ITEM
1. BUSINESS
Overview
We
are a commercial stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through
our innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform
technology, we develop vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the
human immune system. We are committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”),
COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”).
We are headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in
Rehovot, Israel.
Product
Pipeline
Our
pipeline is comprised of vaccine and immunotherapeutic programs developed by virus-like particle technologies to target two distinct,
but often related, disease areas - infectious disease and oncology. We prioritize the development of programs for disease targets that
are challenging, underserved, and where the human immune system, when powered and stimulated appropriately, can be a formidable opponent.
VLP
vaccines are a type of sub-unit vaccine, in which only the portions of viruses critical for eliciting an immune response are presented
to the body. Because of their structural similarity to viruses presented in nature, including their particulate nature and repetitive
structure, VLPs can stimulate potent immune responses. VLPs can be customized to present any protein antigen, including multiple antibody
and T cell targets, making them, we believe, ideal technologies for the development of both prophylactic and therapeutic vaccines. However,
only a few antigenic proteins self-assemble into VLPs, which limit the number of potential targets. Notably, HBV antigens are among those
that are able to spontaneously form orderly VLP structures. Our eVLP platform technology expands the list of potentially viable target
indications for VLPs by providing a stable core (Gag Protein) and lipid bilayer (the “envelope”). It is a flexible platform
that enables the synthetic manufacture of an “enveloped” VLP, or “eVLP”, which looks structurally and morphologically
similar to the virus, with no infectious material.
Our
product pipeline includes an approved vaccine and multiple late- and early-stage investigational programs. The investigational
programs are in various stages of clinical development and the scientific information included about these therapeutics is
preliminary and investigative. The investigational programs have not been approved by the United States Food and Drug Administration
(“FDA”), European Medicines Agency (“EMA”), United Kingdom Medicines and Healthcare products Regulatory
Agency (“MHRA”), Health Canada, or any other health authority and no conclusion can or should be drawn regarding the
safety or efficacy of these investigational programs.
In
addition to our existing pipeline programs, we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that
we believe complement our pipeline, as well as technologies that may supplement our efforts in both immuno-oncology and infectious disease.
Key
Targeted Disease Areas
Hepatitis
B Virus (“HBV”)
HBV
infection can cause liver inflammation, fibrosis, and liver injury, resulting in potentially life-threatening conditions through acute
illness and chronic disease, including liver failure, cirrhosis, and cancer. HBV remains a significant public health burden with as many
as 2.2 million chronically infected people in the U.S. alone. Worldwide, this number is estimated to be
as high as 350 million, with approximately 800,000 deaths resulting from the consequences of HBV infection each year.
Despite
the highly infectious nature of HBV, due to its often-asymptomatic nature, it is estimated that as many as 67% of chronically infected
adults in the U.S. are unaware of their infection status. There is no cure available for HBV infection and while public health initiatives
highlight immunization as the most effective strategy for the prevention of HBV infections, the U.S. adult HBV vaccination rates remain
persistently low at only about 30% of all adults aged 19 years and older.
In
April 2022, the Centers for Disease Control and Prevention (“CDC”) Advisory Committee on Immunization Practices (“ACIP”)
implemented a change to the adult HBV vaccine recommendations. As incorporated in the CDC’s 2022 Adult Immunization Schedule and
as published in the April 1, 2022, CDC Morbidity and Mortality Weekly Report, adults aged 19 to 59 years are now universally recommended
to be vaccinated against HBV infection. Additionally, while adults aged 60 years and older with risk factors for HBV infection are still
recommended to receive HBV vaccinations, adults aged 60 years and older without known risk factors for HBV may now also receive HBV vaccinations.
In
addition to our approved vaccine, PreHevbrio [Hepatitis B Vaccine (Recombinant)], there are four other vaccines approved in the U.S.
for the prevention of HBV infection in adults: Engerix-B® and Twinrix®, manufactured by GlaxoSmithKline
Biologicals S.A. (“GSK”), Recombivax HB®, manufactured by Merck &. Co. (“Merck”), and Heplisav-B®,
manufactured by Dynavax Technologies Corporation (“Dynavax”).
COVID-19
and Other Coronaviruses
Coronaviruses
are a large family of enveloped viruses that cause respiratory illness of varying severities. Only seven coronaviruses are known to cause
disease in humans, four of which most frequently cause symptoms typically associated with the common cold. Three of the seven coronaviruses,
however, have more serious outcomes in people. These more pathogenic coronaviruses are (1) SARS-CoV-2, a novel coronavirus identified
as the cause of COVID-19; (2) MERS-CoV, identified in 2012 as the cause of Middle East Respiratory Syndrome (“MERS”); and
(3) SARS-CoV, identified in 2002 as the cause of Severe Acute Respiratory Syndrome (“SARS”).
The
virus that causes COVID-19 continues to evolve and several SARS-CoV-2 variants have emerged and certain of these variants have been identified
as having a significant public health impact. To date, notable Variants of Concern (“VOC”) have included:
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Alpha
(B.1.1.7) – First identified as in the United Kingdom (“UK”), VOC in December 2020 |
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Beta
(B.1.351) – First identified in South Africa, VOC in December 2020 |
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Gamma
(P.1) – First identified in Brazil, VOC in January 2021 |
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● |
Delta
(B.1.617.2) – First identified in India, VOC in May 2021 |
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Omicron
and subvariants – First identified in South Africa, VOC in November 2021 |
Glioblastoma
(“GBM”)
GBM
is among the most common and aggressive malignant primary brain tumors in humans. In the U.S. alone, about 12,000 new GBM cases are diagnosed
each year. The current standard of care for GBM is surgical resection, followed by radiation and chemotherapy. Even with intensive treatment,
GBM progresses rapidly and has a high mortality rate, with median overall survival for primary GBM of about 14 months. Median overall
survival for recurrent GBM is even lower, at about 8 months.
Cytomegalovirus
(“CMV”)
CMV
is a common virus that is a member of the herpes family. It infects one in every two people in many developed countries. Most CMV infections
are “silent”, meaning the majority of people who are infected exhibit no signs or symptoms. Despite its typically asymptomatic
nature in older children and adults, CMV may cause severe infections in newborn children (congenital CMV) and may also cause serious
infections in people with weakened immune systems, such as solid organ or bone marrow transplant recipients. Congenital CMV infection
can be treated – but not cured – and there are currently no approved vaccines available for the prevention of infection in
either the congenital or the transplant setting.
Zika
Zika
is a mosquito-borne virus that is spread primarily through the bite of an infected Aedes species mosquito, but can also be transmitted
sexually, during pregnancy, or during childbirth. Acute infections are typically mild, but Zika has been associated with a number of
neurological complications in newborns. The first formal description of Zika virus was published in 1952, but it was not until 2007 that
the first Zika outbreak in humans was recorded. Over the past decade, Zika has begun to spread globally, and between January 2014 and
February 2016, 33 countries reported circulation of the Zika virus, including in North America. There is currently no vaccine to prevent
Zika infection.
Pipeline
Programs
The
table below is an overview of our commercial vaccine and our investigational programs as of February 28, 2023:
Indication |
|
Program |
|
Technology |
|
Current
Status |
Approved
Vaccine
●
Hepatitis B |
|
PreHevbrio1,2,3
Hepatitis
B Vaccine |
|
VLP |
|
Registration/Commercial |
|
|
(Recombinant) |
|
|
|
|
Prophylactic
Candidates |
|
|
|
|
|
|
●
Coronaviruses (Multivalent) |
|
VBI-2901 |
|
eVLP |
|
Ongoing
Phase I |
●
COVID-19 (Beta variant) |
|
VBI-2905 |
|
eVLP |
|
Phase
Ib |
●
COVID-19 (Ancestral) |
|
VBI-2902 |
|
eVLP |
|
Phase
Ia |
● Cytomegalovirus |
|
VBI-1501 |
|
eVLP |
|
Phase I Completed |
●
Coronaviruses (Multivalent) |
|
Undisclosed |
|
eVLP |
|
Pre-Clinical |
●
Zika |
|
VBI-2501 |
|
eVLP |
|
Pre-Clinical |
|
|
|
|
|
|
|
Therapeutic
Candidates |
|
|
|
|
|
|
●
Hepatitis B |
|
VBI-2601 |
|
VLP |
|
Ongoing
Phase II |
●
Glioblastoma |
|
VBI-1901 |
|
eVLP |
|
Phase
I/IIa |
●
Other CMV-Associated Cancers |
|
Undisclosed |
|
eVLP |
|
Preclinical |
1Approved for use in the U.S. and Canada,
under the brand name PreHevbrio, for the prevention of infection caused by all known subtypes of HBV in adults 18 years of age and older.
2
Approved for use in the European Union (“EU”) / European Economic Area (“EEA”) and the UK, under the brand
name PreHevbri, for active immunization against infection caused by all known subtypes of the HBV in adults. It can be expected that
hepatitis D will also be prevented by immunization with PreHevbri as hepatitis D (caused by the delta agent) does not occur in the absence
of HBV infection.
3Approved
for use in Israel, under the brand name Sci-B-Vac, for active immunization against hepatitis B virus (HBV infection).
A
summary of our marketed product, lead pipeline programs, and recent developments follows.
Marketed
Product
PreHevbrio
[Hepatitis B Vaccine (Recombinant)]
PreHevbrio
[Hepatitis B Vaccine (Recombinant)] was approved by the FDA on November 30, 2021, for the prevention of infection caused by all known
subtypes of HBV in adults aged 18 years and older. PreHevbrio contains the S, pre-S2, and pre-S1 HBV surface antigens, and is the only
approved 3-antigen HBV vaccine for adults in the U.S. On February 23, 2022, following discussion at the CDC’s ACIP meeting, PreHevbrio
joined the list of recommended products for prophylactic adult vaccination against HBV infection. The inclusion of PreHevbrio in the
ACIP recommendation was reflected in a CDC publication on April 1, 2022 and was a notable milestone as many insurance plans and institutions
require an ACIP recommendation before a vaccine can be reimbursed or is made available to patients. Additionally, PreHevbrio was included
in the 2023 annual update of the CDC Adult Immunization Schedule, as detailed in the CDC publication on February 10, 2023. VBI launched
PreHevbrio in the U.S. at the end of the first quarter of 2022, and revenue generation began in the second quarter of 2022.
Commercial
and regulatory activity for VBI’s 3-antigen HBV vaccine outside of the U.S. include:
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● |
EU: On
May 2, 2022, we announced that the European Commission (the “EC”) granted Marketing Authorization for PreHevbri
[Hepatitis B Vaccine (Recombinant, Adsorbed)]. The European Commission’s centralized marketing authorization is valid in all
EU Member States as well as in the EEA countries (Iceland, Liechtenstein, and Norway). On September 8, 2022, we announced a
partnership with Valneva SE (“Valneva”) for the marketing and distribution of PreHevbri in select European markets,
initially including the UK, Sweden, Norway, Denmark, Finland, Belgium, and the Netherlands. As part of this partnership, VBI expects PreHevbri will be available in certain European countries beginning in the
first half of 2023. |
|
|
|
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● |
UK: On June 1, 2022, we announced that the MHRA
granted marketing authorization for PreHevbri [Hepatitis B Vaccine (Recombinant, Adsorbed)]. This follows the EC centralized marketing
authorization received in May 2022 and was conducted as part of the EC Decision Reliance Procedures (“ECDRP”). VBI expects
to make PreHevbri available in the UK in the first half of 2023 as part of the partnership with Valneva. |
|
|
|
|
●
|
Canada:
On December 8, 2022, we announced that Health Canada approved PreHevbrio [3-antigen Hepatitis B Vaccine (Recombinant)] for the
prevention of infection caused by all known subtypes of HBV in adults aged 18 years and older. VBI expects to make PreHevbrio available
in Canada in 2023. |
|
|
|
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● |
Israel:
Approved and commercially available under the brand name Sci-B-Vac®. |
Prophylactic
Investigational Candidates
VBI-2900:
Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)
In
response to the ongoing SARS-CoV-2 (COVID-19) pandemic, VBI initiated development of a prophylactic coronavirus vaccine program. Coronaviruses
are enveloped viruses by nature which make them a prime target for VBI’s flexible eVLP platform technology.
On
August 26, 2020, we announced data from three pre-clinical studies conducted to enable selection of optimized clinical candidates for
our coronavirus vaccine program. As a result of these studies, VBI selected two vaccine candidates with the goal of bringing forward
candidates that add meaningful clinical and medical benefit to those already approved: (1) VBI-2901, a multivalent coronavirus vaccine
candidate expressing the SARS-CoV-2, SARS, and MERS spike proteins; and (2) VBI-2902, a monovalent vaccine candidate expressing an optimized
“prefusion” form of the SARS-CoV-2 spike protein.
In
March 2021, a Phase I study of VBI-2902 was initiated and on June 29, 2021, we announced initial positive data from the Phase Ia portion
of this study that evaluated one- and two-dose regimens of 5µg of VBI-2902 in 61 healthy adults aged 18-54 years. After two doses,
VBI-2902 induced neutralization titers in 100% of participants, with 4.3x higher geometric mean titer (“GMT”) than that of
the convalescent serum panel (n=25), and peak antibody binding GMT of 1:4,047. VBI-2902 was also well tolerated with no safety signals
observed.
In
response to the increased circulation of SARS-CoV-2 variants, the Phase Ib portion of the Phase I study was initiated in September
2021 to assess VBI-2905, our eVLP vaccine candidate directed against the SARS-CoV-2 Beta variant. On April 5, 2022, we announced new
data from the Phase Ib study (n=53). A single-dose booster of VBI-2905 increased the geometric mean titer (“GMT”) of neutralizing
antibodies directed against the Beta variant 3.8-fold, at day 28, in participants who had previously received two-doses of an mRNA vaccine
(ancestral strain) – approximately 2-fold increases were also seen at day 28 in antibody GMTs against both the ancestral and delta
variant. New preclinical data announced at the same time showed that against a panel of coronavirus variants in mice, reactivity was
seen with VBI-2902 against all variants including the ancestral strain, Delta, Beta, Omicron, Lambda, and RaTG13 (a bat coronavirus that
is distant to circulating human strains). In this same panel, VBI-2901 was able to elicit an even stronger response against all variants
tested – as the strains became more divergent from the ancestral strain, VBI-2901 elicited a greater difference in GMT from VBI-2902,
ranging from 2.5-fold higher against the ancestral strain to 9.0-fold higher against the bat coronavirus. Additionally, a validated pseudoparticle
neutralization assay (“PNA”) benchmarked against the WHO reference standard demonstrated that VBI-2902 elicited neutralizing
antibody responses of 176 IU50/mL in its Phase Ia study – this international standard measure would predict a greater than 90%
efficacy, with two internationally approved vaccines estimated to have 90% efficacy at 83 and 140 IU50/mL (Gilbert, PB, 2021).
The
clinical and preclinical data for all three candidates continue to support the potential of the eVLP platform against coronaviruses.
On September 29, 2022, we announced that we initiated the first clinical study of VBI’s multivalent coronavirus candidate, VBI-2901,
designed to increase breadth of protection against COVID-19 and related coronaviruses. Interim data from this study are expected mid-year
2023.
The
VBI-2900 program is supported by a partnership with the Coalition for Epidemic Preparedness Innovations (“CEPI” and the partnership,
the “CEPI Funding Agreement”), with contributions of up to $33 million; a partnership with the Strategic Innovation Fund
(“SIF”), established by the Government of Canada, with an award of up to CAD $56 million; contribution of up to CAD $1 million
from the Industrial Research Assistance Program (“IRAP”) of the National Research Council of Canada (“NRC”);
and a collaboration with the NRC. On December 6, 2022, we and CEPI announced that we expanded the scope of the CEPI Funding Agreement
to advance the development of multivalent coronavirus vaccines that could be deployed against COVID-19 as well as a future “Coronavirus
X”.
VBI-1501:
Prophylactic CMV Vaccine Candidate
Our
prophylactic CMV vaccine candidate uses the eVLP platform to express a modified form of the CMV glycoprotein B (“gB”) antigen
and is adjuvanted with alum, an adjuvant used in FDA-approved products.
Following
the successful completion of the Phase I study in May 2018, and positive discussions with Health Canada, we announced plans for a Phase
II clinical study evaluating VBI-1501 on December 20, 2018. We received similarly positive guidance from the FDA in July 2019. The Phase
II study is expected to assess the safety and immunogenicity of dosages of VBI-1501 up to 20µg with alum. We are currently evaluating
the timing of the Phase II study.
Therapeutic
Investigational Candidates
VBI-2601:
HBV Immunotherapeutic Candidate
VBI-2601
(BRII-179) is our novel, recombinant, protein-based immunotherapeutic candidate in development for the treatment of chronic HBV
infection. VBI-2601 is formulated to induce broad immunity against HBV, including T-cell immunity which plays an important role in
controlling HBV infection.
On
April 12, 2021, and June 23, 2021, we announced data from the completed Phase Ib/IIa clinical study in patients with chronic HBV infection,
which was conducted by our partner Brii Biosciences Limited (“Brii Bio”). The study was a randomized, controlled study designed
to assess the safety, tolerability, antiviral and immunologic activity of VBI-2601. The study was a two-part, dose-escalation study assessing
different dose levels of VBI-2601 with and without an immunomodulatory adjuvant, conducted at multiple study sites in New Zealand, Australia,
Thailand, South Korea, Hong Kong Special Administrative Region of China, and China.
The
data from the Phase Ib/IIa for 33 evaluable patients across all study arms suggested: (1) VBI-2601 was well tolerated at all dose levels
with and without the adjuvant with no significant adverse events identified; (2) VBI-2601 induced both B cell (antibody) and T cell responses
in chronically-infected HBV patients, (3) VBI-2601 induced restimulation of T cell responses to HBV surface antigens, including S, Pre-S1,
and Pre-S2, in greater than 50% of the evaluable patients compared to no detectable response in the control arm; (4) the T cell responses
and antibody responses were comparable across the 20µg and 40µg unadjuvanted study arms; and (5) T cell response rates between
the adjuvanted and unadjuvanted cohorts were also comparable. Based on the acceptable safety profile and vaccine-induced adaptive immune
responses seen in this study, VBI-2601 (BRII-179) advanced to Phase II studies.
On
April 21, 2021, we announced that the first patient had been dosed in a Phase II clinical study evaluating VBI-2601 in combination
with BRII-835 (VIR-2218), an investigational small interfering ribonucleic acid (“siRNA”) targeting HBV, for the
treatment of chronic HBV infection. The multi-center, randomized, open-label study is designed to evaluate the safety and efficacy
of this combination with and without interferon-alpha as a co-adjuvant. The study is being conducted at clinical sites in
Australia, Taiwan, Hong Kong Special Administrative Region of China, South Korea, New Zealand, Singapore, and Thailand. VBI’s
partner, Brii Bio, is the study sponsor. A total of 50 adult, non-cirrhotic patients who received NRTI therapy for at least 12
months were randomized and dosed across three cohorts:
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● |
Cohort
A: BRII-835 Alone Regimen – Nine subcutaneous 100mg doses of BRII-835, dosed every four (4) weeks through Week 32 |
|
● |
Cohort
B: BRII-835 Alone Regimen + nine 40µg intramuscular doses of VBI-2601 admixed with interferon-alpha (IFN-α) as co-adjuvant
every four weeks from Week 8 through Week 40 |
|
● |
Cohort
C: BRII-835 Alone Regimen + nine 40µg intramuscular doses of VBI-2601 without IFN-α every four weeks from Week 8 through
Week 40 |
On February 15, 2023, we announced
interim data from the Phase II combination study. The data, which was featured in an oral presentation at the 32nd Conference
of the Asian Pacific Association for the Study of the Liver (“APASL”) on February 18, 2023, demonstrated that the combination
therapy was generally well-tolerated, restored strong anti-HBsAg antibody responses, and led to improved HBsAg-specific T-cell responses,
when compared to BRII-835 alone. Notably:
|
● |
Mean
changes in HBsAg reduction relative to baseline at week 40 were -1.68 log10 IU/mL in Cohort A, -1.75 log10 IU/mL in Cohort B, and
-1.77 log10 IU/mL in Cohort C |
|
● |
Potent
HBV surface antibody levels (> 100 IU/L) were observed in more than 40% of participants in Cohorts B and C at week 40 –
by comparison, no antibody responses were detected in Cohort A |
|
● |
Out
of 25 evaluable patients, a higher proportion of Cohort B and C patients demonstrated potent HBsAg-specific T-cell responses (70%;
14/20) relative to those in Cohort A (20%; 1/5) through week 44 |
|
● |
To
date, two participants receiving combination regimens achieved either HBsAg below LLOQ (0.05 mIU/mL), to an undetectable level, or
at LLOQ with maximum reductions of ≥ 4 log10 HBsAg – both participants mounted potent anti-HBs antibody and HBV-specific
T-cell responses |
Additional
data from the study are expected to be announced later this year.
On
January 5, 2022, we announced that the first patient was dosed in a second Phase IIa/IIb clinical study evaluating VBI-2601. This
Phase II study assesses VBI-2601 as an add-on therapy to the standard-of-care in China nucleos(t)ide reverse transcriptase inhibitor
(“NRTI”) and pegylated interferon therapy (PEG-IFN-α,). Interim topline clinical data from part one of this Phase
IIa/IIb clinical study is expected in the third quarter of 2023.
VBI-1901:
Glioblastoma (GBM)
Our
cancer vaccine immunotherapeutic program, VBI-1901, targets CMV proteins present in tumor cells. CMV is associated with a number of solid
tumors including GBM, breast cancer, and pediatric medulloblastoma.
In
January 2018, we initiated dosing in a two-part, multi-center, open-label Phase I/IIa clinical study of VBI-1901 in 38 patients with
recurrent GBM. Phase I (Part A) of the study was a dose-escalation phase that defined the safety, tolerability, and optimal dose level
of VBI-1901 adjuvanted with granulocyte-macrophage colony-stimulating factor (GM-CSF) in recurrent GBM patients with any number of prior
recurrences. In December 2018, this phase completed enrollment of 18 patients across three dose cohorts, the highest of which (10 µg)
was selected as the optimal dose level to test in the Phase IIa portion (Part B) of the study. Phase IIa of the study, which initiated
enrollment in July 2019, is a two-arm study that enrolled 20 first-recurrent GBM patients to receive 10 µg of VBI-1901 in combination
with either GM-CSF or GSK proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 is provided pursuant to a Clinical Collaboration
and Support Study Agreement with GSK, which we entered into on September 10, 2019. Enrollment of the 10 patients in the VBI-1901 with
GM-CSF arm was completed in March 2020 and enrollment of the 10 patients in the VBI-1901 with AS01 arm was completed in October 2020.
Data
from the Phase IIa portion of the study was announced throughout 2020, 2021, and 2022, with the latest data presented in November
2022 at the 2022 Society for Neuro-Oncology (SNO) Annual Meeting. The data from the Phase IIa portion of this study demonstrate: (1)
improvement in 6-month, 12-month, and 18-month overall survival (“OS”) data compared to historical controls; (2) 12-month
OS of 60% (n=6/10) in the VBI-1901 + GM-CSF study arm and 70% (n=7/10) in the VBI-1901 + AS01 study arm, compared to historical controls
of ~30%; (3) 18-month OS of 30% (3/10) in the VBI-1901 + GM-CSF study arm and 40% (n=4/10) in the VBI-1901 + AS01 study arm; (3) 2 patients
with partial tumor responses, one of whom remained on protocol for over two years and had achieved a 93% tumor reduction relative to
baseline at initiation of treatment at the start of the study, and 10 stable disease observations across all study arms; and (4) VBI-1901
continues to be safe and well tolerated at all doses tested, with no safety signals observed.
On
June 8, 2021, we announced that the FDA granted Fast-Track Designation for VBI-1901 formulated with GM-CSF for the treatment of recurrent
GBM patients with first tumor recurrence. The designation was granted based on data from the Phase I/IIa study.
On
June 22, 2022, we announced that the FDA granted Orphan Drug Designation for VBI-1901 for the treatment of GBM.
Based
on the data seen to-date, as part of the next phase of development we anticipate assessing VBI-1901 in randomized, controlled studies
in both primary and recurrent GBM patients. In the recurrent setting, we aim to expand the number of patients in the current trial and
add a control arm, with the potential to support an accelerated approval application based on tumor response rates and improvement in
overall survival. Subject to discussion with the FDA, the amended protocol is expected to initiate enrollment of additional patients
in the second quarter of 2023.
On October 12, 2022, we announced
a collaboration with Agenus Inc. to evaluate VBI-1901 in combination with anti-PD-1 balstilimab in a Phase II study as part of the INSIGhT
adaptive platform trial in patients with primary GBM. Subject to approval from regulatory bodies, we expect enrollment to initiate in
the VBI-1901 study arm in INSIGhT mid-year 2023.
Impact
of the COVID-19 Pandemic on Our Business
In
December 2019, SARS-CoV-2 was reported to have surfaced in Wuhan, China, and on March 12, 2020, the WHO declared the global outbreak
of COVID-19, the disease caused by SARS-CoV-2, to be a pandemic. Multiple vaccine candidates against SARS-CoV-2 continue to be under development,
and certain large, multinational pharmaceutical companies have been granted and continue to seek authorizations for emergency approval
by the FDA. The treatments for COVID-19, including symptomatic and supportive therapies, among other things, continue to be updated on
a rolling basis by healthcare authorities and agencies.
VBI is closely following changing SARS-CoV-2 characteristics and plans to
study the impact of specific mutations that may impact vaccine efficacy and vaccine design. Further investigations are required to understand
the impact of specific mutations on viral properties and the effectiveness of vaccines.
We have three ongoing clinical
studies being conducted, by us or our partners, at clinical sites worldwide: 1) the Phase II study of VBI-2601 and BRII-835 (VIR-2218)
at multiple study sites in Asia Pacific countries; 2) the Phase IIa/IIb study of VBI-2601 at multiple study sites in Asian Pacific countries;
and 3) the Phase I clinical study of VBI-2901 in Canada. In addition to the active studies, we have planned clinical studies expected
to begin in 2023, including two additional studies with VBI-1901. The enrollment of patients at some of the clinical sites in our studies
has in the past been suspended due to the COVID-19 pandemic. Future COVID-19 outbreaks could suspend such studies again, and may suspend
or delay the enrollment of patients at other clinical sites where we are conducting or planning to conduct clinical trials, or lead to
the reallocation of resources or limit of access to clinical facilities. Additionally, if our trial participants are unable to travel
to or visit our clinical study sites as a result of the reimposition of quarantines or other restrictions resulting from new outbreaks
and a resurgence in COVID-19 cases, we could experience higher drop-out rates or delays in our clinical studies. Such quarantines and
other similar restrictions may also require us to temporarily close our clinical sites, research laboratories, or manufacturing facility.
Furthermore, if we determine that our trial participants may suffer from exposure to COVID-19 as a result of their participation in our
clinical trials, we may voluntarily close certain clinical sites as a safety measure until we reasonably believe that the likelihood of
exposure has subsided. As a result, our expected development timelines for VBI-2601, VBI-1901, and our coronavirus vaccine candidates
may be negatively impacted.
During the years 2020 through
2022, in order to reduce exposure risk to COVID-19, we had fewer employees on site at both our manufacturing facility in Israel, where
we manufacture our 3-antigen HBV vaccine and VBI-2601, and at our research and development laboratories in Ottawa, Canada. Further, restrictions
on our ability to travel, stay-at-home orders and other similar restrictions on our business limited our ability to support our operations.
The
COVID-19 pandemic has materially negatively affected the global economy, and the ongoing effects of the COVID-19 pandemic, including
but not limited to, supply chain issues, global shortages of supplies, materials and products, volatile market conditions and rising
global inflation, continue to do so. As a result of the COVID-19 pandemic, our business and results of operations were adversely
affected and, as the ongoing effects of the COVID-19 pandemic continue to impact the global economy, these effects may continue to
adversely affect our business and results of operations. The extent to which these effects will continue to
impact our business will depend on future developments, which are highly uncertain and cannot be predicted. We do not yet know the
full extent of potential delays or impacts on our business, our clinical studies, our research programs, the recoverability of our
assets, and our manufacturing; however, the effects of the COVID-19 pandemic may continue to disrupt or delay our business
operations, including with respect to efforts relating to potential business development transactions, and it could continue to
disrupt the marketplace which could have an adverse effect on our operations.
Corporate
History
We
were incorporated under the laws of British Columbia by Memorandum of Association on April 9, 1965 under the name “Alice Arm Molybendum
Co. Ltd.” On October 21, 1965, we changed our name to “Alice Arm Mining Ltd.” and subsequently, on July 13, 1975, changed
our name to “New Congress Resources Ltd.” On January 12, 1983, we changed our name to “Levon Resources Ltd.”
On
July 9, 2015, we, then known as Levon Resources Ltd. (“Levon”), completed a plan of arrangement (the “Levon Merger”)
pursuant to which SciVac Ltd. (“SciVac”), an Israel based company, completed a reverse takeover of Levon. Levon changed its
name from Levon Resources Ltd. to SciVac Therapeutics Inc. and SciVac became our wholly-owned subsidiary.
On
May 6, 2016, we completed our acquisition of VBI Vaccines (Delaware) Inc. (“VBI DE”), pursuant to which Seniccav Acquisition
Corporation, a Delaware corporation and our wholly-owned subsidiary, merged with and into VBI DE, with VBI DE continuing as the surviving
corporation and as our wholly-owned subsidiary (the “VBI-SciVac Merger”). Upon completion of the VBI-SciVac Merger, we (then
named “SciVac Therapeutics Inc.”) changed our name to “VBI Vaccines Inc.” and received approval for the listing
of our common shares on Nasdaq. Our common shares commenced trading on Nasdaq at the opening of
trading on May 9, 2016 under our new name and the symbol “VBIV.” Following the effective time of the VBI-SciVac Merger, our
common shares began to trade on the Toronto Stock Exchange (“TSX”) under the new symbol “VBV.” Effective as of
March 23, 2018, we voluntarily delisted our common shares from the TSX.
Our
registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver British Columbia V6C 2X8. Our principal executive
offices are located at 160 Second Street, Floor 3, Cambridge, MA 02142; our manufacturing operations are located at 13 Gad Feinstein
Road, POB 580, Rehovot, Israel 7610303 and our research operations are located at 310 Hunt Club Road East, Suite 201, Ottawa, Ontario
Canada K1V 1C1.
Background
of VBI DE
VBI
DE was originally established in 1970 as Paulson Capital Corp., an Oregon corporation (“Paulson Oregon”), which began as
a holding company whose operating subsidiary, Paulson Investment Company, Inc., was a full-service brokerage firm. Effective March 20,
2014, Paulson Oregon changed its state of incorporation from the State of Oregon to the State of Delaware, and as a result, Paulson Oregon
became “Paulson Capital (Delaware) Corp.” and Paulson Oregon ceased to exist.
On
July 25, 2014, Variation Biotechnologies (US), Inc. (“VBI US”) completed its merger with VBI Acquisition Corp. (“Merger
Sub”), a Delaware corporation and wholly-owned subsidiary of Paulson Capital (Delaware) Corp., whereby Merger Sub merged with and
into VBI US, with VBI US continuing as the surviving corporation. As a result of this merger, VBI US was acquired by, and became a wholly-owned
subsidiary of Paulson Capital (Delaware) Corp., which changed its name to VBI Vaccines Inc. and then subsequently to VBI Vaccines (Delaware)
Inc. on July 19, 2016.
Subsidiaries
SciVac,
located in Rehovot, Israel, is our wholly-owned subsidiary that was incorporated on April 18, 2005 pursuant to the Israeli Companies
Law (1999), as amended.
VBI
DE, a Delaware corporation, is our wholly-owned subsidiary.
VBI
US, a Delaware corporation, is a wholly-owned subsidiary of VBI DE and was incorporated on December 18, 2006 in the State of Delaware.
Variation
Biotechnologies Inc. (“VBI Cda”), located in Ottawa, Ontario, Canada, is a wholly-owned subsidiary of VBI US, and was incorporated
on August 24, 2001 under the Canada Business Corporations Act.
SciVac
Hong Kong Limited, is a wholly-owned subsidiary, and was incorporated pursuant to the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong) on January 29, 2019.
VBI
Vaccines B.V., is a wholly-owned subsidiary, and was incorporated on October 21, 2020 in the Netherlands.
Partnerships,
Collaborations, and Licensing Agreements
Our
focus is to develop and deliver vaccines and therapeutics that target significant infectious diseases and aggressive cancers. As part
of this strategy, we have entered into, and expect to enter into additional, partnerships, collaborations, and licensing agreements.
These agreements help VBI commercialize our approved product, advance our investigational programs, and access additional expertise,
capabilities, resources, and funding.
Partnership
with Syneos Health (“Syneos”)
On December 7, 2020, we announced
a partnership for the commercialization of our 3-antigen HBV vaccine with Syneos, who was selected for their robust and innovative commercialization
experience and deep vaccine expertise, including successful partnerships with leading vaccine manufacturers. VBI and Syneos began working
together on the launch strategy in 2019 and expanded the relationship in 2020 to build the leadership team and field teams dedicated to
VBI, incorporating full-service commercialization solutions. As part of this partnership, we have fully-dedicated field team members across
medical affairs, market access, and sales.
The
Master Commercial Services Agreement (“Commercial Agreement”), dated December 17, 2019, has an initial term of five (5) years.
Details regarding activities, leaderships team, and field teams are covered in various work orders, entered into pursuant to and governed
by the Commercial Agreement.
Collaboration
and License Agreement with Brii Bio
On
December 4, 2018, we entered into the License Agreement with Brii Bio, pursuant to which, among other things, subject to terms and conditions
set forth in the License Agreement, amended on April 8, 2021:
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(i) |
we
and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in China, Hong Kong,
Taiwan and Macau (collectively, the “Licensed Territory”), and to conduct a Phase Ib/IIa
collaboration clinical trial for the purpose of comparing VBI-2601, which is a recombinant protein-based
immunotherapeutic developed by VBI for use in treating chronic HBV, with a novel composition developed jointly with Brii Bio (either
being the “Licensed Product”); |
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(ii) |
we
granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be required
to obtain and maintain marketing approval for the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize
and promote the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory; and |
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(iii) |
Brii
Bio granted us an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest in any joint technology
developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV
in the countries of the world other than the Licensed Territory. |
On
December 20, 2021, we and Brii Bio further amended the License Agreement (the “Brii Second Amendment”) subject to the
following additional terms and conditions:
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(i) |
we
and Brii Bio agreed to conduct an additional Phase II combination clinical trial of VBI-2601, both with and without IFN-α,
and BRII-835 (VIR-2218) (“Combo Clinical Trial”); and |
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(ii) |
Brii
Bio granted us a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the Combo Clinical
Trial solely for use in the development, manufacture or commercialization of the Licensed Product in combination with an siRNA in
the countries of the words other than the Licensed Territory. |
Pursuant
to the Brii Second Amendment and the initial development plan, Brii Bio shall fund all clinical trials for the Licensed Territory.
We and Brii Bio will jointly own all right, title and interest in the joint know-how development and the patents claiming joint
inventions made pursuant to the Brii Second Amendment.
As
part of the initial consideration for the collaboration under the License Agreement, we received from Brii Bio a total upfront payment
of $11 million. We are also eligible to receive an additional $117.5 million in potential milestone payments, along with potential low
double-digit royalties on commercial sales in the Licensed Territory. In connection with the License Agreement, we and Brii Bio entered
into a stock purchase agreement, dated as of December 4, 2018, pursuant to which we issued to Brii Bio an aggregate of 2,295,082 common
shares in exchange for a gross contractual allocation of $7 million (included in the $11 million upfront payment), or $3.05 per share,
which had a fair value of $3.6 million on the date of issuance.
There
was no additional consideration contemplated in the Brii Second Amendment.
The
License Agreement will be in effect until the last-to-expire of the latest of the following terms in each region of the Licensed Territory:
(i) expiration, invalidation or lapse of the last of our patent claiming a Licensed Product, (ii) 10 years from the date of first commercial
sale of a Licensed Product in the applicable region, or (iii) termination or expiration of our obligation to pay third party royalties
with respect to sales of a Licensed Product. Upon expiration (but not an earlier termination) of the License Agreement in each region
of the Licensed Territory, we will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license under our technology
related to the Licensed Compounds (as defined in the License Agreement) or Licensed Products pursuant to the License Agreement in such
region to make and sell Licensed Products for the diagnosis and treatment of HBV in such region. Each party may terminate the License
Agreement upon a material breach of the License Agreement which has not been cured within 60 days (or 30 days for a breach payment obligations)
after notice from the terminating party requesting cure of the breach, or upon bankruptcy or insolvency, either voluntary or involuntary,
dissolution, or liquidation of a party. In addition, Brii Bio may terminate the License Agreement without cause upon 180 days’
notice or, if the Data and Safety Monitoring Board or any regulatory authority in the Licensed Territory imposes a clinical hold on any
clinical trial for a Licensed Product for six consecutive months, immediately upon notice. We may terminate the License Agreement immediately
upon notice, if Brii Bio or its affiliates, directly, or indirectly through any third party, commences any interference or opposition
proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of or the grant of a supplementary
protection certificate with respect to, any patents owned or controlled by us related to the composition or the method of making or using
Licensed Compounds or Licensed Products, or are otherwise necessary or useful to research, develop, make, or otherwise commercialize
the licensed compounds or Licensed Products.
Prior
to us entering into the License Agreement, we paid $6 million to terminate a distribution agreement with a third party who previously
held certain distribution rights to certain Asian markets.
Collaboration
Agreement with GSK
On
September 10, 2019, we entered into the Collaboration Agreement with GSK (the “GSK Collaboration Agreement”) pursuant to
which we agreed to investigate the use of GSK’s proprietary AS01 adjuvant in our Phase I/IIa study of VBI-1901. As a
result of the GSK Collaboration Agreement, we added a second study arm to Part B of the study and announced enrollment of patients
in the AS01B arm in March 2020, as described in “Part I - Item I - Business - eVLP Platform - VBI-1901: Cancer
Vaccine Immunotherapeutic Candidate”.
Collaboration
Agreement with the NRC
On
March 31, 2020, we announced a collaboration with the NRC, Canada’s largest federal research and development organization, to develop
a coronavirus vaccine candidate. The collaboration combines VBI’s viral vaccine expertise, eVLP technology platform, and coronavirus
antigens with the NRC’s uniquely designed SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic
vaccine candidate for further development.
On
December 21, 2020, we signed an amendment to the collaboration agreement with the NRC to broaden the scope of collaboration to include
certain pre-clinical evaluations, bioprocess optimization, technology transfer, and the performance of additional scale up work.
On
July 8, 2021, we signed a second amendment to the collaboration agreement with the NRC to broaden the scope of the collaboration to include
developing a vaccine against the Beta variant of SARS-CoV-2.
On
August 27, 2021, we signed a third amendment to the collaboration agreement with the NRC to further broaden the scope to include certain
stable cell line work for our vaccine candidate against the Beta variant of SARS-CoV-2.
On
November 15, 2021, we signed a fourth amendment to the collaboration agreement with the NRC to further broaden the scope for our vaccine
candidate against the Beta variant of SARS-CoV-2 to include additional animal studies and PRNT analysis.
On
February 8, 2022, we signed a fifth amendment to the collaboration agreement with the NRC to further broaden the scope to include additional
assays of new variants against SARS-CoV-2.
On
April 28, 2022, we signed a sixth amendment to the collaboration agreement with the NRC to further broaden the scope to include generation
and testing of stable pools of cells expressing SARS-CoV-2 spike protein.
On February 28, 2023, we signed
a seventh amendment to the collaboration agreement with the NRC to extend the expiration date of the collaboration agreement to December
31, 2023.
Collaboration
Agreement with the Agenus Inc. (“Agenus”)
On
October 12, 2022, the Company entered into a Clinical Collaboration Agreement with Agenus Inc. pursuant to which the Company will evaluate
VBI-1901 in combination anti-PD-1 balstilimab in a Phase II study as part of the INSIGhT adaptive platform trial in patients first diagnosed
with GBM. Subject to approval from regulatory bodies, we expect enrollment to initiate in the VBI-1901 study arm
in INSIGhT mid-year 2023, as described in “Part I - Item I - Business - eVLP Platform - VBI-1901: Cancer Vaccine Immunotherapeutic
Candidate”.
Partnership
with the CEPI
On
March 9, 2021, we announced a partnership with CEPI to develop eVLP vaccine candidates against
SARS-COV-2 variants, including the Beta variant, also known as the B.1.351 variant and 501Y.V2, first identified in South Africa. CEPI
agreed to provide up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of
the spike protein from the Beta variant, through Phase I clinical development.
On
December 6, 2022, we and CEPI entered into an amendment to the CEPI Funding Agreement (the “CEPI Amendment”) to expand
the scope of the CEPI Funding Agreement. The CEPI Amendment, among others, (i) expands the definition of “Project
Vaccine” to include additional multivalent vaccine constructs within the VBI-2900 program, (ii) removes certain pricing
restrictions previously allocated to high-income countries in the CEPI Funding Agreement, (iii) updates the proposed volume
commitment percentage contributions by us to CEPI for a Project Vaccine, and (iv) adds certain commercial benefits and related
adjustments for CEPI following the pandemic period, including royalties paid to CEPI, in the event that CEPI provides funding for
Phase III clinical studies of the Project Vaccine.
Contribution
Agreement with the Government of Canada
On
July 3, 2020, we and the NRC as represented by its IRAP signed a contribution agreement whereby the NRC agreed to contribute up to CAD
$1 million for the transfer and scale-up of the technical production process for our prophylactic coronavirus vaccine program.
On
September 16, 2020, we signed the Contribution Agreement (as amended, the “Contribution Agreement”) with Her Majesty the
Queen in Right of Canada, as represented by the Minister of Industry (the “Minister”), whereby the Minister agreed to contribute
an amount not exceeding the lesser of (i) 75% of VBI Cda’s costs incurred in respect of the Project, subject to certain eligibility
limitations as set forth in the Contribution Agreement and (ii) CAD $56 million from the SIF to support the development of our coronavirus
vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). We initially agreed to complete such project,
to be conducted exclusively in Canada except as permitted otherwise under certain circumstances, in or before the first quarter of 2022
(“Project Completion Date”). On March 28, 2022, we and the Minister signed an amendment
to the Contribution Agreement, the main purpose of which was to extend the collaboration and move the Project Completion Date from March
31, 2022 to December 31, 2023. In consideration of such contribution, we agreed to guarantee the complete performance and fulfillment
of VBI Cda’s obligations under the Contribution Agreement. In the event VBI Cda fails to perform or otherwise satisfy any of its
obligations related to the Contribution Agreement, we will become a primary obligor under the Contribution Agreement.
For
the term of the Contribution Agreement, VBI Cda must have exclusive ownership of all intellectual property developed in connection with
the Project (the “Project Intellectual Property”). Pursuant to the Contribution Agreement, we are required to obtain a consent
of the Minister, not to be unreasonably withheld, prior to granting any right or license to any of the Project Intellectual Property
and certain other intellectual properties that is required for the carrying out of the Project (the “Background Intellectual Property,”);
subject to certain exceptions set forth in the Contribution Agreement. Furthermore, if we are unable to provide a sufficient Canadian-sourced
supply of the COVID-19 vaccine, the Minister may require us to grant a license on commercially reasonable terms to use the Project Intellectual
Property and the Background Intellectual Property, but only to the extent necessary to ensure such supply.
Under
the terms of the Contribution Agreement, we agreed to obtain the Minister’s written consent prior to (i) making significant changes
in the scope, objectives, outcomes or benefits of the Project, (ii) dispose of any assets, which were, in whole or in part, funded by
the Minister under the Agreement, and (iii) effecting a Change in Control (as defined in the Contribution Agreement). In addition, we
will provide a written notice to the Minister of any acquisition of a business, the sale of a business or a merger or amalgamation.
In
an event of default, subject to a rectification period available in certain circumstances, among other things, the Minister may (i) suspend
or terminate its contribution to the Project and (ii) require repayment of all or part of the contribution paid by the Minster, together
with interest from the day of demand at the interest rate set forth in the Contribution Agreement.
The
Contribution Agreement will terminate no earlier than five years following the Project Completion Date unless terminated earlier in accordance
with the terms of the Contribution Agreement. The Contribution Agreement also contains confidentiality and indemnification obligations
of the parties.
In
connection with execution of the Contribution Agreement, we obtained a consent of K2 HealthVentures LLC (“K2HV”)
pursuant to the Loan and Guaranty Agreement (the “Loan Agreement”), dated May 22, 2020, as amended on May 7, 2021 (the
“First Amendment”) and on September 14, 2022 (the “Second Amendment”). Pursuant to such consent, certain
events of default that result in contributions made under the Contribution Agreement in excess of $500, becoming due and payable
could result in an event of default under the Loan Agreement.
Ferring
and SciGen License Agreements
HBsAg products, including our 3-antigen HBV vaccines, are subject of a license agreement between Savient Pharmaceuticals
Inc. and SciGen Ltd dated June 2004, (the “original Ferring License Agreement”). as subsequently amended and restated on October
18, 2022 (the “Amended and Restated Ferring License Agreement”). This Amended and Restated Ferring License Agreement amends
and restates certain of the terms relating to the manufacture and marketing of HBsAg products, which includes, among others, updates to
the definition of net sales, and a reduction in the fixed royalty rate on net sales of HBsAg products (“Product”) from seven
percent (7%) to three and a half percent (3.5%) in consideration for the grant of the license to utilize genetically engineered CHO cells
encoding the hepatitis B antigen and certain information related to the manufacture of hepatitis B vaccines. In connection with the Amended
and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac’s obligations under the Amended
and Restated Ferring License Agreement, or if the Amended and Restated Ferring License Agreement is assigned to a third party, guarantor
for SciVac’s obligations that have accrued up until the date of such assignment.
Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated
February 14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net
sales (as defined in the original Ferring License Agreement) of Product. Under the original Ferring License Agreement and the SciGen Assignment
Agreement, we originally were to pay royalties on a country-by-country basis until the date 10 years after the date of commencement of
the first royalty year in respect of such country. In April 2019, we exercised our option to extend the original Ferring License Agreement
in respect of all the countries that still make up the territory for an additional 7 years by making a one-time payment to Ferring of
$100. Royalties under the Amended and Restated Ferring License Agreement and SciGen Assignment Agreement will continue to be payable for
the duration of the extended license periods.
Royalty
payments under the Amended and Restated Ferring License Agreement or the original Ferring License Agreement of $33 and $18 were
recorded in cost of revenues for the year ended December 31, 2022 and 2021, respectively.
Royalty
payments under the SciGen Assignment Agreement of $47 and $13 were recorded in cost of revenues for the year ended December 31, 2022
and 2021, respectively.
In addition, we are committed
to pay 30% of any and all non-royalty consideration, in any form, received by us from sub-licensees (other than consideration based on
net sales for which a royalty is due under the Amended and Restated Ferring License Agreement), provided that the payment of 30% shall
not apply to a grant of rights in or relating to: (i) the Original Territory (as defined in the original Ferring License Agreement);
or (ii) the Berna Territory (as defined in the Amended and Restated Ferring License Agreement).
eVLP
Technology Purchase Agreement
We
are engaged in the inbound licensing of key intellectual property. We identified the need for a vaccine antigen discovery and design
platform and, through that certain sale and purchase agreement entered into on July 18, 2011 (the “Sale and Purchase Agreement”)
among VBI Cda and ePixis SA (“ePixis”) and the shareholders of ePixis (collectively, the “Sellers”), acquired
100% of the outstanding shares of ePixis in order to obtain access to its exclusive rights to key intellectual property covering its
eVLP vaccine platform (the “Technology”), including patents (the “Acquired Patents”) covering the Technology.
We paid a purchase price of €400 (approximately $450) for the ePixis shares and approximately $75 in related transaction costs.
VBI Cda also agreed to make certain contingent payments to the Sellers as follows:
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Upon
the earlier to occur of (i) first approval by the FDA of a new drug application (an “NDA”) permitting us or any sublicensee
to market and sell any pharmaceutical product or candidate pharmaceutical product that contains or can express an eVLP (a “eVLP
Product”) in the U.S. or (ii) first approval by the European Medicines Agency of a Marketing Authorization Application or equivalent submission
permitting us or our sublicensees to market and sell a eVLP Product candidate in one or more countries in the EU, we must pay to
the Sellers €1,000, or, if there are no longer any issued and valid claims of the Acquired Patents in effect at the date such
event occurs, €500. |
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If
an eVLP Product is commercialized, we will be required to pay the Sellers the following: |
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On
the date that Cumulative Net Sales (as defined in the Sale and Purchase Agreement), of all eVLP Products equals or exceeds €25,000,
we must pay to the Sellers €1,500, or, if there are no longer any issued and valid claims of the Acquired Patents in effect
at the date such event occurs, €750; and |
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On
the Date that Cumulative Net Sales of all eVLP Products equals or exceeds €50,000 in the aggregate, we must pay to the Sellers
€2,000 or, if there are no longer any issued and valid claims of the Acquired Patents in effect at the date such event occurs,
€1,000. |
If
any eVLP Product is commercialized by one or more sublicensees, we have agreed to make the following payments to the Sellers:
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On
the date that Cumulative Net Sales by us or any sublicensees of the eVLP Products equal or exceed €25,000 in the aggregate,
we must pay to the Sellers €750, or, if there are no longer any issued and valid claims of the Acquired Patents in effect at
the date such event occurs, €375; |
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On
the date that Cumulative Net Sales made by us or any sublicensees of the eVLP Products equal or exceed €50,000 in the aggregate,
we must pay to the Sellers €750, or, if there are no longer any issued and valid claims of the Acquired Patents in effect at
the date such event occurs, €375; |
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On
the date that Cumulative Net Sales made by us or any sublicensees of the eVLP Products equal or exceed €75,000 in the aggregate,
we must pay to the Sellers €1,000, or, if there are no longer any issued and valid claims of the Acquired Patents in effect
at the date such event occurs, €500; and |
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On
the date that Cumulative Net Sales made by us or any sublicensees of the eVLP Products equal or exceed €100,000 in the aggregate,
we must pay to the Sellers €1,000, or, if there are no longer any issued and valid claims of the Acquired Patents in effect
at the date such event occurs, €500. |
Included
in the eVLP Acquired Patents were patents (the “UPMC Patents”) co-owned by L’Universite Pierre et Marie Curie, now
Sorbonne Université (“UPMC”), and the Institut National de la Santé et de la Recherche Médicale (“INSERM”),
both in Paris, France. In July 2006, ePixis entered into a license agreement (the “ePixis License Agreement”) with UPMC,
INSERM, and L’école Normale Supérieure de Lyon (collectively the “Licensor”) pursuant to which the Licensor
granted to ePixis an exclusive license (with the right to sublicense with written consent from UPMC) to exploit the UPMC Patents for
the purpose of developing, promoting and marketing products within the U.S., Japan, Canada, and Europe until the expiry of the
last of the UPMC Patents, including any supplementary protection certificates. Pursuant to the ePixis License Agreement, ePixis was to
pay certain fees to the Licensor based on net sales (as defined in the ePixis License Agreement) of products developed from the UPMC
Patents, sublicensing income based on net sales (“Sublicensing Payments”) and one-time payments (“Lump Sum Payments”)
for each product developed from the UPMC Patents. ePixis also agreed to reimburse UPMC for fees and costs related to filing and maintaining
the patent applications.
On
July 12, 2011, the parties to the ePixis License Agreement entered into the first amendment to the ePixis License Agreement (the “ePixis
Amendment”). The ePixis Amendment authorized the transfer of the ePixis License Agreement to VBI Cda and laid out new financial
terms and conditions for the rights granted under the ePixis License Agreement.
The
ePixis Amendment provides that the fees to be paid to the Licensor by ePixis on net sales of eVLP Products based on the UPMC Patents
will be 1.75% of net sales for annual sales between €0 and €50,000, 1% of net sales for annual sales between €50,000 and
€100,000, and 0.75% of net sales for annual sales in excess of €100,000. Pursuant to the ePixis Amendment, Lump Sum Payments
shall be made as follows:
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€50
when the results from pre-clinical studies are sufficient to allow a product to enter a regulatory filing similar to an IND or a
similar entity in a country other than the U.S.; this milestone was met and paid during the year ended December 31, 2016
for the CMV candidate and during the year ended December 31, 2018 for the GBM candidate. During the year ended December 31, 2021,
the milestone was met for our prophylactic coronavirus vaccine program; |
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€150
when the results from pre-clinical studies are sufficient to allow a product into a clinical phase, including Phase I-II clinical
studies; this milestone was met and paid during the year ended December 31, 2016 for the CMV candidate; during the year ended December
31, 2018 for the GBM candidate; and during the year ended December 31, 2021 for our prophylactic coronavirus vaccine program; |
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€250
when a product enters Phase II clinical studies, an event that is defined by the enrollment of the first patient; |
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€500
when a product enters Phase III clinical studies; and |
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€1,000
when a product is first marketed. |
UPMC
is also a co-owner of the patent family covering our VBI-1501 CMV vaccine and we are negotiating extension of our existing
license to cover this patent family.
Fees
on income earned from sublicenses under the ePixis Amendment were revised as follows: 25% of any amounts received by ePixis for the sublicense
if the sublicense is entered into prior to the start of Phase I clinical studies; 10% of any amounts received by ePixis if the sublicense
is entered into during Phase I clinical studies and prior to the start of Phase II clinical studies; 7% of any amounts received by ePixis
if the sublicense is entered into during Phase II clinical studies and prior to the start of Phase III clinical studies, and 5% of any
amounts received by ePixis if the sublicense is entered into after the start of Phase III clinical studies. There was no change to the
requirement that ePixis reimburse UPMC for fees and costs related to filing and maintaining the patent applications and patents.
The
parties may terminate the ePixis License Agreement, as amended, by mutual agreement. There is also a cancellation right that may be exercised
in the event of breach. UPMC may terminate the ePixis License Agreement if we, among other things, declare bankruptcy; do not put forth
reasonable effort or are unable to develop and market the products, and, in particular, if we suspend the development of the products
for more than six months; our inability to make the payments required by the ePixis License Agreement; lack of sales of a product, or
lack of a signed sub-license agreement within one year from the date of acquiring AMM (Autorisation de mise sur le marché –
Regulation of Therapeutic Goods) authorization, or the necessary equivalent authorization for the use of the products; and lack of sales
of a product for more than two years after the initial marketing has taken place. During the year-ended December 31, 2016, VBI Cda paid
UPMC €200 in milestone payments related to CMV Phase I clinical trial approval and start. During the year ended December 31, 2018,
VBI Cda paid UPMC €200, in milestone payments related to the GBM Phase I/IIa clinical trial approval and start.
During the year
ended December 31, 2021, VBI Cda paid UPMC €200 in milestone payments related to our prophylactic coronavirus vaccine program clinical
trial approval and start. No payments were made during the year ended December 31, 2022.
Description
of Operations
We
are headquartered in Cambridge, Massachusetts, with our manufacturing facility in Rehovot, Israel and our research facility in Ottawa,
Ontario, Canada.
The
Cambridge headquarters allows us to leverage our location in a biotechnology hub, and provides us with access to experienced consultants
and executive level talent.
In
Rehovot, Israel, we operate a proprietary, GMP-certified, mammalian cell-derived vaccine manufacturing facility, which we use to
manufacture our 3-antigen HBV vaccine, as well as clinical study supply of VBI-2601. The facility was built in December 2006 and
most recently received GMP certification renewal by the Ministry of Health of the State of Israel (“IMoH”) on February
6, 2022. It has also received IMoH authorization to release vaccine batches to export markets. In 2013, the EU entered into an
agreement with Israel regarding conformity assessment and acceptance of industrial products. This agreement recognizes
Israel’s industrial standards as being equivalent to EU standards. It covers products for human and veterinary use (medicinal
products, active pharmaceutical ingredients and excipients) and procedures related to GMP. The agreement means that Israel and the
EU recognize each other’s GMP inspection conclusions, manufacturing and import authorizations and certification of conformity
of batches. In 2021 our facility passed a FDA Remote Interactive Evaluation as part of the Biologics License Application
(“BLA”) application process whereby PreHevbrio was approved for use in the U.S.
The
Canadian research site benefits from its location in Canada’s National Capital Region, providing us with access to world-class
research facilities. VBI Cda’s active research collaboration with the Canadian federal government’s NRC provides its staff
with on-site access to the NRC’s animal facility for greater control over the testing of our pipeline candidates. NRC staff manages
the general animal husbandry and maintenance requirements for VBI Cda’s animal research activities.
The
three sites collaborate efficiently through the use of a unified information technology infrastructure and web-based video-conferencing
services.
Competitors
Our
pipeline candidates face, and will continue to face, intense competition from large pharmaceutical companies, specialty pharmaceutical
and biotechnology companies as well as academic and research institutions. We compete in an industry that is characterized by: rapid
technological change; evolving industry standards; emerging competition; and new product introductions. Competitors have existing products
and technologies that will compete with our pipeline candidates and technologies and may develop and commercialize additional products
and technologies that will compete with our pipeline candidates and technologies. Because several competing companies and institutions
may have greater financial resources than us, they may be able to: provide broader services and product lines; make greater investments
in research and development (“R&D”); and carry-on larger R&D initiatives. Competitors may also have greater development
capabilities than we do and have substantially greater experience in undertaking nonclinical and clinical testing of products, obtaining
regulatory approvals and manufacturing and marketing pharmaceutical products. They may also have greater name recognition and better
access to customers.
We
face general market competition from several subsectors of the vaccine development field, including: large, multinational pharmaceutical
companies including Sanofi S.A. (“Sanofi”), GSK, Merck, Janssen Pharmaceutical, Inc (“Janssen”), Mitsubishi Tanabe
Pharma Corporation, Takeda Pharmaceutical Company Limited and Pfizer, Inc. (“Pfizer”); large and mid-size pharmaceutical
companies and emerging biotechnology companies including Dynavax, Novavax Inc., Moderna, Inc. (“Moderna”), BioNTech SE, and Hookipa Biotech AG; and
academic and not-for-profit vaccine researchers and developers including the National Institutes of Health. The industry is typified
by extensive collaboration, licensing, and merger and acquisition activity despite the intense competition.
In
the prophylactic HBV vaccine space, we have several key competitors currently commercializing single-antigen HBV vaccines, including:
GSK, the manufacturer of Engerix-B and Twinrix, Merck, the manufacturer of Recombivax HB, and Dynavax, the manufacturer of Heplisav-B.
Within
the therapeutic HBV space, we face both competition from and potential collaboration with other developers of innovative HBV therapeutics
designed to achieve a functional cure in combination with other therapeutics. Key large pharmaceutical companies in the space include:
GSK, Janssen, Gilead Sciences, Inc, and F. Hoffmann-La Roche Ltd (“Roche”). Additionally, there are a number of mid-size
companies developing alternative approaches to treat HBV, including: VIR, Arbutus Biopharma Corp, Dicerna Pharmaceuticals Inc, and Aligos
Therapeutics Inc. It is not yet known which modes of action, or combinations thereof, will lead to a HBV functional cure.
Given
the significant unmet medical need for GBM, there are numerous competitors seeking to develop new immunotherapies to treat GBM. Among
these, Immunomic Therapeutics Inc (“Immunomic”), Immatics Biotechnologies GmBH, Stemline Therapeutics Inc., Mimivax LLC,
and Inovio Pharmaceuticals Inc are developing vaccines that are also currently completing clinical studies. Immunomic’s approach
also targets CMV antigens associated with GBM using a dendritic cell vaccine. Additional cell-based therapies and oncolytic viruses include
those under clinical study by DNAtrix Inc and Transgene SA.
Within the COVID vaccine
space, over the last three years, more than one hundred vaccine candidates against SARS-CoV-2 were under development; four groups
have obtained FDA approval or authorization for emergency use: (i) Pfizer, Inc/BioNTech SE; (ii) Moderna; (iii) J&J/Janssen; and (iv) Novavax. Approvals for additional vaccines targeting COVID-19 and its variants are
anticipated. Other key companies in the space with vaccines recognized by the WHO and/or approved for use by other regulatory
agencies include AstraZeneca AB, Bharat Biotech International Limited, CanSino Biologics Inc., Serum Institute of India Pvt. Ltd,
Sinopharm/Beijing Institute of Biological Products Co., Ltd., and Sinovac Life Sciences Co., Ltd. Dozens of additional companies
and institutions are running clinical studies, and we expect the COVID space to evolve rapidly over the next year.
Within
the CMV vaccine space, we have several key competitors, some of whom are further advanced with their CMV vaccine development. Among these,
Moderna’s CMV vaccine is in Phase III, and Hookipa Biotech AG CMV vaccine is in Phase II.
Suppliers
and Contractors
Suppliers
We
rely on a single source for our supply of vials and certain raw materials required for the manufacturing of our 3-antigen HBV vaccine.
We have supply agreements with these vendors intended to assure quality and flow of materials. Alternative sources from which we can
obtain our supply of these materials is under assessment. We may not be able to find alternative suppliers in a timely manner that would
provide supplies of these materials at acceptable quantities and prices, if at all. Additionally, critical supplies and reagents are
also required by our contractors for manufacturing and release testing of our eVLP-based pipeline candidates. Any interruption in the
supply of these materials would disrupt our ability to manufacture our 3-antigen HBV vaccine and our pipeline candidates and could have
a material adverse effect on our business.
Contractors
We
enter into contracts in the normal course of business with contract research organizations (“CROs”) for clinical trials and
contract development and manufacturing organizations (“CDMOs’) for manufacturing of our eVLP vaccine candidates. We also
enter into contracts in the normal course of operations with vendors for research studies, research supplies and other services and products
for operating purposes. These contracts generally provide for termination on notice.
We engage CRO’s to conduct
our clinical programs including the GBM Phase I/IIa clinical program and our prophylactic coronavirus vaccine program. Our reliance on
these CRO’s reduces our control over these activities and involves certain risks. See “Risk Factors” on page 27 for more information regarding the risks associated with our reliance on CROs.
We
engage CDMOs to manufacture our eVLP vaccine candidates and these CDMOs are dependent on sourcing raw materials from third party suppliers.
Our reliance on these CDMOs reduces our control over these activities and involves certain risks. See “Risk Factors” on page
27 for more information regarding the risks associated with our reliance on CDMOs.
We
rely on a number of contractors to provide services to characterize and release our 3-antigen HBV vaccine. While alternative contractors
exist for these services, we may not be able to transition to alternative contractors in a manner that does not disrupt the normal course
of manufacturing operations and the supply of our 3-antigen HBV vaccine.
Our
novel vaccine development efforts depend on a number of key suppliers to continue our research operations. We have identified the following
parties as key suppliers of reagents, technology, or expertise which impact our development plans with our eVLP pipeline candidates:
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UPMC
is the owner of the eVLP vaccine platform intellectual property portfolio to which we have an exclusive license. Under the terms
of the ePixis License Agreement, as amended, we are required to pay royalties for successful products developed using the intellectual
property for as long as patent claims cover the period in a given jurisdiction. This patent portfolio has claims that are expected
to remain in force until 2023 in the U.S., after which time we are no longer obligated to compensate UPMC for development
of vaccines based on the UPMC intellectual property portfolio. After that time, the remaining patent protection of the CMV vaccine
candidate will be based on patents and patent applications co-owned with UPMC which, if granted, would provide patent protection
extending until 2032. We are negotiating an agreement with UPMC to cover the CMV patents and patent applications. There
can be no assurance that any pending patent applications will be granted or, if granted, will be enforceable, and the claims in pending
patent applications may be amended to reduce the scope of patent claims. |
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We
have collaborated with NRC on various vaccine projects since 2004 and have a long history of successful partnerships including several
NRC-administered industrial research grants. The NRC developed a proprietary cell line (HEK-293-NRC) that we are using for production
of our eVLP-based vaccine candidates. VBI Cda and the NRC have signed a research agreement that provides VBI Cda with access to NRC
facilities and expertise for the advancement of our vaccine candidate programs. Supplementary to such research agreement, we negotiated
terms for a non-exclusive license to the HEK-293-NRC cell line. Under these terms, we were required to pay success-based milestone
payments until the patents on the cell line expired in November of 2018. We are collaborating with NRC to develop a coronavirus vaccine
candidate. The collaboration combines our viral vaccine expertise, eVLP technology platform, and coronavirus antigens with the NRC’s
uniquely designed SARS-CoV-2 antigens and assay development capabilities to select the most immunogenic vaccine candidate for further
development. The scope of collaboration includes certain pre-clinical evaluations, bioprocess optimization, technology transfer,
and the performance of additional scale up work. |
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Key
Reagent Suppliers: Characterization and release assays for our eVLP-based vaccines require specialized reagents. Several key reagents
including reference proteins and growth media are provided by third parties and can impact development timelines. We have secured
sufficient quantities of third-party reference proteins and growth media for ongoing and planned clinical studies. Supply of these
key reagents remains a risk. See “Risk Factors” on page 27 for more information regarding the risks associated with
our reliance on key reagents. |
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We,
through our wholly-owned subsidiaries, depend on subcontractor arrangements to facilitate the completion of our research programs. Catalent
Biologics, previously Paragon Bioservices, has manufactured clinical batches of our CMV vaccine candidate and our GBM immunotherapeutic
vaccine candidate pursuant to the terms of a GMP-Manufacturing Services Agreement dated September 26, 2014. Resilience Biotechnologies,
previously Therapure Biopharma Inc., manufactures clinical batches of our prophylactic coronavirus vaccine program and our GBM immunotherapeutic
vaccine candidate pursuant to the terms of a Master Service and Supply Agreement dated November 10, 2020. |
Employees
As of December 31, 2022, we had
a total of 190 full-time and 6 part-time employees. The manufacturing site in Israel had 124 full-time employees and 4 part-time employees
and the Ottawa research site employed 48 full-time and 2 part-time employees, as of December 31, 2022. Our headquarters in Cambridge,
MA employed 18 full-time employees. None of our employees are represented by unions. Our management considers its relationship with our
employees to be good.
We are committed to maintaining
a diverse and inclusive work environment that promotes fairness and values each team members’ unique experience and contribution
to the workplace. By bringing together individuals with varying backgrounds, expertise, and perspectives into an inclusive and collaborative
work environment, we believe we can better achieve our corporate objectives and deliver long-term, sustained value for key stakeholders
– patients, healthcare providers, and shareholders. We review our internal diversity statistics on an annual basis, and while we
believe we have created a team that is inclusive, we continually strive to better our diversity profile, including by: (i) improving the
rate of self-identification with our internal workforce; and (ii) increasing access to groups where we don’t have representation
by working with certain academic centers and recruiters, and by leveraging diverse job boards and employment centers.
We also strongly believe that
all employees should be treated with respect, and we strictly enforce our Non-Discrimination, Anti-Harassment, and Anti-Retaliation Policies
to protect and maintain a safe, respected, and supportive workplace environment for all employees.
Facilities
and Offices
Our
registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with our headquarters located at 160
Second Street, Floor 3, Cambridge, MA, 02142. Our manufacturing operations are located in Rehovot, Israel and our primary research facility
is located in Ottawa, Ontario, Canada, refer to “Part I – Item 2. Properties.”
We
rent office, manufacturing and research facility space under various operating leases, and we made rent payments of $1,865 during the
fiscal year ended December 31, 2022.
We
believe that our office, manufacturing, and research facilities are suitable and adequate for our current operations but will consider
term extensions or expansion of leased space, depending on market conditions and needs.
Research
and Development
We invest heavily in R&D.
R&D expenses were $15.5 million and $19.6 million for the years ended December 31, 2022 and 2021, respectively. All R&D was funded
by equity financings, term loan financings, collaboration agreements, funding agreements or government grants and contributions. Our most
significant R&D expenses to date have been related to the development of our 3-antigen HBV vaccine, followed by the development of
our GBM vaccine immunotherapeutic candidate (VBI-1901), our prophylactic coronavirus vaccine candidates (VBI-2900), our CMV candidate
(VBI-1501), and the related eVLP platform. We continue to invest in and advance our lead pipeline candidates. In addition, we may bring
other pipeline candidates through the clinical development stage and explore other vaccine opportunities and/or collaborations.
Intellectual
Property
Patents
Our
intellectual property portfolio includes 19 active patent families consisting of 196 fully owned or co-owned or exclusively licensed
patents and patent applications. The highlights of our patent portfolio include:
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eVLP
vaccine related intellectual property: we have an exclusive license to a patent family that protect the eVLP vaccine platform and
derivatives thereof. Among these patents are rights that were originally developed at the UPMC (now Sorbonne Universite), for which we hold a world-wide exclusive license to the base technology for the design of an eVLP. |
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GBM
vaccine immunotherapeutic candidate related intellectual property: we own or co-own three patent families which directly address
our GBM vaccine immunotherapeutic candidate. These patents and applications include claims to compositions of matter and methods
of treating GBM patients. |
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CMV
vaccine candidate related intellectual property: we own or co-own two patent families which directly address our CMV vaccine candidate.
These patents and patent applications include a composition of matter patent describing the CMV vaccine candidate as well as a proprietary
assay used to provide high-throughput screening of anti-CMV vaccine candidate responses. |
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HBV
Immunotherapeutic candidate related intellectual property: we own or co-own two patent families which directly address our HBV immunotherapeutic
candidate. These patent applications include claims to compositions of matter and methods of treating HBV patients. |
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Coronavirus
vaccine candidate related intellectual property: we own or co-own two patent families which directly addresses our coronavirus vaccine
candidates. These patent applications include claims to compositions of matter and methods of treating a subject at risk of COVID-19
infection. |
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Lipid
Particle Vaccines (“LPV”) vaccine related intellectual property: we own six patent families which protect our LPV technology
platform. These patents include the method for manufacturing an LPV so as to confer thermostability, the proprietary ratios of excipients
and antigens that are required to give rise to a thermostable formulation, and specific parameters required to confer thermostability
to several distinct classes of vaccine antigens and biologic proteins. |
We
continuously monitor the competitive landscape for infectious disease vaccines to better understand the research,
business, and patent activities of our academic and industrial competitors. This process helps management to understand the competitive
positioning of our pipeline. This knowledge has informed and shaped our patent portfolio, which is designed to protect our proprietary
vaccine technologies and establish a defense against third-party infringement claims. Our licensed patent family relating to virus-like
particles has a patent whose term extends to 2023 in the U.S. Our most recently filed patent family will have a patent term
that extends to 2041.
Trade
Secrets
Some
of our know-how and technology is not patentable. To protect our proprietary rights in unpatentable intellectual property and trade secrets,
we require employees, consultants, advisors and collaborators to enter into agreements regarding intellectual property and confidential
information.
Trademarks
We
use the PreHevbrio, PreHevbri, and Sci-B-Vac trademarks in connection with our 3-antigen HBV vaccine. These trademarks are registered
in 12 countries. There are two pending marks in the U.S. and one pending mark in Norway. There is one registered European Community
mark. The trademarks are renewable indefinitely, so long as we make the appropriate filings when required. We also have a registration
for the LPV mark in Canada.
Governmental
Regulation and Product Approval
Vaccine
development is a highly regulated field. The manufacturing and marketing of our products and product candidates and our ongoing research
and development activities are subject to extensive regulation by the FDA and comparable regulatory agencies of local, state, and foreign
jurisdictions, such as Health Canada in Canada, the EMA in Europe, and the MHRA in the UK. New products must go through extensive pre-clinical
and clinical development prior to product launch. This process can take more than ten years from candidate identification to licensure/marketing
approval by health authorities worldwide. Despite efforts to harmonize regulatory requirements in different jurisdictions, there exists
a divergence of legal and regulatory requirements in different countries and territories. Delays in regulatory approval to move from
one stage of development to another can potentially cause us significant delays and can affect our market capitalization.
U.S.,
Europe, and Canada Regulatory Agencies
Before
any of our products can be marketed and sold in the U.S., Europe, or Canada, they must receive approval from the relevant regulatory
agencies, including the FDA, EMA, UK MHRA, and Health Canada. To receive regulatory approvals to market any drug or vaccine, including
those we develop, the products in development must undergo rigorous pre-clinical testing and clinical studies that demonstrate the product’s
safety and effectiveness for each indicated use. This extensive regulatory path includes process controls in development, testing, manufacturing,
safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of the pharmaceutical products.
In
general, before any new pharmaceutical or biological product can be marketed in the mentioned geographical areas, the process typically
required by the regulatory agencies includes:
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Pre-clinical
toxicology, laboratory, and animal tests; |
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submission
of an investigational new drug application (an “IND”) in the U.S., which must be reviewed by the FDA before
human clinical trials may begin; submission of a Scientific Advice application to EMA and/or MHRA in Europe; or submission of a Clinical
Trial Application to Health Canada; |
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adequate
and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use; |
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pre-approval
inspection of manufacturing facilities and selected clinical investigator sites; |
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submission
of a NDA, or in the case of a biologics, a BLA, to the FDA, a MAA to the EMA and /or MHRA, or a NDS to Health Canada; and |
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FDA
approval of an NDA, BLA, or a supplement (for subsequent indications or other modifications, including a change in location of the
manufacturing facility), EMA and/or MHRA approval of a MAA, or Health Canada approval of a NDS. |
Pre-clinical
Testing
In
the U.S., drug candidates are tested in animals until adequate proof of safety and efficacy is established. These pre-clinical
studies generally evaluate the mechanism of action and pharmacology of the product and assess the potential safety and efficacy of the
product. Tested compounds must be produced according to applicable cGMP requirements and pre-clinical safety tests must be conducted
in compliance with FDA and international regulations regarding good laboratory practices. The results of the pre-clinical tests, together
with manufacturing information and analytical data, are generally submitted to the FDA as part of an IND, which must become effective
before human clinical trials may commence. The IND will automatically become effective 30 days after receipt by the FDA, unless before
that time the FDA requests an extension or raises concerns about the conduct of the clinical trials as outlined in the application. If
the FDA has any concerns, the sponsor of the application and the FDA must resolve those concerns before clinical trials may begin. Regulatory
authorities may require additional pre-clinical data before allowing the clinical studies to commence or proceed from one phase to another,
and could demand that the studies be discontinued or suspended at any time if there are significant safety issues.
Clinical
Trials
Clinical
trials for new vaccine drug candidates are typically conducted in three sequential phases that may overlap. In Phase I, the initial introduction
of the vaccine drug candidate into human volunteers, the emphasis is on testing for safety or adverse effects, dosage, tolerance, metabolism,
distribution, excretion, and clinical pharmacology. Phase II involves studies in a limited patient population to determine the initial
efficacy of the vaccine drug candidate for specific targeted indications, to determine dosage tolerance and optimal dosage, and to identify
possible adverse side effects and safety risks. Once a vaccine compound shows evidence of effectiveness and is found to have an acceptable
safety profile in Phase II evaluations, pivotal Phase III trials are undertaken to more fully evaluate clinical outcomes and to establish
the overall risk/benefit profile of the drug, and to provide, if appropriate, an adequate basis for product labeling. During all clinical
trials, physicians will monitor patients to determine the effectiveness of the drug candidate and to observe and report any reactions
or safety risks that may result from use of the vaccine drug candidate. The FDA, the trial sites internal review board, and/or the sponsor
may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable
health risk.
Assuming
successful completion of all required testing in accordance with all applicable regulatory requirements, the results of product development,
nonclinical studies and clinical trials are submitted to the FDA as part of a BLA requesting approval to market the product for one or
more indications. The submission of a BLA requires payment of a substantial user fee to the FDA, and the sponsor of an approved BLA is
also subject to annual product and establishment user fees. These fees are typically increased annually. A waiver of user fees may be
obtained under certain limited circumstances. Under applicable laws and FDA regulations, each BLA submitted for FDA approval is usually
given an internal administrative review within 60 days following submission of the BLA. If deemed complete, the FDA will “file”
the BLA, thereby triggering substantive review of the application. The FDA may refuse to file any BLA that it deems incomplete or not
properly reviewable. The FDA has established internal substantive review goals of six months for priority BLAs (for biologics addressing
serious or life-threatening conditions for which there is an unmet medical need) and ten months for regular BLAs. However, these are
agency proposed time frames, and so the FDA is not legally required to complete its review within these periods, and these performance
goals may change over time. Moreover, the outcome of the review, even if generally favorable, is not typically an actual approval, but
an “action letter” that describes additional work that must be done before the BLA can be approved. The FDA’s review
of a BLA may involve review and recommendations by an independent FDA advisory committee. The FDA may deny approval of a BLA or BLA supplement
if the applicable regulatory criteria are not satisfied, or the FDA may require additional clinical data and/or an additional pivotal
Phase III clinical study. Even if such data are submitted, the FDA may ultimately decide the BLA does not satisfy its criteria for approval.
Data
Review and Approval
Substantial
financial resources are necessary to fund the research, clinical trials, and related activities necessary to satisfy FDA requirements
or similar requirements of state, local, and foreign regulatory agencies. It normally takes many years to satisfy these various legal
and regulatory requirements, assuming they are ever satisfied. Information generated in this process is susceptible to varying interpretations
that could delay, limit, or prevent regulatory approval at any stage of the process. Accordingly, the actual time and expense required
to bring a product to market may vary substantially. We cannot assure you that we will submit applications for required authorizations
to manufacture and/or market potential products or that any such application will be reviewed and approved by the appropriate regulatory
authorities in a timely manner, if at all. Success in early-stage clinical trials does not ensure success in later stage clinical trials.
Even if a product candidate receives regulatory approval, the approval may be significantly limited to specific disease states, patient
populations and dosages, or have conditions placed on it that restrict the commercial applications, advertising, promotion or distribution
of these products.
Once
issued, the FDA may withdraw product approval if ongoing regulatory standards are not met or if safety problems occur after the product
reaches the market. In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products which
have been commercialized. The FDA also has the power to prevent or limit further marketing of a product based on the results of these
post-marketing programs. The FDA may also request additional clinical trials after a product is approved. These so-called Phase IV studies
may be made a condition to be satisfied after a drug receives approval. The results of Phase IV studies can confirm the effectiveness
of a product candidate and can provide important safety information via the FDA’s voluntary adverse drug reaction reporting system.
Any products manufactured or distributed by us pursuant to any FDA approvals would be subject to continuing regulation by the FDA, including
record-keeping requirements and reporting of adverse experiences with the drug. Drug and biologics manufacturers and their subcontractors
are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections
by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements upon us
and our third-party manufacturers. We cannot be certain that we or our present or future manufacturers or suppliers will be able to comply
with the cGMP regulations and other FDA regulatory requirements. If our present or future manufacturers or suppliers are not able to
comply with these requirements, the FDA may halt our clinical trials, require us to recall a product from distribution, withdraw approval
of the NDA for that drug, or revoke or suspend a biologics license. Furthermore, even after regulatory approval is obtained, later discovery
of previously unknown negative effects of a product may result in restrictions on the product or even its complete withdrawal from the
market.
The
FDA closely regulates the marketing and promotion of drugs and biologics. Approval is typically subject to post-marketing surveillance
and other record keeping and reporting obligations, and involves ongoing requirements such as post-marketing annual reports and labeling
updates. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur following
initial marketing. A company can make only those claims relating to safety and efficacy that are approved by the FDA. Failure to comply
with these requirements can result in adverse publicity, warning letters, corrective advertising and potential civil and/or criminal
penalties. Physicians may prescribe legally available drugs for uses that are not described in the product’s labeling and that
differ from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe
that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of
physicians in their choice of treatments. The FDA does, however, restrict manufacturers’ communications on the subject of such
off-label use.
Post-Approval
Requirements
Any
products for which we have received, or may, in the future, receive FDA approval are subject to continuing regulation by the FDA, including,
among other things, recordkeeping requirements, reporting of adverse experiences, providing the FDA with updated safety and efficacy
information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include,
among others, standards for direct-to-consumer advertising, restrictions on promoting products for uses or in patient populations that
are not described in the product’s approved uses (known as “off-label” use), limitations on industry-sponsored scientific
and educational activities, and requirements for promotional activities involving the Internet. The FDA and other agencies actively enforce
the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label
uses may be subject to significant liability. If there are any modifications to the product, including changes in indications, labeling
or manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or a supplement,
which may require the applicant to develop additional data or conduct additional pre-clinical studies and clinical trials. Further, if
there are any modifications to the product, including changes in indications, labeling or manufacturing processes or facilities, the
applicant may be required to submit and obtain FDA approval of a new BLA or a BLA supplement, which may require the applicant to develop
additional data or conduct additional pre-clinical studies and clinical trials. The FDA may also place other conditions on approvals
including the requirement for a Risk Evaluation and Mitigation Strategies (or “REMS”) to assure the safe use of the product,
which may require substantial commitment of resources post-approval to ensure compliance. A REMS could include medication guides, physician
communication plans or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization
tools. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing
of products. Product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.
In
addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after approval
to ensure the quality and long-term stability of commercial products. We expect to rely on third parties for the production of clinical
and commercial quantities of our products in accordance with cGMP regulations. The cGMP regulations include requirements relating to
organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production
and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned
or salvaged products. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities
of our products in accordance with cGMP regulations. These manufacturers must comply with cGMP regulations that require, among other
things, quality control and quality assurance, the maintenance of records and documentation and the obligation to investigate and correct
any deviations from cGMP. Manufacturers and other entities involved in the manufacture and distribution of approved products are required
to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA
and certain state agencies for compliance with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and
effort in the area of production and quality control to maintain cGMP compliance. Future inspections by the FDA and other regulatory
agencies may identify compliance issues at the facilities of our CMOs that may disrupt production or distribution or require substantial
resources to correct. In addition, the discovery of conditions that violate these rules, including failure to conform to cGMP regulations,
could result in enforcement actions, and the discovery of problems with a product after approval may result in restrictions on a product,
manufacturer, or holder of an approved BLA, including, among other things, voluntary recall and regulatory sanctions as described below.
Once
an approval or clearance of a drug is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards
is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product,
including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market or
clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
consequences include, among other things:
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on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; |
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fines,
warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; |
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refusal
of the FDA to approve pending BLAs or supplements to approved BLAs, or suspension or revocation of product approvals; |
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product
seizure or detention, or refusal to permit the import or export of products; |
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injunctions
or the imposition of civil or criminal penalties; and |
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consent
decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or mandated modification of promotional
materials and labeling and the issuance of corrective information. |
In
addition, the Drug Supply Chain Security Act, or DSCSA, was enacted with the aim of building an electronic system to identify and
trace certain prescription drugs distributed in the U.S., including most biological products. The DSCSA mandates phased-in and
resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers over a 10-year period that
is expected to culminate in November 2023. From time to time, new legislation and regulations may be implemented that could
significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA.
It is impossible to predict whether further legislative or regulatory changes will be enacted, or FDA regulations, guidance or
interpretations changed or what the impact of such changes, if any, may be.
Coverage,
Pricing and Reimbursement
The
commercial success of any biopharmaceutical products approved by the FDA depends in significant part on the availability of third-party
coverage and adequate reimbursement for the products.
In
the U.S., third-party payors include government healthcare programs, such as Medicare and Medicaid, private health insurers,
managed care plans, and other organizations. These third-party payors are increasingly challenging the price and examining the cost-effectiveness
of medical products and services. Significant uncertainty exists regarding coverage and reimbursement for newly approved healthcare products.
Coverage does not ensure adequate reimbursement. It is time-consuming and expensive to seek coverage and reimbursement from third-party
payors. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all of
the approved products for a particular indication or utilize other mechanisms to manage utilization (such as requiring prior authorization
for coverage for a product for use in a particular patient). Limits on coverage may impact demand for our products. Even if coverage
is obtained, third-party reimbursement may not be adequate to allow us to sell our products on a competitive and profitable basis. As
result, we may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.
Biologics
Price Competition and Innovation Act of 2009 (BPCIA)
Under
the Federal Patient Protection and Affordable Care Act (the “Affordable Care Act”), enacted in 2010, and specifically, the
Biologics Price Competition and Innovation Act of 2009 (BPCIA) included therein, there is an abbreviated path in the United States for
regulatory approval of biosimilar versions of approved biological products. The Affordable Care Act provides a regulatory mechanism that
enables FDA approval of biologic drugs that are similar to (but not exact copies of) innovative drugs on the basis of less extensive
data than is required by a full BLA. Under this regulation, an application for approval of a biosimilar may not be filed until four years
after marketing approval of the innovator product. Pioneer innovative biological products will receive 12 years of regulatory exclusivity,
meaning that the FDA will not approve a biosimilar version until 12 years after the innovative biological product was first approved
by the FDA.
Fast
Track Approval
The
Federal Food, Drug, and Cosmetic Act (“FDCA”), as amended, and the related FDA regulations provide certain mechanisms for
the accelerated “Fast Track” approval of potential products intended to treat serious or life-threatening illnesses which
have demonstrated the potential to address unmet medical needs. These procedures permit early consultation and commitment from the FDA
regarding the pre-clinical and clinical studies necessary to gain marketing approval. Provisions of this regulatory framework also permit,
in certain cases, BLAs to be approved on the basis of valid indirect measurements of benefit of product effectiveness, thus accelerating
the normal approval process. In the future, certain potential products employing our technology might qualify for this accelerated regulatory
procedure. Even if the FDA agrees that these potential products qualify for accelerated approval procedures, FDA may deny approval of
our drugs or may require additional studies before approval. The FDA may also require us to perform post-approval, or Phase IV, studies
as a condition of such early approval. In addition, the FDA may impose restrictions on distribution and/or promotion in connection with
any accelerated approval, and may withdraw approval if post-approval studies do not confirm the intended clinical benefit or safety of
the potential product.
Orphan
Drug Designation
Under
the Orphan Drug Act, the FDA may grant orphan drug designation to drugs or biologics intended to treat a rare disease or condition, which
is generally a disease or condition that affects fewer than 200,000 individuals in the U.S. Orphan drug designation must be
requested before submitting a BLA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential
orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in or shorten the duration of the
regulatory review and approval process. If a product that has orphan drug designation subsequently receives FDA approval for the disease
for which it has such designation, the product is entitled to orphan product exclusivity, which means that FDA may not approve any other
applications to market the same drug for the same disease, except in very limited circumstances, for seven years. These very limited
circumstances are (i) an inability to supply the drug in sufficient quantities or (ii) a situation in which a new formulation of the
drug has shown superior safety or efficacy. This exclusivity, however, also could block the approval of our product for seven years if
a competitor obtains earlier approval of the same drug for the same indication.
Foreign
Regulation
In
addition to regulations in the U.S., we are and will continue to be subject to a variety of laws and regulations governing clinical
trials, commercial sales, and distribution of our products in foreign countries. Whether or not we obtain FDA approval, we must separately
obtain approval for clinical trials or a marketing authorization by the comparable regulatory authorities of those foreign countries
before we may commence clinical trials or marketing of the product in those countries. The approval process varies from country to country,
and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement vary greatly from country to country.
Legal
and compliance landscapes, as well as the policies of the FDA and foreign regulatory authorities may change and additional government
regulations may be enacted which could prevent or delay regulatory approval of our products and could also increase the cost of regulatory
compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative
or administrative action, either in the U.S. or abroad.
Under
the applicable EU regulatory regime, we may submit marketing authorization applications (MAAs) either under a centralized or decentralized
procedure (which also includes the mutual recognition procedure available for companies who already hold national licenses). The decentralized
procedures provide for mutual recognition of national approval decisions. These authorizations provide marketing authorizations. The
centralized procedure, which is available for medicines, inter alia, produced by biotechnology, intended to treat specific illnesses,
or which are highly innovative, provides for the grant of a single marketing authorization that is valid for all EU member states (as
well as in Northern Ireland and the EEA countries of Iceland, Liechtenstein, and Norway).
The
procedure for obtaining marketing authorizations in the United Kingdom has been affected by Brexit, which took place on January 31, 2020.
A transitional period was in place until December 31, 2020, during which time regulation of pharmaceuticals was still governed by EU
law. As of January 1, 2021, the UK MHRA has implemented new procedures for MAAs. Among these new procedures is a Great Britain marketing
authorization that relies on a decision taken by the European Commission (“EC”) in respect of a marketing authorization for
the same product in the centralized procedure. This route – the EC decision reliance procedure (“ECDRP”) – is
currently available to all authorizations approved in the centralized procedure.
Other
Government Regulation
Our
research and development activities use biological and hazardous materials that may be dangerous to human health and safety or the environment.
We are subject to a variety of federal, provincial, state and local laws and regulations governing the use, generation, manufacture,
storage, handling and disposal of these materials and wastes resulting from these materials. We are also subject to regulation by the
Occupational Safety and Health Administration and federal, provincial and state environmental protection agencies and to regulation under
the Toxic Substances Control Act.
In
addition, in the U.S., we may be subject to various federal and state laws and regulations regarding fraud and abuse in the
healthcare industry, as well as industry standards and guidance, such as the codes issued by the Pharmaceutical Research and Manufacturers
of America (or “PhRMA Codes”), which some states reference or incorporate in their statutes and regulations. These laws,
regulations, standards, and guidance may impact, among other things, our sales and marketing activities and our relationships with healthcare
providers and patients. In addition, we may be subject to patient privacy regulation by both the federal government and the states in
which we conduct our business. These federal laws include, by way of example, the following:
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The
anti-kickback statute (Section 1128B(b) of the Social Security Act) which prohibits certain business practices and relationships
that might affect the provision and cost of healthcare services reimbursable under Medicare, Medicaid and other federal healthcare
programs, including the payment or receipt of remuneration for the referral of patients whose care will be paid by Medicare or other
governmental programs; |
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The
physician self-referral prohibition (Ethics in Patient Referral Act of 1989, as amended, commonly referred to as the Stark Law, Section
1877 of the Social Security Act), which prohibits referrals by physicians of Medicare or Medicaid patients to providers of a broad
range of designated healthcare services in which the physicians (or their immediate family members) have ownership interests or with
which they have certain other financial arrangements; |
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The
anti-inducement law (Section 1128A(a)(5) of the Social Security Act), which prohibits providers from offering anything to a Medicare
or Medicaid beneficiary to induce that beneficiary to use items or services covered by either program; |
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The
False Claims Act (31 U.S.C. § 3729 et seq.), which prohibits any person from knowingly presenting or causing to be presented
false or fraudulent claims for payment to the federal government (including the Medicare and Medicaid programs); and |
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The
Civil Monetary Penalties Law (Section 1128A of the Social Security Act), which authorizes the U.S. Department of Health
and Human Services to impose civil penalties administratively for fraudulent or abusive acts. |
These
laws also impose an affirmative duty on those receiving Medicare or Medicaid funding to ensure that they do not employ or contract with
persons excluded from Medicare and other government programs. Due to the breadth of some of these laws, it is possible that some of our
current or future practices might be challenged under one or more of these laws. In addition, there can be no assurance that we would
not be required to alter one or more of our practices to comply with these laws. Evolving interpretations of current laws or the adoption
of new federal or state laws or regulations could adversely affect the arrangements we may have with sales personnel, healthcare providers,
and patients. Our risk of being found in violation of these laws is increased by the fact that some of these laws are open to a variety
of interpretations. If our past or present operations, practices, or activities are found to be in violation of any of the laws described
above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties,
exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, damages, fines, disgorgement,
contractual remedies, reputational harm, diminished profits, and future earnings, if any, and the curtailment or restructuring of our
operations, any of which could adversely affect our ability to operate our business and our results of operations.
Available
Information
Our
Internet website can be found at www.vbivaccines.com. The information on, or that can be accessed through, our website is not part of
this report. We are subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. You may access our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, free of charge at our website as soon as reasonably
practicable after the material is electronically filed with, or furnished to, the SEC.
ITEM
1A: RISK FACTORS
We
are subject to various risks that may materially harm our business, prospects, financial condition and results of operations. An investment
in our common shares is speculative and involves a high degree of risk. In evaluating an investment in our common shares, you should
carefully consider the risks described below, together with the other information included in this Form 10-K, including the consolidated
financial statements and related notes.
The
risks described below are not the only risks we face. If any of the events described in the following risk factors actually occurs, or
if additional risks and uncertainties later materialize, that are not presently known to us or that we currently deem immaterial, then
our business, prospects, results of operations and financial condition could be materially adversely affected. In that event, the trading
price of our common shares could decline, and you may lose all or part of your investment in our shares. The risks discussed below include
forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements.
Summary
of Risk Factors
Below
is a summary of the principal factors that make an investment in our common shares speculative or risky. This summary does not address
all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face,
can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in
this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common shares.
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We
have a history of operating losses, and we cannot guarantee that we can ever achieve sustained profitability; |
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We
will need additional financing to continue our operations. If we are unable to obtain additional financing on acceptable terms, we
may have to curtail or cease our development plans and operations; |
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Our
success is dependent on achieving and sustaining commercial success of PreHevbrio in the U.S. and Canada, and PreHevbri in
Europe; |
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Our
success is dependent on the successful clinical development, regulatory approval, and commercialization of our pipeline candidates,
which will require significant time and resources; |
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We
may not be able to secure sufficient supplies of materials, or the services of third parties, which we require to advance the development
and commercialization of our products; |
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We
face intense competition and rapid technological change, which may make it more difficult to achieve significant market penetration.
If we cannot compete successfully for market share against other drug companies, we may not achieve sufficient product revenues and
our business will suffer; |
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We
may be unable to satisfy our contractual obligations or meet expected deadlines; |
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We
depend or may depend on third parties to conduct clinical trials, commercialize and/or manufacture our product candidates; |
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We
manufacture clinical and commercial supplies of our 3-antigen HBV vaccine and VBI-2601 at a single location. Any disruption in the
operations of our manufacturing facility could adversely affect our business and results of operations; |
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Our
success depends on our ability to maintain the proprietary nature of our technology. |
Risks
Related to Development and Commercialization of Product and our Pipeline Programs
The coronavirus pandemic and its ongoing effects have caused interruptions
or delays of our business plan and may have a significant adverse effect on our business.
In
December 2019, a strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China, and on March 12, 2020, the World Health
Organization (“WHO”) declared COVID-19, disease caused by SARS-CoV-2, to be a pandemic. The government-imposed precautionary
measures have been relaxed in certain countries or states as COVID-19 cases have lessened, but there is no assurance that more strict
measures will not be put in place again due to a future COVID-19 outbreaks.
We have three ongoing clinical
studies being conducted, by us or our partners, at clinical sites worldwide: 1) the Phase II study of VBI-2601 and BRII-835 (VIR-2218)
at multiple study sites in Asia Pacific countries; 2) the Phase IIa/IIb study of VBI-2601 at multiple study sites in Asian Pacific countries;
and 3) the Phase I clinical study of VBI-2901 in Canada. In addition to the active studies, we have several planned clinical studies expected
to begin in 2023, including two additional studies with VBI-1901. The enrollment of patients at some of the clinical sites in our studies
has in the past been suspended, and may again be suspended in the future due to the COVID-19 pandemic, and enrollment of patients at other
clinical sites may be suspended or delayed as hospitals and clinics where we are conducting or planning to conduct clinical trials may
reallocate resources and limit access to or close clinical facilities due to the COVID-19 pandemic. Additionally, if our trial participants
are unable to travel to or visit our clinical study sites as a result of quarantines or other restrictions resulting from the COVID-19
pandemic, we could experience higher drop-out rates or delays in our clinical studies. Government-imposed quarantines, shelter-in-place
and similar restrictions may also require us to temporarily close our clinical sites, research laboratories, or manufacturing facility.
Furthermore, if we determine that our trial participants may suffer from exposure to COVID-19 as a result of their participation in our
clinical trials, we may voluntarily close certain clinical sites as a safety measure until we reasonably believe that the likelihood of
exposure has subsided. As a result, our expected development timelines for VBI-2601, VBI-1901, our coronavirus vaccine candidates (VBI-2900),
and possibly our regulatory timelines for our 3-antigen HBV vaccine, in regions other than U.S., Europe and Canada may be negatively impacted.
In addition, during the years
2020 through 2022, measures taken to reduce exposure to COVID-19 and restrictions on our ability to travel, stay-at-home orders and other
similar restrictions on our business limited the number of employees on sight at our manufacturing facility and our research and development
laboratories and our ability to support our operations.
The
COVID-19 pandemic has materially negatively affected the global economy, and the ongoing effects of the COVID-19 pandemic, including
but not limited to, supply chain issues, global shortages of supplies, materials and products, volatile market conditions and rising
global inflation, continue to do so. As a result of the COVID-19 pandemic, the Company’s business and results of operations were
adversely affected and, as the ongoing effects of the COVID-19 pandemic continue to impact the global economy, may continue to adversely
affect our business and results of operations. The extent to which the effects of the COVID-19 pandemic will continue to impact our business
will depend on future developments, which are highly uncertain and cannot be predicted. We do not yet know the full extent of potential
delays or impacts on our business, our clinical studies, our research programs, the recoverability of our assets, and our manufacturing;
however, the effects of the COVID-19 pandemic may continue to disrupt or delay our business operations, including with respect to efforts
relating to potential business development transactions, and it could continue to disrupt the marketplace which could have an adverse
effect on our operations.
PreHevbrio
is VBI’s first commercial product in the U.S. and we may not achieve and sustain commercial success in the U.S.
We received FDA approval for
PreHevbrio in the U.S. in November 2021 and commercially launched the vaccine at the end of the first quarter of 2022. Successful
commercialization of PreHevbrio in the U.S. will require significant resources, time, expertise, and experience. Despite the
establishment of sales, marketing, market access, and medical capabilities as part of the partnership with Syneos, because this is
VBI’s first marketed product in the U.S., we may not be able to successfully commercialize PreHevbrio.
Successful
commercialization of PreHevbrio will also require that we enter into contracts with third-party logistics companies, wholesales, distributors,
group purchasing organizations, and other institutions and potential distribution and marketing partners, and that we successfully maintain
those relationships and contracts. We may not complete, or complete in a timely manner, or maintain all of these critical contracts,
which may result in us not achieving successful commercialization of PreHevbrio.
Additional
factors that may affect our ability to successfully commercialize PreHevbrio include:
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Our
ability and the ability of Syneos to recruit and retain employees with the right expertise and experience; |
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Our
ability to access and develop relationships with key healthcare providers and public health agencies; |
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Our
ability to compete successfully as a new entrant in established distribution channels for vaccine products; and |
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Our
ability to maintain sufficient funding to cover the costs and expenses associated with building and operating an effective commercial
organization. |
Successful commercialization
of our 3-antigen HBV vaccine and our pipeline candidates face significant obstacles, including establishing complex commercial capabilities
or partnerships and obtaining regulatory approvals. We may not be able to achieve and sustain commercial success and/or we may fail to
obtain regulatory approval in foreign jurisdictions which will prevent us from marketing or selling our products in such jurisdictions.
Our 3-antigen HBV vaccine is approved
for sale in the U.S. and Canada (brand name PreHevbrio), in the EU/EEA and UK (brand name PreHevbri), and in Israel (brand name Sci-B-Vac).
In countries where we have obtained the required regulatory approvals, we will require significant resources, partnerships, time, expertise,
and experience to be commercially successful. For the UK and certain EU countries, initially including Sweden, Norway, Denmark, Finland,
Belgium, the Netherlands, we are partnering with Valneva SE for the marketing and distribution of PreHevbri. Although we selected Valneva
based on their local knowledge, experience, and relationships in each of the aforementioned European countries, because this is the first
vaccine to be marketed and distributed as part of this partnership, there is no assurance that our partnership will be successful, and
we and Valneva may not be able to successfully commercialize PreHevbri in such countries.
In
international countries outside of the Valneva partnership, successful commercialization of our 3-antigen HBV vaccine and our pipeline
candidates will require us to identify and establish additional partnerships or the required resources, experience, and expertise. There
is no guarantee that we will be able to do so.
In
countries where we do not currently have the required approvals, we will need to obtain separate approvals from the relevant regulatory,
pricing, and reimbursement authorities to market or sell our 3-antigen HBV vaccine or any of our pipeline candidates. Pursuing regulatory
approvals will be time-consuming and expensive, and we may not obtain foreign regulatory approvals on a timely basis, if at all. The
regulations vary among countries, and regulatory authorities in one market may require different or additional clinical trials than those
required to obtain approval in another market, and the time required to obtain approval may differ in one market from that required to
obtain approval in another market. Obtaining approval in one country does not ensure approval by regulatory authorities in other countries.
In
addition, for our pipeline programs, we have limited international regulatory, clinical, and commercial resources. We entered into a
collaborative relationship with Brii Bio for development of a HBV recombinant protein-based immunotherapeutic in the Licensed Territory,
and may plan to do so with other pipeline candidates in the future, and, as such, current and future partners are critical to our international
success. We may not be able to maintain current, or enter into future, collaboration agreements with appropriate partners for important
foreign markets on acceptable terms, if at all. Current and future collaborations with foreign partners may not be effective or profitable.
Our
pursuit of coronavirus vaccine candidates is ongoing, and we may be unable to produce a vaccine that successfully provides protection
against the virus in a relevant manner, if at all, or our product(s) may be obsolete by the time they are approved for marketing, if
ever.
In response to the COVID-19 pandemic, and in collaboration with the NRC,
the Minister, and CEPI, we have worked to advance the development of our VBI-2900 program coronavirus candidates, including VBI-2901,
VBI-2902, and VBI-2905. Our development of the monovalent vaccine candidates VBI-2902 and VBI-2905 are in the early clinical stage and
our development of our multivalent coronavirus vaccines VBI-2901 is also in the clinical stage; we may be unable to develop a vaccine
that successfully and safely protects against the viruses in a timely manner, if at all. In addition,
the SARS-CoV-2 virus has mutated as it has spread leading to several variants, including the Alpha, Beta, Gamma, Delta, and Omicron variants,
and new variants may continue to emerge. Given the evolution of the virus and the current and potential emergence of new dominant variants,
the vaccine candidates that we are developing could become irrelevant if they do not work as effectively as other vaccines against then
dominant variants. Furthermore, even if we successfully develop a vaccine, we may encounter difficulties developing and scaling
up manufacturing processes suitable for production of sufficient supply for our clinical trials or for commercialization in a cost-effective
manner. Due to the number of COVID-19 vaccine candidates in clinical trials, we may also encounter difficulty locating clinical sites
with capacity to conduct clinical trials, and therefore, we may experience delays in initiating or enrolling clinical trials of our vaccine
candidate. We are also committing financial resources and personnel to the development of a coronavirus vaccine, which may cause delays
in or otherwise negatively impact our other development programs, despite uncertainties surrounding the longevity and extent of coronavirus
as a global health concern. Our business could be negatively impacted by our allocation of significant resources to a global health threat
that is unpredictable and could rapidly dissipate or against which our vaccine, if developed, may not be partially or fully effective.
There continue to be ongoing
efforts by public and private entities to develop vaccines against COVID-19, including from large, multinational pharmaceutical companies
such as AstraZeneca, GSK, Johnson & Johnson, Moderna, Pfizer, Janssen, Novavax, and Sanofi, some of which have vaccines that are currently approved, authorized for emergency use, or have candidates that are at more advanced stage of development than our
coronavirus vaccine candidates. It
is possible that additional vaccines developed by such large, multinational pharmaceutical companies may receive further approvals and
authorizations in the near term. These entities may develop COVID-19 vaccines that are more effective than any COVID-19 vaccine we may
develop, may develop a COVID-19 vaccine that becomes the standard of care, may develop a COVID-19 vaccine at a lower cost or earlier
than we are able to develop any COVID-19 vaccine, or may be more successful at commercializing a COVID-19 vaccine. Many of these other
organizations are much larger than we are and have access to larger pools of capital, and as such, are able to fund and carry-on larger
research and development initiatives. Such other entities may have greater development capabilities than we do and have substantially
greater experience in undertaking nonclinical and clinical testing of vaccine candidates, obtaining regulatory approvals and manufacturing
and marketing pharmaceutical products. Our competitors may also have greater name recognition and better access to customers.
In
addition to competing vaccines and therapeutics that could reduce the commercial opportunity for our coronavirus vaccine candidates,
once approved (if ever), the end of the public health emergency declared in connection with COVID-19 in the U.S. (and similar statuses
of analogous foreign declarations) could ultimately render our product candidates obsolete to some degree, which could have a material
adverse effect on our business, financial condition, results of operations and future prospects. Moreover, if we experience delayed regulatory
approvals or disputed clinical claims, we may not have a commercial or clinical advantage over competitors’ products. The success
or failure of other entities, or perceived success or failure, may adversely impact our ability to obtain any future funding for our
vaccine development efforts or for us to ultimately commercialize and market any vaccine candidate, if approved. In addition, we may
not be able to compete effectively if our product candidates do not satisfy government procurement requirements with respect to biodefense
products.
We
rely on government and non-government organization grants or subsidies to contribute to our coronavirus vaccine development program.
If we are unable to satisfy our contractual obligations or meet expected deadlines, the development of the coronavirus vaccine candidates
may be extended, delayed, modified, or terminated and we may be required to repay all or part of the grants or subsidies.
On
September 16, 2020, we signed the Contribution Agreement with the Minister whereby the Minister agreed to contribute up to CAD $56 million
from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though the Project. In an amendment to the Contribution
Agreement signed on March 28, 2022, we agreed to complete the Project, to be conducted exclusively in Canada except as permitted otherwise
under certain circumstances, in or before December 31, 2023. In an event of default, subject
to a rectification period available in certain circumstances, among other things, the Minister may (i) suspend or terminate its contribution
to the Project, or (ii) require repayment of all or part of the contribution paid by the Minster, together with interest from the day
of demand at the interest rate set forth in the Contribution Agreement. As a result, if we default on our obligations under the Contribution
Agreement, we may not have sufficient funds available to continue the development of our coronavirus vaccine program, and we cannot be
certain that we will be able to obtain additional capital to fund the program. In addition, we may be required to repay the grants made
under the Contribution Agreement, which would harm our business, financial condition and results of operations.
Furthermore, in connection with execution of the Contribution Agreement,
we obtained a consent from K2HV, as administrative agent for the lenders and a lender, pursuant to the Loan Agreement. Pursuant to the
consent, certain events of default that result in contributions made under the Contribution Agreement in excess of $500,000 becoming due
and payable could result in an event of default under the Loan Agreement.
On March 9, 2021, we signed the CEPI Funding Agreement with the CEPI whereby
CEPI agreed to contribute up to $33 million to support the advancement of our eVLP vaccine candidates against SARS-CoV-2 including the
advancement of VBI-2905 through Phase I clinical development. On December 6, 2022, we and CEPI entered into the CEPI Amendment, which,
among other things, expanded the scope of the CEPI Funding Agreement to advance the development of multivalent coronavirus shots that
could be deployed against COVID-19 as well as a future “Coronavirus X”. We agreed to use commercially reasonable efforts to
fulfill our obligations, including achieving certain objectives and timelines within the agreed timeframe laid out in the CEPI Funding
Agreement, as amended by the CEPI Amendment. If we are unable to achieve such objectives or timelines, or if CEPI determines that we are
unable to meet our obligations under the CEPI Funding Agreement or the CEPI Amendment, subject to certain conditions, CEPI may choose
not to provide additional tranches of funding, to provide less funding, or to terminate the CEPI Funding Agreement.
If CEPI terminates the CEPI Funding Agreement, CEPI will not be required to make any further payments to us, and we will be required to
return any CEPI funds that are unspent, subject to certain limitations. If CEPI terminates the CEPI Funding Agreement or chooses not to
provide additional tranches of funding, or to provide less funding than expected, this could have a material adverse impact on our business,
results of operations, financial condition, and prospects.
Government
involvement may limit the commercial success of our coronavirus vaccine candidates.
The
coronavirus pandemic has been classified as a pandemic by public health authorities, and it is possible that one or more government entities
may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities. In particular, the Government
of Canada has announced that foreign investments into Canada will be subject to enhanced review under the Investment Canada Act, particularly
foreign direct investments in Canadian businesses that are related to public health or involved in the supply of critical goods and services
to Canadians or to the government. If we were to develop a coronavirus vaccine, the economic value of such a vaccine to us could be affected
by these measures.
Various
government entities, including the U.S., Israeli, and Canadian governments, are offering incentives, grants, and contracts to encourage
additional investment by commercial organizations into preventative and therapeutic agents against coronavirus, which may have the effect
of increasing the number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance that
we will be able to successfully establish a competitive market share, if any, for our coronavirus vaccine even if we succeed in developing
one.
Furthermore,
government grants and subsidies may limit our ability to develop and manufacture our coronavirus vaccine candidates in the most efficient
way. For example, under the terms of the Contribution Agreement, we are required to conduct Phase II studies of our coronavirus vaccine
program in Canada, unless permitted otherwise. As a result of such limitations, we may be unable to pursue the most efficient or profitable
path in developing our coronavirus vaccine program.
If
we are successful in producing a vaccine against COVID-19 or more broadly, coronaviruses, we may need to devote significant resources
to its scale-up and development including for use by the Canadian or the U.S. government.
In
the event that the pre-clinical and clinical trials for our coronavirus vaccine candidates are perceived to be successful, we may need
to work toward the large-scale technical development, manufacturing scale-up and larger scale deployment of this potential vaccine through
a variety of U.S. government mechanisms such as an Expanded Access Program or an Emergency Use Authorization program or Canadian government
programs. In this case we may need to divert significant resources to this program, which would require diversion of resources from our
other programs. In addition, since the path to licensure of any vaccine against coronavirus is accelerated, if use of the vaccine is
mandated by the Canadian or the U.S. government, we may have a widely used vaccine in circulation in Canada, the U.S. or another
country prior to our full validation of the overall long-term safety and efficacy profile of our vaccine platform and technology. Unexpected
safety issues in these circumstances could lead to significant reputational damage for us and our technology platform going forward and
other issues, including delays in our other programs, the need for re-design of our clinical trials and the need for significant additional
financial resources. Also, under the Contribution Agreement, if we are unable to provide a sufficient Canadian-sourced supply of the
COVID-19 vaccine, the Minster may require us to grant a license on commercially reasonable terms to use our intellectual property to
the extent necessary to ensure such supply. This provision may inhibit us from pursuing more profitable means of manufacturing and commercializing
our coronavirus vaccine candidates.
Because
our product development efforts depend on new and rapidly evolving technologies, we cannot be certain that our efforts will be successful.
Our
product development efforts depend on new, rapidly evolving technologies and on the marketability and profitability of our products.
Commercialization of our vaccines could fail for a variety of reasons, and include the possibility that:
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Our
3-antigen HBV vaccine may not be commercially successful; |
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our
coronavirus vaccine candidates may not be effective or may not be developed in a timely manner, if at all; |
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our
eVLP vaccine technologies, any or all of the products based on such technologies or our manufacturing process may be ineffective
or unsafe, or otherwise fail to receive necessary regulatory clearances or achieve commercial viability; |
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we
or Brii Bio may be unable to successfully carry out the development and commercialization plans under the License Agreement, as amended; |
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we
may be unable to develop a scale-up method for our manufacturing protocols in a timely and cost-effective manner; |
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the
products, if safe and effective, may be difficult to manufacture on a large-scale or may be uneconomical to market; |
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our
subcontracted third-party manufacturing facilities may fail to continue to pass regulatory inspections; |
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proprietary
rights of third parties may prevent us or our collaborators from exploiting technologies, and manufacturing or marketing products;
and |
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third-party
competitors may gain greater market share due to superior products or marketing capabilities. |
Pre-clinical
and clinical trials will be lengthy and expensive. Delays in clinical trials are common for many reasons and any such delays could result
in increased costs to us and jeopardize or delay our ability to obtain regulatory approval and commence product sales as currently contemplated.
As
part of the regulatory process, we must conduct clinical trials for each vaccine candidate to demonstrate safety and efficacy to the
satisfaction of the regulatory authorities, including the FDA for the U.S., the EMA for the EU, the MHRA for UK, and Health Canada for
Canada. Clinical trials are subject to current Good Clinical Practice regulations (“cGCP”). cGCPs are rigorous practices
that are incorporated into the FDA’s clinical trial regulatory requirements and are expensive and time-consuming to design and
implement. We may experience delays in clinical trials for any of our pipeline candidates, and the projected timelines for continued
development of the technologies and related pipeline candidates by us may otherwise be subject to delay or suspension. Our planned clinical
trials might not begin on time; may be interrupted, delayed, suspended, or terminated once commenced; might need to be redesigned; might
not enroll a sufficient number of patients; or might not be completed on schedule, if at all. Clinical trials can be delayed for a variety
of reasons, including the following:
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delays
in obtaining regulatory approval to commence a trial; |
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imposition
of a clinical hold following an inspection of our clinical trial operations or trial sites by the FDA or other regulatory authorities; |
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imposition
of a clinical hold because of safety or efficacy concerns by the FDA, or other regulatory authorities, a data safety monitoring board
or committee, a clinical trial site’s institutional review board, or us; |
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delays
in reaching agreement on acceptable terms with prospective CROs and clinical trial sites; |
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delays
in obtaining required institutional review board approval at each site for clinical trial protocols; |
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delays
in identifying, recruiting, and training suitable clinical investigators; |
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delays
in recruiting suitable patients to participate in a trial; |
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delays
in having patients complete participation in a trial or return for post-treatment follow-up; |
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clinical
sites dropping out of a trial to the detriment of enrollment; |
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time
required to add new sites; |
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delays
in obtaining sufficient supplies of clinical trial materials, including comparator drugs; |
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delays
resulting from negative or equivocal findings of a data safety monitoring board for a trial; or |
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adverse
or inconclusive results from pre-clinical testing or clinical trials. |
Patient
enrollment, a significant factor in the timing of clinical trials, is affected by many factors, including the size and nature of the
patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial,
competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the investigational
drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are
investigating. Any of these delays in completing our clinical trials could increase costs, slow down the product development and approval
process, and jeopardize our ability to commence product sales and generate revenue.
Development
of sufficient and appropriate clinical protocols to demonstrate safety and efficacy are required, and we may not adequately develop such
protocols to support approval.
In
addition to FDA requirements and those of other regulatory authorities, an independent institutional review board or an independent ethics
committee at each medical institution proposing to participate in the conduct of the clinical trial generally must review and approve
the clinical trial design and patient informed consent form before commencement of the study at the respective medical institution. The
institutional review boards approve the clinical trial protocols and conduct periodic reviews of the clinical trials. The clinical trial
protocols describe the type of people who may participate in the clinical trial, the schedule of tests and procedures, the medications
and dosages to be studied, the length of the study, the study’s objectives, and other details. In general, the institutional review
board will consider, among other matters, ethical factors, the safety of human subjects and the possibility of liability of the institution
conducting the trial. Our pre-clinical studies may not be adequate proof of safety and efficacy, and as a result, we may not be successful
in developing clinical trial protocols necessary to support institutional review board approval. Any delay or failure to obtain institutional
review board approval to conduct a clinical trial at a prospective site could materially impact the costs, timing, or successful completion
of a clinical trial.
We
rely on CROs, collaborators, third-party investigators, and independent sites to conduct our clinical trials. If these third parties
do not fulfill their contractual obligations or meet expected deadlines, our planned clinical trials may be extended, delayed, modified,
or terminated and we may fail to obtain the regulatory approvals necessary to commercialize our pipeline candidates.
We
rely on third-party CROs and collaborators to conduct our clinical trials. CROs, collaborators, third-party investigators, and independent
sites are subject to cGCPs that include conducting, recording, and reporting the results of clinical trials and to assure that data and
reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. The
FDA enforces cGCPs through periodic inspections. If these CROs or collaborators do not perform their obligations, comply with laws or
cGCPs, or meet expected deadlines, our planned clinical trials may be extended, delayed, modified, or terminated. We rely on the processes
of our CROs and collaborators to ensure that accurate records are maintained to support the results of the clinical trials. While we
or our CROs or collaborators conduct regular monitoring of clinical sites, we are dependent on the processes and quality control efforts
of our third-party contractors to ensure that detailed, quality records are maintained to support the results of the clinical trials
that they are conducting on our behalf. Any extension, delay, modification, or termination of our clinical trials or failure to ensure
adequate documentation and the quality of the results in the clinical trials could delay or otherwise adversely affect our ability to
commercialize our products and pipeline candidates and could have a material adverse effect on our business and operations.
We
rely upon independent sites and third-party investigators, such as universities and medical institutions and their faculty or staff,
to conduct our clinical trials. These sites and third-party investigators are not our employees and we cannot control the amount or timing
of resources that they devote to our programs. If these third-party investigators or collaborators fail to devote sufficient time and
resources to our product development programs, do not conduct their activities in compliance with the law, or if their performance is
substandard, the approval of our regulatory submissions and our introductions of new products will be delayed or prevented.
Our
potential CROs and collaborators may also have relationships with other commercial entities, some of which may compete with us. If outside
collaborators assist our competitors to our detriment, the approval of our regulatory submissions will be delayed and the sales from
our products, if and when commercialized, will be less than expected. Even if clinical trials are completed as planned, their results
may not support expectations or intended marketing claims. The clinical trials process may fail to demonstrate that our pipeline candidates
are safe and effective for indicated uses. Such failure could cause us to abandon one or more pipeline candidates and could delay development
of other pipeline candidates.
Additional
delays to the completion of clinical studies may result from modifications being made to the protocol during the clinical trial, if such
modifications are warranted and/or required by the occurrences in the given trial.
Each
modification to a protocol for a clinical trial must be submitted to the FDA or foreign regulatory authorities and the institutional
review boards. This submission could result in the delay or suspension of a clinical trial while the modification is evaluated. In addition,
depending on the magnitude and nature of the changes made, the FDA and other regulatory authorities could take the position that the
data generated by the clinical trial prior to the protocol modification cannot be pooled with the data collected after the modification
because the same protocol was not used throughout the trial. This prohibition might require the enrollment of additional subjects, which
could result in the extension of the clinical trial and the FDA and other regulatory authorities delaying approval of one or more pipeline
candidates.
We
may be required to suspend or discontinue clinical trials because of adverse side effects or other safety risks that could preclude approval
of our biologic candidates.
Our
clinical trials may be suspended or terminated at any time for a number of reasons. A clinical trial may be suspended or terminated by
us, our collaborators, the FDA, or other regulatory authorities because of a failure to conduct the clinical trial in accordance with
regulatory requirements or our clinical protocols, presentation of unforeseen safety issues or adverse side effects, failure to demonstrate
a benefit from using the investigational biologic, changes in governmental regulations or administrative actions, lack of adequate funding
to continue the clinical trial, or negative or equivocal findings of the data safety monitoring board or the institutional review board
for a clinical trial. An institutional review board may also suspend or terminate our clinical trials for failure to protect patient
safety or patient rights. We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an
unacceptable risk to participants. If we elect or are forced to suspend or terminate any clinical trial of any proposed product that
we develop, the commercial prospects of such proposed product will be harmed and our ability to generate product revenue from such proposed
product will be delayed or eliminated. Any of these occurrences may harm our business, financial condition, results of operations, and
prospects significantly.
The results of our previous, current or future clinical trials may not
support regulatory approval of our pipeline candidates or may result in the discovery of unexpected adverse side effects associated with
the use thereof, or they may be deemed insufficient to substantiate certain promotional claims about our current and/or future products
on the market, as applicable, any of which could have a material adverse effect on our business.
Even if our clinical trials are
completed as planned, we cannot be certain that the FDA or other foreign regulatory authorities will agree with our conclusions regarding
them, which may prevent us from receiving regulatory approvals, may restrict what data is included in the prescribing information and
indication if approved, and may prevent us from developing differentiated and meaningful promotional claims as part of the marketing and
commercialization of approved products. Success in pre-clinical studies and early clinical trials does not ensure that later clinical
trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies.
The clinical trial process may fail to demonstrate that our pipeline candidates are safe and effective for the proposed indicated uses.
If the FDA or foreign regulatory authorities conclude that the clinical trials for any of our pipeline candidates for which we might seek
approval have failed to demonstrate safety and effectiveness, we would not receive regulatory approval to market that product in the U.S.
or in other jurisdictions for the indications sought. In addition, such an outcome could cause us to abandon the pipeline candidates and
might delay development of others. Any delay or termination of our clinical trials will delay the filing of any product submissions with
the FDA or foreign regulatory authorities and, ultimately, our ability to commercialize our pipeline candidates and generate revenues.
It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the
product candidate’s profile. Adverse clinical trial results, such as death or injury due to side effects, could jeopardize regulatory
approval, and if approval is granted, such results may also lead to marketing restrictions or prohibitions. In addition, the clinical
trials performed for programs other than for our 3-antigen HBV vaccine involve a relatively small patient population. Because of the small
sample size, their results may not be indicative of future results.
Future
legislation, or regulations and policies adopted by the FDA or other regulatory authorities, may increase the time and costs required
for us to conduct and complete clinical trials for our pipeline candidates.
The
FDA has established regulations, guidelines, and policies to govern the pharmaceutical and biologic development and approval processes,
as have foreign regulatory authorities. We expect there will continue to be federal and state laws and/or regulations, proposed and implemented,
that could impact our operations and business. Any change in regulatory requirements resulting from the adoption of new legislation,
regulations or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes.
Such amendments to existing protocols or clinical trial applications or the need for new ones, may significantly and adversely affect
the cost, timing, and completion of the clinical trials for our candidates.
In
addition, the FDA’s policies and those of other regulatory authorities may change and additional government regulations may be
issued that could prevent, limit, or delay regulatory approval of our pipeline candidates, or impose more stringent product labeling
and post-marketing testing and other requirements.
Developments
by competitors may establish standards of care that affect our ability to conduct our clinical trials as planned.
Changes
in standards related to clinical trial design could affect our ability to design and conduct clinical trials as planned. For example,
regulatory authorities may not allow us to compare one or more of our pipeline candidates to a placebo, or may require a change of standard-of-care
used as a comparator in a particular clinical indication where approved products are available. In that case, both the cost and the amount
of time required to conduct a clinical trial could increase.
We
face product liability exposure, which, if not covered by insurance, could result in significant financial liability.
The
risk of product liability is inherent in the research, development, manufacturing, marketing, and use of pharmaceutical products. Our
3-antigen HBV vaccine (currently approved for sale in the U.S. and Canada under the brand name PreHevbrio, in the EU/EEA and
the UK under the brand name PreHevbri, and in Israel under the brand name Sci-B-Vac), our pipeline candidates currently in clinical trials,
and any products that we may commercially market in the future may cause, or may appear to have caused, injury or dangerous drug reactions,
and expose us to product liability claims. These claims might be made by patients who use the product, their families, healthcare providers,
pharmaceutical companies, our corporate collaborators, or others selling such products. If our current products or any of our pipeline
candidates were to cause adverse side effects, we may be exposed to substantial liabilities.
In
September 2018, two civil claims were brought in the District Court of the central district in Israel which named our subsidiary, SciVac,
as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac
discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing
its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and, that each child suffered side effects
from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated
with Sci-B-Vac in Israel since April 2011 and seeking damages in a total amount of NIS 1,879.5 million ($534.1 million). The second claim
is a civil action brought by two minors and their parents against SciVac and the IMoH
alleging, among other things, that SciVac marketed an experimental, defective, hazardous, or harmful vaccine; that Sci-B-Vac was marketed
in Israel without establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory
body. The claim seeks damages for past and future losses and expenses as well as punitive damages. The motion seeking approval of a class
action has been suspended until a ruling is given on the question of liability in the civil action. The preliminary hearings for the
trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September
30, 2021, June 9, 2022, and January 12, 2023. The next preliminary hearing is scheduled to be held on July 13, 2023.
On
December 5, 2022, another civil claim was filed in the District Court of the central district in Israel naming our subsidiary, SciVac,
as a defendant. The claim was filed by a minor and his parents against SciVac, the IMoH, and Prof. Arieh Raziel, requesting compensation
due to bodily injury of the minor, who was diagnosed as suffering from an Autism Spectrum Disorder (ASD). The plaintiffs allege that
the minor’s disabilities and the syndrome from which he suffers were caused due to a combination of several factors, including
negligent pregnancy monitoring, negligent labor and delivery procedure, and administration of the alleged defective vaccine (Sci-B-Vac
vaccine). According to applicable law in Israel, the Statement of Claim does not specify the claim amount, as it is a personal injury
claim. Preliminary hearings
will begin on July 3, 2023.
Regardless
of the merits or eventual outcome, product liability claims or other claims related to our products or pipeline candidates may result
in:
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decreased
demand for our products due to negative public perception; |
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injury
to our reputation; |
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withdrawal
of clinical trial participants or difficulties in recruiting new trial participants; |
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initiation
of investigations by regulators; |
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costs
to defend or settle the related litigation; |
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a
diversion of management’s time and our resources; |
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substantial
monetary awards to trial participants or patients; |
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product
recalls, withdrawals, or labeling, marketing, or promotional restrictions; |
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loss
of revenues from product sales; and |
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the
inability to commercialize any of our pipeline candidates, if approved. |
We
currently maintain product liability insurance, and we generally obtain clinical trial insurance once a clinical trial is initiated.
However, the insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Insurance coverage is
becoming increasingly expensive, and, in the future, we, or any of our collaborators, may not be able to maintain insurance coverage
at a reasonable cost or in sufficient amounts or at all to protect us against losses due to liability. Even if our agreements with any
current or future collaborators entitle us to indemnification against product liability losses, such indemnification may not be available
or adequate should any claim arise. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against
product liability claims could prevent or inhibit the commercialization of our pipeline candidates. If a successful product liability
claim or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be
sufficient to cover such claims and our business operations could be impaired.
Should
any of the events described above occur, this could have a material adverse effect on our business, financial condition, and results
of operations.
We
are subject to extensive, ongoing post-market regulatory requirements and review in the U.S., and our products may face future
development and regulatory difficulties.
With
regard to our 3-antigen HBV vaccine and any other product candidates for which we obtain approval in the U.S. or other regions (if
any), the FDA and other regulatory bodies may still impose significant restrictions on a product’s indicated uses or
marketing, or impose conditions for approval, or impose ongoing requirements for potentially costly post-approval studies, including
Phase IV clinical trials or post-marketing surveillance. As a condition to granting marketing approval of a product, the FDA or
other regulatory bodies may require us to conduct additional clinical trials. The results generated in these post-approval clinical
trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about side effects or
efficacy of a product. The Food and Drug Administration Amendments Act of 2007 gives the FDA enhanced post-market authority,
including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety
information and compliance with FDA-approved REMS.
We
are also subject to ongoing FDA post-market requirements governing the manufacturing, labeling, packaging, storage, distribution, safety
surveillance, advertising, promotion, record keeping, and reporting of safety and other post-market information. The FDA’s exercise
of its authority could result in delays or increased costs during product development, clinical trials, and regulatory review, increased
costs to comply with additional post-approval regulatory requirements, and potential restrictions on sales of approved products. Foreign
regulatory agencies often have similar authority and may impose comparable costs. Post-marketing studies, whether conducted by us or
by others and whether mandated by regulatory agencies or voluntary, and other emerging data about marketed products, such as adverse
event reports, may also adversely affect sales of our pipeline candidates once approved, and potentially our other marketed products.
Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate)
an entire class of products could have an adverse effect on sales of our approved products. Accordingly, new data about our products
could negatively affect demand because of real or perceived side effects or uncertainty regarding efficacy and, in some cases, could
result in product withdrawal or recall. Furthermore, new data and information, including information about product misuse, may lead government
agencies, professional societies, and practice management groups or organizations involved with various diseases to publish guidelines
or recommendations related to the use of our products or the use of related therapies or place restrictions on sales. Such guidelines
or recommendations may lead to lower sales of our products.
The
holder of a BLA that has been approved also is subject to obligations to monitor and report adverse events and instances of the failure
of a product to meet the specifications in the BLA. License holders must submit new or supplemental applications and obtain FDA approval
for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also submit advertising
and other promotional material to the FDA. Advertising and promotional materials must comply with FDA rules in addition to other potentially
applicable federal and state laws, including, by way of example, the Federal Trade Commission Act. Any sales and promotional activities
are also potentially subject to federal and state consumer protection and unfair competition laws. The FDA and other regulatory agencies
strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for
uses that are not approved by the FDA, or such other regulatory agencies as reflected in the product’s approved labeling. Such regulatory agencies
may impose further requirements or restrictions on the distribution or use of our pipeline candidates as part of a mandatory plan, such
as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients
who meet certain safe-use criteria and requiring treated patients to enroll in a registry. If we receive marketing approval for one or
more of our pipeline candidates, physicians may nevertheless prescribe such products to their patients in a manner that is inconsistent
with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. In particular,
the U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion and has
enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees
or permanent injunctions under which specified promotional conduct is changed or curtailed.
Depending
on the circumstances, failure to meet post-approval requirements by us or our third-party collaborators can result in criminal prosecution,
fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal
of pre-marketing product approvals, FDA issuance of Form 483, untitled letters, and/or warning letters, suspension or termination of
any ongoing clinical trials, or refusal to allow us to enter into supply contracts, including government contracts. Any government investigation
of alleged violations of law could require us to expend significant amounts of time and resources in response and could generate negative
publicity and significantly inhibit our ability to bring to market or continue to market our products and generate revenue.
We
may seek to in-license pipeline candidates or technologies to expand our product pipeline and may not succeed.
If
and when we deem it to be our strategic priority, we may seek to in-license pipeline candidates or technologies to expand our product
pipeline and may not succeed. The number of such candidates and technologies is limited. Competition among large pharmaceutical companies
and biopharmaceutical companies for promising pipeline candidates and technologies is intense because such companies generally desire
to expand their product pipelines through in-licensing. If we fail to carry out such in-licensing and expand our product pipeline, our
potential future revenues may suffer especially if our current products or pipeline candidates fail to generate material revenue.
The
failure by our wholly owned manufacturing facility, our current or future contract manufacturers, or contract testing organizations to
obtain or maintain FDA or other regulatory agencies’ approval for manufacturing or testing facilities could have a material adverse
impact on our business, results of operations, financial condition, and prospects.
Our wholly owned manufacturing
facility and any of our current and future manufacturers, whether the facilities are ours or third-party manufacturer facilities, are
subject to pre-approval and periodic, often unannounced, post-market regulatory inspections by the FDA and applicable foreign equivalents
to evaluate regulatory compliance and product quality and safety. This continual regulatory monitoring and periodic inspections of the
manufacturing facilities where our current and future products, as applicable, are produced can result in substantial costs, time, and
efforts in connection with any perceived deficiencies, as well as the inherently costly and often burdensome quality-assurance and compliance
efforts that are required year-round and in anticipation of a regulatory inspection or audit. Similar rules apply in the EU, the UK and
Israel. Other than for our 3-antigen HBV vaccine and VBI-2601, which are currently manufactured by us at our manufacturing site in Israel,
we are completely dependent on third-party manufacturers for compliance with the requirements of U.S. and ex-U.S. regulators for the manufacture
of our finished products and pipeline candidates, which comes with additional risks, as we are ultimately responsible for any violations
observed at any such third-party facilities but do not have the same level of day-to-day control or oversight as one would have at its
own facility.
If
we or our third-party manufacturers or contract testing organizations cannot successfully produce material that conforms to our specifications
and cGMP requirements of any applicable regulatory agency, we may not be able to secure or maintain approval for our manufacturing or
testing facilities. If the FDA or another regulatory agency does not approve these facilities for commercial production, or if they do
not maintain a satisfactory regulatory standing, we will need to find alternative suppliers, which would result in significant delays
in obtaining required regulatory approvals. In addition, if we or a regulatory agency discover previously unknown problems with a product,
such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured or tested,
a regulatory agency may impose restrictions on that product, the manufacturing or testing facility, or us, including requiring recall
or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit
use of the drug, requiring that we conduct additional clinical trials, imposing new monitoring requirements or requiring that we establish
a REMS program. These challenges may have a material adverse impact on our business, results of operations, financial condition and prospects.
We
manufacture clinical and commercial supplies of our 3-antigen HBV vaccine and VBI-2601 at a single location. Any disruption in the operations
of our manufacturing facility could adversely affect our business and results of operations.
We
rely on a single source for our supply of some of our raw materials and certain reagents required for the manufacture our 3-antigen
HBV vaccine and VBI-2601. Our current manufacturing facility contains highly specialized equipment and materials and utilizes
complicated production processes developed over a number of years, which would be difficult, time-consuming, and costly to duplicate
or, though a remote risk, may be impossible to duplicate. If our facility were damaged or destroyed, or otherwise subject to
disruption, including contamination, it would require substantial lead-time to replace our manufacturing capabilities and could
cause costly delays. In such event, we would be forced to identify and rely entirely on third-party contract manufacturers for an
indefinite period of time, which we may not be able to do in a timely manner and would further increase our production costs. Any
disruptions or delays at our facility or its failure to meet regulatory compliance would significantly impair our ability to
manufacture our 3-antigen HBV vaccine for sale in the jurisdictions where it is approved for sale, for future potential clinical
studies of our 3-antigen HBV vaccine, and for our ongoing and future clinical studies of VBI-2601, which would result in increased
costs and losses and adversely affect our business and results of operations.
If
a supplier of our raw materials and certain reagents fails to provide sufficient quantities to us, we may not be able to obtain an alternative
supply on a timely or acceptable basis.
We
rely on a single source for our supply of some of our raw materials and certain reagents required for the manufacture our 3-antigen HBV
vaccine and VBI-2601. We do not have a written or oral agreement with these single sources of supply, as all orders are handled through
individual purchase orders or on an order-by-order basis. Alternative sources from which we can obtain our supply of most of these materials
exist. However, we may not be able to find alternative suppliers in a timely manner that would provide supplies of these raw materials
or reagents at acceptable quantities and prices, if at all. Any interruption in the supply of these materials would disrupt our ability
to manufacture our 3-antigen HBV vaccine or VBI-2601 for further development, current and future clinical trials, and commercial manufacturing,
and could have a material adverse effect on our business, commercialization of our 3-antigen HBV vaccine and VBI-2601 and future profit
margins, if any.
We
do not manufacture any of our raw materials nor do we plan to develop any capacity to do so. Instead, we rely on multiple sources to
supply our raw materials so that we can manufacture sufficient quantities of our 3-antigen HBV vaccine and VBI-2601 at our manufacturing
facility in Israel and sufficient quantities of our eVLP vaccine candidates at CDMOs. The COVID-19 pandemic has impacted lead times and
availability of many raw materials, which may adversely impact our ability to manufacture products in a timely manner. Some of the countries
of origin of our raw materials are not the same as our drug manufacturing location. Any disruption in supply of raw materials from a
qualified supplier could result in significant delays with our manufacturing, clinical trials, BLA filing, BLA approval or commercial
sale of the finished product due to contract delays, the need to manufacture new raw materials, out of specification raw materials, the
need for import and export permits, and the failure of the newly sourced raw materials to perform to the standards of the previously
sourced raw materials. These delays could have a material adverse effect on our business and future profit margins, if any.
Supply
chain and shipping disruptions may result in shipping delays, a significant increase in shipping costs, and could increase product costs
and result in lost sales and reputational damage, which may have a material adverse effect on our business, operating results and financial
condition.
Our
third-party manufacturers and suppliers have experienced, and may expect to continue to experience, supply chain disruption and
shipping disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of
destination, as a result of the COVID-19 pandemic, congestion in port terminal facilities, labor supply and shipping container
shortages, inadequate equipment and persons to load, dock and offload container vessels and for other reasons. These disruptions, to the extent that they continue, may
impact our ability to receive our raw materials and certain components required for the manufacture of our 3-antigen HBV vaccine and
VBI-2601 and our other pipeline candidates, to distribute our products in a cost-effective and timely manner and to meet demand, all
of which could have an adverse effect on our financial condition and results of operations. There can be no assurance that further
unforeseen events impacting the supply chain will not have a material adverse effect on us in the future. Additionally, the impacts
that supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. Prolonged supply chain disruption
that may impact us or our manufacturers and suppliers could interrupt product manufacturing, increase raw material and product lead
times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and reputational
damage, all of which could have a material adverse effect on our business, financial condition and results of operations.
We
expect the healthcare industry to face increased limitations on reimbursement, rebates, and other payments as a result of continued
healthcare reform changes, which could adversely affect third-party coverage of our current and/or future products and how much or
under what circumstances healthcare providers will prescribe or administer our products, as applicable.
In
both the U.S. and other countries, our product sales depend, or will depend, as applicable and in part, upon the availability of reimbursement from
third-party payers, which include governmental authorities, managed care organizations and other private health insurers.
Third-party payers are increasingly challenging the price and examining the cost effectiveness of medical products and
services.
Increasing
expenditures for healthcare have been the subject of considerable public attention in the U.S. Both private and government entities
are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system
have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription
products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical
products.
Cost
reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement
for any approved products, which in turn would affect the price we can receive for those products. Any reduction in reimbursement that
results from federal legislation or regulation may also result in a similar reduction in payments from payers. New laws may also result
in additional reductions in healthcare funding, which could have a material adverse effect on our customers, which may affect our financial
operations. Legislative and regulatory proposals may expand post-approval requirements and restrict sales and promotional activities
for pharmaceutical products. We cannot be certain whether additional legislative changes will be enacted, or whether relevant regulations,
guidance, or interpretations will be changed, or what the impact of such changes on our products may be.
Although
we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation
pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for,
or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will prescribe
or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise
capital, obtain additional collaborators and market our products. In addition, we believe the increasing emphasis on managed care in
the U.S. has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact
product sales.
Governments
outside the U.S. tend to impose strict price controls, which may adversely affect our future revenues.
In
some countries, particularly countries in Europe, the pricing and/or reimbursement of vaccines and therapeutics is subject to governmental
control. In Canada, the prices of patented medicines are subject to price controls. In these countries, pricing negotiations with governmental,
reimbursement, and coverage authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement
or pricing approval in some countries, we may be required to conduct a study that compares the cost-effectiveness of our products to
other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory
levels, our business could be harmed, possibly materially.
We
face intense competition and rapid technological change, which may make it more difficult to achieve significant market penetration.
If we cannot compete successfully for market share against other companies, we may not achieve sufficient product revenues and our business
will suffer.
The
market for our products and pipeline candidates is characterized by intense competition and rapid technological advances. For example,
our 3-antigen HBV vaccine will compete in the U.S. and Europe with other approved HBV vaccines marketed by GSK, Dynavax, and Merck and
will compete outside the U.S. and Europe with vaccines from GSK and Merck. If competitors’ existing products or new products are
more effective than or considered superior to our current or future products, the commercial opportunity for our products will be reduced
or eliminated. Existing or future competing products may provide greater therapeutic convenience or clinical or other benefits for a
specific indication than our products or may offer comparable performance at a lower cost. We face competition from fully integrated
pharmaceutical companies and smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government
agencies and other public and private research organizations. Many of our competitors have products or pipeline candidates already approved
or in development. In addition, many of these competitors, either alone or together with their collaborative partners, are larger than
us and have substantially greater financial, technical, research, marketing, sales, distribution, and other resources. Existing and potential
competitors may develop or market products that are more effective or commercially attractive than any that we are developing or marketing.
Competitors may obtain regulatory approvals and introduce and commercialize products before we do. These developments could have a significant
negative effect on our financial condition. Even if we are able to compete successfully, we may not be able to do so in a profitable
manner.
We
may be exposed to liability claims associated with the use of hazardous materials and chemicals.
Our
research and development activities involve the controlled use of hazardous materials and chemicals. Although we believe that our safety
procedures for using, storing, handling and disposing of these materials comply with federal, state, provincial and local laws and regulations,
we cannot completely eliminate the risk of accidental injury or contamination from these materials. In the event of such an accident,
we could be held liable for any resulting damages and any liability could materially adversely affect our business, financial condition
and results of operations. In addition, the federal, provincial, state, and local laws and regulations governing the use, manufacture,
storage, handling and disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance
costs that could materially adversely affect our business and financial condition.
Our
products and any pipeline candidates for which we obtain regulatory approval, if any, may never achieve market acceptance, even if
we obtain regulatory approvals.
Regulatory approval to market a given medical product in a given country
does not guarantee that the product will be accepted by the medical community or successful in generating revenue in the applicable market.
Accordingly, the commercial success of our current and future products, as applicable, depends and will depend on, among other things,
their acceptance by physicians, patients, third-party payers such as health insurance companies and other members of the medical community
as a prophylaxis or therapeutic and a cost-effective alternative to competing products. If our products fail to gain market acceptance,
we may be unable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we currently
market or may commercialize in the future depends on many factors, including:
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our
ability to provide acceptable evidence of safety and efficacy; |
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the
prevalence and severity of adverse side effects; |
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whether
our vaccines are differentiated from other vaccines based on immunogenicity or convenience; |
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availability,
relative cost, and relative efficacy of alternative and competing vaccines or treatments; |
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the
effectiveness of our marketing and distribution strategy; |
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publicity
concerning our products or competing products and treatments; and |
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our
ability to obtain sufficient third-party insurance coverage or reimbursement. |
If
our products do not become widely accepted by physicians, patients, third-party payers and other members of the
medical community, our business, financial condition, and results of operations would be materially and adversely affected.
If
we are unable to manufacture our pipeline candidates and products in sufficient quantities, at sufficient yields or are unable to obtain
or maintain regulatory approvals for a manufacturing facility for our vaccines, we may experience delays in product development, clinical
trials, regulatory approval, commercial distribution, and the In Process Research & Development (“IPR&D”) assets
may become impaired and be written off at some time in the future.
Completion
of our clinical trials and commercialization of our pipeline candidates and products require access to, or development of, facilities
to manufacture our pipeline candidates and products at sufficient yields and at commercial-scale. We have limited experience manufacturing
any of our pipeline candidates and products in the volumes that will be necessary to support large-scale clinical trials or commercial
sales. Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield,
purity, cost, potency, or quality.
If
we are unable to manufacture our pipeline candidates and products in clinical or commercial quantities, as the case may be, in sufficient
yields, with sufficient purity, potency, quality, and identity, we may not be able to supply pipeline candidates or products for clinical
or commercial purposes, and we may be required to find, qualify, and rely on third parties. Any new third-party manufacturers must also
receive FDA approval and/or approval from similar regulatory agencies before we may use product manufactured by them as our commercial
products and pipeline candidates. Our products may be in competition with other products for access to these facilities and may be subject
to delays in manufacture if our third-party manufacturers give other products greater priority. Any delays experienced by third-party
manufacturers, whether directly or by its raw material suppliers in relation to our project, may result in delays in clinical development
of our pipeline candidates and products.
As
a result, any delay or interruption, could have a material adverse effect on our business, financial condition, results of operations
and cash flows. In addition, the IPR&D assets may become impaired and be written off at some time in the future, which could also
have a material adverse effect on the financial statements.
In
light of our current resources and limited commercial experience, we have and may need to continue to establish third-party relationships
to successfully commercialize our products.
The near and long-term commercial viability of our current and future (as
applicable) products may depend, in part, on our ability to successfully execute current strategic collaborations and establish new strategic
collaborations with contract commercial organizations, pharmaceutical and biotechnology companies, non-profit organizations, and government
agencies. Establishing and maintaining strategic collaborations and obtaining government funding is difficult and time-consuming. Potential
collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position or
based on their internal pipeline or available resources; government agencies may reject contract or grant applications based on their
assessment of public need, the public interest, the ability of our products to address these areas, or other reasons beyond our expectations
or control. If we fail to establish or maintain collaborations or government relationships necessary for successful commercialization
on acceptable terms, our current commercialization efforts may be unsuccessful, and we may not be able to commercialize our pipeline candidates
that are approved for marketing in the future, if any, or generate sufficient revenue to fund further research and development efforts.
There can be no assurances that
any new or existing collaborations, including our collaborations with Syneos, Valneva, and Brii Bio, and/or government funding will ever
result in the successful development or commercialization of any products for several reasons, including that:
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we may not have the ability to control the activities of our partners and
cannot provide assurance that they will fulfill their obligations to us, including with respect to the license, development, and commercialization
of products and pipeline candidates, in a timely manner or at all; |
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such partners may not devote sufficient resources to the commercialization
or clinical development of our products or pipeline programs or properly maintain or defend our intellectual property rights (if required); |
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relationships
with our collaborators could also be subject to certain fraud and abuse laws if not structured properly to comply with such laws; |
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any
failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development or commercialization
of our pipeline candidates and affect our ability to realize product revenue; and |
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disagreements,
including disputes over the ownership of technology developed with such collaborators, could result in litigation, which would be
time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals, and commercialization
activities. |
If
we or our collaborators fail to maintain our existing agreements or if we fail to establish agreements as necessary, we could be required
to undertake research, development, manufacturing, and commercialization activities solely at our own expense. These activities would
significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly
delay or hinder our commercial success.
Our
marketing, promotional, and business practices are subject to extensive regulation and any material failure to comply could result in
significant sanctions against us.
The
marketing, promotional, and business practices of pharmaceutical and biologics companies are subject to extensive regulation, the enforcement
of which may result in the imposition of civil and/or criminal penalties, injunctions, and/or limitations on marketing practices for
some of our products.
There
is no official FDA definition of “promotion,” but FDA regulations, guidance documents, and enforcement actions make clear
that the FDA takes a broad view of the term. Promotional materials include any written, oral, graphic, or broadcast material made and
distributed to consumers by a company or its agents with the intent to proactively communicate certain attributes (e.g., use/indication,
safety, effectiveness, etc.) of a given drug or biologic product. Examples include presentations, posters, brochures, notes, e-mail messages
(external), blog postings, corporate websites, social media posts, videos, oral representations made by company representatives, product
samples, reprints of scientific, and medical articles, among others. To be lawful, promotions, at a minimum, must:
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consistent with, and not contrary to, labeling; |
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present
“fair balance” between risks and benefits; |
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be
truthful and not false or misleading; |
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be
adequately substantiated (when required); and |
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include
adequate directions for use. |
Aside
from off-label promotion, a lack of fair balance between risk information and benefit information has been among the highest
enforcement priorities for the FDA in this context. We may also be subject to enforcement action in connection with any promotion of
an investigational product. Under the Food, Drug, and Cosmetic Act, a sponsor or investigator, or any person acting on behalf of a
sponsor or investigator, shall not represent in a promotional context that an investigational new drug is safe or effective for the
purposes for which it is under investigation or otherwise promote the product candidate. The most common factors that trigger FDA
enforcement actions for unauthorized promotion of an investigational drug include:
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Absence
of clear and prominent statement on investigational status; |
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Use
of trade name pre-approval (without adequate clarification as to status); |
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Lack
of separation between information on investigational and approved products; |
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Characterizations
and descriptions of a promotional nature that are phrased as established facts (e.g., “long actions,” “tamper-resistant,”
“next generation”); and |
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Presentation
of information in a manner that visually suggests it is an approved product (e.g., under a heading titled “Products”). |
Any
enforcement action or lawsuit brought against us in connection with alleged violations of applicable promotion requirements, or prohibitions,
could harm our business and our reputation, as well as the reputation of any then approved products we may promote or commercialize.
We
may be subject to additional risks due to the involvement of third-party drugs, devices, or other products in clinical studies evaluating
the safety and/or efficacy of our pipeline candidates and/or in connection with the commercial use of any such candidates approved by
the FDA for marketing in the U.S. in the future.
One
or more existing FDA-approved therapies may be involved in the clinical testing of a given product candidate, as such product candidate
may be tested in combination with a therapy developed by another company or administered using a third-party medical device.
For example, our cancer vaccine
immunotherapeutic candidate, VBI-1901, is in a Phase I/IIa clinical study where it was administered in combination with an adjuvant via
intradermal injection. Accordingly, our clinical studies for VBI-1901, and any other study involving a third-party product, may
subject us to additional risks that we may not otherwise face in connection with studies conducted without third-party products.
Among
other potential risks, a third-party product we utilize could be defective, removed from the market, or otherwise rendered unavailable
for the applicable use. Additionally, the safety and/or efficacy of such products may be called into question for reasons beyond our
control, including, but not limited to, serious adverse events associated with the product; regulatory enforcement action against the
product’s manufacturer, developer, or other responsible party, as applicable; or any other circumstance or finding that negatively
impacts the perceived utility or reliability of the product. The occurrence of any such events in connection with a third-party drug,
device, or other product used in our clinical studies could cause the FDA and/or industry to question the validity of our clinical trial
data or improperly attribute safety or efficacy issues to our pipeline candidates, either of which could have a material adverse effect
on our ability to successfully develop and commercialize such candidates. We cannot predict the ultimate impact that any third-party
product used in our clinical studies may have on our business, as such is dependent upon a number of factors outside of our reasonable
control.
Risks
Related to Our Capital Requirements and Financings
We
will need additional financing to continue our operations. If we are unable to obtain additional financing on acceptable terms, we may
have to curtail or cease our development plans and operations.
Our
revenue generating activities include product sales and research and development services pursuant to fee for service agreements, collaboration
agreements, and certain governmental research and development grants. However, our revenues have not been significant to date. Our long-term
success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development
of our products, to bring about their successful commercial release, if approved, to generate revenue, and, ultimately, to attain profitable
operations or alternatively advance the products and technology to such a point that an acquirer would find attractive. We face substantial
demand on our cash resources to fund operations and our growth plans in the future.
To
date, we have been able to obtain financing; however, there is no assurance that financing will be available in the future, or if it
is, that it will be available at terms acceptable to us. Additional financings may be effected through debt financing and/or the issuance
of equity securities, there being no assurance that any type of financing on terms acceptable to us will be available or otherwise occur.
Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially
all of our assets. Any equity financing or debt financing that requires the issuance of equity securities or securities convertible into
equity securities would cause the percentage ownership of our shareholders to be diluted, which dilution may be substantial. Also, any
additional equity securities issued may have rights, preferences, or privileges senior to those of existing shareholders. Furthermore,
if we issue additional securities, whether equity or debt, or if investors believe we may issue additional securities, the market price
of our common shares could decline. If such financing is not available when required or is not available on acceptable terms, we may
be required to reduce or eliminate certain pipeline candidates and development activities, and it may ultimately require us to suspend
or cease operations, which could cause investors to lose the entire amount of their investment.
We
have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.
We have incurred significant
net losses and negative operating cash flows since inception. We incurred net losses of approximately $113.3 million and $69.8
million in 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of $489.6 million and cash of $62.6 million. Cash outflows from operating activities were $73.7 million for the year
ended December 31, 2022. Our income
generating activities have been from sales of PreHevbio in the U.S. and Sci-B-Vac in Israeli markets that have generated a limited
number of sales to-date, fees from research and development services, and revenue from partnership collaborations. We expect to
incur significant operating losses for the next several years as we support the continued commercialization activities of our
3-antigen HBV vaccine, advance other pipeline candidates into and through clinical development, including our immunotherapeutic HBV
candidate, GBM vaccine immunotherapeutic candidate, prophylactic coronavirus vaccine program candidates, and CMV candidate, complete
clinical trials, and seek regulatory approval. Because of the numerous risks and uncertainties associated with developing and
commercializing pharmaceutical products, as well as those related to our expectations for the License Agreement, we are unable to
predict the extent of any future losses or guarantee when, or if, our company will become profitable or cash flow positive. If we
never achieve profitability or positive cash flows, or achieve either later than we anticipate, you may lose some or all of your
investment in us.
Our
financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to
continue as a going concern.
In
its report dated March 13, 2023, EisnerAmper LLP, our independent registered public accounting firm, expressed substantial doubt about
our ability to continue as a going concern as we have suffered recurring losses from operations and have insufficient liquidity to fund
our future operations. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and,
therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause
investors to suffer the loss of all or a substantial portion of their investment. As of December 31, 2022, we had $62.6 million of cash.
In order to have sufficient cash and cash equivalents to fund our operations in the future, we will need to raise additional equity or
debt capital and cannot provide any assurance that we will be successful in doing so.
Risks
Related to Our Business
Adverse
effects resulting from vaccines, immunotherapies, or therapies could negatively affect the perceptions by members of the health
care community, including physicians, about the safety and effectiveness of our products and pipeline candidates.
There
are many other companies that have developed or are currently trying to develop vaccines or immuno-oncology products for the treatment
or prevention of diseases that overlap with our products and pipeline candidates. If adverse effects were to result from vaccines or
immunotherapy drugs or therapies being developed, manufactured, and marketed by others that overlap with our products and pipeline candidates,
it could be attributed to our products or pipeline candidates or immunotherapy protocols as a whole. In the past, biologics have
been associated with certain safety risks and other companies developing biologics have had patients in trials suffer from serious adverse
events, including death. Any such attribution could negatively affect the perceptions by members of the health care community, including
physicians, about the safety and effectiveness of our products or pipeline candidates. Our industry is susceptible to rapid technological
changes and there can be no assurance that we will be able to overcome any new technological challenges presented by the adverse effects
resulting from vaccines or immunotherapy drugs or therapies developed, manufactured or marketed by others.
We
have international operations, which subject us to risks inherent with operations outside of Canada.
We
have international operations and we may seek to obtain market approvals in foreign markets that we deem to generate significant opportunities.
However, even with the cooperation of a commercialization partner, conducting drug development in foreign countries involves inherent
risks, including, but not limited to: difficulties in staffing, funding, and managing foreign operations; different and unexpected changes
in regulatory requirements; export restrictions; tariffs and other trade barriers; different reimbursement systems; economic weaknesses
or political instability in particular foreign economies and markets; compliance with tax, employment, immigration, and labor laws for
employees living or travelling abroad; supply chain and raw materials management; difficulties in protecting, acquiring, enforcing, and
litigating intellectual property rights; fluctuations in currency exchange rates; and potentially adverse tax consequences.
If
we were to experience any of the difficulties listed above, or any other difficulties, our international development activities and our
overall financial condition may suffer and cause us to reduce or discontinue our international development and market approval efforts.
Our
employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We
are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to:
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comply
with FDA regulations or similar regulations of comparable foreign regulatory authorities; |
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provide
accurate information to the FDA or comparable foreign regulatory authorities; |
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comply
with manufacturing standards that we have established; |
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comply
with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced
by comparable foreign regulatory authorities; |
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properly
protect patient information which is subject to federal and state privacy and security laws or similar laws in foreign countries; |
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report
financial information or data accurately; or |
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disclose
unauthorized activities to us. |
In
particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended
to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range
of pricing, discounting, marketing and promotion, sales commissions, customer incentive programs, and other business arrangements. Employee
misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory
sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions
that we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting
us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
If any such actions are instituted against us and we are not successful in defending or asserting our rights, those actions could have
a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
We are subject to federal, provincial and state healthcare laws, regulations,
and policies in connection with our healthcare-related activities and arrangements both in the U.S. and abroad, and our failure to comply
with those laws could have a material adverse effect on our results of operations and financial conditions.
Since
we have obtained FDA approval to commercialize PreHevbrio, our operations are directly and indirectly, through our relationships
with third parties, such as, healthcare providers, customers, and third-party payors, subject to various federal and state fraud and
abuse laws, including, without limitation the following:
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the
federal anti-kickback statute (and state equivalents), which prohibits, among other things, persons from knowingly and willfully
soliciting, receiving, offering, or paying remuneration, directly or indirectly, in exchange for or to induce either the referral
of an individual, or the furnishing, arranging for, or the purchase, order or recommendation of, any item or service that is reimbursable,
in whole or in part, by a federal healthcare program such as the Medicare and Medicaid programs; |
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the
federal physician self-referral law, commonly known as the “Stark Law” (and state equivalents), which prohibits a physician
from making a referral for certain designated health services covered by the Medicare program if the physician or an immediate family
member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls
within an applicable exception to the prohibition; |
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the
federal False Claims Act and related laws (and state equivalents) that prohibit and impose liability on any person or entity that,
among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government; |
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the
so-called qui tam provisions of the federal and state False Claims Act, which permit whistleblowers to sue in the name of the federal
or state governments’ healthcare providers and others for alleged violations of those laws and which permit whistleblowers
to obtain a reward for bringing the case. These qui tam cases have been on the rise in recent years; |
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federal
criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
matters; |
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the
federal transparency requirements under the Affordable Care Act, including the provisions commonly referred to as the Physician Payments
Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under
Medicare, Medicaid or Children’s Health Insurance Program to report annually to the Centers for Medicare & Medicaid Services
information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests
held by physicians and their immediate family members; |
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the
federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare
or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection
of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an
exception applies; |
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the
Prescription Drug Marketing Act, as amended, which governs the distribution of prescription drug samples to healthcare practitioners; |
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the
fraud and abuse provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information
Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations (collectively “HIPAA”),
which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters and established comprehensive federal standards with respect to the privacy and security of protected
health information and requirements for the use of certain standardized electronic transactions, and amendments made in 2013 to HIPAA
under the Health Information Technology for Economic and Clinical Health Act, which strengthens and expands HIPAA privacy and security
compliance requirements, increases penalties for violators, extends enforcement authority to state attorneys general, and imposes
requirements for breach notification; |
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analogous state laws and regulations, including (among others) state anti-kickback,
self-referral, and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution,
sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private
insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines
and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare
providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to
pricing and marketing information and that require tracking gifts and other remuneration and items of value provided to healthcare professionals
and entities; state and local laws that require the registration of pharmaceutical sales representatives; and |
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state
and local law equivalents of HIPAA related to the privacy and security of patient information in certain circumstances, which are
typically not preempted by HIPAA and may apply more broadly, and/or contain different, potentially more stringent, restrictions and
obligations, than HIPAA thus complicating compliance efforts. |
Further,
the Affordable Care Act, among other things, amended the intent requirement of the federal anti-kickback and criminal healthcare
fraud statutes. A person or entity can be found guilty of fraud or false claims under the Affordable Care Act without actual
knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provides that the government may
assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false
or fraudulent claim for purposes of the false claims statutes. Ensuring that our activities and business arrangements with third
parties comply with applicable healthcare laws and regulations generally comes with substantial costs, as does, possibly to an even greater degree, any actual or alleged failure to comply with such laws. Possible sanctions for violation of
the applicable fraud-and-abuse laws may include monetary fines, civil, and criminal penalties, exclusion from Medicare, Medicaid,
and other government programs, forfeiture of amounts collected in violation of such prohibitions, individual imprisonment,
additional reporting obligations, and oversight (if we become subject to a corporate integrity agreement or other agreement to
resolve allegations of non-compliance with these laws), and the curtailment or restructuring of our operations. Any violations of
these laws, or any action against us for violation of these laws, even if we successfully defend against such claims, could result
in a material adverse effect on our reputation, business, results of operations, and financial condition. In addition, there has
been an increase in federal and state regulation of payments made to physicians and teaching hospitals for marketing,
medical directorships, and other purposes. These laws and any other similar initiatives, including, among many others, legislation requiring publication of
drug costs, could materially and adversely impact our business, financial condition and results of operations.
The
scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially in
light of the lack of applicable precedent and regulations. We are not able to predict the impact on our business of any changes in these
laws. Federal or state regulatory authorities may challenge our future activities under these laws. Any such challenge could have a material
adverse effect on our reputation, business, results of operations and financial condition. Any state or federal regulatory review of
the Company, regardless of the outcome, would be costly and time-consuming.
Our business, and our current and future activities and products are also
subject to equivalent healthcare-related laws and regulations of applicable foreign countries, provinces, and/or any other applicable
jurisdictions in which we currently operate or may operate in the future. There can be no assurance that the potential compliance obligations
of any such foreign laws, and any corresponding consequences of noncompliance, will be similar to those of U.S. fraud and abuse laws.
In addition to the spectrum of potentially serious consequences that could result from our noncompliance with any such applicable laws
or regulations, our global compliance efforts currently, and will continue to, require a significant commitment of our time, efforts,
and money.
Healthcare
legislative reform measures or other changes may have a material adverse effect on our business and results of operations.
In the U.S., there have been a
number of legislative and regulatory initiatives focused on containing the cost of healthcare. The federal Patient Protection and Affordable
Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the “ACA”), for example, substantially changed
the way healthcare is financed by both governmental and private insurers. The ACA contains a number of provisions that could impact our
business and operations, in both foreseeable and unforeseeable ways. ACA provisions that may affect our business include those governing
enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under health insurance exchanges,
expansion of the 340B program, expansion of state Medicaid programs, and fraud and abuse enforcement. Such changes may impact existing
government healthcare programs, industry competition, formulary composition, and may result in the development of new programs, including
Medicare payment for performance initiatives, health technology assessments, and improvements to the physician quality reporting system
and feedback program.
Since
its enactment, there have been numerous executive, judicial, and legislative challenges to the ACA, including several efforts to repeal
or replace certain elements thereof, such as, for example, the lawsuit brought by the State of Texas (and others) challenging the constitutionality
of the ACA after the so-called “Individual Mandate” was repealed by Congress, which was ultimately unsuccessful, as the Supreme
Court ordered its dismissal in June 2021. While it appears that the ACA will remain intact, in its current form, for now, we cannot predict
whether, or to what extent, it will undergo additional challenges and/or amendments in the future or the impact any such efforts will
have on our business and financial results.
Various
additional federal reform measures have been introduced in recent years, focusing on healthcare and drug pricing, in particular. For
example, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining
health insurance coverage through the ACA marketplace, which began on February 15, 2021, and remained open through August 15, 2021. The
executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access
to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements
and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. On the legislative
front, the American Rescue Plan Act of 2021 was signed into law on March 11, 2021, which, in relevant part, eliminates the statutory
Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source drugs and innovator multiple
source drugs, beginning January 1, 2024. And, in July 2021, the Biden administration released an executive order entitled, “Promoting
Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response, on September 9, 2021,
HHS released a “Comprehensive Plan for Addressing High Drug Prices” that outlines principles for drug pricing reform and
sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take
to advance these principles.
Additionally,
in August 2022, the Inflation Reduction Act (“IRA”) was signed into law, which will, among other things, allow U.S. Department
of Health and Human Services (“HHS”) to negotiate the selling price of certain drugs and biologics that the Centers for Medicare
& Medicaid Services (“CMS”) reimburses under Medicare Part B and Part D, although only high-expenditure single-source
drugs that have been approved for at least 7 years, or 11 years for biologics, can be selected by CMS for negotiation, with the negotiated
price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped
at a statutory ceiling price. Beginning in October 2023, the IRA will also penalize drug manufacturers that increase prices of Medicare
Part B and Part D drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these
provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject
to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance
coverage in ACA marketplaces through plan year 2025.
In
foreign healthcare markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted
price ceilings on specific products and therapies. We cannot predict how our business will ultimately be affected by existing healthcare
reform measures or what new statutory, regulatory, and/or administrative initiatives may be adopted in the future. However, we expect
there to be continued, or increased, downward pressure on drug pricing in most, if not all, jurisdictions in which we currently, or may
in the future, market one or more biological products. Any and all current and future reform measures at any level and in any country
could result in, among other things, reduced demand for or market acceptance of our current and future (if any) products. If we or any
third parties we may engage are slow or unable to adapt to changes in the applicable regulatory landscape or the adoption of new requirements
and/or policies, or if we or such third parties are not able to maintain regulatory compliance, the success of our products and development
pipeline will likely suffer, and we may have greater difficulty achieving or sustaining profitability.
Our internal computer systems, and/or those of our third-party vendors,
collaborators, and/or other contractors may be subject to various federal and state confidentiality and data privacy laws in the U.S.
and abroad and could sustain system failures, security breaches, or other disruptions, any of which could have a material adverse effect
on our business.
Numerous
international, national, federal, provincial and state laws, including state privacy laws (such as the California Consumer Privacy Act,
or “CCPA”), state security breach notification and information security laws, and federal and state consumer protection laws
govern the collection, use, and disclosure of personal information. In addition, most healthcare providers who may, in future, prescribe
and dispense our products in the U.S. and research institutions in the U.S. with whom we collaborate for our sponsored
clinical trials are “covered entities” subject to privacy and security requirements under Health Care Insurance and Accountability
Act of 1996 (“HIPAA”). Among other things, the Health Information Technology for Economic and Clinical Health Act (“HITECH”)
makes HIPAA’s privacy and security standards directly applicable to business associates, independent contractors, or agents of
covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable
to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts
to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. Certain of
our clinical sites or collaborators could be subject to a wide range of penalties and sanctions under HIPAA, including criminal penalties
if they knowingly obtain or disclose individually identifiable health information maintained by a covered entity in a manner that is
not authorized or permitted by HIPAA. Failure to comply with current and future privacy laws and regulations could result in governmental
enforcement actions (including the imposition of significant penalties), criminal and civil liability, and/or adverse publicity that
negatively affects our business.
Moreover,
we rely on our internal and third-party provided information technology systems and applications to support our operations and to maintain
and process company information including personal information, confidential business information and proprietary information. Furthermore,
we generate intellectual property that is central to the future success of the business and transmit certain amounts of confidential
information. Additionally, we collect, store and transmit confidential information of collaborators, employees or other third-party contractors.
We have experienced in the past, and may experience in the future, cybersecurity incidents, threats, and intrusions. Incidents, threats,
and intrusions may require remediation to protect sensitive information, including our intellectual property and personal information,
and our overall business. The continually changing threat landscape of cybersecurity today makes our systems potentially vulnerable to
service interruptions, system errors or to security breaches from inadvertent or intentional actions by our employees, partners, and
vendors, and from attacks by malicious third parties, including supply chain attacks originating at our third-party partners. Such attacks
are of ever-increasing levels of sophistication. Attacks may be made by individuals or groups that have varying levels of expertise,
some of which are technologically advanced and well-funded including, without limitation, nation states, organized criminal groups, and
hacktivists organizations. A breach of cybersecurity, a disruption in availability, or the unauthorized alteration of systems or data
could adversely affect our business, results of operations and financial condition, or lead to the loss, theft, destruction, corruption,
or compromise of our information or that of our collaborators, or third-party contractors, as applicable.
While
we have invested in cybersecurity and have implemented processes and procedural controls to maintain the confidentiality and integrity
of such information, there can be no guarantee that our efforts will prevent all service interruptions or security breaches. Any such
interruption or breach of our systems could adversely affect our business operations and result in the loss of critical or sensitive
confidential information or intellectual property, and could result in financial, legal, and reputational harm to our business, including
legal claims and proceedings, liability under laws that protect the privacy of personal information, government enforcement actions,
and regulatory penalties, as well as remediation costs. While we seek to protect our information technology systems from these types
of incidents, the healthcare sector continues to see a high frequency of cyberattacks and increasingly sophisticated threat actors, and
our systems and the information maintained within those systems remain potentially vulnerable to data security incidents. Moreover, losses
from such events may not be completely covered by insurance coverage (or may not be covered at all by any of our insurance policies depending
on the circumstances). Furthermore, this insurance may not be sufficient to cover the financial, legal, or reputational losses that may
result from an interruption or breach of our systems.
Any
of the above-described cyber or other security-related incidents may trigger notification obligations to affected individuals and government
agencies, legal claims or proceedings, and liability under foreign, federal, provincial, and state laws that protect the privacy and
security of personal information. Our proprietary and confidential information may also be accessed. Any one of these events could cause
our business to be materially harmed and our results of operations may be adversely impacted. Finally, as cyber threats continue to evolve,
and privacy and cybersecurity laws and regulations continue to develop, we may need to invest additional resources to implement new compliance
measures, strengthen our information security posture, or respond to cyber threats and incidents.
We
may expand our business through the acquisition of rights to new pipeline candidates that could disrupt our business and harm our financial
condition.
We
may expand our product offerings, and we may seek acquisitions of pipeline candidates or technologies to do so. We may also seek to expand
our business through the acquisition of businesses or companies having rights to new pipeline candidates. Acquisitions involve numerous
risks, including substantial cash expenditures; potentially dilutive issuances of equity securities; incurrence of debt and contingent
liabilities, some of which may be difficult or impossible to identify at the time of the acquisition; difficulties in assimilating the
acquired technologies or the operations of the acquired companies; diversion of management’s attention away from other business
concerns; risks of entering markets in which we have limited or no direct experience; and the potential loss of key employees or key
employees of the acquired companies.
There
can be no assurance that any acquisition by us will result in short-term or long-term benefits to us. We may incorrectly judge the value
or worth of an acquired product, company or business. In addition, future success of the combined company will depend in part on our
ability to manage the rapid growth associated with some of these acquisitions. There can be no assurance that we will be able to make
the combination of our business with that of any acquired products, businesses, or companies work or be successful. Furthermore, the
development or expansion of our business or any acquired products, businesses, or companies may require a substantial capital investment
by us. We may not have these necessary funds, or such funds might not be available on acceptable terms or at all. We may also seek to
raise funds by selling capital stock or instruments convertible into or exercisable for capital stock, which could dilute each shareholder’s
ownership interest.
Under
current U.S., Canadian, and Israeli law, we may not be able to enforce covenants not to compete or to prevent the breach of
confidentiality agreements, and therefore, may be unable to prevent our competitors from benefiting from the expertise of some of our
former employees.
We
generally enter into non-competition agreements with our employees and certain key consultants. These agreements prohibit our employees
and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients
for a limited period of time. However, under current U.S., Canadian, and Israeli law, we may be unable to enforce these agreements,
in whole or in part, and therefore, we cannot be sure that these employees and key consultants will not compete with us. For example,
in the past, Israeli courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that
the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have
been recognized by the courts, such as the secrecy of a company’s confidential commercial information or the protection of its
intellectual property. If we are unable to demonstrate that harm would be caused to us or otherwise enforce these non-competition agreements,
in whole or in part, we may be unable to prevent our competitors from benefitting from the expertise our former employees or consultants
developed while working for us and our ability to remain competitive may be diminished.
We
rely on confidential information that we seek to protect through confidentiality agreements with our employees and other parties. If
these agreements are breached, competitors may obtain and use our confidential information to gain a competitive advantage over us or
could substantially delay product development or harm our commercialization activities. We may not have any remedies against our competitors
and any remedies that may be available to us may not be adequate to protect our business or compensate us for the damaging disclosure.
In addition, we may have to expend resources to protect our interests from possible infringement by others, which may divert our available
funds away from our business activities.
Global,
market and economic conditions may negatively impact our business, financial condition and share price.
Concerns
over inflation, geopolitical issues, the U.S. financial markets, foreign exchange rates, capital and exchange controls, unstable
global credit markets and financial conditions and the COVID-19 pandemic and the ongoing effects from such conditions have led to
periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for
the global economy and expectations of slower global economic growth going forward, and increased unemployment rates. Our general
business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or
unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any
necessary debt or equity financing more difficult to complete, more costly, and more dilutive. In addition, there is a risk that one
or more of our current or future service providers, manufacturers, suppliers, our third-party payors, and other partners could be
negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule
and on budget or meet our business and financial objectives.
In
addition, we face several risks associated with international business and are subject to global events beyond our control, including
war, public health crises, such as pandemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts
and other international events. Any of these changes could have a material adverse effect on our reputation, business, financial condition
or results of operations. There may be changes to our business if there is instability, disruption or destruction in a significant geographic
region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters,
including famine, flood, fire, earthquake, storm or disease. In February 2022, armed conflict escalated between Russia and Ukraine. The
sanctions announced by the U.S. and other countries, following Russia’s invasion of Ukraine against Russia to date include restrictions
on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected
individuals and political, military, business and financial organizations in Russia. The U.S. and other countries could impose wider
sanctions and take other actions should the conflict further escalate. It is not possible to predict the broader consequences of this
conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic
conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition and results of
operations.
We
have significant operations located in Israel and, therefore, our results may be adversely affected by political, economic, and military
instability in Israel.
Our
subsidiary’s operations are located in Rehovot, Israel. Accordingly, political, economic, and military conditions in Israel may
directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between
Israel and its neighboring countries. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and
its trading partners could adversely affect our business and results of operations.
Any
armed conflicts, terrorist activities, or political instability in the region could adversely affect business conditions and could harm
our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined
to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order
to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom
we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements
pursuant to force majeure provisions in such agreements.
Since
the Gaza Strip’s 2007 coup, by which the terrorist organization Hamas seized control, there have been a number of armed conflicts
between Hamas and Israel – in December-January 2008-9, November 2012, July-August 2014, May 2021, and as recently as August 2022
– in all of which conflicts, rockets were fired from Gaza into Israeli civilian population centers. During the summer of 2006,
Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party backed by Iran and
controlling large swathes of Lebanon. These conflicts involved missile strikes against civilian targets in various parts of Israel, including
areas in which our Rehovot facilities, employees and some of our consultants are located, and negatively affected business conditions
in Israel. Civil unrest and political turbulence have occurred in other countries in the region, including Syria which shares a common
border with Israel, and is affecting the political stability of those countries. Since April 2011, a civil war that has been ongoing
in Syria has escalated, and evidence indicates that chemical weapons have been used in the region. This instability and any intervention
may lead to additional conflicts in the region. In addition, Iran has threatened to attack Israel and is widely believed to be developing
nuclear weapons. Iran also has a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon,
and both the Allawite regime and various rebel militia groups in Syria. These situations may potentially escalate in the future to more
violent events which may affect Israel and us. Any armed conflicts, terrorist activities, or political instability in the region could
adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital.
Commercial
insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although
the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks
or acts of war, we cannot assure that this government coverage will be maintained, or if maintained, will be sufficient to compensate
us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts
or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.
Political
relations could limit our ability to sell or buy internationally.
We
could be adversely affected by the interruption or reduction of trade between Israel and its trading partners. To date, the State of
Israel and Israeli companies have been repeatedly subjected to economic boycotts. Several countries, companies and organizations continue
to participate in a boycott of Israeli firms and others doing business with Israel or with Israeli companies. Also, over the past several
years there have been calls in Europe and elsewhere to reduce trade with Israel. These restrictive laws and policies may have an adverse
impact on our operating results, financial condition or the expansion of our business.
The
operations of our subsidiary in Israel may be disrupted as a result of the obligation of Israeli citizens to perform military service.
Many
Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty until they reach the
age of 40 (or older, for reservists who are officers or who have certain special training) and, in the event of a military conflict,
may be called to active duty. In response to increases in terrorist activity and recent armed conflicts, there have been periods
of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. The operations
of our subsidiary in Israel could be disrupted by such call-ups, which may include the call-up of our employees or the employees of our
Israeli business partners. Such disruption could materially adversely affect our business, financial condition and results of operations.
Exchange
rate fluctuations between the United States Dollar, Canadian Dollar and the New Israeli Shekel currencies may negatively affect our earnings
cash flows.
Our functional currency is the United States Dollar. We incur expenses
in New Israeli Shekel, which we refer to as NIS, Canadian Dollars, United States Dollars and the Euro. As a result, we are exposed to
the risks that the United States Dollar may devalue relative to the Canadian Dollar, the Euro or NIS, or, if the United States Dollar
appreciates relative to the Canadian Dollar, the Euro or NIS, that the inflation rate in the U.S. may exceed such rate of devaluation
of the United States Dollar, or that the timing of such devaluation may lag behind inflation in the U.S. The average exchange rate for
the year ended December 31, 2022, was US$1.00 = NIS 3.3579, US$1.00 = CAD $1.3005 and US$ 1.00 = €0.9694. We cannot predict any future
trends in the rate of inflation in the U.S.or the rate of devaluation, if any, of the United States Dollar against the Canadian Dollar,
Euro or NIS.
Risks
Related to Our Intellectual Property
Our
success depends on our ability to maintain the proprietary nature of our technology. We may become subject to third parties’ claims
alleging infringement of patents and proprietary rights or seeking to invalidate our patents or proprietary rights, which would be costly,
time-consuming, and, if successfully asserted against us, delay or prevent the development of our current or future pipeline candidates
or commercialization of our products.
Our
success in large part depends on our ability to maintain the proprietary nature of our technology. To do so, we must, at significant
cost, prosecute patent applications and maintain existing patents, obtain new patents, and pursue trade secret and other intellectual
property protection. We also must operate without infringing the proprietary rights of third parties or allowing third parties to infringe
our rights. We currently have rights to over 200 fully owned, co-owned, or exclusively licensed patents and patent applications. However,
patent issues relating to pharmaceuticals and biologics involve complex legal, scientific, and factual questions.
To
date, no consistent policy has emerged regarding the breadth of biotechnology patent claims that are granted by the United States Patent
and Trademark Office or enforced by the federal courts. Therefore, we do not know whether our patent applications will result in the
issuance of patents, or that any patents issued to us will provide us with any competitive advantage. We also cannot be sure that we
will develop additional proprietary products that are patentable. Furthermore, there is a risk that others will independently develop
similar technology or products or circumvent the patents issued to us.
Even if we are issued patents for our technologies, there is always a risk
that third parties will submit prior art, or initiate opposition, derivation, reexamination, supplemental, examination, interference proceedings,
post grant review or inter parties review proceedings to challenge the validity of one or more of our patents. These proceedings can result
in the loss of patent claims. Even if we are successful in defending our patents during these proceedings, these procedures are time consuming
and expensive and may have a negative impact on our results. An adverse determination in any such submission or proceeding could reduce
the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with
us, or reduce our ability to manufacture or commercialize products. Furthermore, if the scope or strength of protection provided by our
patents and patent applications is threatened, it could discourage companies from collaborating with us to license, develop or commercialize
current or future products. The ownership of our proprietary rights could also be challenged.
There is also a risk that third parties may challenge our existing patents
in court or claim that we are infringing their patents or proprietary rights. We cannot assure you that the manufacture, use, sale, offer
for sale, or importation of any of our products or current or future pipeline candidates will not infringe existing or future patents.
Because we have not conducted a formal freedom to operate analysis for patents related to our products or pipeline candidates, we may
not be aware of patents that have already been issued that a third-party might assert are infringed by one of our products or current
or future pipeline candidates. Because patent applications can take many years to issue and may be confidential for eighteen months or
more after filing, there also may be applications now pending of which we are unaware and which may later result in issued patents that
we may infringe by commercializing any of our products or current or future pipeline candidates. Similarly, publication of discoveries
in the scientific or patent literature often lags behind actual discoveries. We cannot be certain that we or our licensors were the first
to invent, or the first to file, patent applications covering our products and candidates. We also may not know if our competitors filed
patent applications for technology covered by our pending applications or if we were the first to invent the technology that is the subject
of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary
rights that block or compete with our patents. We could incur substantial costs in defending patent infringement suits or in filing suits
against others to have their patents declared invalid or to claim infringement of our patents. It is also possible that we may be required
to obtain licenses from third parties to avoid infringing third-party patents or other proprietary rights. We cannot be sure that such
third-party licenses would be available to us on acceptable terms, if at all. If we are unable to obtain required third-party licenses,
we may be delayed in or prohibited from developing, manufacturing or selling products requiring such licenses.
Although
our patent filings include claims covering various features of our pipeline candidates, including composition, methods of manufacture
and use, our patents do not provide us with complete protection against the development of competing products. Furthermore, follow-on
versions of patented biologic products (i.e., biosimilars) may have structural differences that cause them to fall outside the scope
of patent claims. Some of our know-how and technology is not patentable. To protect our proprietary rights in unpatentable intellectual
property and trade secrets, we require employees, consultants, advisors, and collaborators to enter into confidentiality agreements.
These agreements may not provide meaningful protection for our trade secrets, know-how, or other proprietary information.
Our
3-antigen HBV vaccine is not currently protected by any pending patent application nor any unexpired patent. Accordingly, our 3-antigen
HBV vaccine may be subject to competition from the sale of generic products that could adversely affect our business and operations.
Our 3-antigen HBV vaccine has no patent protection, and therefore, we will
seek to rely on trade secrets, know-how, other non-patent intellectual property, and non-patent data exclusivity in the BPCIA and similar
legislation in other countries, which is described further under “—Risks Related to our Intellectual Property —We
may not be able to obtain marketing exclusivity in the U.S. under the BPCIA or equivalent regulatory data exclusivity protection in other
jurisdictions for our products.” Non-patent protection, however, can be weaker than the protection afforded by patents. For
example, trade secret protection is effective only against wrongful acquisition, use or disclosure of confidential information, and only
while the trade secret remains confidential and meets the legal standards to qualify as a trade secret. A competitor can avoid a claim
of trade secret misappropriation by showing, for example, loss of confidentiality or independent development without use of a trade secret
owner’s information, however, this typically requires some time, effort, and financial resources to develop independently. In the
event that our competition can develop a substantially equivalent product to our 3-antigen HBV vaccine independently, this competition
could have a materially adverse effect on our business, financial condition, and operating results.
Our
3-antigen HBV vaccine is the only product we currently market in the U.S. and Israel or are planning to commercialize in Europe and Canada.
Failure to obtain and retain marketing exclusivity or expiration of the market exclusivity could adversely affect the revenue
potential for our 3-antigen HBV vaccine in the jurisdictions where it is approved for sale.
Our
ability to protect and enforce our patents does not guarantee that we will secure the right to commercialize the patents.
A
patent is a limited monopoly right conferred upon an inventor, and any successors in title, in return for the making and disclosing of
a useful, new, and non-obvious invention. This monopoly is of limited duration but, while in force, allows the patent holder to prevent
others from making and/or using his invention. While a patent gives the holder this right to exclude others, it is not a license to commercialize
the invention, where other permissions may be required for permissible commercialization to occur. For example, a drug cannot be marketed
in the U.S. without the appropriate authorization from the FDA, regardless of the existence of a patent covering the product.
Further, the invention, even if patented itself, may be prohibited from commercialization if it infringes the valid patent rights of
another party.
Furthermore,
the issuance of a patent, while presumed valid and enforceable, is not conclusive as to its validity or its enforceability and it may
not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors
may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies,
designs or methods. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants,
vendors, former employees and current employees.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements
imposed by governmental patent offices, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The
United States Patent and Trademark Office and various foreign governmental patent offices require compliance with a number of procedural,
documentary, fee payment, and other provisions during the patent process. There are situations in which noncompliance can result in abandonment
or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such
an event, competitors might be able to enter the market earlier than would otherwise have been the case, which could result in a material
adverse effect on our business or results of operations.
We
are dependent on technologies we have licensed, and we may need to license in the future, and if we fail to obtain licenses we need,
or fail to comply with our payment obligations in the agreements under which we in-license intellectual property and other rights from
third parties, we could lose our ability to develop our pipeline candidates.
We
currently are dependent on licenses from third parties for certain of our key technologies, including the license under the Amended and
Restated Ferring License Agreement between us, Ferring International Center S.A. (“Ferring”), a company incorporated pursuant
to the laws of Switzerland and SciVac, and the license from UMPC. Under the Amended and Restated Ferring License Agreement, we are committed to pay
Ferring royalties equal to 3.5% of net sales (as defined therein) of HbsAg “Product” (as defined therein). Under the Assignment
Agreement between FDS Pharm LLP and SciGen Ltd., dated February 14, 2012 (the “SciGen Assignment Agreement”), we are required
to pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the original Ferring License Agreement) of Product. Under the
original Ferring License Agreement and the SciGen Assignment Agreement, we originally were to pay royalties on a country-by-country
basis until the date 10 years after the date of commencement of the first royalty year in respect of such country. In April 2019, we
exercised our option to extend the original Ferring License Agreement in respect of all the countries that still make up the territory
for an additional 7 years by making a one-time payment to Ferring of $100. Royalties under the Amended and Restated Ferring License Agreement
and SciGen Assignment Agreement will continue to be payable for the duration of the extended license periods. Under our license agreement
with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that is expected to expire
in the U.S. in 2023 and expired in other countries in 2021. Under this agreement, we are required to pay UPMC between 0.75%
to 1.75% of net sales and certain lump-sum milestone payments. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV
vaccine and we are negotiating extension of our existing license to cover this patent family.
No
assurance can be given that our existing license will be extended on reasonable terms or at all. In addition, we expect we will need
to license intellectual property from other third parties in the future and that these licenses will be material to our business. No
assurance can be given that we will generate sufficient revenue or raise additional financing to meet our payment obligations in the
license agreements with Ferring, UPMC, or other license agreements we enter into with third parties in the future. Any failure to make
the payments required by the license agreements may permit the licensor to terminate the license. If we were to lose or otherwise be
unable to maintain these licenses for any reason, it would halt our ability to develop our pipeline candidates. Furthermore, such loss
of these licenses may enable development of new products that may compete with our pipeline candidates, and our competitors may gain
proprietary position. Any of the foregoing could result in a material adverse effect on our business or results of operations.
In
addition, we do not own the patents or patent applications that we license, and as such, we may need to rely upon our licensors to properly
prosecute and maintain those patent applications and prevent infringement of those patents. If our licensors are unable to adequately
protect their proprietary intellectual property we license from legal challenges, or we are unable to enforce such licensed intellectual
property against infringement or alternative technologies, we will not be able to compete effectively in the drug discovery and development
business.
If
patent laws or the interpretation of patent laws change, our competitors may be able to develop and commercialize our discoveries.
Important
legal issues remain to be resolved as to the extent and scope of available patent protection for biopharmaceutical products and
processes in the U.S. and other important markets outside the U.S., such as Europe, China and Japan. As such, litigation or
administrative proceedings may be necessary to determine the validity, scope and ownership of certain of our and others’
proprietary rights. Any such litigation or proceeding may result in a significant commitment of resources in the future and could
force us to do one or more of the following: cease selling or using any of our products that incorporate the challenged intellectual
property, which would adversely affect our revenue; obtain a license or other rights from the holder of the intellectual property
right alleged to have been infringed or otherwise violated, which license may not be available on reasonable terms, if at all; and
redesign our products to avoid infringing or violating the intellectual property rights of third parties, which may be
time-consuming or impossible to do. In addition, changes in patent laws in the U.S. and other countries may result in
allowing others to use our discoveries or develop and commercialize our products. We cannot provide assurance that the patents we
obtain or the unpatented technology we hold will afford us significant commercial protection.
We
may not be able to enforce our intellectual property rights throughout the world. This risk is exacerbated for us because we expect that
one or more of our products or pipeline candidates will be manufactured and used in a number of foreign countries.
Patent
rights are territorial, and patent protection extends only to those countries where we have issued patents. Filing, prosecuting, and defending
patents on our products and product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive,
and our intellectual property rights in some countries outside the U.S. could be less extensive than those in the U.S. Competitors may
successfully challenge or avoid our patents, or manufacture products in countries where we have not applied for patent protection. Changes
in the patent laws in the U.S. or other countries may diminish the value of our patent rights. As a result of these and other factors,
the scope, validity, enforceability, and commercial value of our patent rights are uncertain and unpredictable.
The
laws of foreign countries may not protect intellectual property rights to the same extent as the laws of the U.S. Many companies
have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. This
risk is exacerbated for us as a result of our existing and planned manufacturing operations, clinical study sites, and marketing authorizations
in a number of foreign countries.
The
legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property
protection, especially those relating to life sciences. This could make it difficult for us to stop the infringement or other misappropriation
of our intellectual property rights. For example, several foreign countries have compulsory licensing laws under which a patent owner
must grant licenses to third parties. In addition, some countries limit the enforceability of patents against third parties, including
government agencies or government contractors. In these countries, patents and trade secrets may provide limited or no benefit.
Most
jurisdictions in which we have applied for, intend to apply for or have been issued patents have patent protection laws similar to those
of the U.S., but some of them do not. For example, in addition to the collaboration with Brii Bio, we may do business in China, Indonesia,
and India in the future, these countries may not provide the same or similar protection as that provided in the U.S. Additionally,
due to uncertainty in patent protection law, we have not filed applications in many countries where significant markets exist.
Proceedings
to enforce patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects
of our business. Accordingly, efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes
in the law and legal decisions by courts in the U.S. and foreign countries may affect our ability to obtain adequate protection
for our technology and the enforcement of our intellectual property.
If
we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our technology and
products could be significantly diminished.
We
rely on trade secrets to protect our proprietary technologies to maintain our competitive position, especially where we do not believe
patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements
with our employees, consultants, outside scientific collaborators, sponsored researchers, contract manufacturers, vendors and other advisors
to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential
information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition,
we cannot guarantee that we have executed these agreements with each party that may have or have had access to our trade secrets. Furthermore,
if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, we may not have
adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further,
our trade secrets or similar knowledge relevant to our business could otherwise become known or be independently discovered by our competitors.
We
may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their
former employers.
Our
employees may have been previously employed at other companies in the industry, including our competitors or potential competitors. Although
we are not aware of any claims currently pending against us, we may be subject to claims that these employees or we have inadvertently
or otherwise used or disclosed trade secrets or other proprietary information of the former employers of our employees. Litigation may
be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in
substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may
lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability
to commercialize product(s), which would materially adversely affect our commercial development efforts.
We
may not be able to monetize intangible assets, including IPR&D and goodwill, which may result in the need to record an impairment
charge.
Our
consolidated balance sheet contains approximately $58.3 million of intangible assets. For IPR&D assets, which consist of the CMV
and GBM programs, the risk of failure is significant, and there can be no certainty that these assets ultimately will yield
successful products. The nature of our business is high-risk and requires that we invest in a large number of projects in an effort
to achieve a successful portfolio of approved products. Our ability to realize value on these significant investments is often
contingent upon, among other things, regulatory approvals, availability of resources, and market acceptance. These IPR&D and
goodwill assets may become impaired and be written off at some time in the future, which can have a material adverse effect on the
financial statements. The fair value of our CMV asset was in excess of its carrying value by greater than 25% as of August 31, 2022.
In the event we continue to experience challenging market conditions, insufficient internal resources due to competing programs, and
changes in the competitive and technological landscape for CMV vaccines, this may give rise to a triggering event that may require
the Company to record impairment charges on our IPR&D assets and/or goodwill in the future.
While
all intangible assets can face events and circumstances that can lead to impairment, in general, intangible assets that are most at risk
of impairment include IPR&D assets. IPR&D assets are high-risk, as research and development is an inherently risky activity.
We
may not be able to obtain marketing exclusivity in the U.S. under the BPCIA or equivalent regulatory data exclusivity protection
in other jurisdictions for our products.
The
BPCIA, which is included in the Affordable Care Act, provides the manufacturer of innovator biologic to seek a twelve-year period of
marketing exclusivity. Similar data exclusivity regimes exist in the EU and in Canada, although the term of market exclusivity is shorter
than in the U.S. We intend to seek the maximum period of market exclusivity for our 3-antigen HBV vaccine and our other pipeline candidates
in each jurisdiction, but there is no guarantee that any of our products will receive any marketing exclusivity under the BPCIA, or under
analogous legislation in other jurisdictions. Furthermore, changes in applicable law could alter any period of market exclusivity or
limit its availability. Our failure to obtain exclusivity for any product that is ultimately approved by the FDA, the EMA or Health Canada
may expose us to substantial competition, which could have significant adverse financial consequences.
Risks
Related to Our Indebtedness
Our
obligations under our credit facility are secured by substantially all of our assets, so if we default on those obligations, the lender
could foreclose on our assets. As a result of these security interests, such assets would only be available to satisfy claims of our
general creditors or to holders of our equity securities if we were to become insolvent at a time when the value of such assets exceeded
the amount of our indebtedness and other obligations.
K2HV,
pursuant to the Loan Agreement, as amended by the First Amendment and the Second Amendment, has a security interest in substantially
all of our assets other than intellectual property. As a result, if we default under our obligations to the lender, the lender could
foreclose on its security interests and liquidate some or all of these assets, which would harm our business, financial condition
and results of operations. The principal amount of the term loan as of December 31, 2022, was $55 million ($55.7 million including
the exit fees).
In
the event of a default, K2HV would have a prior right to substantially all of our assets to the exclusion of our general creditors.
In that event, our assets would first be used to repay in full all indebtedness and other obligations secured by K2HV, resulting in
all or a portion of our assets being unavailable to satisfy the claims of any unsecured indebtedness. Only after satisfying the
claims of any unsecured creditors would any amount be available for our equity holders. These events of default include, among other
things, our failure to pay any amounts due under the Loan Agreement, as amended by the First Amendment and the Second Amendment, or
any of the other loan documents, a breach of covenants under the Loan Agreement, our insolvency, a material adverse effect
occurring, the occurrence of certain defaults under certain other indebtedness or certain final judgments against us.
The
pledge of these assets and other restrictions may limit our flexibility in raising capital for other purposes. Because substantially
all of our assets are pledged under the term loan, our ability to incur additional secured indebtedness or to sell or dispose of assets
to raise capital may be impaired, which could have an adverse effect on our financial flexibility.
If
we are unable to comply with certain financial and operating restrictions in our existing credit facility, we may be limited in our business
activities and access to credit or may default under our credit facility.
Provisions
in the Loan Agreement as amended by the First Amendment and the Second Amendment, impose restrictions or require prior approval on our
ability, and the ability of certain of our subsidiaries to, among other things:
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additional debt; |
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pay
dividends and make distributions; |
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make
certain investments and acquisitions; |
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guarantee
the indebtedness of others or our subsidiaries; |
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redeem
or repurchase capital shares; |
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create
liens or encumbrances; |
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enter
into transactions with affiliates; |
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engage
in new lines of business; |
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sell,
lease or transfer certain parts of our business or property; |
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incur
obligations for capital expenditures; |
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issue
additional capital shares; and |
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acquire
new companies and merge or consolidate. |
The
Loan Agreement, as amended by the First Amendment and the Second Amendment also contains other customary covenants, including minimum
net revenue covenants. We may not be able to comply with these covenants in the future. Our failure to comply with these covenants may
result in the declaration of an event of default, which, if not cured or waived, may result in the acceleration of the maturity of indebtedness
outstanding under this agreement and would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated,
we may not have sufficient funds available for repayment or we may not have the ability to borrow or obtain sufficient funds to replace
the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay our indebtedness would result in K2HV foreclosing
on all or a portion of our assets and force us to curtail or cease our operations.
Our
outstanding term loan obligations may adversely affect our cash flow and our ability to operate our business.
Pursuant
to the terms of Loan Agreement as amended by the First Amendment and the Second Amendment, K2HV made a term loan to us in aggregate
amount of $50.0 million. During the year ended December 31, 2022, we made average monthly payments of interest in the amount of approximately
$293. We are required to pay interest only until maturity on September 14, 2026.
The
terms of our term loan could have negative consequences to us, such as:
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we
may be unable to obtain additional financing to fund working capital, operating losses, capital expenditures or acquisitions on terms
acceptable to us, or at all; |
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the amount of our interest expense may increase because our term loan has
a variable rate of interest at any time dependent on the Wall Street Journal, Money Rates prime rate; and |
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may be more vulnerable to economic downturns and adverse developments in our industry or the economy in general. |
Our
ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business,
economic, regulatory and other factors. We will be unable to control many of these factors, such as economic conditions. We cannot be
certain that we will continue to have sufficient capital to allow us to pay the principal and interest on our debt and meet any other
obligations. If we do not have enough money to service our debt, we may be required, but unable to refinance all or part of our existing
debt, sell assets, borrow money, or raise equity on terms acceptable to us, if at all, and K2HV could foreclose on its security interests
and liquidate some or all of our assets.
Risks
Related to Our Common Shares
The
price of our common shares has been, and may continue to be, volatile. This may affect the ability of our investors to
sell their shares, and the value of an investment in our common shares may decline.
During
the 12-month period ended March 10, 2023, our common shares traded as high as $1.86 per share and as low as $0.334 per share.
The market prices of our common shares may continue to be volatile and could fluctuate widely in response to various factors, many of
which are beyond our control, including the following:
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future
announcements about us, our collaborators, or competitors, including the results of testing, technological innovations, or new products
and services; |
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clinical
trial results; |
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depletion
of cash reserves; |
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additions
or departures of key personnel; |
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operating
results that fall below expectations; |
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announcements
by us relating to any strategic relationship; |
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sales
of equity securities or issuance of additional debt; |
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industry
developments; |
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changes
in state, provincial, or federal regulations affecting us and our industry; |
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the
continued large fluctuations in major stock market indexes which causes investors to sell our common shares; |
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economic,
political, and other external factors; and |
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period-to-period
fluctuations in our financial results. |
Furthermore,
the stock market in general and the market for biotechnology companies, in particular, have from time-to-time experienced extreme
price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. The
COVID-19 pandemic and its ongoing effects has resulted in significant financial market volatility and uncertainty. A continuation or
worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to
access capital, on our business, results of operations and financial condition, and on the market price of our common
shares.
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common shares.
On
July 1, 2022, we received a letter from the Listings Qualifications Department of Nasdaq indicating that, based upon the closing bid
price of our common shares for the 30 consecutive business day period between May 18, 2022, through June 30, 2022, we did not meet the
minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). On December
29, 2022, we were granted an additional 180-day period, or until June 26, 2023, to regain compliance with the Minimum Bid Price Requirement.
In
order to regain compliance with the Minimum Bid Price Requirement, our common shares must maintain a minimum closing bid price of $1.00
for at least ten consecutive business days during the additional 180-day grace period, which will end on June 26, 2023. As of the date
of this filing, we have not regained compliance with the Minimum Bid Price Rule, and there can be no assurance that the market price
of our common shares will remain at least $1.00 for a minimum of ten consecutive business days in order for us to regain compliance with
the Minimum Bid Price Rule prior to June 26, 2023.
In
the event that we do not regain compliance by June 26, 2023, Nasdaq will notify us that our common shares are subject to delisting. We
would then be permitted to appeal any delisting determination to a Nasdaq Hearings Panel. Our common shares would remain listed on Nasdaq pending the panel’s decision after the hearing. If we do not appeal the delisting determination, or do not
succeed in such an appeal, we may list our common shares on an over-the-counter exchange. Any such delisting determination could seriously
decrease or eliminate the value of an investment in our common shares.
To
resolve the noncompliance, we may consider available options including a reverse share split, which may not result in a permanent
increase in the market price of our shares, which is dependent on many factors, including general economic, market and industry
conditions and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission (the
“SEC”). It is not uncommon for the market price of a company’s shares to decline in the period following a reverse
share split.
Although
we expect to take actions intended to restore our compliance with the listing requirements, we can provide no assurance that any action
taken by us would be successful, or that any such action would stabilize the market price or improve the liquidity of our shares. Should
a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to
the value of our shares, and our ability to raise future capital through the sale of our shares could be severely limited.
We
have no immediate plans to pay dividends.
We
plan to reinvest all of our earnings, to the extent we have earnings, in order to market our products and to cover operating costs and
to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable
future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to
the holders of our common shares as a dividend. In addition, our Loan Agreement, as amended by the First Amendment and the Second Amendment, with K2HV prohibits us from declaring or paying cash
dividends or making distributions on any class of our capital stock. We currently intend to retain earnings, if any, for reinvestment
in our business. Therefore, holders of our common shares should not expect to receive cash dividends on our common shares.
Common
shares eligible for future sale may cause the price of our common shares to decline.
From
time to time, certain of our shareholders may be eligible to sell all or some of their restricted common shares by means of ordinary
brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended, subject to
certain limitations. In general, pursuant to Rule 144, non-affiliate shareholders may sell freely after six months, subject only to the
current public information requirement (which disappears after one year). Of the 258,257,494 common shares outstanding as of December
31, 2022, approximately 74.1% common shares are held by “non-affiliates,” all of which are currently freely tradable either
because those were issued in a registered offering or pursuant to Rule 144.
Any
substantial sale of our common shares pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on
the market price of our common shares.
In
addition, as of December 31, 2022, we had outstanding options, awards, convertible debt, and warrants for the purchase of 32,571,391
common shares. Of this amount, options, awards, convertible debt, and warrants for the purchase of 16,248,435 common shares are held
by non-affiliates, who may sell these shares in the public markets from time to time, without limitations on the timing, amount, or method
of sale. If our share price rises, the holders may exercise their options and sell a large number of shares. This could cause the market
price of our common shares to decline.
Although
we expect that we will not be classified as a passive foreign investment company (“PFIC”) in 2023, there can be no assurance
that we will not be classified as a PFIC in 2023 or any subsequent year, which would result in adverse U.S. federal income tax consequences
to U.S. holders of our common shares.
A
non-U.S. corporation, such as us, would be classified as a PFIC for U.S. federal income tax purposes for any taxable year if either (i)
75% or more of its gross income is passive income, or (ii) 50% or more of the value of its assets (based on an average of the values
of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. We do not
expect to be a PFIC for the 2023 taxable year. However, the fair market value of our assets may be determined in large part by the market
price of our common shares, which is likely to fluctuate, and the composition of our income and assets will be affected by how, and how
quickly, we spend any cash that is raised in any financing transaction. No assurance can be provided that we will not be classified as
a PFIC for the 2023 taxable year or any future taxable year. If we are a PFIC in any year, U.S. holders will be subject to certain adverse
U.S. federal income tax consequences. Prospective U.S. holders should consult their tax advisors regarding our PFIC status.
We
are a “smaller reporting company” and may elect to comply with reduced public company reporting requirements, which could
make our common shares less attractive to investors.
We
are currently a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act. For as long as we continue to be
a “smaller reporting company”, we may take advantage of exemptions from various reporting requirements that are applicable
to other public reporting companies that are not smaller reporting companies, including providing simplified executive compensation disclosures
in our filings and having certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in our annual reports. Consequently,
it may be more challenging for investors to analyze our results of operations and financial prospects.
We
will remain a smaller reporting company so long as (1) the value of our common shares held by non-affiliates is less than $250 million
as measured on the last business day of our second fiscal quarter, or (2) our annual revenues are less than $100 million during the most
recently completed fiscal year and the value of our common shares held by non-affiliates is less than $700 million as measured on the
last business day of our second fiscal quarter.
Furthermore,
we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation
of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies
under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor provide an attestation
of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain
undetected for a longer period.
We
cannot predict if investors will find our securities less attractive because we may rely on these exemptions. If some investors find
our securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities
may be more volatile.
U.S.
civil liabilities may not be enforceable against us or certain of our officers.
We are governed by the Business Corporations Act (British Columbia)
(“BCBCA”) and a substantial portion of our assets, including our manufacturing facility in Rehovot, Israel, and our research
facility in Ottawa, Canada, are located outside the U.S. As a result, it may be difficult for investors to effect service of process within
the U.S. upon us or to enforce judgments obtained against us in U.S. courts, in any action, including actions predicated upon the civil
liability provisions of U.S. federal securities laws or any other laws of the U.S. Additionally, rights predicated solely upon civil liability
provisions of U.S. federal securities laws or any other laws of the U.S. may not be enforceable in original actions, or actions to enforce
judgments obtained in U.S. courts, brought in Canadian or Israeli courts. In addition, two of our officers reside outside of the U.S.,
and all or a substantial portion of their assets may be located outside the U.S., which may make effecting service of process within the
U.S. or enforcing judgments obtained against such persons in U.S. courts difficult.
We
are governed by the corporate laws of British Columbia which in some cases have a different effect on shareholders than the corporate
laws of Delaware, U.S.
We
are governed by the BCBCA and other relevant laws, which may affect the rights of shareholders differently than those of a company governed
by the laws of a U.S. jurisdiction, and may, together with our charter documents, including the advance notice provisions in
our articles for the nomination of directors, have the effect of delaying, deferring, or discouraging another party from acquiring control
of our company by means of a tender offer, a proxy contest, or otherwise, or may affect the price an acquiring party would be willing
to offer in such an instance. The material differences between the BCBCA and Delaware General Corporation Law (“DGCL”), that may have
the greatest such effect include, but are not limited to, the following: (i) for material corporate transactions (such as mergers and
amalgamations, other extraordinary corporate transactions or amendments to our articles) the BCBCA generally requires a two-thirds majority
vote by shareholders, whereas DGCL generally only requires a majority vote; and (ii) under the BCBCA a holder of 5% or more of our common
shares can requisition a special meeting of shareholders, whereas such right does not exist under the DGCL.
The
concentration of the capital stock ownership with our insiders will likely limit the ability of other shareholders to influence corporate
matters.
As
of December 31, 2022, approximately 25.9% of our outstanding common shares were controlled by our officers, directors, beneficial owners
of 10% or more of our securities, and their respective affiliates. As a result, these shareholders, if they acted together, may be able
to determine or influence matters that require approval by our shareholders, including the election of directors and approval of significant
corporate transactions. Corporate actions might be taken even if other shareholders oppose them. This concentration of ownership might
also have the effect of delaying or preventing a corporate transaction that other shareholders may view as beneficial.
General
Risk Factors
We
may not be successful in hiring and retaining key employees, in which case our business may be harmed.
Our
business is highly dependent upon the continued services of our senior management and key scientific and technical personnel. As such,
our future success depends on our ability to identify, attract, hire or engage, retain, and motivate well-qualified managerial, technical,
clinical, regulatory, business, and commercial personnel. Our operations require qualified personnel with expertise in nonclinical pharmacology
and toxicology, pharmaceutical development, clinical research, legal and regulatory affairs, manufacturing, sales, and marketing. We
must compete for qualified individuals with numerous biopharmaceutical companies, universities, and other research institutions. Competition
for such individuals is intense, and, when the need arises, we may not be able to hire the personnel necessary to support our efforts.
There can be no assurance that these professionals will be available in the market, or that we will be able to retain existing professionals
or to meet or to continue to meet their compensation requirements. Furthermore, the cost base in relation to such compensation, which
may include equity compensation, may increase significantly, which could have a material adverse effect on us. Failure to establish and
maintain an effective management team and work force could adversely affect our ability to operate, grow, and manage our business. Increased
turnover rates within our employee base or as a result of general macroeconomic factors, could lead to increased costs, such as increased
wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our manufacturing and distribution
facilities and overall business. If we are unable to hire and retain employees capable of performing at a high-level, or if mitigation
measures we may take to respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative
effects, there may be a material adverse impact on our operations, results of operations, liquidity or cash flows.
We
could be adversely affected by violations of the United States Foreign Corrupt Practices Act and similar anti-bribery laws.
We
are subject to the United States Foreign Corrupt Practices Act and similar anti-corruption laws in other jurisdictions. These laws generally
prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to government officials for
the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws could
result in substantial criminal and/or monetary penalties. We operate in jurisdictions that have experienced corruption, bribery, pay-offs,
and other similar practices from time-to-time and, in certain circumstances, such practices may be local custom. Our Code of Business
Conduct and Ethics mandates compliance with these anti-corruption laws. However, we cannot be certain that these policies and procedures
will protect us against liability. There can be no assurance that our employees, other agents, or third-party manufacturers or other
organizations will not engage in such conduct for which we might be held responsible. If our employees, other agents, or third-party
manufacturers or other organizations are found to have engaged in such practices, we could suffer severe criminal or civil penalties
and other consequences that could have a material adverse effect on our business, financial condition, results of operations, cash flows,
and/ or share price.
Business
interruptions could limit our ability to operate our business.
Our
operations, as well as those of any collaborators on which we depend, are vulnerable to damage or interruption from computer viruses,
human error, natural disasters, extreme weather, electrical and telecommunication failures, international acts of terror, public health
crises, such as pandemics and epidemics, and similar events. Our formal disaster recovery plan and back-up operations and business interruption
insurance may not be adequate to compensate us for losses we may suffer. A significant business interruption could result in losses or
damages incurred by us and require us to cease or curtail our operations.
For additional discussion of the
impact of the COVID-19 pandemic on our business, please see the risk factor titled “The coronavirus pandemic and its ongoing
effects have caused interruptions or delays of our business plan and may have a significant adverse effect on our business.”
Our
business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.
In
the ordinary course of our business, we collect and store sensitive data, including intellectual property, research data, our proprietary
business information and that of our suppliers, technical information about our products, clinical trial plans and employee records.
Similarly, our third-party providers possess certain of our sensitive data and confidential information. The secure maintenance of this
information is critical to our operations and business strategy. Despite the implementation of security measures, our internal computer
systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, ransomware, cyber fraud,
natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments
to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach
or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber terrorists,
has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased.
Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, encrypted, lost,
or stolen. Any such access, inappropriate disclosure of confidential or proprietary information, or other loss of information, including
our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws
that protect the privacy of personal information, disruption of our operations or our product development programs, and damage to our
reputation, which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned
clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce
the data.
We are required to comply with the domestic reporting regime under the
Exchange Act, and incur significant legal, accounting, and other expenses, and our management are required to devote substantial time
to compliance initiatives and corporate governance practices.
We are required to comply with
all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to a publicly traded U.S. domestic issuer.
The obligations of being a public reporting company require significant expenditures, including costs resulting from public company reporting
obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley
Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements of Nasdaq. These rules require the establishment
and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and corporate
governance practices, among many other complex rules that are often difficult and time consuming to implement, monitor, and maintain compliance
with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some
activities more time-consuming and costly, particularly after we are no longer an “emerging growth company.” In addition,
these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance. Compliance
with such requirements also places significant demands on our management, administrative, operational, internal audit, and accounting
resources. As a result, we incur, and we expect to continue to incur, legal and financial compliance costs and some activities are highly
time consuming and costly.
There
are inherent limitations in all control systems, and misstatements due to error or fraud may occur and not be detected.
The
ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act require us to identify material weaknesses in internal control
over financial reporting, which is a process to provide reasonable assurance regarding the reliability of financial reporting for external
purposes in accordance with accounting principles generally accepted in the U.S. Our management, including our chief executive
officer and chief financial officer, does not expect that our internal controls and disclosure controls will prevent all errors and all
fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints
and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, in our company have been detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because
of simple errors or mistakes. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons,
or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential
future conditions. Over time, a control may be inadequate because of changes in conditions, such as growth of the company or increased
transaction volume, or the degree of compliance with the policies or procedures may deteriorate. Because of inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be detected.
In
addition, discovery and disclosure of a material weakness, by definition, could have a material adverse impact on our financial statements.
Such an occurrence could discourage certain customers or suppliers from doing business with us, cause downgrades in our future debt ratings
leading to higher borrowing costs and affect how our common shares trade. This could, in turn, negatively affect our ability to access
public debt or equity markets for capital.
We
may be subject to securities litigation, which is expensive and could divert management attention.
In
the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action
litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs
and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation
could also subject us to significant liabilities.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the price of
our common shares and trading volume could decline.
The
trading market for our common shares will depend in part on the research and reports that securities or industry analysts publish about
us or our business. Multiple securities and industry analysts currently cover us. If one or more of the analysts downgrade our common
shares or publish inaccurate or unfavorable research about our business, the price of our common shares would likely decline. If one
or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common shares could decrease,
which could cause the price of our common shares and trading volume to decline.