Several
academic research groups, such as at the New Jersey Institute of Technology, are currently researching sensing and obstruction-resistant
catheter designs, and the Smart Sensors and Integrated Microsystems (SSIM) Program at Wayne State University has publicized that it is
engaging in smart shunt development activity. However, based in part on its knowledge of the patented technologies, Microbot believes
that these technologies are still early in the research and development cycle. Although we believe the SCS may face direct competition
from Anuncia Inc., a spin-off of Alycone Lifesciences Inc., which received a CE Mark and FDA 510k clearance for the Alivio ReFlow™
Ventricular System for the treatment of hydrocephalus, the commercialization status of the device is not clear. The SCS also faces non-direct
competition from Aqueduct Neurosciences, Inc., which we believe is developing a non-shunt, electro-mechanical technology platform to
control the draining of cerebrospinal fluid, and from Cerevasc Inc., which is developing the eShuntTM System that aims to
eliminate the need for passing a rigid catheter through cerebral cortex and subcortical white matter.
Microbot
does not expect its SCS device to directly compete against shunt systems currently available in the market. The SCS device is designed
to replace a component of existing shunt systems and is expected to be an aftermarket purchase that would be used to modify existing
products by the end user. However, there can be no assurance that Microbot’s product candidate will be accepted by the shunt market
as an alternative component.
TipCAT
Competitive Landscape
Microbot
has not at this time completed its evaluation of the current competitive landscape in the endovascular space for potential uses of the
TipCAT.
One
& DoneTM (CardioSert) Competitive Landscape
Competition
includes moveable-core guidewires from companies such as Boston Scientific and Rapid Medical, and steerable and deflectable sheaths and
catheters from companies such as Bendit Technologies, Agile Devices and Merit Medical. To our knowledge, the CardioSert device is the
only device that combines an inner moveable guidewire and an outer microcatheter, with the ability to control the shape and stiffness
of the distal tip in a continuous, gradual manner, and intends to compete on that basis.
LIBERTY
Competitive Landscape
We
believe the main competitor to the LIBERTY system is the CorPath GRX vascular robotics system by Corindus Vascular Robotics, a Siemens
Healthineers company. The CorPath GRX system has FDA approvals for percutaneous coronary interventions (PCI) and peripheral vascular
interventions (PVI) and is pending an approval for neurovascular interventions. Other competitors include Robocath (CE Marked for PCI
only) and Hansen Medical (a J&J Company with FDA approval for PVI). We believe these systems have drawbacks, such as limited maneuverability,
the requirement to exchange and use multiple expensive surgical tools, being cumbersome to set-up and operate, and requiring significant
capital expenditures. We further believe that these systems have captured a marginal market share to date.
Microbot’s
existing and planned products could also be rendered obsolete or uneconomical by technological advances developed in the future by existing
or new competitors. Some of Microbot’s competitors currently have significantly greater resources than Microbot does; have established
relationships with healthcare professionals, customers and third-party payors; and have long-term contracts with group purchasing organizations
in the United States. In addition, many of Microbot’s competitors have established distributor networks, greater resources for
product development, sales and marketing, additional lines of products and the ability to offer financial incentives such as rebates,
bundled products or discounts on other product lines that Microbot cannot provide.
Intellectual
Property
General
The
SCS and TipCAT are based on technological platforms licensed from The Technion Research and Development Foundation Ltd., or TRDF, as
further discussed below. The LIBERTY platform core technology is co-owned by Microbot and TRDF. The One & DoneTM
device is based on technologies acquired by Microbot from CardioSert. Microbot plans to develop other medical-robotic solutions
through internal research and development, to strengthen its intellectual property position, and to continue exploring strategic
collaborations and accretive acquisition opportunities. Microbot currently holds an intellectual property portfolio of 47 patents
issued/allowed and 29 patent applications pending worldwide. It also has registered trademarks in Israel, Europe and the US relating
to its LIBERTY platform, and also has trademarks relating to its proprietary Microbot Medical tradename and logo registered in
Israel, Europe, and the UK, and pending in the US and China, in addition to having registered trademarks for the “One
& Done” name in Israel, allowed in Europe and pending in the US, UK, China, and Japan.
Microbot
relies or intends to rely on intellectual property licensed or developed, including patents, trade secrets, trademarks, technical innovations,
laws of unfair competition and various licensing agreements, to provide its future growth, to build its competitive position and to protect
its technology. As Microbot continues to expand its intellectual property portfolio, it is critical for Microbot to continue to invest
in filing patent applications to protect its technology, inventions, and improvements.
Microbot
requires its employees and consultants to execute confidentiality agreements in connection with their employment or consulting relationships
with Microbot. Microbot also requires its employees and consultants who work on its product candidates to agree to disclose and assign
to Microbot all inventions conceived during the term of their service, while using Microbot property, or which relate to Microbot’s
business.
Patent
applications in the United States and in foreign countries are maintained in secrecy for a period of time after filing, which results
in a delay between the filing date of the patent applications and the time when they are published. Patents issued and patent applications
filed relating to medical devices are numerous, and there can be no assurance that current and potential competitors and other third
parties have not filed or in the future will not file applications for, or have not received or in the future will not receive, patents
or obtain additional proprietary rights relating to product candidates, products, devices or processes used or proposed to be used by
Microbot. Microbot believes that the technologies it employs in its products and systems do not infringe the valid claims of any third-party
patents. There can be no assurance, however, that third parties will not seek to assert that Microbot devices and systems infringe their
patents or seek to expand their patent claims to cover aspects of Microbot’s products and systems.
The
medical device industry in general has been characterized by substantial litigation regarding patents and other intellectual property
rights. Any such claims, regardless of their merit, could be time-consuming and expensive to respond to and could divert Microbot’s
technical and management personnel. Microbot may be involved in litigation to defend against claims of infringement by other patent holders,
to enforce patents issued to Microbot, or to protect Microbot’s trade secrets. If any relevant claims of third-party patents are
upheld as valid and enforceable in any litigation or administrative proceeding, Microbot could be prevented from practicing the subject
matter claimed in such patents, or would be required to obtain licenses from the patent owners of each such patent, or to redesign Microbot’s
products, devices or processes to avoid infringement. There can be no assurance that such licenses would be available or, if available,
would be available on terms acceptable to Microbot or that Microbot would be successful in any attempt to redesign products or processes
to avoid infringement. Accordingly, an adverse determination in a judicial or administrative proceeding or failure to obtain necessary
licenses, could potentially prevent Microbot from manufacturing and selling its products.
Microbot’s
issued U.S. patents, which cover Microbot’s product candidates, will expire between 2026 and 2040, not including any patent term
adjustments that may be available. Issued patents outside of the United States directed to Microbot’s product candidates will expire
between 2026 and 2036.
License
Agreement with the Technion
In
June 2012, Microbot entered into a license agreement with TRDF, the technology transfer subsidiary of The Technion Institute of Technology,
pursuant to which it obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating
to the SCS and TipCAT technology platforms invented by Professor Moshe Shoham, a former director of and an advisor to the Company, and
in certain circumstances other TRDF-related persons. Pursuant to the terms of the license agreement, in order to maintain the license
with respect to each platform, Microbot must use commercially reasonable efforts to develop products covered by the license, including
meeting certain agreed upon development milestones. The milestones for both SCS and TipCAT include commencing first in human clinical
trials by December 2021. Failure to meet any development milestone will give TRDF the right to terminate the license with respect to
the technology underlying the missed milestone.
As
partial consideration for the grant of the licenses under the agreement, Microbot issued a number of shares to TRDF equal to 3% of its
issued and outstanding shares at such time on a fully diluted basis. Such shares were initially subject to antidilution protections but
are no longer subject to adjustment. In addition, as partial consideration for the licenses granted, Microbot agreed to pay TRDF royalties
of between 1.5% and 3.0% of net sales of products covered by the licenses, subject to certain reductions, and certain percentages of
amounts received by Microbot in the event of sublicensing.
In
the case of termination of the license by Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive
license from Microbot with respect to improvements to the licensed technologies made by Microbot. In such cases, TRDF would pay a royalty
of 10% of the income received by TRDF in connection its sublicensing of such patent right and related intellectual property. If the license
from TRDF were to be terminated with respect with either of the technology platforms underlying the SCS or the TipCAT, Microbot would
no longer be able to continue its development of the related product candidate. However, Microbot believes that its current intellectual
property portfolio, and its ongoing efforts to expand into other micro-robotic surgical technologies, will give it the flexibility to
shift its resources towards developing and commercializing related products.
In
addition to the licensed SCS and TipCAT technologies, the LIBERTY platform, which was invented by employees of Microbot together with
Professor Moshe Shoham of the Technion, in his capacity as a consultant to Microbot, is co-owned by Microbot and TRDF, and a process
is being conducted for establishing the LIBERTY platform as a “Joint Invention” in accordance with the terms of the License
Agreement. Once the Joint Invention is established, Microbot will have to pay TRDF royalties of between 1.5% and 3.0% of net sales of
products covered by this Joint Invention.
Research
and Development
Microbot’s
research and development programs are generally pursued by engineers and scientists employed by Microbot in its offices in Israel on
a full-time basis or as consultants, or through partnerships with industry leaders in manufacturing and design and researchers in academia.
Microbot is also working with subcontractors in developing specific components of its technologies.
The
primary objectives of Microbot’s research and development efforts are to continue to introduce incremental enhancements to the
capabilities of its candidate products and to advance the development of proposed products.
Microbot
has obtained grants from the Israeli Innovation Authority (“IIA”) for participation in research and development activities
since 2013 through 2021. During this time, Microbot has received grant revenues of approximately $1,500,000. In return, Microbot is obligated
to pay royalties amounting to 3%-3.5% of its future sales up to the amount of the grant. The grant is linked to the exchange rate of
the dollar to the New Israeli Shekel and bears interest of USD LIBOR per annum.
Under
the terms of the grants and applicable law, Microbot is restricted from transferring any technologies, know-how, manufacturing or manufacturing
rights developed using the grant outside of Israel without the prior approval of the Israel Innovation Authority. Microbot has no obligation
to repay the grant, if the SCS project fails, is unsuccessful or aborted before any sales are generated. The financial risk is assumed
completely by the IIA.
Microbot
expects to continue to access government funding in the future.
For
the fiscal year ended December 31, 2021 and 2020, respectively, Microbot incurred research and development expenses of approximately
$6,153,000 compared to approximately $3,396,000.
SCS
Microbot
has already made plans to develop a second version of its SCS device that will have an embedded controller and battery, initially to
support its animal trials. This alternative design will allow the cleaning mechanism to be automatically activated, without the need
for the patient’s involvement in the activation process.
Microbot
has completed the development of an SCS prototype and is currently continuing the safety testing, general proof of concept testing and
performance testing for the device, which Microbot began in mid-2013. In May 2018, Microbot previously announced the results of two pre-clinical
studies assessing the SCS, an in-vitro study and a small animal study. The in-vitro study, which was performed at Wayne State University,
supports the SCS’s potential as a viable technology for preventing occlusion in shunts used to treat hydrocephalus. The animal
study designed to assess the safety profile of the SCS, which was performed at Washington University School of Medicine in St. Louis,
met the primary goal to determine the safety of the SCS device that aims to prevent obstruction in CSF catheters. Since the completion
of these initial studies, Microbot conducted a follow-up study to further evaluate the safety of the SCS. The follow-up study was also
conducted by leading hydrocephalus experts at Washington University and Wayne State University. The study included a larger sample size
compared to the initial studies and the primary and secondary endpoints seek to validate the safety and efficacy of the SCS that will
be activated in both in-vitro (lab) and in-vivo (animal) models. In that in-vivo study, the major finding was that the SCS system is
as safe to use as currently marketed devices.
In
conjunction with conducting the follow-up study, Microbot also contracted with Envigo CRS Israel, to conduct an in-vitro study designed
to evaluate the operational performance of the SCS. The first Envigo study that was conducted in 2018 used human brain glioblastoma cells
to assess the performance of the SCS in a test system with accelerated cell growth, accumulation, and obstruction rates. The performance
of a constantly activated (always-on) SCS to prevent shunt occlusion in the laboratory study was compared with a non-operating SCS after
30 days, and the results were captured with photographs shared by Microbot in a press release issued on January 14, 2019. While significant
cell growth and accumulation was seen in the cell cultures with a non-operating SCS, the shunt openings within the cells seeded with
a constantly operating SCS remained clear, with little to no cell attachment on the robotic brush (ViRob) and on the opening where the
robotic brush (ViRob) operates after 30 days of cell culturing and growth. We believe this experiment validates the operational effectiveness
of the SCS to prevent shunt occlusion and provides additional data to support the device’s proof of concept. We believe the in-vitro
laboratory study further confirms that the SCS has the ability to operate after cells have accumulated on the catheter holes and the
robotic brush (ViRob) and to potentially disintegrate existing occlusions formed on the robotic brush (ViRob) and on the opening where
the robotic brush (ViRob) operates, based on the results from a third test group in which cells were allowed to grow for four weeks and
then exposed to an activated SCS device. We believe the images captured by Envigo and Microbot demonstrate that the cleaning mechanism
of the SCS is powerful enough to clear accumulated cells at blocked pores, as significant improvements were observed in the degree of
shunt obstruction after only a short period of time following activation of the SCS.
The
SCS was further validated in a broader follow-up in-vitro lab study which commenced in July 2019 and concluded on August 14, 2019 and
clearly demonstrated the device prevented shunt occlusion under the parameters of that study. This follow-up study was also conducted
by Envigo CRS Israel. Human brain glioblastoma cells were used in order to assess performance of the SCS in a test system with accelerated
cell growth rate, accumulation and obstruction rates. Specifically, the study demonstrated:
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Significant
cell growth and accumulation in a non-operating SCS as well as a standard of care surgical shunt. |
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A
significant inhibition in cell growth in daily (5-10 minutes) or weekly (up to 2 hours over the week) operating SCS with little cell
attachment on the robotic brush (ViRob) and on the opening where the robotic brush (ViRob) operates. |
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The
effectiveness of the Company’s SCS devices in preventing cells blockage as compare to standard of care surgical shunts. |
The
follow-up in vitro (lab) study at Wayne State University included a larger sample size compared to the initial study and the primary
and secondary end points seek to validate the efficacy of the SCS while being activated in-vitro (lab). Generally, the data from this
study did not reveal statistically significant trends indicating a strong preference for any of the designs tested, including the SCS;
therefore, these tests as they stand are inconclusive but have provided us with trends which Microbot may decide to further explore.
After
submitting the existing data to the FDA, on January 27, 2021 we announced the completion of successful discussions with the FDA, for
the SCSTM. After review of our existing pre-clinical data, the FDA’s feedback will allow us to apply for the EFS. We
expect to continue to work with the FDA towards finalizing the SCSTM design, and to incorporate their feedback prior to submitting
the IDE to seek authorization to begin the EFS clinical trial. While there can be no assurance that the FDA will approve the EFS study,
the agency’s recent feedback indicates that the agency will be receptive to allowing a first-in-human study to proceed based on
existing data. After completing the EFS, we would then seek FDA input on the device design as finalized through the EFS process in a
subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline for the submission of the IDE for First-in-Human
clinical trial under the EFS is expected to commence in the first quarter of 2023.
Although
the FDA agreed that the SCS is suitable to apply for an EFS program, we can give no assurance that the FDA will agree that an EFS is
warranted, in which case we will have to re-commence animal trials or otherwise re-evaluate the FDA approval process, which could delay
and hinder our ability to commercialize the SCS device.
LIBERTY
The
LIBERTY prototype system was tested at our laboratories in an in-vitro silicone model, using off-the-shelf guidewires and microcatheters,
and showing an ability to successfully provide linear and rotational movements of the guidewires and linear motion of the microcatheters.
We also conducted a single preliminary animal trial with the LIBERTY prototype.
The
LIBERTY prototype is designed to control the One & DoneTM tool; however, the One & DoneTM tool is not currently
expected to be integrated into the next version of the LIBERTY device. Additionally, we are exploring and evaluating additional innovative
guidewire/microcatheter technologies to be integrated and combined with the LIBERTY robotic platform to further enhance the performance
of the system.
Since
the One & DoneTM tool was originally designed for chronic total occlusion, we are currently working with subcontractors
and guidewire design-houses to perfect the performance of the One & DoneTM tool to the indication that will be selected
for the LIBERTY platform. These may include procedures in the peripheral, coronary or neurovascular spaces.
Manufacturing
Microbot
does not have any manufacturing facilities or manufacturing personnel. Microbot currently relies, and expects to continue to rely, on
third parties for the manufacturing of its product candidates for preclinical and clinical testing, as well as for commercial manufacturing
if its product candidates receive marketing approval.
Commercialization
Microbot
has not yet established a sales, marketing or product distribution infrastructure for its product candidates, which are still in development
stages. Microbot plans to access the U.S. markets with its initial device offerings through strategic partnerships but may develop its
own focused, specialized sales force or distribution channels once it has several commercialized products in its portfolio. Microbot
has not yet developed a commercial strategy outside of the United States.
Government
Regulation
General
Microbot’s
medical technology products and operations are subject to extensive regulation in the United States and other countries. Most notably,
if Microbot seeks to sell its products in the United States, its products will be subject to the Federal Food, Drug, and Cosmetic Act
(FDCA) as implemented and enforced by the U.S. Food and Drug Administration (FDA). The FDA regulates the development, bench and clinical
testing, manufacturing, labeling, storage, record-keeping, promotion, marketing, sales, distribution and post-market support and reporting
of medical devices in the United States to ensure that medical products distributed domestically are safe and effective for their intended
uses. Regulatory policy affecting its products can change at any time.
Advertising
and promotion of medical devices in the United States, in addition to being regulated by the FDA, are also regulated by the Federal Trade
Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products of other
companies have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In
addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising
claims.
Foreign
countries where Microbot wishes to sell its products may require similar or more onerous approvals to manufacture or market its products.
Government agencies in those countries also enforce laws and regulations that govern the development, testing, manufacturing, labeling,
advertising, marketing and distribution, and market surveillance of medical device products. These regulatory requirements can change
rapidly with relatively short notice.
Other
regulations Microbot encounters in the United States and in other jurisdictions are the regulations that are common to all businesses,
such as employment legislation, implied warranty laws, and environmental, health and safety standards, to the extent applicable. In the
future, Microbot will also encounter industry-specific government regulations that would govern its products, if and when they are developed
for commercial use.
U.S.
Regulation
The
FDA governs the following activities that Microbot performs, will perform, upon the clearance or approval of its product candidates,
or that are performed on its behalf, to ensure that medical products distributed domestically or exported internationally are safe and
effective for their intended uses:
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product
design, and development; |
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product
safety, testing, labeling and storage; |
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record
keeping procedures; and |
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product
marketing. |
There
are numerous FDA regulatory requirements governing the approval or clearance and subsequent commercial marketing of Microbot’s
products. These include:
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the
timely submission of product listing and establishment registration information, along with associated establishment user fees; |
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continued
compliance with the Quality System Regulation, or QSR, which require specification developers and manufacturers, including third-party
manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects
of the manufacturing process; |
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labeling
regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; |
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clearance
or approval of product modifications that could significantly affect the safety or effectiveness of the device or that would constitute
a major change in intended use; |
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Medical
Device Reporting regulations (MDR), which require that manufacturers keep detailed records of investigations or complaints against
their devices and to report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned
in a way that would likely cause or contribute to a death or serious injury if it were to recur; |
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adequate
use of the Corrective and Preventive Actions process to identify and correct or prevent significant systemic failures of products
or processes or in trends which suggest same; |
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post-approval
restrictions or conditions, including post-approval study commitments; |
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post-market
surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness
data for the device; and |
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notices
of correction or removal and recall regulations. |
Unless
an exemption applies, before Microbot can commercially distribute medical devices in the United States, Microbot must obtain, depending
on the classification of the device, either prior 510(k) clearance, 510(k) de-novo clearance or premarket approval (PMA), from the FDA.
The FDA classifies medical devices into one of three classes based on the degree of risk associated with each medical device and the
extent of regulatory controls needed to ensure the device’s safety and effectiveness:
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Class
I devices, which are low risk and subject to only general controls (e.g., registration and listing, medical device labeling compliance,
MDRs, Quality System Regulations, and prohibitions against adulteration and misbranding) and, in some cases, to the 510(k) premarket
clearance requirements; |
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Class
II devices, which are moderate risk and generally require 510(k) or 510(k) de-novo premarket clearance before they may be commercially
marketed in the United States as well as general controls and potentially special controls like performance standards or specific
labeling requirements; and |
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Class
III devices, which are devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable
devices, or devices deemed not substantially equivalent to a predicate device. Class III devices generally require the submission
and approval of a PMA supported by clinical trial data. |
Microbot
expects the medical products in its pipeline currently to be classified as Class II. Class II devices are those for which general controls
alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient information to establish special
controls. Special controls can include performance standards, post-market surveillance, patient histories and FDA guidance documents.
Premarket review and clearance by the FDA for these devices is generally accomplished through the 510(k) or 510(k) de-novo premarket
notification process. As part of the 510(k) or 510(k) de-novo notification process, FDA may require the following:
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Development
of comprehensive product description and indications for use; |
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Comprehensive
review of predicate devices and development of data supporting the new product’s substantial equivalence to one or more predicate
devices; and |
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If
appropriate and required, certain types of clinical trials (IDE submission and approval may be required for conducting a clinical
trial in the US). |
When
clinical evidence is necessary because non-clinical or animal testing is unavailable or inadequate to provide the information needed
to advance device development, an Early Feasibility Study (EFS) for a limited clinical investigation of the device may be applicable
and which we are evaluating with respect to the SCS device. If the FDA agrees to the EFS approach in general, we will work to finalize
the design of the device, to resolve any questions from the FDA, and to incorporate the FDA’s feedback prior to submitting the
IDE to seek authorization to begin the EFS clinical trial. After completing the EFS study, we will then seek FDA input on the device
design as finalized through the EFS process in a subsequent IDE filing for approval of a pivotal clinical study proposal.
Clinical
trials involve use of the medical device on human subjects under the supervision of qualified investigators in accordance with current
Good Clinical Practices (GCPs), including the requirement that all research subjects provide informed consent for their participation
in the clinical study. A written protocol with predefined end points, an appropriate sample size and pre-determined patient inclusion
and exclusion criteria, is required before initiating and conducting a clinical trial. All clinical investigations of devices to determine
safety and effectiveness must be conducted in accordance with the FDA’s Investigational device Exemption, or IDE, regulations that
among other things, govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping,
reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk,”
as defined by the FDA, the agency requires the device sponsor to submit an IDE application, which must become effective prior to commencing
human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the application
or notifies the company that the investigation is on hold and may not begin. If the FDA determines that there are deficiencies or other
concerns with an IDE that requires modification, the FDA may permit a clinical trial to proceed under a conditional approval. In addition,
the study must be approved by, and conducted under the oversight of, an Institutional Review Board (IRB) for each clinical site. If the
device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for the trial
by one or more IRBs without separate approval from the FDA, but it must still follow abbreviated IDE requirements, such as monitoring
the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. 510(k) clearance
typically involves the following:
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Assuming
successful completion of all required testing, a detailed 510(k) premarket notification or 510(k) de-novo is submitted to the FDA
requesting clearance to market the product. The notification includes all relevant data from pertinent preclinical and clinical
trials, together with detailed information relating to the product’s manufacturing controls and proposed labeling, and other
relevant documentation. |
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A
510(k) clearance letter from the FDA will authorize commercial marketing of the device for one or more specific indications for
use. |
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After
510(k) clearance, Microbot will be required to comply with a number of post-clearance requirements, including, but not limited to,
Medical Device Reporting and complaint handling, and, if applicable, reporting of corrective actions. Also, quality control and
manufacturing procedures must continue to conform to QSRs. The FDA periodically inspects manufacturing facilities to assess
compliance with QSRs, which impose extensive procedural, substantive, and record keeping requirements on medical device
manufacturers. In addition, changes to the manufacturing process are strictly regulated, and, depending on the change, validation
activities may need to be performed. Accordingly, manufacturers must continue to expend time, money and effort in the area of
production and quality control to maintain compliance with QSRs and other types of regulatory controls. |
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After
a device receives 510(k) clearance from the FDA, any modification that could significantly affect its safety or effectiveness, or
that would constitute a major change in its intended use or technological characteristics, requires a new 510(k) clearance or could
require a PMA. The FDA requires each manufacturer to make the determination of whether a modification requires a new 510(k)
notification or PMA in the first instance, but the FDA can review any such decision. If the FDA disagrees with a
manufacturer’s decision not to seek a new 510(k) clearance or PMA for a particular change, the FDA may retroactively require
the manufacturer to seek 510(k) clearance or PMA. The FDA can also require the manufacturer to cease U.S. marketing and/or recall
the modified device until additional 510(k) clearance or PMA approval is obtained. |
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The
FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of Microbot’s products to ensure that
the claims Microbot makes are consistent with its regulatory clearances, that there is scientific data to substantiate the claims
and that product advertising is neither false nor misleading. |
To
obtain 510(k) clearance, Microbot must submit a notification to the FDA demonstrating that its proposed device is substantially equivalent
to a predicate device (i.e., a device that was in commercial distribution before May 28, 1976, a device that has been reclassified from
Class III to Class I or Class II, or a 510(k)-cleared device). The FDA’s 510(k) clearance process generally takes from three to
12 months from the date the application is submitted but also can take significantly longer. If the FDA determines that the device or
its intended use is not substantially equivalent to a predicate device, the device is automatically placed into Class III, requiring
the submission of a PMA.
There
is no guarantee that the FDA will grant Microbot 510(k) clearance for its pipeline medical device products, and failure to obtain the
necessary clearances for its products would adversely affect Microbot’s ability to grow its business. Delays in receipt or failure
to receive the necessary clearances, or the failure to comply with existing or future regulatory requirements, could reduce its business
prospects.
Devices
that cannot be cleared through the 510(k) process due to lack of a predicate device but would be considered low or moderate risk may
be eligible for the 510(k) de-novo process. In 1997, the Food and Drug Administration Modernization Act, or FDAMA added the de novo classification
pathway now codified in section 513(f)(2) of the FD&C Act. This law established an alternate pathway to classify new devices into
Class I or II that had automatically been placed in Class III after receiving a Not Substantially Equivalent, or NSE, determination in
response to a 510(k) submission. Through this regulatory process, a sponsor who receives an NSE determination may, within 30 days of
receipt, request FDA to make a risk-based classification of the device through what is called a “de novo request.” In 2012,
section 513(f)(2) of the FD&C Act was amended by section 607 of the Food and Drug Administration Safety and Innovation Act (FDASIA),
in order to provide a second option for de novo classification. Under this second pathway, a sponsor who determines that there is no
legally marketed device upon which to base a determination of substantial equivalence can submit a de novo request to FDA without first
submitting a 510(k).
In
the event that Microbot receives a Not Substantially Equivalent determination for either of its device candidates in response to a 510(k)
submission, the Microbot device may still be eligible for the 510(k) de-novo classification process.
Devices
that cannot be cleared through the 510(k) or 510(k) de-novo classification process require the submission of a PMA. The PMA process is
much more time consuming and demanding than the 510(k) notification process. A PMA must be supported by extensive data, including but
not limited to data obtained from preclinical and/or clinical studies and data relating to manufacturing and labeling, to demonstrate
to the FDA’s satisfaction the safety and effectiveness of the device. After a PMA application is submitted, the FDA’s in-depth
review of the information generally takes between one and three years and may take significantly longer. If the FDA does not grant 510(k)
clearance to its products, there is no guarantee that Microbot will submit a PMA or that if Microbot does, that the FDA would grant a
PMA approval of Microbot’s products, either of which would adversely affect Microbot’s business.
Microbot
is currently evaluating whether it is appropriate for it to seek 510(k) clearance, given the technological features of the SCS device
and the FDA’s recent announcements about enhancing the 510(k) process to further ensure safety and efficacy. However, the Company
believes that given the similarities between the SCS and some cleared predicate devices, there is a reasonable likelihood that a de novo
application might be acceptable to the FDA.
Foreign
Regulation
In
addition to regulations in the United States, Microbot will be subject to a variety of foreign regulations governing clinical trials,
marketing authorization and commercial sales and distribution of its products in foreign countries. The approval process varies from
country to country, and the time may be longer or shorter than that required for FDA approval or clearance. The requirements governing
the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
International
sales of medical devices are subject to foreign governmental regulations which vary substantially from country to country. Whether or
not Microbot obtains FDA approval or clearance for its products, Microbot will be required to make new regulatory submissions to the
comparable regulatory authorities of foreign countries before Microbot can commence clinical trials or marketing of the product in such
countries. The time required to obtain certification or approval by a foreign country may be longer or shorter than that required for
FDA clearance or approval, and the requirements may differ. Below are summaries of the regulatory systems for medical devices in Europe
and Israel, where Microbot currently anticipates marketing its products. However, its products may also be marketed in other countries
that have different systems or minimal requirements for medical devices.
Europe.
The primary regulatory body in Europe is the European Union, or E.U., which consists of 27 member states and has a coordinated system
for the authorization of medical devices.
The
E.U. has adopted legislation, in the form of directives to be implemented in each member state, concerning the regulation of medical
devices within the European Union. The directives include, among others, the Medical Device Regulation, or MDR, that establishes certain
requirements with which medical devices must comply before they can be commercialized in the European Economic Area, or EEA (which comprises
the member states of the E.U. plus Norway, Liechtenstein and Iceland). Under the MDR, medical devices are classified into four Classes,
I, IIa, IIb, and III, with Class I being the lowest risk and Class III being the highest risk.
In
order to commercialize medical devices in the European Union, a CE Mark certificate is needed. This certification verifies that a device
meets all regulatory requirements for medical devices, which will soon change under the new Medical Devices Regulation (MDR 2017/745).
The CE approval process in Europe is summarized below:
|
1. |
To
obtain CE Marking certification, comply with European Commission Regulation (EU) No. 2017/745, commonly known as the Medical Device
Regulation (MDR). |
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2. |
Appoint
a Person Responsible for regulatory compliance. Determine classification of device - Class I (self-certified); Class I (sterile,
measuring or reusable surgical instrument); Class IIa, Class IIb, or Class III. |
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3. |
For
all devices except Class I (self-certified), implement a Quality Management System (QMS) in accordance with the MDR. Companies usually
apply the EN ISO 13485 standard to achieve compliance. The QMS must include Clinical Evaluation, Post-Market Surveillance (PMS) and
Post Market Clinical Follow-up (PMCF) plans. Make arrangements with suppliers about unannounced Notified Body audits. For Class I
(self-certified), implement a QMS though Notified Body intervention is not required. |
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4. |
Prepare
a CE Technical File or Design Dossier (Class III) providing information about the device and its intended use plus testing reports,
Clinical Evaluation Report (CER), risk management file, Instruction For Use (IFU), labeling and more. Obtain a Unique Device Identifier
(UDI) for the device. All devices, even legacy products in use for decades, will require clinical data. Most of these data should
refer to the subject device. Clinical studies are generally required for implantable and Class III devices. Existing clinical data
may be acceptable. Clinical trials in Europe must be pre-approved by a European Competent Authority. |
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5. |
If
the company does not have a location in Europe, appoint an Authorized Representative (EC REP) located in the EU who is qualified
to handle regulatory issues. Place the EC REP name and address on device label. Obtain a Single Registration Number from the regulators. |
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6. |
For
all devices except Class I (self-certified), the QMS and Technical File or Design Dossier must be audited by a Notified Body, a third
party accredited by European authorities to audit medical device companies and products. |
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7. |
For
all devices except Class I (self-certified), the company will be issued a European CE Marking Certificate for the device and an ISO
13485 certificate for the company’s facility following successful completion of the Notified Body audit. ISO 13485 certification
must be renewed every year. CE Marking certificates are typically valid for a maximum of 5 years, but are typically reviewed during
the annual surveillance audit. |
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8. |
Prepare
a Declaration of Conformity, a legally binding document prepared by the manufacturer stating that the device is in compliance with
the applicable European requirements. At this time, the CE Marking may be affixed. |
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9. |
Register
the device and its Unique Device Identifier (UDI) in the EUDAMED database. UDI must be on label and associated with the regulatory
documents. |
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10. |
For
Class I (self-certified), annual NB audits are not required. However, CER, Technical File, and PMS activities must be kept updated.
For all other classes, the company will be audited each year by a Notified Body to ensure ongoing compliance with the MDR. Failure
to pass the audit will invalidate the CE Marking certificate. The company must perform Clinical Evaluation, PMS, and PMCF. |
Microbot
intends to apply for the CE Mark for each of its medical device products. There is no guarantee that Microbot will be granted a CE Mark
for all or any of its pipeline products and failure to obtain the CE Mark would adversely affect its ability to grow its business.
Israel.
Israel’s Medical Devices Law generally requires the registration of all medical products with the Ministry of Health, or MOH, Registrar
as a precondition for production and distribution in Israel. Special exemptions may apply under limited circumstances and for purposes
such as the provision of essential medical treatment, research and development of the medical device, and personal use, among others.
Registration
of medical devices requires the submission of an application to the Ministry of Health Medical Institutions and Devices Licensing Department,
or AMAR. An application for the registration of a medical device includes the following:
|
● |
Name
and address of the manufacturer, and of the importer as applicable; |
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|
● |
Description
of the intended use of the medical device and of its medical indications; |
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● |
Technical
details of the medical device and of its components, and in the event that the device or the components are not new, information
should be provided on the date or renovation; |
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● |
Certificate
attesting to the safety of the device, issued by a competent authority of one of the following countries: Australia, Canada, European
Community (EC), Member States (MSs), Israel, Japan, or the United States; |
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● |
Information
on any risk which may be associated with the use of the device (including precautionary measures to be taken); |
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|
● |
Instructions
for use of the device in Hebrew; the MOH may allow the instructions to be in English for certain devices; |
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● |
Details
of the standards to which the device complies; |
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|
● |
Description
of the technical and maintenance services, including periodic checks and inspections; and |
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|
● |
Declaration,
as appropriate: of the local manufacturer/importer, and of the foreign manufacturer. |
If
the application includes a certificate issued by a competent authority of one of the following “recognized” countries: Australia,
Canada, European Community (CE) Member States (MSs), Japan, or the United States, the registration process is generally expedited, but
could still take 6-9 months for approval. If such certificate is not available, the registration process will take significantly longer
and a license is rarely issued. Furthermore, the MOH will determine what type of testing is needed. In general, in the case of Israeli
manufactured devices that are not registered or authorized in any “recognized” country, the application requires presentation
of a risk analysis, a clinical evaluation, a summary of the clinical trials, and expert opinions regarding the device’s safety
and effectiveness. Additional requirements may apply during the registration period, including follow-up reviews, to improve the quality
and safety of the devices.
According
to regulations issued by Israel’s Minister of Health in June 2013, a decision on a request to register a medical device must be
delivered by AMAR within 120 days from the date of the request, although this rarely occurs. The current rules for the registration of
medical devices do not provide for an expedited approval process.
Once
granted by the MOH, a license (marketing authorization) for a medical device is valid for five years from the date of registration of
the device, except for implants with a life-supporting function, for which the validity is for only two years from the date of registration.
Furthermore, the holder of the license, the Israeli Registration Holder, or IRH, must do the following to maintain its license:
|
● |
Reside
and maintain a place of business in Israel and serve as the regulatory representative. |
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|
● |
Respond
to questions from AMAR concerning the registered products. |
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|
● |
Report
adverse events to AMAR. |
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|
● |
Renew
the registration on time to keep the market approval active. |
Comply
with post-marketing requirements, including reporting of adverse and unexpected events occurring in Israel or in other countries where
the device is in use.
Getting
a device listed on Israel’s four major Sick Funds (health insurance entities) is also necessary in order for Israeli hospitals
and health care providers to order such products.
Microbot
intends to apply for a license from the MOH for each of its medical devices. There is no guarantee that Microbot will be granted licenses
for its pipeline products and failure to obtain such licenses would adversely affect its ability to grow its business.
Employees
Microbot’s
Chief Executive Officer, President and Chairman, Harel Gadot, along with 3 full-time employees, are based in Microbot’s U.S. office
located in Hingham, Massachusetts. Additionally, Microbot currently has 17 full-time employees based in its office located in Yokneam,
Israel. These employees oversee day-to-day operations of the Company supporting management and leading engineering, manufacturing, intellectual
property and administration functions of the Company. As required, Microbot also engages consultants to provide services to the Company,
including regulatory, legal and corporate services. We are subject to labor laws and regulations within our locations in the U.S. and
Israel. These laws and regulations principally concern matters such as pensions, paid annual vacation, paid sick days, length of the
workday and work week, minimum wages, overtime pay, insurance for work-related accidents, severance pay and other conditions of employment.
Microbot has no unionized employees.
Item
1A. Risk Factors
This
Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties. Our business, operating results,
financial performance, and share price may be materially adversely affected by a number of factors, including but not limited to the
following risk factors, any one of which could cause actual results to vary materially from anticipated results or from those expressed
in any forward-looking statements made by us in this Annual Report on Form 10-K or in other reports, press releases or other statements
issued from time to time. Additional factors that may cause such a difference are set forth elsewhere in this Annual Report on Form 10-K.
Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking
statements.
Risks
Relating to Microbot’s Financial Position and Need for Additional Capital
Microbot
has had no revenue and has incurred significant operating losses since inception and is expected to continue to incur significant operating
losses for the foreseeable future. The Company may never become profitable or, if achieved, be able to sustain profitability.
Microbot
has incurred significant operating losses since its inception and expects to incur significant losses for the foreseeable future as Microbot
continues its preclinical and clinical development programs for its existing product candidates, primarily the SCS and LIBERTY devices;
its research and development of any other future product candidates; and all other work necessary to obtain regulatory clearances or
approvals for its product candidates in the United States and other markets. In the future, Microbot intends to continue conducting micro-robotics
research and development; performing necessary animal and clinical testing; working towards medical device regulatory compliance; and,
if SCS, LIBERTY or other future product candidates are approved or cleared for commercial distribution, engaging in appropriate sales
and marketing activities that, together with anticipated general and administrative expenses, will likely result in Microbot incurring
further significant losses for the foreseeable future.
Microbot
is a development-stage medical device company and currently generates no revenue from product sales, and may never be able to commercialize
SCS, LIBERTY, TipCAT or other future product candidates. Microbot does not currently have the required approvals or clearances to market
or test in humans the SCS, LIBERTY, TipCAT, or any other future product candidates and Microbot may never receive them. Microbot does
not anticipate generating significant revenues until it can successfully develop, commercialize and sell products derived from its product
pipeline, of which Microbot can give no assurance. Even if Microbot or any of its future development partners succeed in commercializing
any of its product candidates, Microbot may never generate revenues significant enough to achieve profitability.
Because
of the numerous risks and uncertainties associated with its product development pipeline and strategy, Microbot cannot accurately predict
when it will achieve profitability, if ever. Failure to become and remain profitable would depress the value of the Company and could
impair its ability to raise capital, which may force the Company to curtail or discontinue its research and development programs and/or
day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained on an ongoing basis.
Microbot
has a limited operating history, which may make it difficult to evaluate the prospects for the Company’s future viability.
Microbot
has a limited operating history upon which an evaluation of its business plan or performance and prospects can be made. The business
and prospects of Microbot must be considered in the light of the potential problems, delays, uncertainties and complications that may
be encountered in connection with a newly established business. The risks include, but are not limited to, the possibility that Microbot
will not be able to develop functional and scalable products, or that although functional and scalable, its products will not be economical
to market; that its competitors hold proprietary rights that may preclude Microbot from marketing such products; that its competitors
market a superior or equivalent product; that Microbot is not able to upgrade and enhance its technologies and products to accommodate
new features and expanded service offerings; or the failure to receive necessary regulatory clearances or approvals for its products.
To successfully introduce and market its products at a profit, Microbot must establish brand name recognition and competitive advantages
for its products. There are no assurances that Microbot can successfully address these challenges. If it is unsuccessful, Microbot and
its business, financial condition and operating results could be materially and adversely affected.
Microbot’s
operations to date have been limited to organizing the company, entering into licensing arrangements to initially obtain rights to its
technologies, developing and securing its technologies, raising capital, developing regulatory and reimbursement strategies for its product
candidates and preparing for pre-clinical and clinical trials of the SCS, LIBERTY and TipCAT. Microbot has not yet demonstrated its ability
to successfully complete development of any product candidate, obtain marketing clearance or approval, manufacture a commercial-scale
product or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product
commercialization. Consequently, any predictions made about Microbot’s future success or viability may not be as accurate as they
could be if Microbot had a longer operating history.
Microbot
may need additional funding. If Microbot is unable to raise capital when needed, it could be forced to delay, reduce or eliminate its
product development programs or commercialization efforts.
To
date, Microbot has funded its operations primarily through offerings of debt and equity securities, grants and loans. Microbot does not
know when, or if, it will generate any revenue, but does not expect to generate significant revenue unless and until it obtains regulatory
clearance or approval of and commercializes one of its current or future product candidates. It is anticipated that the Company will
continue to incur losses for the foreseeable future, and that losses will increase as it continues the development of, and seeks regulatory
review of, its product candidates, and begins to commercialize any approved or cleared products following a successful regulatory review.
Microbot
expects the research and development expenses of the Company to increase substantially in future periods as it conducts pre-clinical
studies in large animals and potentially clinical trials for its product candidates, and especially if it initiates additional research
programs for future product candidates, including LIBERTY. In addition, if the Company obtains marketing clearance or approval for any
of its product candidates, it expects to incur significant commercialization expenses related to product manufacturing, marketing and
sales. Microbot may also require additional funds for operations if it loses its current lawsuit with Empery and Hudson Bay, discussed
in great detail elsewhere in this Annual Report on Form 10-K. Furthermore, Microbot incurs substantial costs associated with operating
as a public company in the United States. Accordingly, the Company may need to obtain substantial additional funding in connection with
its continuing operations through its projected profitability, of which it can give no assurance of success. If the Company is unable
to raise capital when needed or on attractive terms, it could be forced to delay, reduce or eliminate its research and development programs
or any future commercialization efforts.
The
Company intends to continue to opportunistically strengthen its balance sheet by raising additional funds through equity offerings, including
possibly through its existing At-the-Market offering, or otherwise in order to meet expected future liquidity needs, including the introduction
of the SCS device into the hydrocephalus and NPH market, and the introduction of LIBERTY. The Company’s future capital requirements,
generally, will depend on many factors, including:
|
● |
the
timing and outcomes of the product candidates’ regulatory reviews, subsequent approvals or clearances, or other regulatory
actions; |
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|
● |
the
final outcome of the Company’s existing lawsuit with Empery and Hudson Bay; |
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|
● |
the
costs, design, duration and any potential delays of the clinical trials that could be conducted at the FDA’s request using
Microbot’s product candidates; |
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● |
the
costs of acquiring, licensing or investing in new and existing businesses, product candidates and technologies; |
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● |
the
costs to maintain, expand and defend the scope of Microbot’s intellectual property portfolio; |
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● |
the
costs to secure or establish sales, marketing and commercial manufacturing capabilities or arrangements with third parties regarding
same; |
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● |
the
Company’s need and ability to hire additional management and scientific and medical personnel; and |
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● |
the
costs to operate as a public company in the United States. |
An
epidemic of the coronavirus disease is ongoing and may result in significant disruptions to our clinical trials or other business operations,
which could have a material adverse effect on our business.
An
epidemic of the coronavirus disease is ongoing throughout the world. Although we have not yet commenced clinical trials, in the event
the pandemic is continuing when we are prepared to commence such trials, the coronavirus disease may cause significant delays and disruptions
to our clinical trials and our interactions with the FDA. If the patients involved with any such clinical trials become infected with
the coronavirus disease, we may have more AEs and deaths in our clinical trials as a result. We may also face difficulties enrolling
patients in our clinical trials if the patient populations that are eligible for our clinical trials are impacted by the coronavirus
disease. Additionally, if our clinical trial patients are unable to travel to our clinical trial sites as a result of quarantines or
other restrictions resulting from the coronavirus disease, we may experience higher drop-out rates or delays in our clinical trials,
and some patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare
services, which could impact our ability to determine the efficacy or safety of our SCS or LIBERTY device. Site initiation and patient
enrollment may also be delayed due to prioritization of hospital resources toward the coronavirus disease outbreak.
Additionally,
travel restrictions and expanded screenings have been implemented worldwide in an effort to contain the coronavirus disease. As such,
we and our contract research organizations may be unable to visit our trial sites and monitor the data from our trials on timely basis.
Our employees may also face travel restrictions, which would impact our business. Furthermore, some of our manufacturers and suppliers
are in Europe and may be impacted by port closures and other restrictions resulting from the coronavirus outbreak, which may disrupt
our supply chain or limit our ability to obtain sufficient materials for our products.
The
ultimate impact of the coronavirus disease outbreak or a similar health epidemic is highly uncertain and subject to change, and we cannot
presently predict the scope and severity of any further potential business shutdowns or disruptions, but if we or any of the third parties
with whom we engage, including the suppliers, clinical trial sites, contract research organizations, regulators, including the FDA health
care providers and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our
ability to conduct our business and operations could be materially and negatively impacted, which could prevent or delay us from obtaining
approval for our SCS and LIBERTY devices.
Risks
Relating to the Development and Commercialization of Microbot’s Product Candidates
Unsuccessful
animal studies, clinical trials or procedures relating to product candidates under development could have a material adverse effect on
Microbot’s prospects.
The
regulatory approval process for new products and new indications for existing products requires extensive data and procedures, including
the development of regulatory and quality standards and, potentially, certain clinical studies. Unfavorable or inconsistent data from
current or future clinical trials or other studies conducted by Microbot or third parties, or perceptions regarding such data, could
adversely affect Microbot’s ability to obtain necessary device clearance or approval and the market’s view of Microbot’s
future prospects. Specifically, the interim data of our animal trial with respect to the SCS device suggests that the animal trial results
are inconclusive to assess safety. As a result, we have submitted the existing data to the FDA as part of a pre-submission meeting and
we intend to apply for a limited clinical investigation of the device known as an Early Feasibility Study (EFS).
Failure
to successfully complete these studies, or any similar studies with respect to any of our other product candidates, in a timely and cost-effective
manner could have a material adverse effect on Microbot’s prospects with respect to the SCS device or such other product candidates.
Because animal trials, clinical trials and other types of scientific studies are inherently uncertain, there can be no assurance that
these trials or studies will be completed in a timely or cost-effective manner or result in a commercially viable product. Clinical trials
or studies may experience significant setbacks even if earlier preclinical or animal studies have shown promising results. Furthermore,
preliminary results from clinical trials may be contradicted by subsequent clinical analysis. Results from clinical trials may also not
be supported by actual long-term studies or clinical experience. If preliminary clinical results are later contradicted, or if initial
results cannot be supported by actual long-term studies or clinical experience, Microbot’s business could be adversely affected.
Clinical trials also may be suspended or terminated by us, the FDA or other regulatory authorities at any time if it is believed that
the trial participants face unacceptable health risks. The FDA may disagree with our interpretation of the data from our clinical trials,
or may find the clinical trial design, conduct or results inadequate to demonstrate safety and effectiveness of the product candidate.
The FDA may also require additional pre-clinical studies or clinical trials which could further delay approval of our product candidates.
Microbot’s
business depends heavily on the success of its lead product candidates, the SCS and LIBERTY. If Microbot is unable to commercialize the
SCS or LIBERTY, or experiences significant delays in doing so, Microbot’s business will be materially harmed.
As
stated above, we applied for an EFS for the SCS device and the FDA agreed that the SCS is suitable to apply for the submission of the
IDE for the EFS program. After completing the EFS, we would then seek FDA input on the device design as finalized through the EFS process
in a subsequent IDE filing for approval of a clinical study proposal. Consequently, the timeline for the submission of the IDE for First-In-Human
clinical trials under the EFS is expected to commence in the first quarter of 2023.
Generally,
after all necessary clinical and performance data supporting the safety and effectiveness of the SCS or LIBERTY devices, or any other
product candidate, are collected, Microbot must still obtain FDA clearance or approval to market the device and those regulatory processes
can take several months to several years to be completed. Therefore, Microbot’s ability to generate product revenues will not occur
for at least the next few years, if at all, and will depend heavily on the successful commercialization of SCS device and/or the LIBERTY
device, or any of our other product candidates from time to time. The success of commercializing any of our product candidates, include
the SCS and LIBERTY devices, will depend on a number of factors, including the following:
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● |
our
ability to obtain additional capital; |
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● |
With
respect to the SCS device, approval of the FDA to participate in an EFS program and/or successful completion of animal studies and,
if necessary, additional human clinical trials (beyond the EFS trials) and the collection of sufficient data to demonstrate that
the device is safe and effective for its intended use; |
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● |
With
respect to all of our product candidates, successful completion of animal studies and, if necessary, human clinical trials and the
collection of sufficient data to demonstrate that the device is safe and effective for its intended use; |
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● |
receipt
of marketing approvals or clearances from the FDA and other applicable regulatory authorities; |
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● |
establishing
commercial manufacturing arrangements with one or more third parties; |
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● |
obtaining
and maintaining patent and trade secret protections; |
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● |
protecting
Microbot’s rights in its intellectual property portfolio; |
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● |
establishing
sales, marketing and distribution capabilities; |
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● |
generating
commercial sales, if and when approved, whether alone or in collaboration with other entities; |
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● |
acceptance
of our product candidates, if and when commercially launched, by the medical community, patients and third-party payors; |
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● |
effectively
competing with existing and competitive products on the market and any new competing products that may enter the market; and |
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● |
maintaining
quality and an acceptable safety profile of our products following clearance or approval. |
If
Microbot does not achieve one or more of these factors in a timely manner or at all, it could experience significant delays or an inability
to successfully commercialize the SCS, LIBERTY or any other product candidate, which would materially harm its business.
Microbot’s
ability to expand its technology platforms for other uses, including endovascular neurosurgery other than for the treatment of hydrocephalus,
may be limited.
After
spending time working with experts in the field, Microbot has decided to no longer pursue the use of TipCAT in colonoscopy and has instead
committed to focus on expanding all of its technology platforms for use in segments of the endovascular neurosurgery market, including
traumatic brain injury, to capitalize on its existing competencies in hydrocephalus and the market’s needs. Microbot’s ability
to expand its technology platforms for use in the endovascular neurosurgery market will be limited by its ability to develop and/or refine
the necessary technology, obtain the necessary regulatory approvals for their use on humans, and the marketing of its products and otherwise
obtaining market acceptance of its product in the United States and in other countries.
At
this time, Microbot does not know whether the FDA will require it to submit clinical data in support of its future marketing applications
for its SCS product candidate, particularly in light of recent initiatives by the FDA to enhance and modernize its approach to medical
device safety and innovation, which creates uncertainty for Microbot as well as the possibility of increased product development costs
and time to market.
Although
Microbot has identified a predicate device for its lead product candidate, the SCS, which it intended to use in its 510(k) application,
it may determine that a 510(k) de novo application is more appropriate for the SCS. If the Company determines to proceed with the 510(k)
application and the FDA agrees with the Company’s determination, the SCS will be classified by the FDA as Class II and eligible
for marketing pursuant to FDA clearance through the 510(k) application. However, in light of recent initiatives by the FDA relating to
safety, efficacy and the inconclusive results of the animal and laboratory trial, there is no guarantee that the FDA will agree with
the Company’s determination or that the FDA would accept the predicate device that Microbot intends to submit in its 510(k). The
FDA also may request additional data in response to a 510(k), or require Microbot to conduct further testing or compile more data in
support of its 510(k). Such additional data could include clinical data that must be derived from human clinical studies that are designed
appropriately to address the potential questions from the FDA regarding a proposed product’s safety or effectiveness. It is unclear
at this time whether and how various activities recently initiated or announced by the FDA to modernize the U.S. medical device regulatory
system could affect the marketing pathway or timeline for our product candidate, given the timing and the undeveloped nature of some
of the FDA’s new medical device safety and innovation initiatives. One of the recent initiatives was announced in April 2018, when
the FDA Commissioner issued a statement with the release of a Medical Device Safety Action Plan. Among other key areas of the Medical
Device Safety Action Plan, the Commissioner stated that the FDA is “exploring what further actions we can take to spur innovation
towards technologies that can make devices and their use safer. For instance, our Breakthrough Device Program that helps address unmet
medical needs can be used to facilitate patient access to innovative new devices that have important improvements to patient safety.
We’re considering developing a similar program to support the development of safer devices that do not otherwise meet the Breakthrough
Program criteria, but are clearly intended to be safer than currently available technologies.” This type of program may negatively
affect our existing development plan for the SCS or any other product candidate or it may benefit Microbot, but at this time those potential
impacts from recent FDA medical device initiatives are unknown and uncertain. Similarly, the FDA Commissioner announced various agency
goals under a Medical Innovation Access Plan in 2017.
If
the FDA does require clinical data to be submitted as part of the SCS marketing submission, any type of clinical study performed in humans
will require the investment of substantial expense, professional resources and time. In order to conduct a clinical investigation involving
human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, a company must, among other things,
apply for and obtain Institutional Review Board, or IRB, approval of the proposed investigation. In addition, if the clinical study involves
a “significant risk” (as defined by the FDA) to human health, the sponsor of the investigation must also submit and obtain
FDA approval of an Investigational Device Exemption, or IDE, application. Microbot may not be able to obtain FDA and/or IRB approval
to undertake clinical trials in the United States for any new devices Microbot intends to market in the United States in the future.
Moreover, the timing of the commencement, continuation and completion of any future clinical trial may be subject to significant delays
attributable to various causes, including scheduling conflicts with participating clinicians and clinical institutions, difficulties
in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delay
in or failure to obtain IRB approval to conduct a clinical trial at a prospective site, and shortages of supply in the investigational
device.
Thus,
the addition of one or more mandatory clinical trials to the development timeline for the SCS, LIBERTY or any other product candidate
would significantly increase the costs associated with developing and commercializing the product and delay the timing of U.S. regulatory
authorization. The current uncertainty regarding near-term medical device regulatory changes by the FDA could further affect our development
plans for the SCS, LIBERTY or any other product candidate, depending on their nature, scope and applicability. Microbot and its business,
financial condition and operating results could be materially and adversely affected as a result of any such costs, delays or uncertainty.
The
FDA may disagree with Microbot’s determination that the SCS is a Class II device or that the chosen predicate device (or any predicate
device) is appropriate for a substantial equivalence comparison to the SCS.
Although
the Company intended to submit a 501(k) application for the SCS, the Company is now considering that the FDA may determine that the SCS
is a Class III device because there is no appropriate predicate device for substantial equivalence comparison, which would require Microbot
to submit a De Novo classification request or an application for premarket approval (“PMA”). Both De Novo requests and PMA
applications require applicants to prepare information and data about device safety and efficacy in addition to the 510(k) requirements,
including a benefit-risk analysis, a discussion of proposed general and special controls to eliminate or mitigate device risks, and additional
testing data. PMA applications almost always require data from human clinical studies, and while De Novo requests do not require human
clinical study data, in most cases, such data is necessary to demonstrate that the FDA can appropriately classify the device as Class
II.
Any
type of clinical study performed in humans (including the EFS) will require the investment of substantial expense, professional resources
and time. In order to conduct a clinical investigation involving human subjects for the purpose of demonstrating the safety and effectiveness
of a medical device, a company must, among other things, apply for and obtain Institutional Review Board, or IRB, approval of the proposed
investigation. In addition, if the clinical study involves a “significant risk” (as defined by the FDA) to human health,
the sponsor of the investigation must also submit and obtain FDA approval of an Investigational Device Exemption, or IDE, application.
Microbot may not be able to obtain FDA and/or IRB approval to undertake clinical trials in the United States for any new devices Microbot
intends to market in the United States in the future. Moreover, the timing of the commencement, continuation and completion of any future
clinical trial may be subject to significant delays attributable to various causes, including scheduling conflicts with participating
clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure
of patients to complete the clinical trial, delay in or failure to obtain IRB approval to conduct a clinical trial at a prospective site,
and shortages of supply in the investigational device. Thus, the addition of one or more mandatory clinical trials to the development
timeline for the SCS would significantly increase the costs associated with developing and commercializing the product and delay the
timing of U.S. regulatory authorization.
Furthermore,
if Microbot is required to submit a De Novo request or PMA application instead of a 510(k), the FDA review process may take significantly
more time. While the FDA commits to reviewing 510(k)s in 90 days, the review period for De Novo requests and PMA applications is 150
days and 180 days, respectively. After an initial review of our De Novo request or PMA application, the FDA may request additional information
or data which can significantly delay an ultimate decision on our submission.
Thus,
submitting a De Novo request or PMA application for the SCS would significantly increase the costs associated with developing and commercializing
the product and delay the timing of U.S. regulatory authorization. Microbot and its business, financial condition and operating results
could be materially and adversely affected as a result of any such costs or delays.
Microbot’s
CardioSert technology is subject to a buy-back clause which, if triggered, could cause us to lose rights to the technology and delay
or curtail the development of our products.
Pursuant
to the Agreement we entered into in January 2018 to acquire the CardioSert technology, we are required to meet certain commercialization
deadlines or CardioSert may terminate the agreement and buy back the technology for $1.00, subject to certain limited exceptions. The
next such commercialization deadline is in 2022. At this time, we can give no assurance that we will meet the commercialization deadlines.
Failure
to meet the applicable commercialization deadlines and any resulting sale back of the technology to CardioSert could materially adversely
affect our ability to develop and commercialize, or materially delay the development and commercialization of, our planned LIBERTY device.
Microbot
has no prior experience in conducting clinical trials and will depend upon the ability of third parties, including contract research
organizations, collaborative academic groups, future clinical trial sites and investigators, to conduct or to assist the Company in conducting
clinical trials for its product candidates, if such trials become necessary.
As
a development-stage, pre-clinical company, Microbot has no prior experience in designing, initiating, conducting and monitoring human
clinical trials. Microbot will depend upon its ability and/or the ability of future collaborators, contract research organizations, clinical
trial sites and investigators to successfully design, initiate, conduct and monitor such clinical trials.
Failure
by Microbot or by any of these future collaborating parties to timely and effectively initiate, conduct and monitor a future clinical
trial could significantly delay or materially impair Microbot’s ability to complete those clinical trials and/or obtain regulatory
clearance or approval of its product candidates and, consequently, could delay or materially impair its ability to generate revenues
from the commercialization of those products.
If
the commercial opportunity for SCS, LIBERTY and any other commercial products that may be developed by Microbot is smaller than Microbot
anticipates, Microbot’s future revenue from SCS, LIBERTY and such other products will be adversely affected and Microbot’s
business will suffer.
If
the size of the commercial opportunities in any of Microbot’s target markets is smaller than it anticipates, Microbot may not be
able to achieve profitability and growth. For instance, Microbot is developing SCS as a device for the treatment of hydrocephalus and
NPH. It is difficult to predict the penetration, future growth rate or size of the market for Microbot’s product candidate.
The
commercial success of the SCS, LIBERTY or any other product candidates will require broad acceptance of the devices by the doctors and
other medical professionals who specialize in the procedures targeted by each device, a limited number of whom may be able to influence
device selection and purchasing decisions. If Microbot’s technologies are not broadly accepted and perceived as having significant
advantages over existing medical devices, then it will not meet its business objectives. Such perceptions are likely to be based on a
determination by medical facilities and physicians that Microbot’s product candidates are safe and effective, are cost-effective
in comparison to existing devices, and represent acceptable methods of treatment. Microbot cannot assure that it will be able to establish
the relationships and arrangements with medical facilities and physicians necessary to support the market uptake of its product candidates.
In addition, its competitors may develop new technologies for the same markets Microbot is targeting that are more attractive to medical
facilities and physicians. If doctors and other medical professionals do not consider Microbot product candidates to be suitable for
application in the procedures we are targeting and an improvement over the use of existing or competing products, Microbot’s business
goals will not be realized.
Customers
will be unlikely to buy the SCS, LIBERTY or any other product candidates unless Microbot can demonstrate that they can be produced for
sale to consumers at attractive prices.
To
date, Microbot has focused primarily on research and development of the first generation versions of the SCS, as well as initial development
of the LIBERTY device. Consequently, Microbot has no experience in manufacturing its product candidates, and intends to manufacture its
product candidates through third-party manufacturers. Microbot can offer no assurance that either it or its manufacturing partners will
develop efficient, automated, low-cost manufacturing capabilities and processes to meet the quality, price, engineering, design and production
standards or production volumes required to successfully mass produce its commercial products. Even if its manufacturing partners are
successful in developing such manufacturing capability and quality processes, including the assurance of GMP-compliant device manufacturing,
there can be no assurance that Microbot can timely meet its product commercialization schedule or the production and delivery requirements
of potential customers. A failure to develop such manufacturing processes and capabilities could have a material adverse effect on Microbot’s
business and financial results.
The
proposed price of Microbot’s product candidates, once approved for sale, will be dependent on material and other manufacturing
costs. Microbot cannot offer any assurances that its manufacturing partner will be able manufacture its product candidates at a competitive
price or that achieving cost reductions will not cause a reduction in the performance, reliability and longevity of its product candidates.
Microbot
will rely on third party design houses for the redesign of the CardioSert guidewire to other specific indications.
Since
the CardioSert Guidewire was originally designed for treating chronic total occlusions, the design will need to be modified to treat
other indications. As we do not specialize in the design of guidewires and microcatheters, Microbot is currently working with two leading
third party design houses that specialize in this type of design. Such designs may require several design and regulatory iterations prolonging
the product release and certification, which could delay the commercialization of our planned LIBERTY device.
Microbot
has relied on, and intends to continue to rely on, third-party manufacturers to produce its product candidates.
Microbot
currently relies, and expects to rely for the foreseeable future, on third-party manufacturers to produce and supply its product candidates,
and it expects to rely on third parties to manufacture the commercialized products as well, should they receive the necessary regulatory
clearance or approval. Reliance on third-party manufacturers entails risks to which Microbot would not be subject if Microbot manufactured
its product candidates or future commercial products itself, including:
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possible breach of manufacturing agreements by third parties because of various factors beyond Microbot’s control; and |
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possible termination or non-renewal of manufacturing agreements by third parties for various reasons beyond Microbot’s control,
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If
Microbot is not able to maintain its key manufacturing relationships, Microbot may fail to find replacement manufacturers or develop
its own manufacturing capabilities, which could delay or impair Microbot’s ability to obtain regulatory clearance or approval for
its product candidates and could substantially increase its costs or deplete profit margins, if any. If Microbot does find replacement
manufacturers, Microbot may not be able to enter into agreements with them on terms and conditions favorable to it and there could be
a substantial delay before new facilities could be qualified and registered with the FDA and other foreign regulatory authorities.
Additionally,
the existing design of the CardioSert device was produced in very low quantities by the seller of the technology. Accordingly, the scaling-up
to high volume production may require significant changes to the existing design and production methods. These changes are currently
being carried out by two leading third party companies that specialize in design and high volume production of guidewires and microcatheters.
These design changes/modifications may have significant negative implications in price and time to market of the CardioSert system.
If
Microbot’s product candidates are not considered to be a safe and effective alternative to existing technologies, Microbot will
not be commercially successful.
The
SCS, LIBERTY and TipCAT rely on new technologies, and Microbot’s success will depend on acceptance of these technologies by the
medical community as safe, clinically effective, cost effective and a preferred device as compared to products of its competitors. Microbot
does not have long-term data regarding efficacy, safety and clinical outcomes associated with the use of SCS, LIBERTY or TipCAT. Any
data that is generated in the future may not be positive or may not support the product candidates’ regulatory dossiers, which
would negatively affect market acceptance and the rate at which its product candidates are adopted. Equally important will be physicians’
perceptions of the safety of Microbot’s product candidates because Microbot’s technologies are relatively new. If, over the
long term, Microbot’s product candidates do not meet surgeons’ expectations as to safety, efficacy and ease of use, they
may not become widely adopted.
Market
acceptance of Microbot’s product candidates will also be affected by other factors, including Microbot’s ability to convince
key opinion leaders to provide recommendations regarding its product candidates; convince distributors that its technologies are attractive
alternatives to existing and competing technologies; supply and service sufficient quantities of products directly or through marketing
alliances; and price products competitively in light of the current macroeconomic environment, which is becoming increasingly price sensitive.
Microbot
may be subject to penalties and may be precluded from marketing its product candidates if Microbot fails to comply with extensive governmental
regulations.
Microbot
believes that its medical device product candidates will be categorized as Class II devices, which typically require a 510(k) or 510(k)
de-novo premarket submission to the FDA. However, the FDA has not made any determination about whether Microbot’s medical product
candidates are Class II medical devices and may disagree with that classification. If the FDA determines that Microbot’s product
candidates should be reclassified as Class III medical devices, Microbot could be precluded from marketing the devices for clinical use
within the United States for months, years or longer, depending on the specifics of the change in classification. Reclassification of
any of Microbot’s product candidates as Class III medical devices could significantly increase Microbot’s regulatory costs,
including the timing and expense associated with required clinical trials and other costs.
The
FDA and non-U.S. regulatory authorities require that Microbot product candidates be manufactured according to rigorous standards. These
regulatory requirements significantly increase Microbot’s production costs, which may prevent Microbot from offering products within
the price range and in quantities necessary to meet market demands. If Microbot or one of its third-party manufacturers changes an approved
manufacturing process, the FDA may need to review the process before it may be used. Failure to comply with applicable pre-market and
post-market regulatory requirements could subject Microbot to enforcement actions, including warning letters, fines, injunctions and
civil penalties, recall or seizure of its products, operating restrictions, partial suspension or total shutdown of its production, and
criminal prosecution.
If
Microbot is not able to both obtain and maintain adequate levels of third-party reimbursement for procedures involving its product candidates
after they are approved for marketing and launched commercially, it would have a material adverse effect on Microbot’s business.
Healthcare
providers and related facilities are generally reimbursed for their services through payment systems managed by various governmental
agencies worldwide, private insurance companies, and managed care organizations. The manner and level of reimbursement in any given case
may depend on the site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available budget, or
a combination of these factors, and coverage and payment levels are determined at each payor’s discretion. The coverage policies
and reimbursement levels of these third-party payors may impact the decisions of healthcare providers and facilities regarding which
medical products they purchase and the prices they are willing to pay for those products. Microbot cannot assure you that its sales will
not be impeded and its business harmed if third-party payors fail to provide reimbursement for Microbot products that healthcare providers
view as adequate.
In
the United States, Microbot expects that its product candidates, once approved, will be purchased primarily by medical institutions,
which then bill various third-party payors, such as the Centers for Medicare & Medicaid Services, or CMS, which administers the Medicare
program through Medicare Administrative Contractors, and other government health care programs and private insurance plans, for the healthcare
products and services provided to their patients. The process involved in applying for coverage and incremental reimbursement from CMS
is lengthy and expensive. Moreover, many private payors look to CMS in setting their reimbursement policies and amounts. If CMS or other
agencies limit coverage for procedures utilizing Microbot’s products or decrease or limit reimbursement payments for doctors and
hospitals utilizing Microbot’s products, this may affect coverage and reimbursement determinations by many private payors.
If
a procedure involving a medical device is not reimbursed separately by a government or private insurer, then a medical institution would
have to absorb the cost of Microbot’s products as part of the cost of the procedure in which the products are used. At this time,
Microbot does not know the extent to which medical institutions would consider insurers’ payment levels adequate to cover the cost
of its products. Failure by hospitals and surgeons to receive an amount that they consider to be adequate reimbursement for procedures
in which Microbot products are used could deter them from purchasing Microbot products and limit sales growth for those products.
Microbot
has no control over payor decision-making with respect to coverage and payment levels for its medical device product candidates, once
they are approved. Additionally, Microbot expects many payors to continue to explore cost-containment strategies (e.g., comparative and
cost-effectiveness analyses, so-called “pay-for-performance” programs implemented by various public government health care
programs and private third-party payors, and expansion of payment bundling initiatives, and other such methods that shift medical cost
risk to providers) that may potentially impact coverage and/or payment levels for Microbot’s current product candidates or products
Microbot develops in the future.
As
Microbot’s product offerings are used across diverse healthcare settings, they will be affected to varying degrees by the different
payment systems.
Clinical
outcome studies for the SCS and LIBERTY may not provide sufficient data to make such product candidates the standard of care.
Microbot’s
business plan with respect to the SCS and LIBERTY relies on the broad adoption by surgeons of the products for their respective planned
applications. For instance, although Microbot believes the occurrence of shunt occlusion complications is well known among physicians
practicing in the relevant medical fields, SCS may be adopted for replacement shunt surgeries only. Neurosurgeons may adopt SCS for primary
shunt placement procedures only upon additional clinical studies with longer follow up periods, if at all. It may also be necessary to
provide outcome studies on the preventative capabilities of the SCS in order to convince the medical community of its safety and efficacy.
Clinical
studies may not show an advantage in SCS or LIBERTY based procedures in a timely manner, or at all, and outcome studies have not been
designed at this time, and may be too large and too costly for Microbot to conduct. Both situations could prevent broad adoption of the
SCS and LIBERTY and materially impact Microbot’s business.
Microbot
products may in the future be subject to mandatory product recalls that could harm its reputation, business and financial results.
The
FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of
material deficiencies or defects in design or manufacture that could pose a risk of injury to patients. In the case of the FDA, the authority
to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury
or death, although in most cases this mandatory recall authority is not used because manufacturers typically initiate a voluntary recall
when a device violation is discovered. In addition, foreign governmental bodies have the authority to require the recall of Microbot
products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall
a product if any material deficiency in a device is found. A government-mandated or voluntary recall by Microbot or one of its distributors
could occur as a result of component failures, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls
of any Microbot products would divert managerial and financial resources and have an adverse effect on Microbot’s financial condition
and results of operations, and any future recall announcements could harm Microbot’s reputation with customers and negatively affect
its sales. In addition, the FDA could take enforcement action, including any of the following sanctions for failing to timely report
a recall to the FDA:
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If
Microbot’s future commercialized products cause or contribute to a death or a serious injury, Microbot will be subject to Medical
Device Reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.
Under
FDA regulations, Microbot will be required to report to the FDA any incident in which a marketed medical device product may have caused
or contributed to a death or serious injury or in which a medical device malfunctioned and, if the malfunction were to recur, would likely
cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in European Union markets are
legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the relevant authority
in whose jurisdiction the incident occurred.
Microbot
anticipates that in the future it is likely that we may experience events that would require reporting to the FDA pursuant to the Medical
Device Reporting (MDR) regulations. Any adverse event involving a Microbot product could result in future voluntary corrective actions,
such as product actions or customer notifications, or agency actions, such as inspection, mandatory recall or other enforcement action.
Any corrective action, whether voluntary or involuntary, as well as defending Microbot in a lawsuit, will require the dedication of our
time and capital, distract management from operating our business, and may harm our reputation and financial results.
Microbot
could be exposed to significant liability claims if Microbot is unable to obtain insurance at acceptable costs and adequate levels or
otherwise protect itself against potential product liability claims.
The
testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. Product
liability insurance is expensive and may not be available on acceptable terms, if at all. A successful product liability claim or product
recall could inhibit or prevent the successful commercialization of Microbot’s products, cause a significant financial burden on
Microbot, or both, which in any case could have a material adverse effect on Microbot’s business and financial condition.
The
results of Microbot’s research and development efforts are uncertain and there can be no assurance of the commercial success of
Microbot’s product candidates.
Microbot
believe that its success will depend in part on its ability to expand its product offerings and continue to improve its existing product
candidates in response to changing technologies, customer demands and competitive pressures. As such, Microbot expects to continue dedicating
significant resources in research and development. The product candidates and services being developed by Microbot may not be technologically
successful. In addition, the length of Microbot’s product candidates and service development cycle may be greater than Microbot
originally expected.
If
Microbot fails to retain certain of its key personnel and attract and retain additional qualified personnel, Microbot might not be able
to pursue its growth strategy effectively.
Microbot
is dependent on its senior management, in particular Harel Gadot, Microbot’s Chairman, President and Chief Executive Officer. Although
Microbot believes that its relationship with members of its senior management is positive, there can be no assurance that the services
of any of these individuals will continue to be available to Microbot in the future. Microbot’s future success will depend in part
on its ability to retain its management and scientific teams, to identify, hire and retain additional qualified personnel with expertise
in research and development and sales and marketing, and to effectively provide for the succession of senior management, when necessary.
Competition for qualified personnel in the medical device industry is intense and finding and retaining qualified personnel with experience
in the industry is very difficult. Microbot believes that there are only a limited number of individuals with the requisite skills to
serve in key positions at Microbot, particularly in Israel, and it competes for key personnel with other medical equipment and technology
companies, as well as research institutions.
Microbot
does not carry, and does not intend to carry, any key man life insurance policies on any of its existing executive officers.
Risks
Relating to International Business
If
Microbot fails to obtain regulatory clearances in other countries for its product candidates under development, Microbot will not be
able to commercialize these product candidates in those countries.
In
order for Microbot to market its product candidates in countries other than the United States, it must comply with the safety and quality
regulations in such countries.
In
Europe, these regulations, including the requirements for approvals, clearance or grant of Conformité Européenne, or CE,
Certificates of Conformity and the time required for regulatory review, vary from country to country. Failure to obtain regulatory approval,
clearance or CE Certificates of Conformity (or equivalent) in any foreign country in which Microbot plans to market its product candidates
may harm its ability to generate revenue and harm its business. Approval and CE marking procedures vary among countries and can involve
additional product testing and additional administrative review periods. The time required to obtain approval or CE Certificate of Conformity
in other countries might differ from that required to obtain FDA clearance. The regulatory approval or CE marking process in other countries
may include all of the risks detailed above regarding FDA clearance in the United States. Regulatory approval or the CE marking of a
product candidate in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval
or a CE Certificate of Conformity in one country may negatively impact the regulatory process in others. Failure to obtain regulatory
approval or a CE Certificate of Conformity in other countries or any delay or setback in obtaining such approval could have the same
adverse effects described above regarding FDA clearance in the United States.
Microbot
cannot be certain that it will be successful in complying with the requirements of the CE Certificate of Conformity and receiving a CE
Mark for its product candidates or in continuing to meet the requirements of the Medical Devices Directive in the European Economic Area
(EEA).
Israel’s
Medical Devices Law generally requires the registration of all medical products with the Ministry of Health, or MOH, Registrar through
the submission of an application to the Ministry of Health Medical Institutions and Devices Licensing Department, or AMAR. If the application
includes a certificate issued by a competent authority of a “recognized” country, which includes Australia, Canada, the European
Community Member States, Japan or the United States, the registration process is expedited, but is generally still expected to take 6
to 9 months for approval. If certification from a recognized country is not available, the registration process takes significantly longer
and a license is rarely issued under such circumstances, as the MOH may require the presentation of significant additional clinical data.
Once granted, a license (marketing authorization) for a medical device is valid for five years from the date of registration of the device,
except for implants with a life-supporting function, for which the validity is for only two years from the date of registration. Furthermore,
the holder of the license must meet several additional requirements to maintain the license. Microbot cannot be certain that it will
be successful in applying for a license from the MOH for its product candidates.
Risks
Relating to Microbot’s Intellectual Property
Microbot’s
right to develop and commercialize the SCS and TipCAT product candidates are subject to the terms and condition of a license granted
to Microbot by Technion Research and Development Foundation Ltd. and termination of the license with respect to one or both of the technology
platforms underlying the product candidates would result in Microbot ceasing its development efforts for the applicable product candidate(s).
Microbot
entered into a license agreement with Technion Research and Development Foundation Ltd., or TRDF, in 2012 pursuant to which Microbot
obtained an exclusive, worldwide, royalty-bearing, sub-licensable license to certain patents and inventions relating to the SCS and TipCAT
technology platforms. Pursuant to the terms of the license agreement, in order to maintain the license with respect to each platform,
Microbot must use commercially reasonable efforts to develop products covered by the license, including meeting certain agreed upon development
milestones. TRDF has the option to terminate a license granted with respect a particular technology in the event Microbot fails to meet
a development milestone associated with such technology. Therefore, the failure to meet development milestones may lead to a complete
termination of the applicable license agreement and result in Microbot ceasing its development efforts for the applicable product candidate.
The milestones for both SCS and TipCAT include commencing first in human clinical trials by December 2021. Failure to meet any development
milestone will give TRDF the right to terminate the license with respect to the technology underlying the missed milestone. TRDF has
previously demonstrated flexibility with respect to amending the terms of the license to extend the milestone dates, although we can
give no assurance at this time that TRDF will continue to be so flexible with respect to amending the terms of the license.
Under
the license agreement, Microbot is also subject to various other obligations, including obligations with respect to payment upon the
achievement of certain milestones and royalties on product sales. TRDF may terminate the license agreement under certain circumstances,
including material breaches by Microbot or under certain bankruptcy or insolvency events. In the case of termination of the license by
Microbot without cause or by TRDF for cause, TRDF has the right to receive a non-exclusive license from Microbot with respect to improvements
to the licensed technologies made by Microbot.
If
TRDF were to terminate the license agreement or if Microbot was to otherwise lose the ability to exploit the licensed patents, Microbot’s
competitive advantage could be reduced or terminated, and Microbot will likely not be able to find a source to replace the licensed technology.
Additionally,
if there is any future dispute between Microbot and TRDF regarding the respective parties’ rights under the license agreement,
Microbot’s ability to develop and commercialize the SCS and TipCAT may be materially harmed.
Microbot
may not meet its product candidates’ development and commercialization objectives in a timely manner or at all.
Microbot
has established internal goals, based upon expectations with respect to its technologies, which Microbot has used to assess its progress
toward developing its product candidates. These goals relate to technology and design improvements as well as to dates for achieving
specific development results. If the product candidates exhibit technical defects or are unable to meet cost or performance goals, Microbot’s
commercialization schedule could be delayed and potential purchasers of its initial commercialized products may decline to purchase such
products or may opt to pursue alternative products, which would materially harm its business.
Intellectual
property litigation and infringement claims could cause Microbot to incur significant expenses or prevent Microbot from selling certain
of its product candidates.
The
medical device industry is characterized by extensive intellectual property litigation. From time to time, Microbot might be the subject
of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend
and divert the time and effort of Microbot’s management and operating personnel from other business issues. A successful claim
or claims of patent or other intellectual property infringement against Microbot could result in its payment of significant monetary
damages and/or royalty payments or negatively impact its ability to sell current or future products in the affected category and could
have a material adverse effect on its business, cash flows, financial condition or results of operations.
If
Microbot or TRDF are unable to protect the patents or other proprietary rights relating to Microbot’s product candidates, or if
Microbot infringes on the patents or other proprietary rights of others, Microbot’s competitiveness and business prospects may
be materially damaged.
Microbot’s
success depends on its ability to protect its intellectual property (including its licensed intellectual property) and its proprietary
technologies. Microbot’s commercial success depends in part on its ability to obtain and maintain patent protection and trade secret
protection for its product candidates, proprietary technologies, and their uses, as well as its ability to operate without infringing
upon the proprietary rights of others.
Microbot
currently holds, through licenses or otherwise, an intellectual property portfolio that includes U.S. and international patents and pending
patents, and other patents under development. Microbot intends to continue to seek legal protection, primarily through patents, including
the TRDF licensed patents, for its proprietary technology. Seeking patent protection is a lengthy and costly process, and there can be
no assurance that patents will be issued from any pending applications, or that any claims allowed from existing or pending patents will
be sufficiently broad or strong to protect its proprietary technology. There is also no guarantee that any patents Microbot holds, through
licenses or otherwise, will not be challenged, invalidated or circumvented, or that the patent rights granted will provide competitive
advantages to Microbot. Microbot’s competitors have developed and may continue to develop and obtain patents for technologies that
are similar or superior to Microbot’s technologies. In addition, the laws of foreign jurisdictions in which Microbot develops,
manufactures or sells its product candidates may not protect Microbot’s intellectual property rights to the same extent as do the
laws of the United States.
Adverse
outcomes in current or future legal disputes regarding patent and other intellectual property rights could result in the loss of Microbot’s
intellectual property rights, subject Microbot to significant liabilities to third parties, require Microbot to seek licenses from third
parties on terms that may not be reasonable or favorable to Microbot, prevent Microbot from manufacturing, importing or selling its product
candidates, or compel Microbot to redesign its product candidates to avoid infringing third parties’ intellectual property. As
a result, Microbot may be required to incur substantial costs to prosecute, enforce or defend its intellectual property rights if they
are challenged. Any of these circumstances could have a material adverse effect on Microbot’s business, financial condition and
resources or results of operations.
Microbot
has the first right, but not the obligation, to control the prosecution, maintenance or enforcement of the licensed patents from TRDF.
However, there may be situations in which Microbot will not have control over the prosecution, maintenance or enforcement of the patents
that Microbot licenses, or may not have sufficient ability to consult and input into the patent prosecution and maintenance process with
respect to such patents. If Microbot does not control the patent prosecution and maintenance process with respect to the TRDF licensed
patents, TRDF may elect to do so but may fail to take the steps that are necessary or desirable in order to obtain, maintain and enforce
the licensed patents.
Microbot’s
ability to develop intellectual property depends in large part on hiring, retaining and motivating highly qualified design and engineering
staff and consultants with the knowledge and technical competence to advance its technology and productivity goals. To protect Microbot’s
trade secrets and proprietary information, Microbot has entered into confidentiality agreements with its employees, as well as with consultants
and other parties. If these agreements prove inadequate or are breached, Microbot’s remedies may not be sufficient to cover its
losses.
Dependence
on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may
result in Microbot’s payment of significant monetary damages or impact offerings in its product portfolios.
Microbot’s
long-term success largely depends on its ability to market technologically competitive product candidates. If Microbot fails to obtain
or maintain adequate intellectual property protection, it may not be able to prevent third parties from using its proprietary technologies
or may lose access to technologies critical to our product candidates. Also, Microbot currently pending or future patent applications
may not result in issued patents, and issued patents are subject to claims concerning priority, scope and other issues.
Furthermore,
Microbot has not filed applications for all of our patents internationally and it may not be able to prevent third parties from using
its proprietary technologies or may lose access to technologies critical to its product candidates in other countries.
Risks
Relating to Operations in Israel
Microbot
has facilities located in Israel, and therefore, political conditions in Israel may affect Microbot’s operations and results.
Microbot
has facilities located in Israel. In addition, one of its seven directors, its Chief Technology Officer, Chief Medical Officer and its
Chief Financial Officer, as well as substantially all of its research and development team and non-management employees, are residents
of Israel. Accordingly, political, economic and military conditions in Israel will directly or indirectly affect Microbot’s operations
and results. Since the establishment of the State of Israel, a number of armed conflicts have taken place between Israel and its Arab
neighbors. An ongoing state of hostility, varying in degree and intensity has led to security and economic problems for Israel. For a
number of years there have been continuing hostilities between Israel and the Palestinians. This includes hostilities with the Islamic
movement Hamas in the Gaza Strip, which have adversely affected the peace process and at times resulted in armed conflicts. Such hostilities
have negatively influenced Israel’s economy as well as impaired Israel’s relationships with several other countries. Israel
also faces threats from Hezbollah militants in Lebanon, from ISIS and rebel forces in Syria, from the government of Iran and other potential
threats from additional countries in the region. Moreover, some of Israel’s neighboring countries have recently undergone or are
undergoing significant political changes. These political, economic and military conditions in Israel could have a material adverse effect
on Microbot’s business, financial condition, results of operations and future growth.
Political
relations could limit Microbot’s ability to sell or buy internationally.
Microbot
could be adversely affected by the interruption or reduction of trade between Israel and its trading partners. Some countries, companies
and organizations continue to participate in a boycott of Israeli firms and others doing business with Israel, with Israeli companies
or with Israeli-owned companies operating in other countries. Foreign government defense export policies towards Israel could also make
it more difficult for us to obtain the export authorizations necessary for Microbot’s activities. Also, over the past several years
there have been calls in the United States, Europe and elsewhere to reduce trade with Israel. There can be no assurance that restrictive
laws, policies or practices directed towards Israel or Israeli businesses will not have an adverse impact on Microbot’s business.
Israel’s
economy may become unstable.
From
time to time, Israel’s economy may experience inflation or deflation, low foreign exchange reserves, fluctuations in world commodity
prices, military conflicts and civil unrest. For these and other reasons, the government of Israel has intervened in the economy employing
fiscal and monetary policies, import duties, foreign currency restrictions, controls of wages, prices and foreign currency exchange rates
and regulations regarding the lending limits of Israeli banks to companies considered to be in an affiliated group. The Israeli government
has periodically changed its policies in these areas. Reoccurrence of previous destabilizing factors could make it more difficult for
Microbot to operate its business and could adversely affect its business.
Exchange
rate fluctuations between the U.S. dollar and the NIS currencies may negatively affect Microbot’s operating costs.
A
significant portion of Microbot’s expenses are paid in New Israeli Shekels, or NIS, but its financial statements are denominated
in U.S. dollars. As a result, Microbot is exposed to the risks that the NIS may appreciate relative to the U.S. dollar, or the NIS instead
devalues relative to the U.S. dollar, and the inflation rate in Israel may exceed such rate of devaluation of the NIS, or that the timing
of such devaluation may lag behind inflation in Israel. In any such event, the U.S. dollar cost of Microbot’s operations in Israel
would increase and Microbot’s U.S. dollar-denominated results of operations would be adversely affected. Microbot cannot predict
any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the U.S. dollar.
Microbot’s
primary expenses paid in NIS that are not linked to the U.S. dollar are employee expenses in Israel and lease payments on its Israeli
facility. If Microbot is unsuccessful in hedging against its position in NIS, a change in the value of the NIS compared to the U.S. dollar
could increase Microbot’s research and development expenses, labor costs and general and administrative expenses, and as a result,
have a negative impact on Microbot’s profits.
Funding
and other benefits provided by Israeli government programs may be terminated or reduced in the future and the terms of such funding may
have a significant impact on future corporate decisions.
Microbot
participates in programs under the auspices of the Israeli Innovation Authority, for which it receives funding for the development of
its technologies and product candidates. If Microbot fails to comply with the conditions applicable to this program, it may be required
to pay additional penalties or make refunds and may be denied future benefits. From time to time, the government of Israel has discussed
reducing or eliminating the benefits available under this program, and therefore these benefits may not be available in the future at
their current levels or at all.
Microbot’s
research and development efforts from inception until now have been financed in part through such Israeli Innovation Authority royalty
bearing grants in an aggregate amount of approximately $1,500,000 through December 31, 2021. With respect to such grants Microbot is
committed to pay royalties at a rate of between 3% to 3.5% on sales proceeds up to the total amount of grants received, linked to the
dollar, plus interest at an annual rate of USD LIBOR. In addition, as a recipient of Israeli Innovation Authority grants, Microbot must
comply with the requirements of the Israeli Encouragement of Industrial Research and Development Law, 1984, or the R&D Law, and related
regulations. Under the terms of the grants and the R&D Law, Microbot is restricted from transferring any technologies, know-how,
manufacturing or manufacturing rights developed using Israeli Innovation Authority grants outside of Israel without the prior approval
of Israeli Innovation Authority. Therefore, if aspects of its technologies are deemed to have been developed with Israeli Innovation
Authority funding, the discretionary approval of an Israeli Innovation Authority committee would be required for any transfer to third
parties outside of Israel of the technologies, know-how, manufacturing or manufacturing rights related to such aspects. Furthermore,
the Israeli Innovation Authority may impose certain conditions on any arrangement under which it permits Microbot to transfer technology
or development outside of Israel or may not grant such approvals at all.
If
approved, the transfer of Israeli Innovation Authority-supported technology or know-how outside of Israel may involve the payment of
significant fees, which will depend on the value of the transferred technology or know-how, the total amount Israeli Innovation Authority
funding received by Microbot, the number of years since the funding and other factors. These restrictions and requirements for payment
may impair Microbot’s ability to sell its technology assets outside of Israel or to outsource or transfer development or manufacturing
activities with respect to any product or technology outside of Israel. Furthermore, the amount of consideration available to Microbot’s
shareholders in a transaction involving the transfer of technology or know-how developed with Israeli Innovation Authority funding outside
of Israel (such as through a merger or other similar transaction) may be reduced by any amounts that Microbot is required to pay to the
Israeli Innovation Authority.
Some
of Microbot’s employees and officers are obligated to perform military reserve duty in Israel.
Generally,
Israeli adult male citizens and permanent residents are obligated to perform annual military reserve duty up to a specified age. They
also may be called to active duty at any time under emergency circumstances, which could have a disruptive impact on Microbot’s
workforce.
It
may be difficult to enforce a non-Israeli judgment against Microbot or its officers and directors.
The
operating subsidiary of the Company is incorporated in Israel. Some of Microbot’s executive officers and directors are not residents
of the United States, and a substantial portion of Microbot’s assets and the assets of its executive officers and directors are
located outside the United States. Therefore, a judgment obtained against Microbot, or any of these persons, including a judgment based
on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not necessarily
be enforced by an Israeli court. It also may be difficult to affect service of process on these persons in the United States or to assert
U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other
person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based
on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim.
In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the
claim. If U.S. law is found to be applicable, the content of applicable U.S. law often involves the testimony of expert witnesses, which
can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding
case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against
Microbot in Israel, it may be impossible to collect any damages awarded by either a U.S. or foreign court.
Risks
Relating to Microbot’s Securities, Governance and Other Matters
If
we fail to comply with the continued listing requirements of The Nasdaq Capital Market, our common stock may be delisted and the price
of our common stock and our ability to access the capital markets could be negatively impacted.
Our
common stock is currently listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and
other continued listing requirements and standards, including those regarding director independence and independent committee requirements,
minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that
we will be able to comply with the applicable listing standards. In 2018, we effected a 1:15 reverse stock split to address our stock
price falling below the minimum share price required by Nasdaq. Failure to meet applicable Nasdaq continued listing standards could result
in a delisting of our common stock. A delisting of our common stock from The Nasdaq Capital Market could materially reduce the liquidity
of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm
our ability to raise capital on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees
and fewer business opportunities. Additionally, if we are not eligible for quotation or listing on another exchange, trading of our common
stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such
as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations
for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could
cause the price of our common stock to decline further.
We
do not expect to pay cash dividends on our common stock.
We
anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate paying cash dividends on our Common
Stock in the future. Investors seeking cash dividends should not invest in our Common Stock for that purpose.
Anti-takeover
provisions in the Company’s charter and bylaws under Delaware law may prevent or frustrate attempts by stockholders to change the
board of directors or current management and could make a third-party acquisition of the Company difficult.
Provisions
in the Company’s certificate of incorporation and bylaws may delay or prevent an acquisition or a change in management. These provisions
include a classified board of directors. In addition, because the Company is incorporated in Delaware, it is governed by the provisions
of Section 203 of the DGCL, which prohibits stockholders owning in excess of 15% of outstanding voting stock from merging or combining
with the Company. Although the Company believes these provisions collectively will provide for an opportunity to receive higher bids
by requiring potential acquirers to negotiate with the Company’s board of directors, they would apply even if the offer may be
considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by the Company’s
stockholders to replace or remove then current management by making it more difficult for stockholders to replace members of the board
of directors, which is responsible for appointing members of management.
We
are subject to litigation, which may divert management’s attention and have a material adverse effect on our business, financial
condition and results of operations.
We
are the defendant in a lawsuit captioned Empery Asset Master Ltd., Empery Tax Efficient, LP, Empery Tax Efficient II, LP, Hudson Bay
Master Fund Ltd., Plaintiffs, against Microbot Medical Inc., Defendant, in the Supreme Court of the State of New York, County of New
York (Index No. 651182/2020). The complaint alleged, among other things, that we breached multiple representations and warranties contained
in the Securities Purchase Agreement (the “SPA”) related to our June 8, 2017 equity financing (the “Financing”),
of which the Plaintiffs participated. The complaint seeks rescission of the SPA and return of the Plaintiffs’ $6.75 million purchase
price with respect to the Financing.
Management
is unable to assess the likelihood that we would be successful in any trial with respect to the SPA or the Financing, having previously
lost another lawsuit with respect to the Financing. Accordingly, no assurance can be given that if we go to trial and ultimately lose,
or if we decide to settle at any time, such an adverse outcome would not be material to our consolidated financial position. Additionally,
in any such case, we will likely be required to use available cash, or the proceeds from future offerings, towards the rescission or
settlement, that we otherwise would have used to build our business and develop our technologies into commercial products. In such event,
we would be required to raise additional capital sooner than we otherwise would, of which we can give no assurance of success, or delay,
curtail or cease the commercialization of some or all of our product candidates.
General
Risks
Raising
additional capital may cause dilution to the Company’s investors, restrict its operations or require it to relinquish rights to
its technologies or product candidates.
Until
such time, if ever, as the Company can generate substantial product revenues, it expects to finance its cash needs through a combination
of equity offerings, including through its existing At-the-Market offering, licensing, collaboration or similar arrangements, grants
and debt financings. The Company does not have any committed external source of funds. To the extent that the Company raises additional
capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the
terms of these securities may include liquidation or other preferences that adversely affect the rights of holder of the Company’s
common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting the Company’s
ability to take specific actions, such as incurring additional debt, making capital expenditures, declaring dividends or other distributions,
selling or licensing intellectual property rights, and other operating restrictions that could adversely affect the Company’s ability
to conduct its business.
If
the Company raises additional funds through licensing, collaboration or similar arrangements, it may have to relinquish valuable rights
to its technologies, future revenue streams, research and development programs or product candidates or to grant licenses on terms that
may not be favorable to the Company. If the Company is unable to raise additional funds through equity or debt financings or other arrangements
when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant
rights to develop and market product candidates that it would otherwise prefer to develop and market itself.
Microbot
operates in a competitive industry and if its competitors have products that are marketed more effectively or develop products, treatments
or procedures that are similar, more advanced, safer or more effective, its commercial opportunities will be reduced or eliminated, which
would materially harm its business.
Our
competitors may develop products, treatments or procedures that directly compete with our products and potential products and which are
similar, more advanced, safer or more effective than ours. The medical device industry is very competitive and subject to significant
technological and practice changes. Microbot expects to face competition from many different sources with respect to the SCS, LIBERTY
and other products that it is seeking to develop or commercialize with respect to its other product candidates in the future.
Competing
against large established competitors with significant resources may make establishing a market for any products that it develops difficult
which would have a material adverse effect on Microbot’s business. Microbot’s commercial opportunities could also be reduced
or eliminated if its competitors develop and commercialize products, treatments or procedures quicker, that are safer, more effective,
are more convenient or are less expensive than the SCS, LIBERTY or any product that Microbot may develop. Many of Microbot’s potential
competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing approved products than Microbot may have. Mergers and acquisitions
in the medical device industry market may result in even more resources being concentrated among a smaller number of Microbot’s
potential competitors.
Our
business strategy in part relies on identifying, acquiring and developing complementary technologies and products, which entails risks
which could negatively affect our business, operations and financial condition.
We
may pursue other acquisitions of businesses and technologies. Acquisitions entail numerous risks, including:
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difficulties
in the integration of acquired operations, services and products; |
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failure
to achieve expected synergies; |
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diversion
of management’s attention from other business concerns; |
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assumption
of unknown material liabilities of acquired companies; |
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amortization
of acquired intangible assets, which could reduce future reported earnings; |
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potential
loss of clients or key employees of acquired companies; and |
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dilution
to existing stockholders. |
As
part of our growth strategy, we may consider, and from time to time may engage in, discussions and negotiations regarding transactions,
such as acquisitions, mergers and combinations within our industry. The purchase price for possible acquisitions could be paid in cash,
through the issuance of common stock or other securities, borrowings or a combination of these methods.
We
cannot be certain that we will be able to identify, consummate and successfully integrate acquisitions, and no assurance can be given
with respect to the timing, likelihood or business effect of any possible transaction. For example, we could begin negotiations that
we subsequently decide to suspend or terminate for a variety of reasons. However, opportunities may arise from time to time that we will
evaluate. Any transactions that we consummate would involve risks and uncertainties to us. These risks could cause the failure of any
anticipated benefits of an acquisition to be realized, which could have a material adverse effect on our business, financial condition,
results of operations and prospects.
Microbot
operations in international markets involve inherent risks that Microbot may not be able to control.
Microbot’s
business plan includes the marketing and sale of its proposed product candidates internationally, and specifically in Europe and Israel.
Accordingly, Microbot’s results could be materially and adversely affected by a variety of factors relating to international business
operations that it may or may not be able to control, including:
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adverse
macroeconomic conditions affecting geographies where Microbot intends to do business; |
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closing
of international borders, including as a result of biohazards or pandemics; |
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foreign
currency exchange rates; |
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political
or social unrest or economic instability in a specific country or region; |
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higher
costs of doing business in certain foreign countries; |
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infringement
claims on foreign patents, copyrights or trademark rights; |
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difficulties
in staffing and managing operations across disparate geographic areas; |
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difficulties
associated with enforcing agreements and intellectual property rights through foreign legal systems; |
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trade
protection measures and other regulatory requirements, which affect Microbot’s ability to import or export its product candidates
from or to various countries; |
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adverse
tax consequences; |
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unexpected
changes in legal and regulatory requirements; |
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military
conflict, terrorist activities, natural disasters and medical epidemics; and |
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Microbot’s
ability to recruit and retain channel partners in foreign jurisdictions. |
Microbot’s
financial results may be affected by fluctuations in exchange rates and Microbot’s current currency hedging strategy may not be
sufficient to counter such fluctuations.
Microbot’s
financial statements are denominated in U.S. dollars and the financial results of the Company are denominated in U.S. dollars, while
a significant portion of Microbot’s business is conducted, and a substantial portion of its operating expenses are payable, in
currencies other than the U.S. dollar. Exchange rate fluctuations may have an adverse impact on Microbot’s future revenues or expenses
as presented in the financial statements. Microbot may in the future use financial instruments, such as forward foreign currency contracts,
in its management of foreign currency exposure. These contracts would primarily require Microbot to purchase and sell certain foreign
currencies with or for U.S. dollars at contracted rates. Microbot may be exposed to a credit loss in the event of non-performance by
the counterparties of these contracts. In addition, these financial instruments may not adequately manage Microbot’s foreign currency
exposure. Microbot’s results of operations could be adversely affected if Microbot is unable to successfully manage currency fluctuations
in the future.
The
market price for our Common Stock may be volatile.
The
market price for our Common Stock may be volatile and subject to wide fluctuations in response to factors including the following:
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actual
or anticipated fluctuations in our quarterly or annual operating results; |
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changes
in financial or operational estimates or projections; |
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conditions
in markets generally; |
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changes
in the economic performance or market valuations of companies similar to ours; |
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announcements
by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; |
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our
intellectual property position; and |
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general
economic or political conditions in the United States, Israel or elsewhere. |
In
addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the
operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of
shares of our Common Stock.
The
issuance of shares upon exercise of outstanding warrants and options could cause immediate and substantial dilution to existing stockholders.
The
issuance of shares upon exercise of warrants and options could result in substantial dilution to the interests of other stockholders
since the holders of such securities may ultimately convert and sell the full amount issuable on conversion.