VBIV VBI Vaccines Inc

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

OR

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission file number: 001-37769

 

VBI VACCINES INC.

(Exact name of registrant as specified in its charter)

 

British Columbia, Canada		N/A
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

 

160 Second Street, Floor 3
Cambridge, Massachusetts		02142
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: 617-830-3031

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Shares, no par value per share		VBIV		Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Common Shares, no par value per share		23,687,695
(Class)		Outstanding at November 14, 2023

 

 

 

VBI VACCINES INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

TABLE OF CONTENTS

 

		Page
PART I - FINANCIAL INFORMATION		5
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets - September 30, 2023 (unaudited) and December 31, 2022	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022 (unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2023 and 2022 (unaudited)	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II - OTHER INFORMATION		47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity	52
Item 3.	Defaults Upon Senior Securities	52
Item 4.	Mine Safety Disclosures	52
Item 5.	Other Information	52
Item 6.	Exhibits	53
Signatures		54

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

CONTAINED IN THIS REPORT

 

This quarterly report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and the provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. You can find many (but not all) of these statements by looking for words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “would,” “should,” “could,” “will,” “may,” or other similar expressions in this Form 10-Q. In particular, these include statements relating to future actions; prospective products, applications, customers, and technologies; future performance or results of anticipated products; anticipated expenses; and projected financial results. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from our historical experience and our present expectations, or projections described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 13, 2023. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

 

●	the timing of, and our ability to, obtain and maintain regulatory approvals for our clinical trials, products, and pipeline candidates;
●	our ability to achieve and sustain commercial success of PreHevbrio in the United States (“U.S.”) and Canada and PreHevbri in Europe;
●	the timing and results of our ongoing and planned clinical trials for products and pipeline candidates;
●	the amount of funds we require for our prophylactic and therapeutic pipeline candidates;
●	the potential benefits of strategic partnership agreements and our ability to enter into and successfully execute strategic partnership arrangements;
●	our ability to manufacture, or to have manufactured, our 3-antigen hepatitis B vaccine and our pipeline candidates, at commercially viable scales to the standards and requirements of regulatory agencies;
●	the impact and continuing effects of the COVID-19 endemic on our clinical studies, research programs, manufacturing, business plan, regulatory review including site inspections, and the global economy;
●	our ability to effectively execute and deliver our plans related to commercialization, marketing, manufacturing capabilities, and strategy;
●	our ability to retain and maintain a good relationship with our current employees, and our ability to competitively attract new employees with relevant experience and expertise;
●	the suitability and adequacy of our office, manufacturing, and research facilities and our ability to secure term extensions or expansions of leased space;
●	the ability of our vendors and suppliers to manufacture and deliver materials in a timely manner that meet regulatory agency and our standards and requirements to meet planned timelines and milestones;

 

 

●	any disruption in the operations of our Rehovot, Israel manufacturing facility where we manufacture all of our clinical and commercial supplies of our 3-antigen hepatitis B vaccine and clinical supplies of our hepatitis B immunotherapeutic, VBI-2601;
●	our compliance with all laws, rules, and regulations applicable to our business and products;
●	our ability to continue as a going concern;
●	our history of losses;
●	our ability to generate revenues and achieve profitability;
●	emerging competition and rapidly advancing technology in our industry that may outpace our technology;
●	customer demand for our 3-antigen hepatitis B vaccine and pipeline candidates;
●	the impact of competitive or alternative products, technologies, and pricing;
●	general economic conditions and events and the impact they may have on us and our potential customers;
●	our ability to obtain adequate financing in the future on reasonable terms, if, as, and when we need it;
●	our ability to implement network systems and controls that are effective at preventing cyber-attacks, malware intrusions, malicious viruses, and ransomware threats;
●	our ability to secure and maintain protection over our intellectual property;
●	our ability to maintain our existing licenses with licensors of intellectual property, or obtain new licenses for intellectual property;
●	changes to legal and regulatory processes for biosimilar approval and marketing that could reduce the duration of market exclusivity for our products;
●	our ability to regain and maintain compliance with the NASDAQ Capital Market’s (“Nasdaq”) listing standards;
●	our success at managing the risks involved in the foregoing items; and
●	other factors discussed in this Form 10-Q.

 

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

Unless otherwise stated or the context otherwise requires, the terms “VBI,” “we,” “us,” “our,” and the “Company” refer to VBI Vaccines Inc. and its subsidiaries.

 

Unless indicated otherwise, all references to the U.S. Dollar, Dollar, or $ are to the United States Dollar, the legal currency of the United States of America and all references to € mean Euros, the legal currency of the European Union. We may also refer to NIS, which is the New Israeli Shekel, the legal currency of Israel, and the Canadian Dollar or CAD, which is the legal currency of Canada.

 

Except for share and per share amounts, or as otherwise specified to be in millions, amounts presented are stated in thousands.

 

 

PART I—FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

 

		September 30, 2023				December 31, 2022
		(unaudited)
CURRENT ASSETS
Cash		$	35,454			$	62,629
Accounts receivable, net			353				94
Inventory, net			7,540				6,599
Prepaid expenses			2,930				2,309
Other current assets			3,870				6,059
Total current assets			50,147				77,690
NON-CURRENT ASSETS
Other long-term assets			1,094				1,355
Property and equipment, net			9,423				12,253
Right of use assets			2,396				3,316
Intangible assets, net			35,603				58,345
Goodwill			2,121				2,127
Total non-current assets			50,637				77,396
TOTAL ASSETS		$	100,784			$	155,086
CURRENT LIABILITIES
Accounts payable		$	7,008			$	12,973
Other current liabilities			11,923				22,588
Current portion of deferred revenues			6,970				409
Current portion of long-term debt, net of debt discount			50,299				-
Current portion of lease liability			994				972
Total current liabilities			77,194				36,942
NON-CURRENT LIABILITIES
Deferred revenues, net of current portion			1,748				2,204
Long-term debt, net of debt discount			-				48,888
Lease liability, net of current portion			1,426				2,365
Liabilities for severance pay			530				524
Total non-current liabilities			3,704				53,981
COMMITMENTS AND CONTINGENCIES (NOTE 14)			-				-
STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (September 30, 2023 - issued and outstanding 23,339,220; December 31, 2022 - issued and outstanding 8,608,539)			453,901				442,312
Additional paid-in capital			105,955				90,020
Accumulated other comprehensive income			42,462				21,440
Accumulated deficit			(582,432	)			(489,609	)
Total stockholders’ equity			19,886				64,163
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	100,784			$	155,086

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

 

		2023				2022				2023				2022
		Three Months Ended September 30								Nine Months Ended September 30
		2023				2022				2023				2022
Revenues, net		$	6,624			$	317			$	7,829			$	789
Operating expenses:
Cost of revenues			2,525				2,672				9,564				7,948
Research and development			1,532				4,983				7,975				12,988
Sales, general and administrative			9,036				14,220				33,237				40,234
Impairment charges			3,600				-				23,600				-
Total operating expenses			16,693				21,875				74,376				61,170
Loss from operations			(10,069	)			(21,558	)			(66,547	)			(60,381	)
Interest expense, net			(1,543	)			(958	)			(4,680	)			(2,799	)
Foreign exchange loss			(8,832	)			(2,693	)			(21,596	)			(28,982	)
Loss before income taxes			(20,444	)			(25,209	)			(92,823	)			(92,162	)
Income tax expense			-				-				-				-
NET LOSS			(20,444	)		$	(25,209	)			(92,823	)		$	(92,162	)
Deemed dividend on certain warrants			(862	)			-				(862	)			-
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS		$	(21,306	)		$	(25,209	)		$	(93,685	)		$	(92,162	)
Other comprehensive income (loss)			7,753				(494	)			21,022				23,845
COMPREHENSIVE LOSS		$	(12,691	)		$	(25,703	)		$	(71,801	)		$	(68,317	)
Net loss per share of common shares, basic and diluted		$	(1.01	)		$	(2.93	)		$	(7.30	)		$	(10.71	)
Weighted-average number of common shares outstanding, basic and diluted			21,166,818				8,608,539				12,840,633				8,608,530

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)

 

		Number												Accumulated
		of								Additional				Other								Total
		Common				Share				Paid-in				Comprehensive				Accumulated				Stockholders’
		Shares				Capital				Capital				Income (Loss)				Deficit				Equity
BALANCE AS OF DECEMBER 31, 2022			8,608,539			$	442,312			$	90,020			$	21,440			$	(489,609	)		$	64,163
Stock-based compensation			-				10				2,001				-				-				2,011
Net loss			-				-				-				-				(27,751	)			(27,751	)
Currency translation adjustments			-				-				-				6,599				-				6,599
BALANCE AS OF MARCH 31, 2023			8,608,539			$	442,322			$	92,021			$	28,039			$	(517,360	)		$	45,022
BALANCE AS OF APRIL 1, 2023			8,608,539			$	442,322			$	92,021			$	28,039			$	(517,360	)		$	45,022
Stock-based compensation			-				-				1,674				-				-				1,674
Net loss			-				-				-				-				(44,628	)			(44,628	)
Currency translation adjustments			-				-				-				6,670				-				6,670
BALANCE AS OF JUNE 30, 2023			8,608,539			$	442,322			$	93,695			$	34,709			$	(561,988	)		$	8,738
BALANCE AS OF JULY 1, 2023			8,608,539			$	442,322			$	93,695			$	34,709			$	(561,988	)		$	8,738
Common shares issued in financing transactions, net of issuance costs			14,730,681				22,339				-				-				-				22,339
Warrants issued in connection with financing transactions			-				(10,760	)			10,760				-				-				-
Stock-based compensation			-				-				1,500				-				-				1,500
Net loss			-				-				-				-				(20,444	)			(20,444	)
Currency translation adjustments			-				-				-				7,753				-				7,753
BALANCE AS OF SEPTEMBER 30, 2023			23,339,220			$	453,901			$	105,955			$	42,462			$	(582,432	)		$	19,886
BALANCE AS OF DECEMBER 31, 2021			8,608,298			$	442,235			$	81,583			$	(1,565	)		$	(378,371	)		$	143,882
Adjustments for prior periods from adoption of ASU 2020-06			-				-				(2,746	)			-				2,065				(681	)
Common shares issued upon exercise of options			241				12				-				-				-				12
Stock-based compensation			-				25				2,477				-				-				2,502
Net loss			-				-				-				-				(21,254	)			(21,254	)
Currency translation adjustments			-				-				-				5,103				-				5,103
BALANCE AS OF MARCH 31, 2022			8,608,539			$	442,272			$	81,314			$	3,538			$	(397,560	)		$	129,564
BALANCE AS OF APRIL 1, 2022			8,608,539			$	442,272			$	81,314			$	3,538			$	(397,560	)		$	129,564
Stock-based compensation			-				14				2,443				-				-				2,457
Net loss			-				-				-				-				(45,699	)			(45,699	)
Currency translation adjustments			-				-				-				19,236				-				19,236
BALANCE AS OF JUNE 30, 2022			8,608,539			$	442,286			$	83,757			$	22,774			$	(443,259	)		$	105,558
BALANCE AS OF JULY 1, 2022			8,608,539			$	442,286			$	83,757			$	22,774			$	(443,259	)		$	105,558
Balance			8,608,539			$	442,286			$	83,757			$	22,774			$	(443,259	)		$	105,558
Warrant issued in connection with debt amendment			-				-				1,550				-				-				1,550
Stock-based compensation			-				14				2,398				-				-				2,412
Net loss			-				-				-				-				(25,209	)			(25,209	)
Currency translation adjustments			-				-				-				(494	)			-				(494	)
BALANCE AS OF SEPTEMBER 30, 2022			8,608,539			$	442,300			$	87,705			$	22,280			$	(468,468	)		$	83,817
Balance			8,608,539			$	442,300			$	87,705			$	22,280			$	(468,468	)		$	83,817

 

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

		2023				2022
		For the Nine Months Ended September 30
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(92,823	)		$	(92,162	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,516				1,541
Stock-based compensation			5,185				7,371
Amortization of debt discount			1,411				1,237
Loss on extinguishment of long-term debt			-				172
Impairment charges			23,600				-
Inventory reserve			1,547				1,401
Change in operating right of use assets			975				1,010
Unrealized foreign exchange loss			21,891				28,410
Net change in operating working capital items:
Change in accounts receivable			(264	)			(127	)
Change in inventory			(3,026	)			(5,174	)
Change in prepaid expenses			(649	)			(407	)
Change in other current assets			2,120				(667	)
Change in other long-term assets			151				(174	)
Change in accounts payable			(5,923	)			7,606
Change in deferred revenues			6,485				30
Change in other current liabilities			(10,051	)			(3,715	)
Payments made on operating lease liabilities			(971	)			(1,001	)
Net cash flows used in operating activities			(48,826	)			(54,649	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(697	)			(2,892	)
Net cash flows used in investing activities			(697	)			(2,892	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of commons shares for cash			23,908				-
Share issuance costs			(1,482	)			-
Proceeds from debt financing			-				20,000
Debt issuance costs			-				(563	)
Proceeds from issuance of common shares for cash, upon exercise of options			-				12
Net cash flows provided by financing activities			22,426				19,449
Effect of exchange rates on cash			(78	)			(52	)
CHANGE IN CASH FOR THE PERIOD			(27,175	)			(38,144	)
CASH, BEGINNING OF PERIOD			62,629				121,694
CASH, END OF PERIOD		$	35,454			$	83,550
Supplementary information:
Interest paid		$	4,550			$	2,067
Non-cash investing and financing activities:
Adjustments for prior periods from adoption of ASU 2020-06			-				681
Warrant issued in connection with financing transactions			10,760				-
Warrants issued in connection with debt amendment			-				1,550
Capital expenditures included in accounts payable and other current liabilities			67				283
Share issuance costs included in other current liabilities			154				67

 

See accompanying Notes to Condensed Consolidated Financial Statements

 

 

VBI Vaccines Inc. and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

September 30, 2023 and 2022

(in thousands, except share and per share amounts)

 

1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS

 

Corporate Overview

 

VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.

 

The Company and its wholly owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies, Inc. a Canadian company and the wholly owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd. an Israeli company (“SciVac”); SciVac Hong Kong Limited (“SciVac HK”); and VBI Vaccines B.V, a Netherlands company (“VBI BV”), are collectively referred to as the “Company”, “we”, “us”, “our”, or “VBI”.

 

The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot, Israel and research facilities located in Ottawa, Ontario, Canada.

 

Reverse Stock Split

 

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

 

Principal Operations

 

VBI is a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.

 

2023 Organizational Changes

 

As announced on April 4, 2023, the Company reduced its internal workforce by 30-35%, which began in April and was completed by the end of September 2023. As a result of this and other reductions in spend, VBI expects its operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared with the second half of 2022.

 

9

 

COVID-19 Endemic

 

In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the U.S. government announced its plan to let the declaration of a public health emergency associated with COVID-19 expire on May 11, 2023. COVID-19 is expected to remain a serious endemic threat for an indefinite future period and may continue to adversely affect the global economy, and we are unable to predict 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. The effects of the COVID-19 endemic, including but not limited to supply chain issues, global shortages of supplies, material and products, volatile market conditions and rising global inflation may continue to disrupt or delay our business operations, including with respect to efforts relating to potential business development transactions, and it could continue to disrupt the marketplace which could have an adverse effect on our operations.

 

Liquidity and Going Concern

 

The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development and commercialization of its products.

 

The Company has an accumulated deficit of $582,432 and cash of $35,454 as of September 30, 2023. Cash outflows from operating activities were $48,826 for the nine months ended September 30, 2023.

 

The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and commercially launch and sell our approved products. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. If we are unable to obtain additional financing, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.

 

On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal (the “ATM Program”). During the third quarter of 2023, the Company issued 467,045 common shares under the ATM Program, for total gross proceeds of $373 at a weighted average price of $0.80 per share. The Company incurred $54 in sales agent commissions and share issuance costs related to the common shares issued in the quarter ended September 30, 2023, resulting in net proceeds of $319. As of September 30, 2023, approximately $124,627 of common shares remained available for issuance under the ATM Program.

 

On July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Bio. Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in Asia Pacific (“APAC”), excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $15,000 consisting of a $3,000 equity investment in a concurrent registered direct offering (discussed below), $5,000 as an advance payment for the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023, by and between the Company and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement (the “Letter Agreement”), dated July 5, 2023, by and among the Company, SciVac, and Brii Bio, the Company also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2 HealthVentures LLC (“K2HV”), in all of its respective right, title, and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of the Company’s obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (each as defined herein).

 

10

 

The Company is also eligible to receive up to an additional $422,000 in potential regulatory and commercial milestone payments (combined under the Brii Collaboration Agreements), and royalties in the licensed territories, which is worldwide for VBI-2601 and APAC, excluding Japan, for PreHevbri. Brii Bio will be responsible for all development, regulatory, and commercial activities and costs for the two programs in their respective licensed territories. There is no assurance that Brii Bio will achieve any of the milestones as specified in the Brii Collaboration Agreements and that we will receive any or all of these potential payments pursuant to the Brii Collaboration Agreements.

 

In July 2023, the Company closed (i) an underwritten public offering of 12,445,454 common shares and accompanying common warrants to purchase up to 12,545,454 common shares (which included 1,536,363 common shares and common warrants to purchase up to 1,636,363 common shares issued pursuant to the underwriters’ partial exercise of their option to purchase additional common shares and common warrants) at a combined public offering price of $1.65 per common share and accompanying common warrant, and (ii) a concurrent registered direct offering, pursuant to the expanded hepatitis B partnership with Brii Bio, of 1,818,182 common shares and accompanying common warrants to purchase up to 1,818,182 common shares, at a combined purchase price of $1.65 per share and accompanying common warrant. The accompanying common warrants issued and sold in each of the underwritten public offering and the registered direct offering have an initial exercise price of $1.65 per share, which, pursuant to certain anti-dilution provisions of the warrants, was reduced to $0.6749 per share, as of September 30, 2023, and expire five years from the date of issuance. The aggregate gross proceeds from the underwritten public offering, including aggregate gross proceeds from the underwriters’ exercise of their option to purchase additional securities, were $20,500. The aggregate gross proceeds from the concurrent registered direct offering were $3,000.

 

As of September 30, 2023, the Company had outstanding warrants to purchase up to an aggregate of 14,363,636 common shares, issued in July 2023. Pursuant to certain anti-dilution provisions of the warrants, as the consideration paid per common share under the ATM Program was less than the exercise price of such warrants in effect immediately prior to such issuance (“New Issuance Price”), the exercise price of the warrants (the “Exercise Price”) was reduced to the New Issuance Price. As of September 30, 2023, the Exercise Price in effect was $0.6749 per share, which resulted in a deemed dividend of $862 as the fair value of the warrants was greater subsequent to the reduction in Exercise Price than it was immediately prior to such reduction in Exercise Price. The fair values were determined using the Black-Scholes option pricing model.

 

On November 1, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, it 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 letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

In order to regain compliance with Nasdaq’s minimum bid price requirement, the common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period. In the event that the Company does not regain compliance by the end of the Compliance Period, it may be eligible for additional time to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, the Company may be granted an additional 180 calendar days to regain compliance. The Company has not regained compliance as of the date of this Form 10-Q, and if it fails to regain compliance during the Compliance Period or any subsequent grace period granted by Nasdaq, its common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.

 

Financial instruments recognized in the condensed consolidated balance sheet consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Consolidation

 

The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2022 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), as filed with the SEC on March 13, 2023.

 

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.

 

11

 

In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.

 

Significant Accounting Policies

 

The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2022 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2023, other than the polices discussed below.

 

Restructuring charges

 

Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company’s restructuring plans are typically completed within a one-year period or less. Restructuring costs incurred under these plans may include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities.

 

3. NEW ACCOUNTING PRONOUNCEMENTS

 

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Our adoption of this ASU, effective January 1, 2023, did not have a material impact on our condensed consolidated financial statements and the related footnote disclosures.

 

4. INVENTORY, NET

 

Inventory consists of the following:

 SCHEDULE OF INVENTORY

		September 30, 2023				December 31, 2022
Finished goods		$	1,940			$	893
Work-in-process			2,136				1,869
Raw materials			3,464				3,837
Inventory, net		$	7,540			$	6,599

 

5. OTHER CURRENT ASSETS

 

Other current assets consisted of the following:

 SCHEDULE OF OTHER CURRENT ASSETS

		September 30, 2023				December 31, 2022
Government receivables		$	3,470			$	4,033
Other current assets			400				2,026
Total other current assets		$	3,870			$	6,059

 

12

 

6. IMPAIRMENT CHARGES

 

The drop in market conditions experienced in April 2023 and subsequently in September 2023 were considered triggering events for interim impairment tests for property and equipment, In-Process Research and Development (“IPR&D”) and goodwill. The impairment test compares the carrying amount of the assets to their respective fair values. If the carrying amount exceeds the fair value of the assets, such excess is recorded as an impairment charge.

 

Impairment charges consist of the following:

 SCHEDULE OF IMPAIRMENT CHARGES

		2023				2022				2023				2022
		Three months ended September 30								Nine months ended September 30
		2023				2022				2023				2022
Property and equipment (Note 7)		$	-			$	-			$	1,000			$	-
IPR&D (Note 8)			3,600				-				22,600				-
Impairment charges		$	3,600			$	-			$	23,600			$	-

 

7. PROPERTY AND EQUIPMENT

 

As discussed above, in April 2023, the Company performed an interim impairment test. The fair value of the property and equipment’s assets included in the impairment test was determined using a combination of the market approach and the cost approach and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value the property and equipment include: 1) current market prices; 2) cost to replace the assets; and 3) factors to account for obsolescence. The Company recorded an impairment of property and equipment of $1,000 as a result of its interim impairment test performed as of April 30, 2023. The Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed, which such test resulted in no further impairment as of September 30, 2023.

 

8. INTANGIBLE ASSETS, NET, AND GOODWILL

 

The Company’s intangible assets determined to have indefinite useful lives IPR&D and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. As discussed above, in April 2023, the Company performed an interim impairment test. The IPR&D assets, consisting of the CMV and GBM programs acquired in a business combination (the 2016 merger between VBI and SciVac), are capitalized as an intangible asset and are tested for impairment at least annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. The fair value of the IPR&D assets included in the impairment test was determined using the income approach method and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value of IPR&D assets include: 1) the amount and timing of costs to develop the IPR&D into viable products; 2) the amount and timing of future cash inflows; 3) the discount rate; and 4) the probability of technical and regulatory success. The discount rate used was 15% and the cumulative probability of technical and regulatory success to achieve approval to market the products ranged from approximately 10% to 17%. During the second quarter of 2023, the Company recorded an impairment of IPR&D of $19,000, as a partial impairment to the congenital CMV asset, as a result of its interim impairment test performed as of April 30, 2023. The Company performed its annual test as of August 31, 2023 and determined there was no additional IPR&D impairment. The methodology and significant estimates and assumptions used in determining the fair value of the IPR&D assets as of August 31, 2023 were the same as the interim impairment test performed as of April 30, 2023. As discussed above, the Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed. During the third quarter of 2023, the Company recorded an impairment of IPR&D of $3,600, as a partial impairment to the congenital CMV asset, as a result of its interim impairment test performed as of September 30, 2023. The methodology and significant estimates and assumptions used in determining the fair value of the IPR&D assets as of September 30, 2023 were the same as the annual impairment test, other than the discount rate. This discount rate used was 25%.

 

13

 SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION

						September 30, 2023
		Gross								Cumulative				Cumulative
		Carrying				Accumulated				Impairment				Currency				Net Book
		Amount				Amortization				Charge				Translation				Value
IPR&D assets		$	61,500			$	-			$	(22,900	)		$	(2,997	)		$	35,603

 

						December 31, 2022
		Gross								Cumulative				Cumulative
		Carrying				Accumulated				Impairment				Currency				Net Book
		Amount				Amortization				Charge				Translation				Value
IPR&D assets		$	61,500			$	-			$	(300	)		$	(2,855	)		$	58,345

 

The change in carrying value for IPR&D assets from December 31, 2022, relates to the impairment of $22,600 and currency translation adjustments which decreased by $142 for the nine months ended September 30, 2023.

 

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary, after step zero), if the carrying value of a reporting unit exceeded its fair value an impairment would be recorded. We performed our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no goodwill impairment determined as a result of the Company’s interim impairment test performed as of April 30, 2023 and its annual impairment test performed as of August 31, 2023. As discussed above, the Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed and determined there was no goodwill impairment as of September 30, 2023. The Company consists of a single reporting unit and uses its market capitalization to determine the fair value of the reporting unit. In order to determine the market capitalization, the Company used the trailing 20-day volume weighted average price of its shares as of the testing date.

 SCHEDULE OF GOODWILL

						September 30, 2023
		Gross				Cumulative				Cumulative
		Carrying				Impairment				Currency				Net Book
		Amount				Charge				Translation				Value
Goodwill		$	8,714			$	(6,292	)		$	(301	)		$	2,121

 

						December 31, 2022
		Gross				Cumulative				Cumulative
		Carrying				Impairment				Currency				Net Book
		Amount				Charge				Translation				Value
Goodwill		$	8,714			$	(6,292	)		$	(295	)		$	2,127

 

The change in carrying value for goodwill from December 31, 2022, relates to currency translation adjustments which decreased by $6 for the nine months ended September 30, 2023.

 

The Company has experienced a continued drop in market conditions subsequent to September 30, 2023 that may be an indicator of additional impairment to our property and equipment, intangible assets, and/or goodwill, which may result in the Company having to perform an additional interim impairment analysis during the three months ended December 31, 2023.

 

9. OTHER CURRENT LIABILITIES

 

Other current liabilities consisted of the following:

 SCHEDULE OF OTHER CURRENT LIABILITIES

		September 30, 2023				December 31, 2022
Accrued research and development expenses (including clinical trial accrued expenses)		$	3,405			$	6,561
Accrued professional fees			1,568				3,250
Payroll and employee-related costs			1,883				4,036
Deferred funding			3,925				6,966
Other current liabilities			1,142				1,775
Total other current liabilities		$	11,923			$	22,588

 

14

 

Included in payroll and employee-related costs are one time termination benefits as a result of our organizational changes to reduce our internal workforce by 30-35%, which took place mostly in the second quarter of 2023, as discussed in Note 1. The Company did not incur contract termination costs or other related costs.

 

The Company did not incur significant charges in one-time termination benefits during the three or nine months ended September 30, 2023.

 

The following table presents changes in one-time termination benefits for nine months ended September 30, 2023.

 SCHEDULE OF CHANGES IN ONE-TIME TERMINATION BENEFITS

Accrued balance at January 1, 2023		$	-
Charges			759
Cash payments			(698	)
Accrued balance at September 30, 2023		$	61

 

The restructuring charges are included in cost of revenues, research and development and sales, general and administrative in the condensed consolidated statements of operations and comprehensive loss.

 

10. LOSS PER SHARE OF COMMON SHARES

 

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 12, Stockholders’ Equity and Additional Paid-in Capital.

 

The following potentially dilutive securities outstanding at September 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:

 SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING

		2023				2022
		Nine months ended September 30,
		2023				2022
Warrants			14,467,566				118,816
Stock options and restricted stock units			1,662,836				769,933
K2HV conversion feature			205,396				205,396
Total			16,335,798				1,094,145

 

11. LONG-TERM DEBT

 

As of September 30, 2023, and December 31, 2022, the Company’s long-term debt is as follows:

 SCHEDULE OF LONG-TERM DEBT

		September 30, 2023				December 31, 2022
Long-term debt, net of debt discount of $5,400 ($6,811 at December 31, 2022)		$	50,299			$	48,888
Less: current portion, net of debt discount of $5,400 ($0 at December 31, 2022)			50,299				-
Long-term debt, net of current portion		$	-			$	48,888

 

15

 

On May 22, 2020, the Company, along with its subsidiary VBI Cda (collectively, the “Borrowers”), entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders, converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.

 

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

 

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

 

On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.

 

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

 

In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08 per share. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant.

 

The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.

 

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

 

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

 

16

 

The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at September 30, 2023, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4.00%. The interest rate as of September 30, 2023 was 12.50%. The effective interest rate on the loan of $50,000, excluding the Original Final Payment and Second Amendment Final Payment, is 16.03%.

 

The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, includes both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement period ended September 30, 2023, and did not qualify for an exception for this covenant, which constitutes an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023. On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement period ended September 30, 2023 (the “Specified Default”), from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. The Forbearance Period will immediately terminate if an Event of Default other than the Specified Default, occurs, including any Event of Default caused by a breach of the terms of the Forbearance Agreement. There is no assurance that the Company will be able to meet the conditions set forth in the Forbearance Agreement, which will result in a termination of the Forbearance Period. In addition, the Forbearance Agreement is not a waiver by K2HV of the Company’s obligation to meet the covenants pursuant to the Loan Agreement. Accordingly, K2HV may declare an Event of Default after the end of the Forbearance Period, and there is no assurance that the Company would be able to enter into another forbearance agreement for any additional periods. Upon occurrence and during the continuance of an Event of Default, K2HV is entitled to declare all obligations under the Loan Agreement immediately due and payable and to stop advancing money or extending credit under the Loan Agreement, and the applicable rate of interest, described above, will be increased by 5.00% per annum.

 

The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.

 

On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.

 

The total initial debt discount related to the Second Amendment is $7,359. As of September 30, 2023, and December 31, 2022, the unamortized debt discount was $5,400 and $6,811 respectively. The debt discount is being charged to interest expense, net in the condensed consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.

 

At September 30, 2023 and December 31, 2022, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be $46,230 and $56,510, respectively.

 

17

 

Interest expense, net recorded in the three and nine months ended September 30, 2023 and 2022 was as follows:

 SCHEDULE OF INTEREST EXPENSE

		2023				2022				2023				2022
		Three months ended September 30								Nine months ended September 30
		2023				2022				2023				2022
Interest expense		$	1,588			$	856			$	4,586			$	2,132
Amortization of debt discount			470				416				1,411				1,237
Extinguishment loss			-				172				-				172
Interest income			(515)				(486	)			(1,317	)			(742	)
Total interest expense, net of interest income		$	1,543			$	958			$	4,680			$	2,799

 

12. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL

 

Stock option plans

 

The Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.

 

2006 VBI US Stock Option Plan

 

The 2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of September 30, 2023, there were 28,038 options outstanding under the 2006 Plan.

 

2014 Equity Incentive Plan

 

On May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined below) and no further options will be issued under the 2014 Plan. As of September 30, 2023, there were 17,195 options outstanding under the 2014 Plan.

 

2016 VBI Equity Incentive Plan

 

The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock, or other such award as may be permitted under the 2016 Plan. As of September 30, 2023, there were 1,617,603 options outstanding and no RSUs unvested under the 2016 Plan.

 

The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled 622,295 at September 30, 2023.

 

18

 

Activity related to stock options is as follows:

 SCHEDULE OF STOCK OPTIONS ACTIVITY

		Number of				Weighted
		Stock				Average
		Options				Exercise Price
Balance outstanding at December 31, 2022			761,243			$	71.26
Granted			996,143				2.02
Forfeited			94,550				61.90
Balance outstanding at September 30, 2023			1,662,836			$	30.32
Exercisable at September 30, 2023			633,031			$	69.26

 

Information relating to RSUs is as follow:

 SCHEDULE OF RESTRICTED STOCK UNITS

						Weighted
						Average
		Number of				Fair Value
		Stock Awards				at Grant Date
Unvested shares outstanding at December 31, 2022			82			$	43.80
Vested			(82	)			43.80
Unvested shares outstanding at September 30, 2023			-			$	-

 

In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:

 SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK SCHOLES OPTION PRICING ASSUMPTIONS

		Nine months ended September 30
		2023				2022
Volatility			112.44	%			93.23	%
Risk free interest rate			4.17	%			1.75	%
Expected term in years			5.74				5.83
Expected dividend yield			0.00	%			0.00	%
Weighted average fair value per option		$	1.65			$	33.90

 

The fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted for when they occur. The total stock-based compensation expense recorded in the three and nine months ended September 30, 2023 and 2022 was as follows:

 SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE

		Three months ended September 30								Nine months ended September 30
		2023				2022				2023				2022
Research and development		$	191			$	514			$	684			$	1,534
Sales, general, and administrative			1,287				1,868				4,437				5,751
Cost of revenues			22				30				64				86
Total stock-based compensation expense		$	1,500			$	2,412			$	5,185			$	7,371

 

13. REVENUES, NET AND DEFERRED REVENUE

 

Revenues, net comprises the following:

 SCHEDULE OF REVENUE COMPRISED

		2023				2022				2023				2022
		Three months ended September 30								Nine months ended September 30
		2023				2022				2023				2022
Product revenues, net		$	1,076			$	258			$	2,262			$	680
License revenue			3,596				-				3,596				-
R&D service revenues			1,952				59				1,971				109
Revenues		$	6,624			$	317			$	7,829			$	789

 

19

 

The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2023:

 SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS

		Total				Current portion to September 30, 2024				Remaining portion thereafter
Product revenues, net		$	5,314			$	5,314			$	-
R&D service revenues			3,404				1,656				1,748
		$	8,718			$	6,970			$	1,748

 

The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2023:

 SUMMARY OF CHANGES IN DEFERRED REVENUE

Balance at January 1, 2022		$	2,803
			-
			-
			-
Balance at December 31, 2022			2,613
Revenue deferred			8,049
Recognition of deferred revenue			(1,971	)
Currency translation			27
Balance at September 30, 2023		$	8,718
Short Term		$	6,970
Long Term		$	1,748

 

Brii Collaboration Agreements – VBI-2601

 

On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “Brii Collaboration and License Agreement”) with Brii Bio, amended on April 8, 2021, whereby:

 

	●	the Company and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “Licensed Territory”), and to conduct a Phase II 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”);
	●	the Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be required to obtain and maintain marketing approval of the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize and the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory; and
	●	Brii Bio granted the Company an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest in any joint technology developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV in the countries of the world other than the Licensed Territory.

 

20

 

On December 20, 2021, the Company and Brii Bio further amended the Brii Collaboration and License Agreement (the “Brii Second Amendment Collaboration and License Agreement”) whereby:

 

	●	the Company 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
	●	Brii Bio granted the Company a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the Combo Clinical Trial solely for use in the development, manufacture, or commercialization of the Licensed Product in combination with an siRNA in the countries of the world other than the Licensed Territory.

 

Pursuant to the Brii Collaboration and License Agreement, as amended, the Company was responsible for the R&D Services and Brii Bio was responsible for costs relating to the clinical trials for the Licensed Territory.

 

The Company and Brii Bio will jointly own all right, title, and interest in the joint know-how development and the patents claiming joint inventions made pursuant to the Brii Second Amendment Collaboration and License Agreement.

 

The initial consideration of the Brii Collaboration and License Agreement consisted of an $11,000 non-refundable upfront payment. As part of the Brii Collaboration and License Agreement, the Company and Brii Bio entered into a stock purchase agreement. Under the terms of the stock purchase agreement, the Company issued to Brii Bio 76,502 of its common shares valued at $3,626 (based on the Company’s common share price on December 4, 2018). The remaining $7,374, deemed to be the initial transaction price, was allocated to two performance obligations: (i) the VBI-2601 license and (ii) R&D services. The R&D services were allocated $4,737 of the transaction price using an estimated selling price based on an expected cost plus a margin approach and the remaining transaction price of $2,637 was allocated to the VBI-2601 license using the residual method.

 

There was no additional consideration contemplated in the Brii Second Amendment Collaboration and License Agreement.

 

On July 5, 2023, the Company and Brii Bio entered into the A&R Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the A&R Collaboration Agreement, expand the Licensed Territory to the entire world (the “New Licensed Territory”) for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601 (“VBI-2601 Licensed Product”). Pursuant to the A&R Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the VBI-2601 Licensed Products in the New Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in the New Licensed Territory. Except for the rights and licenses expressly granted in the A&R Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property. Additionally, the A&R Collaboration Agreement constitutes the entire agreement between the VBI and Brii Bio relating to VBI-2601 and supersedes all previous agreements, including the Brii Collaboration and License Agreement and the Brii Second Amendment Collaboration and License Agreement. As a result of the A&R Collaboration Agreement, the unsatisfied performance obligation of $1,925 under the Brii Collaboration and License Agreement prior to the amendment and restatement was immediately recognized as R&D service revenues during the three and nine months ended September 30, 2023.

 

The initial consideration of the A&R Collaboration Agreement consisted of a $5,000 non-refundable upfront payment. In addition, the Company is also eligible to receive up to an additional $227,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the New Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the A&R Collaboration Agreement or have been recognized under the A&R Collaboration Agreement. The $5,000 of initial consideration of the A&R Collaboration Agreement was allocated to three performance obligations: (i) the VBI-2601 license for the New Licensed Territory; (ii) R&D services related to VBI-2601; and (iii) the technology transfer of VBI-2601. The initial consideration of $5,000 was allocated as follows: R&D services were allocated $43, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $3,360 was allocated to the VBI-2601 license for the New Licensed Territory.

 

21

 

The A&R Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) expiration, invalidation or lapse of the last Company patent claiming such VBI-2601 Licensed Product, (ii) 10 years from the date of first commercial sale of such VBI-2601 Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such VBI-2601 Licensed Product in such region. Upon expiration (but not an earlier termination) of the A&R Collaboration Agreement in each region of the New Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license under the Company’s technology related to the VBI-2601 Licensed Products in such region to make and sell VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.

 

Brii Collaboration Agreements – PreHevbri

 

On July 5, 2023, the Company and Brii Bio also entered into the Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the Collaboration Agreement, acquired an exclusive license for PreHevbri in APAC, excluding Japan (“PreHevbri Licensed Territory”), for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri (“PreHevbri Licensed Product”). Pursuant to the Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the PreHevbri Licensed Products in the PreHevbri Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in the PreHevbri Licensed Territory. Except for the rights and licenses expressly granted in the Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property.

 

The initial consideration of the Collaboration Agreement consisted of a $2,000 non-refundable upfront payment. In addition, the Company is also eligible to receive up to an additional $195,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the PreHevbri Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the Collaboration Agreement or have been recognized under the Collaboration Agreement. The $2,000 of the initial consideration of the Collaboration Agreement was allocated to three performance obligations: (i) the PreHebvri license for the PreHevbri Licensed Territory; (ii) R&D services related to PreHevbri; and (iii) the technology transfer of PreHevbri. The initial consideration of $2,000 was allocated as follows: the R&D services were allocated $88, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $315 was allocated to the PreHevbri license for the PreHevbri Licensed Territory.

 

The Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) 10 years from the date of first commercial sale of such PreHevbri Licensed Product in the applicable region, or (ii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such PreHevbri Licensed Product in such region. Upon expiration (but not an earlier termination) of the Collaboration Agreement in each region of the PreHevbri Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license under the Company’s technology related to the PreHevbri Licensed Products in such region to make and sell PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.

 

The R&D services and technology transfer for the Brii Collaboration Agreements will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.

 

Upon termination of the Brii Collaboration Agreements prior to the end of the term, there is no obligation for refund and any amounts in deferred revenue related to unsatisfied performance obligations will be immediately recognized.

 

22

 

Supply Agreement

 

On July 5, 2023, in connection with the Brii Collaboration Agreements, the Company and Brii Bio entered into the Supply Agreement related to the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures, as negotiated. Pursuant to the Supply Agreement, as the Company achieved a qualified underwritten public offering of $5,000 of its common shares within 90 days of the effective date of the Supply Agreement, the Company received an advance payment of $5,000 from Brii Bio. The advance payment of $5,000 will be allocated to the following performance obligations, depending on which performance obligation is requested by Brii Bio, until the advance payment of $5,000 has been fully utilized: (i) units of VBI-2601 and/or PreHevbri; and (ii) manufacturing expenditures. The advance payment of $5,000 is included in deferred revenue as of September 30, 2023.

 

The performance obligation of a unit of VBI-2601 and/or PreHevbri will be satisfied at a point in time using the prices set out in the Supply Agreement and revenue will be recognized upon transfer of control of the performance obligation.

 

The manufacturing expenditures will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.

 

As of September 30, 2023, performance obligations related to the Brii Collaboration Agreements and the Supply Agreements that remain unsatisfied are $8,049.

 

14. COLLABORATION ARRANGEMENTS

 

The Company has entered into, and expects to enter into from time to time in the future, license agreements, funding agreements, collaboration agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “Collaboration Agreements”) are described in detail in the Company’s 2022 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding Collaboration Agreements are materially consistent with those described in the 2022 10-K, other than described below.

 

Set forth below are the approximate amounts expensed for Collaboration Agreements during the three and nine months ended September 30, 2023 and 2022, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.

  SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE

		2023				2022				2023				2022
		Three months ended								Nine months ended
		September 30								September 30
		2023				2022				2023				2022
National Research Council of Canada (“NRC”)		$	-			$	118			$	35			$	702
Coalition for Epidemic Preparedness Innovations (“CEPI”)			829				692				3,023				3,098
Agenus Inc.			72				-				436				-
Research and Development expenses		$	901			$	810			$	3,494			$	3,800

 

NRC

 

On February 28, 2023, the Company signed a seventh amendment to the collaboration agreement with the NRC to extend the expiration date of the collaboration agreement to December 31, 2023.

 

On April 17, 2023, the Company signed an eighth amendment to the collaboration agreement with the NRC to further broaden the scope to include the development of stable cell lines for our multivalent vaccine candidate against coronaviruses.

 

23

 

CEPI

 

The Company has $3,925 recorded as deferred funding, recorded in other current liabilities on the condensed consolidated balance sheet.

 

15. GOVERNMENT GRANTS

 

Strategic Innovation Fund (“SIF”)

 

On September 16, 2020, the Company 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 $55,976 from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). The Company 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, the Company 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, the Company 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, the Company will become a primary obligor under the Contribution Agreement.

 

Costs associated with the Contribution Agreement are expensed as incurred in Research and Development expenses and overhead charges are included in Sales, General and Administrative. For the three and nine months ended September 30, 2023, the Company recognized $2,095 and $4,970 respectively, as a reduction in expenses. As of September 30, 2023, the Company had $0 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

 

For the three and nine months ended September 30, 2022, the Company recognized $1,831 and $3,783, respectively, as a reduction in expenses. As of September 30, 2022, the Company had $716 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

 

16. COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

 

24

 

On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($491,501). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.

 

The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023 and July 13, 2023. The next preliminary hearing is scheduled to be held on November 16, 2023.

 

On December 5, 2022, another tort 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. 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). Preliminary hearings have been postponed and a new date has not yet been scheduled.

 

SciVac intends to defend these claims vigorously.

 

17. LEASES

 

The Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are classified as operating leases. The office facility lease agreement in the U.S. expires on October 31, 2024 with no option to extend. Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027. A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025.

 

There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.

 SCHEDULE OF LEASE COST AND OTHER INFORMATION

		Three months ended								Nine months ended
		September 30								September 30
		2023				2022				2023				2022
Operating lease cost		$	399			$	489			$	1,373			$	1,383

 

Weighted average discount rate			13	%
Weighted average remaining lease term			2.51 years

 

Operating lease costs are included G&A expenses in the statement of operations and comprehensive loss.

 

25

 

The following table summarizes future undiscounted cash payments reconciled to the lease liabilities:

SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES  

Remaining 2023		$	310
2024			1,142
2025			654
2026			564
2027			154
Total		$	2,824
Effect of discounting			(404	)
Total lease liability		$	2,420
Less: current portion			(994	)
Lease liability, net of current portion		$	1,426

 

18. SEGMENT INFORMATION

 

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.

 

Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:

 SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS

		2023				2022				2023				2022
		Three Months Ended								Nine Months Ended
		September 30								September 30
		2023				2022				2023				2022
United States		$	690			$	238			$	1,520			$	444
Israel			42				60				98				281
China / Hong Kong			5,562				19				5,580				58
Europe			330				-				631				6
Revenues		$	6,624			$	317			$	7,829			$	789

 

There was no revenue attributed to our country of domicile, Canada, for the three and nine months ended September 30, 2023 and 2022.

 

19. SUBSEQUENT EVENTS

 

ATM Program

 

Subsequent to September 30, 2023 the Company sold and issued 348,475 common shares under the ATM Program for total gross proceeds of $219 at a weighted average price of $0.6270 per share.

 

As of November 13, 2023, the Exercise Price of the warrants that contain certain anti-dilution provisions (see Note 1 Liquidity and Going Concern above), in effect is $0.6057.

 

Extension Agreements and Forbearance Agreement with K2HV

 

On October 27, 2023 the Company and K2HV entered into the Extension Agreement, pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. On November 13, 2023, the Company and K2HV entered into the Forbearance Agreement. See Note 11 for more details.

 

Nasdaq Minimum Bid Price Requirement

 

On November 1, 2023, the Company received a letter from the Nasdaq indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, it did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq. See Note 1 Liquidity and Going Concern for more details.

 

 

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

 

The following discussion and analysis summarize the significant factors affecting our operating results, financial condition, liquidity, and cash flows as of and for the periods presented below. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q. In addition to historical information, this discussion and analysis here and throughout this Form 10-Q contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

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 and a proprietary mRNA-launched eVLP (“MLE”) 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. We have also developed a technology that leverages the strengths of both eVLP and mRNA technologies to create a proprietary mRNA-launched eVLP platform technology. This novel approach to particulate vaccines adds a genetic code for particle-forming structural protein – the same protein at the core of our eVLPs – to a mRNA vaccine, fundamentally changing the cellular interaction with the vaccine. The addition of this structural protein instructs cells to not only crate target antigens but also to create eVLPs in vivo. These particles are released from the cells that generate them to circulate in the body, provoking the immune system to drive B-cell and T-cell responses.

 

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 candidates is preliminary and investigative. The investigational programs have not been approved by the United States Food and Drug Administration (“FDA”), European Medicines Agency, United Kingdom Medicines and Healthcare products Regulatory Agency, Health Canada, or any other health authority and no conclusion can or should be drawn regarding the safety or efficacy of these investigational programs.

 

In addition to our existing pipeline programs, we may also seek to in-license clinical-stage vaccines or vaccine-related technologies that we believe complement our pipeline, as well as technologies that may supplement our efforts in both 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 United States (“U.S.”) alone. Worldwide, this number is estimated to be as high as 350 million, with approximately 800,000 deaths resulting from the consequences of HBV infection each year.

 

Despite the highly infectious nature of HBV, due to its often-asymptomatic nature, it is estimated that as many as 67% of chronically infected adults in the U.S. are unaware of their infection status. There is 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:

 

	●	Alpha (B.1.1.7) – First identified as in the United Kingdom (“UK”), VOC in December 2020
	●	Beta (B.1.351) – First identified in South Africa, VOC in December 2020
	●	Gamma (P.1) – First identified in Brazil, VOC in January 2021
	●	Delta (B.1.617.2) – First identified in India, VOC in May 2021
	●	Omicron 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.

 

Pipeline Programs

 

The table below is an overview of our commercial vaccine and our lead investigational programs as of November 10, 2023:

 

Indication		Program		Technology		Current Status
Approved Vaccine		PreHevbrio1,2,3		VLP		Registration/Commercial
● Hepatitis B		Hepatitis B Vaccine
		(Recombinant)
Prophylactic Candidates
● Coronaviruses (Multivalent)		VBI-2901		eVLP		Ongoing Phase I
● COVID-19 (Beta variant)		VBI-2905		eVLP		Phase Ib Completed
● COVID-19 (Ancestral)		VBI-2902		eVLP		Phase Ia Completed
● Cytomegalovirus		VBI-1501		eVLP		Phase I Completed
● Coronaviruses (Multivalent)		Undisclosed		eVLP		Pre-Clinical
● Undisclosed		Undisclosed		MLE		Pre-Clinical
Therapeutic Candidates
● Glioblastoma		VBI-1901		eVLP		Ongoing Phase IIb
● Hepatitis B		VBI-2601 (BRII-179)4		VLP		Ongoing Phase II
● Undisclosed		Undisclosed		MLE		Pre-clinical

 

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).

 

⁴Licensed to Brii Biosciences (“Brii Bio”) in July 2023.

 

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. In June 2023, PreHevbrio was also awarded part of the CDC 2023 Adult Vaccine contract, for up to $25,350. The CDC vaccine contracts are established for the purchase of vaccines by immunization programs that receive CDC immunization cooperative agreement funds (i.e., state health departments, certain large city immunization projects, and certain current and former U.S. territories).

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

 

● 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. On July 19, 2023, we announced that PreHevbri is now available in the Netherlands and Belgium for active immunization against infection caused by all known subtypes of HBV in adults. VBI expects PreHevbri will be made available in certain additional European Union countries in the fourth quarter of 2023 through its partnership with Valneva.

 

● UK: On June 1, 2022, we announced that the UK Medicines and Healthcare Products Regulatory Agency 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. The UK is included in the Valneva marketing and distribution agreement for PreHevbri. On June 15, 2023, VBI announced the launch and availability of PreHevbri in the UK as part of the Valneva partnership.

 

● 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.

 

● Israel: Approved and commercially available under the brand name Sci-B-Vac^® since 2000.

 

● APAC: On July 5, 2023, we announced a license and collaboration agreement with Brii Bio for the development and commercialization of PreHevbri in the Asia Pacific region (“APAC”), excluding Japan.

 

Prophylactic Investigational Candidates

 

VBI-2900: Coronavirus Vaccine Program (VBI-2901, VBI-2902, VBI-2905)

 

In response to the SARS-CoV-2 (COVID-19) endemic, 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 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 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 was announced on September 27, 2023, demonstrating that VBI-2901 induced broad and durable protective titers against variants of concern. Notably:

 

●

All participants saw boosting and/or high neutralizing responses against a panel of COVID-19 variants, including Wuhan, Delta, Beta, Omicron BA.5, as well as multiple animal coronaviruses including bat and pangolin variants

●

Participants with low baseline neutralization titers (geometric mean titer (“GMT”): 148 IU50/mL), who are at the highest risk of infection, saw the greatest vaccine-induced boosting effects across all variants tested at Day 28, after one dose, with increases of: 8.5x against Wuhan, 9.1x against Delta, 14.2x against Beta, and 5.8x against Omicron BA.5

●

All participants who received one dose had enhanced persistence of neutralizing responses, with only about 25% reduction in GMT against Wuhan after 5 months vs. peak responses

●

Similar enhanced durability trends were observed against all tested variants

●

By comparison, a recently published study [Gilboa et al., 2022] evaluating immune responses after a third dose of a licensed mRNA vaccine in nearly 4,000 healthcare workers in Israel demonstrated an approximate 77% decline in GMT against Wuhan after 5 months vs. peak responses

■

In the same study [Gilboa et al., 2022], durability trends against other variants, including Omicron, were seen to wane even more aggressively, with 4-fold to 10-fold lower neutralization titers within 4 months of the third dose

 

Additional durability and breadth data from the VBI-2901 Phase I study is expected in the first quarter of 2024.

 

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 $33,018; a partnership with the Strategic Innovation Fund, established by the Government of Canada, with an award of up to CAD $55,976; contribution of up to CAD $1,000 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 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-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, was a two-arm study that enrolled 20 first-recurrent GBM patients who received 10 µg of VBI-1901 in combination with either GM-CSF or GSK proprietary adjuvant system, AS01, as immunomodulatory adjuvants. AS01 was 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; (4) 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 (5) 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.

 

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

 

On September 7, 2023, we announced that the dosing of the first patient in a Phase IIb study of VBI-1901 in recurrent GBM patients with first tumor recurrence. This study expands the existing study to include a Part C, which is a multi-center, randomized, controlled, open-label study. Interim data analyses is expected in the second half of 2024, subject to speed of enrollment. 

 

VBI-2601: HBV Immunotherapeutic Candidate

 

VBI-2601 is a 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 July 5, 2023, we announced the A&R Collaboration Agreement (as defined below) with Brii Bio, expanding Brii Bio’s rights to the development and commercialization of VBI-2601 from Greater China rights to global rights.

 

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 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. 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:

 

	●	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 32^nd Conference of the Asian Pacific Association for the Study of the Liver 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

 

 

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,).

 

On September 6, 2023, we announced that Brii Bio announced topline interim cohort-level unblinded week 36 data from the Phase II add-on therapy study. Per the topline interim results announced by Brii Bio, the cohort level unblinded data from the study demonstrated that in the intent to treat analysis at week 24 (end of treatment or “EoT”), 26.3% (15 patients) treated with VBI-2601/PEG-IFNα achieved HBsAg loss compared to 19.3% (11 patients) with placebo/PEG-IFNα; at week 36 (12 weeks follow-up), 24.6% (14 patients) treated with VBI-2601/PEG-IFNα had HBsAg loss, compared with 14.0% (8 patients) with placebo/PEG-IFNα. In the per protocol analysis at week 24, 32.6% (15 patients) treated with VBI-2601/PEG-IFNα achieved HBsAg loss compared to 21.6% (11 patients) with placebo/PEG-IFNα; at week 36, 31.8% (14 patients) and 14.9% (7 patients) had HBsAg loss, respectively. In addition, 9 out of 15 patients in the cohort treated with VBI-2601/PEG-IFNα achieved HBsAg seroconversion at EoT (week 24), versus 1 out of 11 in the cohort treated with PEG-IFNα alone. The cohort level unblinded 24 weeks safety data showed VBI-2601/PEG-IFNα treatment was generally safe and tolerated, with adverse events similar to those associated with PEG-IFNα treatment or VBI-2601 as previously reported.

 

In November 2023, in two late-breaking poster presentations at AASLD The Liver Meeting® 2023, Brii Bio announced new data from the Phase II study of VBI-2601 (BRII-179) highlighting progress towards achieving HBV functional cure:

 

	●	Direct evidence that BRII-179 induced functional antibody responses can contribute to increased and sustained HBsAg loss rate
	●	New insight utilizing BRII-179 to enrich patients with intrinsic humoral immune responses for higher HBsAg loss or HBV functional cure rates.

 

Third Party License and Assignment Agreements

 

We currently are dependent on licenses from third parties for certain of our key technologies, including the license granted pursuant to an agreement between Savient Pharmaceuticals Inc. and SciGen Ltd dated June 2004, as subsequently amended (the “original Ferring License Agreement”) and a license from L’Universite Pierre et Marie Curie, now Sorbonne Université (“UPMC”), Institut National de la Santé et de la Recherche Médicale (“INSERM”) and L’école Normale Supérieure de Lyon.

 

On October 18, 2022, the Company amended and restated the original Ferring License Agreement (the “Amended and Restated Ferring License Agreement”), which amends and restates certain of the terms relating to the manufacture and marketing of HBsAg products, which includes, among others, updates to the definition of net sales, and a reduction in the fixed royalty rate on net sales of HBsAg products (“Product”) from seven percent (7%) to three and a half percent (3.5%) in consideration for the grant of the license to utilize genetically engineered CHO cells encoding the hepatitis B antigen and certain information related to the manufacture of hepatitis B vaccines. In connection with the Amended and Restated Ferring License Agreement, the Company has also agreed to act as the guarantor for SciVac’s obligations under the Amended and Restated Ferring License Agreement, or if the Amended and Restated Ferring License Agreement is assigned to a third party, guarantor for SciVac’s obligations that have accrued up until the date of such assignment. Under an Assignment Agreement between FDS Pharm LLP and SciGen Ltd., dated February 14, 2012 (the “SciGen Assignment Agreement”), we are required to pay royalties to SciGen Ltd. equal to 5% of net sales (as defined in the original Ferring License Agreement) of Product. Under the original Ferring License Agreement and the SciGen Assignment Agreement, we originally were to pay royalties on a country-by-country basis until the date 10 years after the date of commencement of the first royalty year in respect of such country. In April 2019, we exercised our option to extend the original Ferring License Agreement in respect of all the countries that still make up the territory for an additional 7 years by making a one-time payment to Ferring of $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 a license agreement with UPMC and other licensors relating to eVLP technology, we have an exclusive license to a family of patents that expired in the U.S. in 2023 and expired in other countries in 2021. UPMC is also a co-owner of the patent family covering our VBI-1501 CMV vaccine. During the three and nine months ended September 30, 2023, we did not make any milestone payments.

 

Expanded Hepatitis B Partnership with Brii Bio

 

On July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Bio. Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in APAC, excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $15,000, consisting of a $3,000 equity investment in a concurrent registered direct offering (discussed below), $5,000 as an advance payment for the clinical and commercial manufacture and supply of the VBI-2601 licensed product and PreHevbri and any related manufacturing expenditures, pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023 by and between the Company and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement, dated July 5, 2023, by and among the Company, SciVac and Brii Bio, the Company also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2HV, in all of its respective right, title and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of the Company’s obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (each as defined herein).

 

 

The Company is also eligible to receive up to an additional $422,000 in potential regulatory and commercial milestone payments (combined under the Brii Collaboration Agreements), and potential double-digit royalties in the licensed territories, which is worldwide for VBI-2601, and APAC, excluding Japan, for PreHevbri. Brii Bio will be responsible for all development, regulatory, and commercial activities and costs for the two programs in their respective licensed territories. There is no assurance that Brii Bio will achieve any of the milestones as specified in the Brii Collaboration Agreements and that we will receive any or all of these potential payments pursuant to the Brii Collaboration Agreements.

 

July 2023 Underwritten Public Offering and Registered Direct Offering

 

In July 2023, the Company closed (i) an underwritten public offering of 12,445,454 common shares and accompanying common warrants to purchase up to 12,545,454 common shares (which included 1,536,363 common shares and common warrants to purchase up to 1,636,363 common shares issued pursuant to the underwriters’ partial exercise of their option to purchase additional common shares and common warrants) at a combined public offering price of $1.65 per common share and accompanying common warrant, and (ii) a concurrent registered direct offering, pursuant to the expanded hepatitis B partnership with Brii Bio, of 1,818,182 common shares and accompanying common warrants to purchase up to 1,818,182 common shares, at a combined purchase price of $1.65 per share and accompanying common warrant. The accompanying common warrants issued and sold in each of the underwritten public offering and the registered direct offering have an initial exercise price of $1.65 per share, which, pursuant to certain anti-dilution provisions of the warrants, was reduced to $0.6749 per share, as of September 30, 2023, and expire five years from the date of issuance. The aggregate gross proceeds from the underwritten public offering, including aggregate gross proceeds from the underwriters’ exercise of their option to purchase additional securities, were $20,500. The aggregate gross proceeds from the concurrent registered direct offering were $3,000. As of November 13, 2023 the current exercise price of the warrants is $0.6057 per share.

 

Recent Developments

 

K2HV Extension Agreements and Forbearance Agreement

 

We were not in compliance with the minimum Net Revenue (as defined in the Loan Agreement, as defined herein) covenant for the measurement period ended September 30, 2023, and did not qualify for an exception for this covenant, which constitutes an Event of Default (as defined in the Loan Agreement). On October 27, 2023, the Borrowers (as defined herein) and K2 HealthVentures LLC (“K2HV”) entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for us to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement was extended from October 30, 2023 to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, K2HV has agreed to refrain from declaring an Event of Default (as defined in the Loan Agreement) under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement). On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement period ended September 30, 2023 (the “Specified Default”), from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. The Forbearance Period will immediately terminate if an Event of Default other than the Specified Default, occurs, including any Event of Default caused by a breach of the terms of the Forbearance Agreement. There is no assurance that the Company will be able to meet the conditions set forth in the Forbearance Agreement, which will result in a termination of the Forbearance Period. In addition, the Forbearance Agreement is not a waiver by K2HV of the Company’s obligation to meet the covenants pursuant to the Loan Agreement. Accordingly, K2HV may declare an Event of Default after the end of the Forbearance Period, and there is no assurance that the Company would be able to enter into another forbearance agreement for any additional periods. Upon occurrence and during the continuance of an Event of Default, K2HV is entitled to declare all obligations under the Loan Agreement immediately due and payable and to stop advancing money or extending credit under the Loan Agreement, and the applicable rate of interest, described above, will be increased by 5.00% per annum. See “Sources of Liquidity – K2 HealthVentures LLC Long Term Debt” and “Item 1A: Risk Factors – ‘Our credit facility contains certain customary covenants, including minimum net revenue covenants, and instances of non-compliance may lead to the declaration of an event of default, which could accelerate our repayment obligations, increase the interest rate under the credit facility, and lead to the foreclosure on substantially all of our assets, among others.’

 

 

Nasdaq Minimum Bid Price Requirement

 

On November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, 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 letter also indicated that we will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

In order to regain compliance with Nasdaq’s minimum bid price requirement, our common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the Compliance Period or any subsequent grace period granted by Nasdaq, our common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in our common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.

 

Financial Operations Overview

 

At present, our operations are focused on:

 

●	continuing the commercialization of PreHevbrio in the U.S. and commercialization of PreHevbri in Europe;
●	manufacturing our 3-antigen HBV vaccine at commercial scale to meet demand in the U.S., Europe, Canada, and Israel, where it is approved, and to prepare for supply in markets where we or our partner Brii Bio may obtain marketing authorization;
●	manufacturing VBI-2601, our protein-based immunotherapeutic candidate for treatment of chronic HBV, in collaboration with Brii Bio;
●	continuing the Phase IIb clinical study of our GBM vaccine immunotherapeutic candidate, VBI-1901, in the recurrent GBM setting;
●	preparing for a clinical study of VBI-1901 in the primary GBM setting;
●	continuing the Phase I clinical study of our multivalent coronavirus candidate, VBI-2901;
●	preparing for commercialization of PreHevbrio in Canada;
●	completing the Phase I clinical study of our monovalent prophylactic COVID-19 vaccine candidates, VBI-2902 (ancestral strain) and VBI-2905 (Beta variant);
●	continuing our development and scaling-up production processes for our prophylactic coronavirus vaccine candidates using a Contract Development and Manufacturing Organization (“CDMO”) located in Canada;
●	preparation for further development of VBI-1501, our preventative CMV vaccine candidate;
●	continuing the research and development (“R&D”) of our other pipeline candidates, including the exploration and development of new pipeline candidates;
●	implementing operational, compliance, financial, and management information systems, including through third party partners, to support our commercialization activities;
●	maintaining, expanding, and protecting our intellectual property portfolio; and
●	developing our internal systems and processes for regulatory affairs, legal, and compliance.

 

VBI’s revenue generating activities have been the sale of our 3-antigen HBV vaccine, under the brand name PreHevbrio in the U.S., PreHevbri in the UK and certain countries in the EU, and Sci-B-Vac in Israel. We have also generated revenue from various business development transactions and R&D services generating fees. To date, we have financed our operations primarily with proceeds from sales of our securities, our long-term debt agreements, and contribution agreements and partnerships with CEPI and the Government of Canada.

 

 

VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and new pipeline candidates. As of September 30, 2023, VBI had an accumulated deficit of approximately $582,432, stockholders’ equity of approximately $19,886 and cash of $35,454. Cash outflows from operating activities were $48,826 for the nine months ended September 30, 2023. Our ability to maintain our status as an operating company and to realize our investment in our In Process Research & Development (“IPR&D”) assets, which consist of our CMV and GBM programs, is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our administrative overhead and our research and development activities, and ultimately to profitably monetize our IPR&D. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing, if required. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.

 

We have incurred operating losses since inception, have not generated significant product sales revenue, and have not achieved profitable operations. We incurred net losses of $92,823 for the nine months ended September 30, 2023, which includes a $23,600 non-cash impairment realized in the nine months ended September 30, 2023, and we expect to continue to incur substantial losses in future periods. We anticipate that we will continue to incur substantial operating expenses as we continue our research and development and clinical studies, and as we continue the commercialization of PreHevbrio in the U.S. and Canada, and PreHevbri in Europe. These include expenses related to the focus of our operations highlighted above.

 

In addition, we have incurred and will continue to incur significant expenses as a public company, which subject us to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the rules and regulations of Nasdaq, and the Canadian securities regulators. We have also incurred and will continue to incur regulatory compliance costs and general and administrative costs related to our clinical regulatory operations and commercialization of our marketed product and product candidates.

 

Overall Performance

 

The Company had net losses of $20,444 and $25,209 for the three months ended September 30, 2023 and 2022, respectively, which includes a $3,600 non-cash impairment realized in the three months ended September 30, 2023, and $92,823 and $92,162 for the nine months ended September 30, 2023 and 2022, respectively, which includes a $23,600 non-cash impairment realized in the nine months ended September 30, 2023. We had an accumulated deficit of $582,432 at September 30, 2023. We had $35,454 of cash and net working capital of $(27,047) as of September 30, 2023. As described elsewhere, in early July 2023, the Company received $15,000 from an upfront payment from Brii Bio, pursuant to the Brii Collaboration Agreements and the concurrent registered direct offering, and aggregate gross proceeds of $20,500 from the underwritten public offering.

 

Revenues, net

 

Revenues, net consist of product sales of PreHevbrio in the U.S., PreHevbri in the UK and certain countries in the EU as part of our partnership with Valneva, sales of Sci-B-Vac in Israel, license revenue from the Brii Collaboration Agreements, as well as R&D services revenue recognized as part of the Brii Collaboration Agreements.

 

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

 

 

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

 

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

 

Cost of Revenues

 

Cost of revenues consist primarily of costs incurred for manufacturing our 3-antigen HBV vaccine which includes cost of materials, consumables, supplies, contractors, and manufacturing salaries.

 

Research and Development Expenses

 

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

 

	●	the cost of acquiring, developing, and manufacturing clinical study materials, and other consumables and lab supplies used in our pre-clinical studies;
	●	expenses incurred under agreements with contractors or CDMOs or Contract Research Organizations to advance the vaccine candidates into and through completion of clinical studies; and
	●	employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense.

 

We expense R&D costs when we incur them.

 

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

 

SG&A expenses consist principally of commercialization costs, salaries, and related costs for executive and other administrative personnel and consultants, including stock-based compensation, and travel expenses. Other sales, general, and administrative expenses include professional fees for legal, patent protection, consulting and accounting services, travel and conference fees, board of directors meeting costs, scientific and commercial advisory board meeting costs, rent, maintenance of facilities, depreciation, office supplies, information technology costs and expenses, insurance, and other general expenses. SG&A expenses are expensed when incurred.

 

Impairment charges

 

Impairment charges consist of impairment on property and equipment, IPR&D, and goodwill.

 

 

Interest Expense, Net

 

Interest expense is associated with our long-term debt as discussed in Note 11 of the notes to the condensed consolidated financial statements.

 

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

 

Results of Operations

 

Three and Nine Months Ended September 30, 2023 Compared to the Three and Nine Months Ended September 30, 2022

 

All dollar amounts stated below are in thousands, unless otherwise indicated.

 

		Three months ended
		September 30
		2023				2022				Change $				Change %
Revenues, net		$	6,624			$	317			$	6,307				1990	%
Expenses:
Cost of revenues			2,525				2,672				(147	)			(6	)%
Research and development			1,532				4,983				(3,451	)			(69	)%
Sales, general and administrative			9,036				14,220				(5,184	)			(36	)%
Impairment charges			3,600				-				3,600				100	%
Total operating expenses			16,693				21,875				(5,182	)			(24	)%
Loss from operations			(10,069	)			(21,558	)			11,489				(53	)%
Interest expense, net			(1,543	)			(958	)			(585	)			61	%
Foreign exchange loss			(8,832	)			(2,693	)			(6,139	)			228	%
Loss before income taxes			(20,444	)			(25,209	)			4,765				(19	)%
Income tax expense			-				-				-				0	%
NET LOSS		$	(20,444	)		$	(25,209	)		$	4,765				(19	)%

 

		Nine months ended
		September 30
		2023				2022				Change $				Change %
Revenues, net		$	7,829			$	789			$	7,040				892	%
Expenses:
Cost of revenues			9,564				7,948				1,616				20	%
Research and development			7,975				12,988				(5,013	)			(39	)%
Sales, general and administrative			33,237				40,234				(6,997	)			(17	)%
Impairment charges			23,600				-				23,600				100	%
Total operating expenses			74,376				61,170				13,206				22	%
Loss from operations			(66,547	)			(60,381	)			(6,166	)			10	%
Interest expense, net			(4,680	)			(2,799	)			(1,881	)			67	%
Foreign exchange loss			(21,596	)			(28,982	)			7,386				(25	)%
Loss before income taxes			(92,823	)			(92,162	)			(661	)			1	%
Income tax expense			-				-				-				0	%
NET LOSS		$	(92,823	)		$	(92,162	)		$	(661	)			1	%

 

 

Revenues, net

 

Revenues, net for the three months ended September 30, 2023, were $6,624 as compared to $317 for the three months ended September 30, 2022. Revenues for the three months ended September 30, 2023 increased by $6,307 or 1990% due to an increase in product revenue, as well as license revenue and R&D services revenue associated with the Brii Collaboration Agreements, which were effective as of July 5, 2023. Product revenue increased due to revenue growth since the launch of PreHevbrio in the U.S. in the first quarter of 2022 and the sale of PreHevbri to our European partner Valneva as a result of our launch in the UK, the Netherlands, and Belgium in the second quarter of 2023, offset by slightly lower sales in the Israeli market. R&D service revenue increased due to the recognition of performance obligations relating to the Brii Collaboration and License Agreement prior to the amendment and restatement, during the three months ended September 30, 2023.

 

Revenues, net for the nine months ended September 30, 2023, were $7,829 as compared to $789 for the nine months ended September 30, 2022. Revenues for the nine months ended September 30, 2023 increased by $7,040 or 892% due to the items discussed above.

 

Revenues, net Composition

 

		Three months ended								Nine months ended
		September 30								September 30
		2023				2022				2023				2022
Product revenue, net		$	1,076			$	258			$	2,262			$	680
License revenue			3,596				-				3,596				-
R&D service revenue			1,952				59				1,971				109
Total revenues, net		$	6,624			$	317			$	7,829			$	789

 

Revenues, net by Geographic Region

 

		Three months ended
		September 30
		2023				2022				$ Change				% Change
Revenue, net in United States		$	690			$	238			$	452				190	%
Revenue, net in Israel			42				60				(18	)			(30	)%
Revenue, net in China / Hong Kong			5,562				19				5,543				29174	%
Revenue, net in Europe			330				-				330				100	%
		$	6,624			$	317			$	6,307				1990	%

 

		Nine months ended
		September 30
		2023				2022				$ Change				% Change
Revenue, net in United States		$	1,520			$	444			$	1,076				242	%
Revenue, net in Israel			98				281				(183	)			(65	)%
Revenue, net in China / Hong Kong			5,580				58				5,522				9521	%
Revenue, net in Europe			631				6				625				10417	%
		$	7,829			$	789			$	7,040				892	%

 

 

Cost of Revenues

 

Cost of revenues for the three months ended September 30, 2023 was $2,525 as compared to $2,672 for the three months ended September 30, 2022. The decrease in the cost of revenues of $147 or 6% is due to increased product sales, offset by lower direct labor costs as a result of our recent organizational changes, and decreased inventory-related costs incurred in the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

 

Cost of revenues for the nine months ended September 30, 2023 was $9,564 as compared to $7,948 for the nine months ended September 30, 2022. The increase in the cost of revenues of $1,616 or 20% is due to increased product sales and inventory-related costs incurred in the nine months ended September 30, 2023 compared to the three months ended September 30, 2022.

 

Research and Development Expenses

 

R&D expenses for the three months ended September 30, 2023 were $1,532 as compared to $4,983 for the three months ended September 30, 2022. R&D expenses were offset by $2,674 for the three months ended September 30, 2023 and $2,354 for the three months ended September 30, 2022 due to government grants and funding arrangements. The decrease in R&D expenses of $3,451 or 69%, is mainly a result of the increase in government grants and funding arrangements and a decrease in R&D expenses related to the development of our vaccine candidates VBI-2901 and VBI-1901. During the three months ended September 30, 2022, preparations were underway to begin clinical trials for both programs; however, during the three months ended September 30, 2023 although both vaccines candidates were in clinical trial, the clinical trial for VBI-1901 started later in the quarter ended September 30, 2023 and the clinical trial for VBI-2901 is nearing completion.

 

R&D expenses for the nine months ended September 30, 2023 were $7,975 as compared to $12,988 for the nine months ended September 30, 2022. R&D expenses were offset by $7,413 for the nine months ended September 30, 2023 and $6,210 for the nine months ended September 30, 2022 due to government grants and funding arrangements. The decrease in R&D expenses of $5,013 or 39% is due to the items discussed above.

 

Sales, General, and Administrative Expenses

 

SG&A expenses, net of government grants and funding arrangements, for the three months ended September 30, 2023 were $9,036 as compared to $14,220 for the three months ended September 30, 2022. SG&A expenses were offset by $231 for the three months ended September 30, 2023 and $148 for the three months ended September 30, 2022 due to government grants and funding arrangements. The SG&A expense decrease of $5,184 or 36%, is mainly a result of the recent organizational changes which reduced our internal headcount, commercial field teams, and our activity-based commercial expenses related to PreHevbrio in the U.S.

 

SG&A expenses, net of government grants and funding arrangements, for the nine months ended September 30, 2023 were $33,237 as compared to $40,234 for the nine months ended September 30, 2022. SG&A expenses were offset by $620 for the nine months ended September 30, 2023 and $567 for the nine months ended September 30, 2022 due to government grants and funding arrangements. The SG&A expense decrease of $6,997 or 17%, is due to the items discussed above.

 

Impairment charges

 

Non-cash impairment charges for the three and nine months ended September 30, 2023 were $3,600 and $23,600, respectively, compared to impairment charges for the three and nine months ended September 30, 2022 of $0 and $0, respectively. The impairment charges were related to property and equipment and IPR&D. See Note 6 in the condensed consolidated financial statements.

 

Loss from Operations

 

The net loss from operations for the three months ended September 30, 2023 was $10,069 as compared to $21,558 for the three months ended September 30, 2022. The $11,489 decrease in the net loss from operations resulted from the reduction in other expenses and other items discussed above. As a result of the headcount reductions and other reductions in spend as announced on April 4, 2023, we expect our operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared to the second half of 2022.

 

 

The net loss from operations for the nine months ended September 30, 2023 was $66,547 as compared to $60,381 for the nine months ended September 30, 2022. The $6,166 increase in the net loss from operations resulted from the $23,600 non-cash impairment charge which was partially offset by a reduction in other expenses discussed above. As a result of the headcount reductions and other reductions in spend as announced on April 4, 2023, we expect our operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared to the second half of 2022.

 

Interest Expense, Net

 

Interest expense, net for the three months ended September 30, 2023 was $1,543 as compared to $958 for the three months ended September 30, 2022. The increase in interest expense, net of $585 or 61% is due to an increase in long-term debt of $20,000 beginning mid-September 2022 and increased interest payments on our long-term debt due to higher interest rates applied during the three months ended September 30, 2023.

 

Interest expense, net for the nine months ended September 30, 2023 was $4,680 as compared to $2,799 for the nine months ended September 30, 2022. The increase in interest expense, net of $1,881 or 67% is due to an increase in long-term debt of $20,000 beginning mid-September 2022 and increased interest payments on our long-term debt due to higher interest rates applied during the nine months ended September 30, 2023.

 

Foreign Exchange Loss

 

The foreign exchange loss for the three months ended September 30, 2023 was $8,832 compared to $2,693 for the three months ended September 30, 2022. The increase in the foreign exchange loss is a result of the changes in the foreign currency exchange rates (NIS and CAD) in which the foreign currency transactions were denominated for each of those periods, including the foreign exchange impact of intercompany loans that are translated at period end.

 

The foreign exchange loss for the nine months ended September 30, 2023 was $21,596 compared to $28,982 for the nine months ended September 30, 2022. The decrease in the foreign exchange loss is a result of the changes in the foreign currency exchange rates (NIS and CAD) in which the foreign currency transactions were denominated for each of those periods, including the foreign exchange impact of intercompany loans that are translated at period end.

 

Net Loss

 

Net loss for the three months ended September 30, 2023 was $20,444 compared to $25,209 for the three months ended September 30, 2022 and was a result of the items discussed above.

 

Net loss for the nine months ended September 30, 2023 was $92,823 compared to $92,162 for the nine months ended September 30, 2022 and was a result of the items discussed above.

 

Liquidity and Capital Resources

 

		September 30, 2023				December 31, 2022				$ Change				% Change
Cash		$	35,454			$	62,629			$	(27,175	)			(43	)%
Current Assets			50,147				77,690				(27,543	)			(35	)%
Current Liabilities			77,194				36,942				40,252				109	%
Working Capital			(27,047	)			40,748				(67,795	)			(166	)%
Accumulated Deficit			(582,432	)			(489,609	)			(92,823	)			19	%

 

As of September 30, 2023, we had cash of $35,454 as compared to $62,629 as of December 31, 2022. As of September 30, 2023, we had working capital of $(27,047) as compared to working capital of $40,748 at December 31, 2022. Working capital is calculated by subtracting current liabilities from current assets.

 

 

Net Cash Used in Operating Activities

 

The Company incurred net losses of $92,823 and $92,162 in the nine months ended September 30, 2023 and 2022, respectively. The Company used $48,826 and $54,649 in cash for operating activities during the nine months ended September 30, 2023 and 2022, respectively. The decrease in cash outflows is largely a result non-cash reconciling items, mainly impairment charges and unrealized foreign exchange loss and the change in operating working capital, most notably in inventory, other current assets, accounts payable, deferred revenues, and other current liabilities.

 

Net Cash Used in Investing Activities

 

Net cash flows used by investing activities was $697 for the nine months ended September 30, 2023 compared to cash used in investing activities of $2,892 for the nine months ended September 30, 2022. The cash outflow in both periods is a result of routine property and equipment purchases.

 

Net Cash Provided by Financing Activities

 

Net cash flows provided by financing activities was $22,426 for the nine months ended September 30, 2023 compared to cash flows provided by financing activities of $19,449 during the nine months ended September 30, 2022. The cash flow provided for the nine months ended September 30, 2023 relates to proceeds from issuance of our securities from the July 2023 underwritten public offering and the concurrent registered direct offering, described below, and sales of our common shares under our ATM Program (as defined below), whereas the cash flow provided for the nine months ended September 30, 2022 relates to proceeds from debt financing.

 

Sources of Liquidity

 

Jefferies Open Market Sale Agreement

 

On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal (the “ATM Program”). During the third quarter of 2023, the Company issued 467,045 common shares under the ATM Program, for total gross proceeds of $373 at a weighted average price of $0.80 per share. The Company incurred $54 in sales agent commissions and share issuance costs related to the common shares issued in the quarter ended September 30, 2023, resulting in net proceeds of $319. As of September 30, 2023, approximately $124,627 of common shares remained available for issuance under the ATM Program.

 

July 2023 Underwritten Public Offering and Registered Direct Offering

 

In July 2023, the Company closed (i) an underwritten public offering of 12,445,454 common shares and accompanying common warrants to purchase up to 12,545,454 common shares (which included 1,536,363 common shares and common warrants to purchase up to 1,636,363 common shares issued pursuant to the underwriters’ partial exercise of their option to purchase additional common shares and common warrants), at a combined public offering price of $1.65 per share and accompanying common warrant, and (ii) a concurrent registered direct offering, pursuant to the expanded hepatitis B partnership with Brii Bio, of 1,818,182 common shares and accompanying common warrants to purchase 1,818,182 common shares, at a combined purchase price of $1.65 per share and accompanying common warrant. The accompanying common warrants issued and sold in each of the underwritten public offering and concurrent registered direct offering have an initial exercise price of $1.65 per share, which, pursuant to certain anti-dilution provisions of the warrants, has been reduced to $0.6749 per share, as of September 30, 2023, and expire five years from the date of issuance. The aggregate gross proceeds from the underwritten public offering, including aggregate gross proceeds from the underwriters’ exercise of their option to purchase additional securities, were $20,500. The aggregate gross proceeds from the concurrent registered direct offering were $3,000. As of November 13, 2023, the current exercise price of the warrants is $0.6057 per share.

 

 

K2 HealthVentures LLC Long Term Debt

 

On May 22, 2020, the Company, along with its subsidiary VBI Cda, (collectively, the “Borrowers”) entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.

 

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

 

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

 

On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.

 

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

 

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

 

The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.

 

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

 

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

 

The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at September 30, 2023, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4.00%. The interest rate as of September 30, 2023 was 12.50%. The Company is required to pay only interest until September 14, 2026. The effective interest rate on the loan of $50,000, excluding the Original Final Payment and Second Amendment Final Payment, is 16.03%.

 

The secured term loan maturity date is September 14, 2026, until which we are required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, includes both financial and non-financial covenants, including quarterly minimum Net Revenue targets. We were not in compliance with the minimum Net Revenue covenant for the measurement period ended September 30, 2023, and did not qualify for an exception for this covenant, which constitutes an Event of Default. In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, we began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into the Extension Agreement, pursuant to which the due date for us to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023. On November 13, 2023, the Borrowers entered into the Forbearance Agreement with the Lenders, pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ rights with respect to the Specified Default, from November 13, 2023, through and including November 28, 2023, subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. The Forbearance Period will immediately terminate if an Event of Default other than the Specified Default, occurs, including any Event of Default caused by a breach of the terms of the Forbearance Agreement. There is no assurance that we will be able to meet the conditions set forth in the Forbearance Agreement, which will result in a termination of the Forbearance Period. In addition, the Forbearance Agreement is not a waiver by K2HV of our obligation to meet the covenants pursuant to the Loan Agreement. Accordingly, K2HV may declare an Event of Default after the end of the Forbearance Period, and there is no assurance that we will be able to enter into another forbearance agreement for any additional periods. Upon occurrence and during the continuance of an Event of Default, K2HV is entitled to declare all obligations under the Loan Agreement immediately due and payable and to stop advancing money or extending credit under the Loan Agreement, and the applicable rate of interest, described above, will be increased by 5.00% per annum.

 

The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.

 

On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement (the “Supply Agreement”), dated July 5, 2023 by and between the Company and Brii Bio, and the Letter Agreement (the “Letter Agreement”), dated July 5, 2023, by and among the Company, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.

 

 

CEPI Partnership

 

On March 9, 2021, we and CEPI announced the CEPI Funding Agreement, to develop eVLP vaccine candidates against SARS-COV-2 variants, including the Beta variant, also known as the B.1.351 variant and as 501Y.V2, first identified in South Africa. CEPI agreed to provide up to $33,018 to support the advancement of VBI-2905, a monovalent eVLP candidate expressing the pre-fusion form of the spike protein from the Beta variant strain, through Phase I clinical development. On December 6, 2022, we and CEPI entered into the CEPI Amendment to expand the scope of the CEPI Funding Agreement. The CEPI Amendment, among others, (i) expands the definition of “Project Vaccine” to include additional multivalent vaccine constructs within the VBI-2900 program, (ii) removes certain pricing restrictions previously allocated to high-income countries in the CEPI Funding Agreement, (iii) updates the proposed volume commitment percentage contributions by us to CEPI for a Project Vaccine, and (iv) adds certain commercial benefits and related adjustments for CEPI following the pandemic period, including royalties paid to CEPI, in the event that CEPI provides funding for Phase III clinical studies of the Project Vaccine. Since inception of the CEPI Funding Agreement we received $19,327, of which there is a balance remaining of $3,925 in other current liabilities on the consolidated balance sheet.

 

Plan of Operations and Future Funding Requirements

 

The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2022 contains an explanatory paragraph regarding our ability to continue as a going concern. VBI has incurred significant net losses and negative operating cash flows since inception and expects to continue incurring losses and negative cash flows from operations as we carry out our planned clinical, regulatory, R&D, commercial, and manufacturing activities with respect to the advancement of our 3-antigen HBV vaccine and pipeline candidates. As of September 30, 2023, VBI had an accumulated deficit of $582,432 and stockholders’ equity of $19,886.

 

Our ability to maintain our status as an operating company and to realize our investment in our IPR&D assets is dependent upon obtaining adequate cash to finance our clinical development, manufacturing, our commercialization activities, our administrative overhead and our research and development activities. We expect that we will need to secure additional financing to finance our business plans, which may be a combination of proceeds from the issuance of equity securities, the issuance of additional debt, government or non-government grants or subsidies, and revenues from potential business development transactions, if any. There is no assurance we will manage to obtain these sources of financing. If we are unable to obtain additional financing, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The accompanying financial statements have been prepared assuming that we will continue as a going concern; however, the above conditions raise substantial doubt about our ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty. Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of our products, to bring about their successful commercial release, to generate revenue, and, ultimately, to attain profitable operations, or, alternatively, to advance our products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

 

We will require additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and, subject to such approvals, commercially launch and sell our products, and will need to secure additional financing in the future to support our operations and to realize our investment in our IPR&D assets. We base this belief on assumptions that are subject to change, and we may be required to use our available cash and cash equivalent resources sooner than we currently expect. Our actual future capital requirements will depend on many factors, including the progress and results of our ongoing clinical trials, the duration and cost of discovery and preclinical development, laboratory testing and clinical trials for our pipeline candidates, the timing and outcome of regulatory review of our products, product sales, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the number and development requirements of other pipeline candidates that we pursue, and the costs of commercialization activities, including product marketing, sales, and distribution.

 

 

We expect to finance our future cash needs through public or private equity offerings, debt financings, government grants or non-government funding, or business development transactions. Pursuant to the Contribution Agreement, we will receive up to CAD $55,976 as a government grant to support the development of the Company’s coronavirus vaccine program, though Phase II clinical studies, and pursuant to the CEPI Funding Agreement, as amended by the CEPI Amendment, we will receive up to $33,018 in funding to support the development of the Company’s coronavirus vaccine program. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are favorable. Additional equity, debt, government grants or non-government funding, or business development transactions may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our R&D programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain pipeline candidates that we might otherwise seek to develop or commercialize independently.

 

Pursuant to the underwriting agreement, dated July 5, 2023, the Company agreed not to issue any common shares or common share equivalents or to file any other registration statement with the SEC (in each case, subject to certain exceptions) until after the 60th day following the date of the underwriting agreement, without the prior written consent of Raymond James & Associates, Inc. In addition, the common warrants sold in July 2023 in the underwritten public offering and the registered direct offering contain a full ratchet anti-dilution price protection to be triggered upon issuance of equity or equity-linked securities at an effective common share purchase price of less than the exercise price in effect. Such obligations may make any additional financing difficult to obtain or unavailable to the Company.

 

To the extent we raise additional capital by issuing equity securities or obtaining borrowings convertible into equity, ownership dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders. The incurrence of indebtedness or debt financing would result in increased fixed obligations and could also result in covenants that would restrict our operations. Our ability to obtain additional capital may depend on prevailing economic conditions and financial, business, and other factors beyond our control. The COVID-19 endemic, its ongoing effects, the continuing war between Russia and Ukraine and between Israel and Hamas, and inflation, among others, have caused an unstable economic environment globally. Disruptions in the global financial markets may adversely impact the availability and cost of credit, as well as our ability to raise money in the capital markets. Current economic conditions have been, and continue to be, volatile. Continued instability in these market conditions may limit our ability to access the capital necessary to fund and grow our business.

 

The Company’s long-term success and ability to continue as a going concern are dependent upon obtaining sufficient capital to fund the research and development of its pipeline candidates, to bring about their successful commercial release, to generate revenue and, ultimately, to attain profitable operations or, alternatively, to advance its products and technology to such a point that they would be attractive candidates for acquisition by others in the industry.

 

To date, the Company has been able to obtain financing as and when it was needed; however, there is no assurance that financing will be available in the future, or if it is, that it will be available at acceptable terms.

 

As of September 30, 2023, we have no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

 

Nasdaq Minimum Bid Price Requirement

 

On November 1, 2023, we received a letter from the Listing Qualifications Department of the Nasdaq indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, 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 letter also indicated that we will be provided with the Compliance Period, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

 

 

In order to regain compliance with Nasdaq’s minimum bid price requirement, our common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. We have not regained compliance as of the date of this Form 10-Q, and if we fail to regain compliance during the Compliance Period or any subsequent grace period granted by Nasdaq, our common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in our common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.

 

Known Trends, Events, and Uncertainties

 

As with other companies that are in the process of developing and commercializing novel pharmaceutical and biologic products, we will need to successfully manage normal business and scientific risks. Research and development of new technologies is, by its nature, unpredictable. We cannot assure you that our technology will be adopted, that we will ever earn revenues sufficient to support our operations, or that we will ever be profitable. In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the declaration of a public health emergency associated with COVID-19 subsequently expired on May 11, 2023. COVID-19 is expected to remain a serious endemic threat for an indefinite future period and has adversely affected and may continue to adversely affect our operations and global economy. In addition, the consequences of the ongoing war between Russia and Ukraine and between Israel and Hamas, including related sanctions and countermeasures, are difficult to predict, and could adversely impact geopolitical and macroeconomic conditions, the global economy, and contribute to increased market volatility, which may in turn adversely affect our business and operations. Furthermore, other than as discussed in this report, we have no committed source of financing and may not be able to raise money as and when we need it to continue our operations. If we cannot raise funds as and when we need them, we may be required to severely curtail, or even to cease, our operations.

 

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

 

Other than as discussed above and elsewhere in this report, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition.

 

Critical Accounting Policies and Estimates

 

There have been no changes to our critical accounting policies during the nine months ended September 30, 2023. Critical accounting policies and the significant accounting estimates made in accordance with such policies are regularly discussed with the Audit Committee of the Company’s board of directors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), as well as in our consolidated financial statements and the footnotes thereto, included in the 2022 Form 10-K.

 

Recent Accounting Pronouncements

 

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

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer and Head of Corporate Development (our principal financial and accounting officer), the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer and Head of Corporate Development have concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and procedures are effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer and Head of Corporate Development, as appropriate, to allow timely decisions regarding required disclosure.

 

 

Changes in Internal Control Over Financial Reporting

 

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended September 30, 2023, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.

 

On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($491,501). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.

 

The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023 and July 13, 2023. The next preliminary hearing is scheduled to be held on November 16, 2023.

 

On December 5, 2022, another tort 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. 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). Preliminary hearings have been postponed and a new date has not yet been scheduled.

 

SciVac intends to defend these claims vigorously.

 

 

Item 1A. Risk Factors

 

The following description of risk factors includes any material changes to risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of the 2022 10-K. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results, and stock price.

 

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

 

Risks Related to Our Indebtedness

 

Our credit facility contains certain customary covenants as well as financial and non-financial covenants, including minimum net revenue covenants, and instances of non-compliance may lead to the declaration of an event of default, which could accelerate our repayment obligations, increase the interest rate under the credit facility, and lead to the foreclosure on substantially all of our assets, among others.

 

The Loan Agreement, as amended by the First Amendment, the Second Amendment, and the Third Amendment contains customary covenants as well as financial and non-financial covenants, including minimum net revenue covenants and delivery of certain compliance certificates as related to our net revenue. For the measurement period ended September 30, 2023, we were not in compliance with the minimum Net Revenue covenant, and did not qualify for an exception from this covenant, since as of September 30, 2023, we had not maintained a market capitalization of least $500,000 throughout such fiscal quarter, or maintained throughout such fiscal quarter unrestricted cash and cash equivalents equal to or in excess of 150% of the obligations under the Loan Agreement outstanding as of such date.

 

Pursuant to the Forbearance Agreement, the Forbearance Period shall immediately terminate if an Event of Default other than the Specified Default occurs, including any Event of Default caused by a breach of the terms of the Forbearance Agreement. There is no assurance that we will be able to meet the conditions set forth in the Forbearance Agreement. In addition, the Forbearance Agreement is not a waiver by K2HV of the Company’s obligation to meet the covenants pursuant to the Loan Agreement. Accordingly, K2HV may declare an Event of Default after the end of the Forbearance Period, and there is no assurance that the Company would be able to enter into another forbearance agreement for any additional periods

 

In addition, we may not be able to comply with covenants in the Loan Agreement in the future, or obtain from K2HV any extensions or waivers of instances of non-compliance or forbearance on our repayment obligations. Failure to comply with such covenants, or to obtain extensions, waivers, or forbearance for any instances of non-compliance or ability to make repayments, may constitute event of defaults under the Loan Agreement. Upon the occurrence and during the continuance of an event of default, K2HV is entitled to declare all obligations under the Loan Agreement immediately due and payable and to stop advancing money or extending credit to us under the Loan Agreement. Additionally, upon the occurrence and during the continuance of an event of default, the applicable interest rate under the Loan Agreement will be increased by 5.00% per annum. The principal amount of the term loan as of September 30, 2023, was $50 million ($55.7 million including the exit fees). As of September 30, 2023, we were required under applicable accounting rules to reclassify the outstanding principal amount of the Loan Agreement, as amended, as a current liability rather than a long-term liability due to the Specified Default. The reclassification of the indebtedness as a current liability has resulted in negative net working capital as of September 30, 2023. 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 may result in K2HV foreclosing on all or a portion of our assets and force us to curtail or cease our operations.

 

 

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 such 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, the Second Amendment and the Third 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. As of September 30, 2023, we are required under applicable accounting rules to reclassify the outstanding principal of the Loan Agreement, as amended, as a current rather than long-term liability due to our inability to meet the minimum net revenue covenant as of the measurement period ending September 30, 2023. This could allow K2HV to accelerate our indebtedness and foreclose their liens, which in turn could adversely affect our business, financial condition and results of operations. The reclassification of the indebtedness as a current liability has also resulted in negative net working capital as of September 30, 2023.

 

Additionally, 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. Pursuant to the Third Amendment, K2HV also has a security interest in all of our respective right, title and interest in substantially all of our intellectual property. As a result, if we default under our obligations, K2HV 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 pledge of these assets and intellectual property and other restrictions may limit our flexibility in raising capital for other purposes. Because substantially all of our assets are pledged under the credit facility, 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.

 

Risks Related to Our Business and Our Common Shares

 

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, war, 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.

 

 

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organization commenced in parallel to their continued rocket and terror attacks. Moreover, the clash between Israel and Hezbollah in Lebanon, may escalate in the future into a greater regional conflict. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Any armed conflicts, war, 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.

 

It is currently not possible to predict the duration or severity of the ongoing war or its effects on our business, operations and financial conditions. The ongoing war is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources and availability of supply and hamper our ability to raise additional funds or sell our securities, among others. As a result of reduced transport in and out of Israel due to the ongoing war, we have experienced delays in shipping supplies and materials in and out of Israel, and while there have been temporary delays to date, there may be additional disruption in transport in the future. We currently do not have any active study sites in Israel. The ongoing war has not, however, materially affected our customers, manufacturing, research and development, supply chain, and manufacturing commercialization activities. However, there can be no assurances that further unforeseen events will not have a material adverse effect on us or our operations in the future.

 

We currently have about 93 employees who are located in and/or reside in Israel, including one member of our senior management. Shelter-in-place and work-from-home measures, government-imposed restrictions on movement and travel and other precautions taken to address the ongoing war have and may again temporarily disrupt our management and employees’ ability to effectively perform their daily tasks. Additionally, three employees located in Israel are responsible for global operations, including manufacturing, regulatory, and quality control, one of whom has been called to serve. As many Israeli citizens are subject to military service should the Israel Defense Force deem it necessary, it is possible there will be further military reserve duty call-ups in the future, which may cause disruptions and delays in our operations.

 

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.

 

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 September 30, 2023, we had $35.5 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.  If we are unable to obtain additional financing, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws.  Holders of our common shares will likely not receive any value or payments in a restructuring or similar scenario. In the event we pursue Bankruptcy Protection, we will be subject to the risks and uncertainties associated with such proceedings. There can be no guarantees that if we seek Bankruptcy Protection, we will emerge from Bankruptcy Protection as a going concern or that holders of our common shares will receive any recovery from any bankruptcy proceedings.

 

Certain of our warrants contain “full ratchet” anti-dilution provisions, which may dilute the interests of our shareholders, depress the price of our common shares, and make it difficult for us to raise additional capital.

 

Certain of our warrants (the “July 2023 warrants”) issued in the underwritten public offering and concurrent registered direct offering consummated in July 2023 contain “full ratchet” anti-dilution provisions applicable to the exercise price. Pursuant to such “full-ratchet” anti-dilution provisions of the July 2023 warrants, as the consideration paid per common share under the ATM Program was less than the exercise price of the July 2023 warrants in effect immediately prior to such issuance, the exercise price of the July 2023 warrants was reduced, and the current exercise price in effect is $0.6057 per share. If in the future, while any of the July 2023 warrants are outstanding, we issue securities at an effective purchase price per common share that is less than the applicable exercise price of the July 2023 warrants as then in effect, we will be required, subject to certain limitations and adjustments as provided in the July 2023 warrants, to further reduce the relevant exercise price of the July 2023 warrants. Such adjustments can dilute the book value per common share and reduce any proceeds we may receive from the exercise of the July 2023 warrants. In addition, the perceived risk of dilution may cause our shareholders to be more inclined to sell their common shares, which may in turn depress the price of common shares regardless of our business performance. We may also find it more difficult to raise additional equity capital while any of the July 2023 warrants are outstanding.

 

 

The April 2023 Reverse Stock Split may decrease the liquidity of our common shares.

 

The liquidity of our common shares may be affected adversely by the 1-for-30 reverse stock split (the “Reverse Stock Split”) effectuated on April 12, 2023, given the reduced number of shares that are outstanding following the Reverse Stock Split. In addition, the Reverse Stock Split would have increased the number of shareholders who own odd lots (less than 100 shares) of our common shares, creating the potential for such shareholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.

 

The reduction in our internal workforce and other cost reductions we are undertaking to reduce our operating expenses could disrupt our business.

 

On April 4, 2023, we announced organizational changes including our intention to reduce our internal workforce and other expenses by 30-35%, activity which began in April 2023 and was completed by the end of September 2023. The headcount reduction and other actions we are undertaking to reduce our operating costs may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees seeking alternative employment, decreased morale among our remaining employees, and the risk that we may not achieve the anticipated benefits of the reduction in force. Our workforce reductions could also harm our ability to attract and retain qualified management and personnel who are critical to our business. In addition, our former employees may initiate lawsuits related to their termination. The reduction in internal workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives. Any of the foregoing may be disruptive to our operations. If we are unable to realize the anticipated benefits from the reduction in internal workforce, or if we experience significant unintended adverse consequences from the reduction in internal workforce, our business, financial condition, and results of operations may be materially adversely affected.

 

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common shares.

 

As previously reported, on November 1, 2023, we received a letter from Nasdaq indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, 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). In order to regain compliance with Nasdaq’s 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 Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the minimum bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, including by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common shares will be subject to delisting.

 

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 SEC. It is not uncommon for the market price of a company’s shares to decline in the period following a reverse share split. For example, we did not meet the minimum bid price for the period between May 18, 2022 to June 30, 2022, and we effected the Reverse Stock Split in April 2023 with the primary intent of increasing the price of our common shares immediately following the Reverse Stock Split to regain compliance with the minimum bid price requirement, and regained compliance in April 2023. It cannot be assured that any future reverse stock split will result in any sustained proportionate increase in the market price of our common shares, which is dependent upon many factors, including the business and financial performance of the company, general market conditions, and prospects for future success, which are unrelated to the number of shares of our common shares outstanding. It is not uncommon for the market price of a company’s common shares to decline in the period following a reverse stock 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.

 

 

Impairment in the value of IPR&D has, and any impairment of goodwill, other intangible assets, and long-lived assets in the future could, negatively impact our results of operations.

 

Under generally accepted accounting principles, we review our intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered when determining if the carrying value of our goodwill, other intangible assets and long-lived assets may not be recoverable include a sustained, significant decline in our stock price and market capitalization or a significant decline in our expected future cash flows. If our stock price decreases to the point where the fair value of our assets (as partially indicated by our market capitalization) is less than our book value, this could indicate a potential impairment and we may be required to record an impairment charge. Our valuation methodology for assessing impairment requires management to make judgments and assumptions based on projections of future operating performance. We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results. As a result, we may incur substantial impairment charges to earnings in our financial statements should an impairment of our goodwill, other intangible assets and long-lived assets be determined resulting in an adverse impact on our results of operations.

 

The drop in market conditions experienced in April 2023 was considered a triggering event for an interim impairment test for property and equipment, IPR&D, and goodwill. As a result of our evaluation, we recognized a non-cash, pre-tax impairment charge of $23,600 during the nine months ended September 30, 2023, which consists of non-cash impairment charge of $22,600 related to the IPR&D intangible asset, specifically attributable to the congenital CMV asset, and $1,000 related to the property and equipment assets. These charges in the nine months ended September 30, 2023, and any future charges related to intangible assets have, and may in the future have, a material adverse effect on our results of operations or financial condition. A significant impairment charge could have a material negative impact on our financial condition and results of operations. We will continue to evaluate our intangible assets for potential impairment in accordance with our accounting policies.

 

Events giving rise to impairment are difficult to predict and are an inherent risk in the pharmaceutical industry. Some of the potential risks that could result in impairment of our IPR&D include negative clinical trial results, adverse regulatory developments, delay or failure to obtain regulatory approval, additional development costs, changes in the manner of our use or development of our product candidate, competition, earlier than expected loss of exclusivity, pricing pressures, higher operating costs, changes in tax laws, prices that third parties are willing to pay for our IPR&D or similar assets in an arm’s-length transaction being less than the carrying value of our IPR&D, and other market and economic environment changes or trends, such as the continuing impacts of the COVID-19 endemic. We operate in highly competitive environments and projections of future operating results and cash flows may vary significantly from actual results. Events or changes in circumstances may lead to significant impairment charges on our IPR&D in the future. As a result, we may incur substantial impairment charges to earnings in our financial statements should an impairment of our goodwill, other intangible assets and long-lived assets be determined resulting in an adverse impact on our results of operations.

 

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

 

a) Sales of Unregistered Securities

 

There have been no unregistered sales of securities during the period covered by this Form 10-Q that have not been previously reported in a Current Report on Form 8-K. We have not made any purchases of our own securities during the time period covered by this Form 10-Q.

 

c) Issuer Purchases of Equity Securities

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

On November 13, 2023, the Borrowers and the Lenders entered into the Forbearance Agreement. See “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations – Recent Developments – K2HV Extension Agreements and Forbearance Agreement” and “Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations – Sources of Liquidity – K2 HealthVentures LLC Long Term Debt”. The description of the Forbearance Agreement contained herein is not complete and is qualified in its entirety by reference to the full text of the Forbearance Agreement, which is attached to this Quarterly Report on Form 10-Q as Exhibit 10.9 and incorporated by reference herein.

 

 

Item 6. Exhibits

 

See the Exhibit Index following the signature page to this Form 10-Q for a list of exhibits filed or furnished with this Form 10-Q, which Exhibit Index is incorporated herein by reference.

 

EXHIBIT INDEX

 

Exhibit No.		Description
1.1		Underwriting Agreement dated July 6, 2023 between the Company and Raymond James & Associates, Inc. as Representative of the Several Underwriters (incorporated by reference the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on July 6, 2023).
4.1		Form of Underwritten/Registered Direct Warrant (incorporated by reference to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on July 6, 2023)
10.1		Stock Purchase Agreement, dated July 5, 2023, by and between the Company and Brii Biosciences Limited (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No. 001-37769), filed with the SEC on July 5, 2023).
10.2		Third Amendment to Loan and Guaranty Agreement, dated July 5, 2023, by and among VBI Vaccines Inc., as borrower, Variation Biotechnologies Inc., as borrower representative, each of the guarantors signatory thereto, and K2 HealthVentures LLC, as lender and as administrative agent (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (SEC File No. 001-37769), filed with the SEC on August 14, 2023).
10.3*(1)(2)		Collaboration and License Agreement, dated July 5, 2023, by and between VBI Vaccines Inc. and Brii Biosciences.
10.4*(1)(2)		Amended and Restated Collaboration and License Agreement, dated July 5, 2023, by and between VBI Vaccines Inc. and Brii Biosciences.
10.5*(1)(2)		Supply Agreement, dated July 5, 2023, by and between VBI Vaccines Inc. and Brii Biosciences.
10.6*(2)		Letter Agreement, dated July 5, 2023, by and between VBI Vaccines Inc. and Brii Biosciences.
10.7*		Extension Agreement, dated October 27, 2023, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC.
10.8*		Extension Agreement, dated November 3, 2023, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC.
10.9*		Forbearance Agreement, dated November 13, 2023, by and among VBI Vaccines Inc., Variation Biotechnologies Inc. and K2 HealthVentures LLC.
31.1*		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2*		Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934.
32.1**		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2**		Certification of Principal Financial and Accounting Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101.INS*		Inline XBRL Instance Document.
101.SCH*		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

* Filed herewith.

 

** Furnished herewith.

 

+ Indicates a management contract or compensatory plan.

 

(1) Certain of the schedules (and similar attachments) to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K under the Securities Act because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the Exhibit or the disclosure document. The registrant hereby agrees to furnish a copy of all omitted schedules (or similar attachments) to the SEC upon its request.

 

(2) Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K under the Securities Act, because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the SEC upon its request.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: November 14, 2023	VBI VACCINES INC.
	By:	/s/ Jeffrey Baxter
		Jeffrey Baxter
		President and Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ Nell Beattie
		Nell Beattie
		Chief Financial Officer and Head of Corporate Development
		(Principal Financial and Accounting Officer)

 

 

 

Exhibit 10.3

 

[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.

 

COLLABORATION AND LICENSE AGREEMENT

 

This COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is entered into as of July 5, 2023 (the “Effective Date”) between VBI VACCINES INC., a company organized under the laws of the Province of British Columbia, Canada (“VBI”), and having a principal place of business at 310 Hunt Club Road, Suite 201, Ottawa ON K1V 1C1, and BRII BIOSCIENCES LIMITED, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”), having its registered office at Vistra (Cayman) Limited, PO Box 3119, Grand Pavilion Hibiscus Way, 802 West Bay Road Grand Cayman KYI-1205.

 

WHEREAS

 

A. VBI has developed PreHevbri (defined below), a three (3) antigen vaccine for use in the prevention of Hepatitis B;

 

B. Brii Bio and VBI wish to collaborate on further development of PreHevbri; and

 

C. Brii Bio desires to obtain from VBI certain exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri in the Field, and VBI is willing to grant to Brii Bio such rights and licenses on the terms and conditions that are set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, VBI and Brii Bio hereby agree as follows:

 

Article 1
DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings set out in this Article 1 unless the context clearly and unambiguously dictates otherwise.

 

1.1 “Affiliate” of a Party shall mean any company, partnership, or other entity that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but for only so long as such control exists. For the purposes of this definition, “control” shall mean: (a) direct or indirect beneficial ownership of at least fifty percent (50%) of the voting share capital or other equity interest in such Person; or (b) the power to direct the management of such Person by contract or otherwise.

 

1.2 “Agreement” shall have the meaning set forth in the Preamble.

 

1.3 “Alliance Manager” shall have the meaning set forth in Section 4.2.

 

1.4 “Applicable Laws” shall mean the applicable provisions of any and all national, state, and local laws, statutes, rules, regulations, administrative codes, ordinances, judgments, decrees, directives, injunctions, orders, permits (including Marketing Approvals) of or from any court, Regulatory Authority or Governmental Authority having jurisdiction over or related to the subject matter.

 

 

1.5 “Anti-Corruption Laws” shall mean (a) the U.S. Foreign Corrupt Practices Act of 1977, (b) the U.K. Bribery Act 2010, (c) the Peoples Republic of China (PRC) Anti-Unfair Competition Law, and (d) the criminal code of each Region in the Licensed Territory.

 

1.6 “BLA” shall mean a Biologics License Application filed pursuant to the requirements of the FDA under Section 351(k) of the Public Health Services Act (Title 42, U.S.C., Chapter 6A) and 12 C.F.R., Section 601.2, to obtain Marketing Approval for a biological product in the United States, or the equivalent application or filing in another country (as applicable).

 

1.7 “Brii Bio” shall have the meaning set forth in the Preamble.

 

1.8 “Brii Bio Know-How” shall mean Know-How owned or Controlled by Brii Bio as of the Effective Date or developed during the Term independent of activities under this Agreement, excluding any Joint Know-How.

 

1.9 “Brii Bio Patents” shall mean Patents owned or Controlled by Brii Bio as of the Effective Date or during the Term that cover or claim the Brii Bio Know-How.

 

1.10 “Brii Bio Technology” shall mean the Brii Bio Know-How and the Brii Bio Patents.

 

1.11 “Business Day” shall mean a day other than a Saturday or Sunday or any public holiday in the United States or China. For the avoidance of doubt, references in this Agreement to “days” shall mean calendar days.

 

1.12 “Chairperson” shall mean the chairperson of the Joint Steering Committee.

 

1.13 “Clinical Trial” shall mean a study in which human subjects or patients are dosed with a drug, whether approved or investigational, including any Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, or any study required to be conducted following Marketing Approval as a condition to maintaining such approval.

 

1.14 “Commercially Reasonable Efforts” shall mean, with respect to a Party and an obligation to conduct a particular activity pertaining to the research, development, manufacturing or commercialization obligations hereunder, that level of efforts and resources reasonably required to carry out such obligation consistent with the efforts commonly used by such Party with respect to a biopharmaceutical product which is of similar market potential and at a similar stage in its development or product life, and all other Relevant Factors. Notwithstanding the foregoing, to the extent that the performance of a Party’s obligations hereunder is impaired by the other Party’s failure to perform its obligations hereunder, the determination of whether such first Party has used Commercially Reasonable Efforts in performing a given obligation will be determined in the context of such other Party’s failure. The Parties understand that the level of effort may change over time, reflecting changes in the status of a Licensed Product. Furthermore, Commercially Reasonable Efforts will not mean that a Party commits that it will actually accomplish an applicable task, or that it will devote thereto efforts or resources beyond those that a prudent commercial enterprise would devote, even though remaining motivated to do so as described above.

 

 

1.15 “Competing Product” shall mean any [**], [**], or [**] for the prevention of Hepatitis B or any other indication for which PreHevbri has obtained Marketing Approval.

 

1.16 “Confidential Information” shall have the meaning set forth in Section 11.1.

 

1.17 “Confidentiality Agreement” shall mean that certain letter agreement dated July 9, 2018 between VBI and Brii Bio.

 

1.18 “Control” or “Controlled” shall mean, with respect to any Know-How, Patent or other intellectual property right, the legal authority or right (whether by ownership, license or otherwise but without taking into account any rights granted by one Party to the other Party under the terms of this Agreement) of a Party or its Affiliates to grant access, a license or a sublicense of or under such Know-How, Patent or other intellectual property rights to another Party hereto, or to otherwise disclose proprietary or trade secret information to such other Party, without breaching the terms of any agreement with a Third Party, or misappropriating the proprietary or trade secret information of a Third Party, in each case in existence as of the time such Party or its Affiliates would first be required hereunder to grant the other Party such access, license or sublicense.

 

1.19 “Disclosing Party” shall have the meaning set forth in Section 11.1.

 

1.20 “Distributor” shall mean a Third Party to whom Brii Bio has granted the right to market, detail, promote, advertise, sell, and/or distribute Licensed Product in the Licensed Territory.

 

1.21 “Dollar” or “$” shall mean the legal tender of the United States.

 

1.22 “Effective Date” shall have the meaning set forth in the Preamble hereto.

 

1.23 “FDA” shall mean the United States Food and Drug Administration or its successor.

 

1.24 “Ferring” shall have the meaning set forth in Section 1.25.

 

1.25 “Ferring License” shall mean that certain License Agreement that was made as of September 1, 2021, by and among Ferring International Center S.A. (“Ferring”), SciVac Ltd, and VBI, as amended or restated.

 

1.26 “Field” shall mean the prevention of Hepatitis B.

 

1.27 “First Commercial Sale” shall mean with respect to a Licensed Product in any Region in the Licensed Territory, the first sale for monetary value for use or consumption of such Licensed Product in such Region after Marketing Approval for such Licensed Product has been obtained in such Region.

 

1.28 “Force Majeure Event” shall have the meaning set forth in Section 17.1.

 

1.29 “GAAP” shall mean generally accepted accounting principles in the United States, or internationally, as appropriate, consistently applied and shall mean the international financial reporting standards (“IFRS”) at such time and location as IFRS becomes the generally accepted accounting standard and Applicable Laws require that a Party use IFRS.

 

 

1.30 “Global Clinical Trial” shall mean a Clinical Trial conducted by VBI or Brii Bio in the Licensed Territory and the VBI Territory in accordance with the Global Development Plan with the intent of generating data to support an application for Marketing Approval in each of the Licensed Territory and the VBI Territory.

 

1.31 “Global Development Plan” shall mean, for the Licensed Product, the plan setting forth: (a) the global development activities for Licensed Product, including the proposed pre- clinical studies, Clinical Trials, regulatory plans; (b) the timelines for such activities; (c) an outline of the key elements involved in obtaining Marketing Approval of such Licensed Product; and (d) the allocation of responsibilities between the Parties of the development activities set forth under such Global Development Plan, as the same may be amended from time-to-time in accordance with Section 4.1.

 

1.32 “Good Manufacturing Practices” or “GMP” shall mean the then-current good manufacturing practices required by the FDA, as set forth in the United States Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder, for the manufacture and testing of pharmaceutical materials, and comparable laws or regulations applicable to the manufacture and testing of pharmaceutical materials in jurisdictions outside the United States, as they may be updated from time to time. Good Manufacturing Practices shall include applicable quality guidelines promulgated under the ICH.

 

1.33 “Governmental Authority” shall mean any multinational, federal, national, state, provincial or local entity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative, or taxing authority or functions of any nature over any of the activities contemplated by this Agreement.

 

1.34 “Greater China Region” shall mean the following countries: mainland China, Hong Kong, Taiwan, and Macau.

 

1.35 “ICH” shall mean the International Conference on Harmonization (of Technical Requirements for Registration of Pharmaceuticals for Human Use).

 

1.36 “IFRS” shall have the meaning set forth in Section 1.29.

 

1.37 “IND” shall mean an Investigational New Drug Application (including any amendments thereto) filed with the FDA pursuant to 21 C.F.R. §312 before commencement of clinical trials of a pharmaceutical product, or any comparable filings with Regulatory Authorities in the Licensed Territory, including clinical trial applications.

 

1.38 “Inventions” shall mean any and all inventions, discoveries, improvements, processes, and techniques discovered, conceived, or first reduced to practice in the course of activities conducted under this Agreement by, or on behalf of a Party during the Term whether or not patentable or included in any claim of Patents and Patent applications, including all rights, title, and interest in and to the intellectual property rights therein.

 

 

1.39 “Joint Inventions” shall mean any and all Inventions that are jointly discovered, conceived, or first reduced to practice by the Parties (or their Affiliates) in the course of carrying out any activities conducted under this Agreement, whereby “jointly” means at least one co-inventor is obligated to assign rights to VBI and at least one co-inventor is obligated to assign rights to Brii Bio. For the avoidance of doubt, “Joint Inventions” shall exclude any Inventions to the extent such Inventions comprise improvements to the VBI Patents, VBI Know-How or the Brii Bio Technology.

 

1.40 “Joint Know-How” shall mean Know-How that is developed jointly by the Parties or by Third Parties acting on their behalf in the performance of any activities conducted under this Agreement and that is necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export and otherwise commercialize the Licensed Products.

 

1.41 “Joint Patents” shall mean all Patents claiming any Joint Inventions.

 

1.42 “Joint Technology” shall mean Joint Know-How and Joint Patents.

 

1.43 “Joint Steering Committee” or “JSC” shall have the meaning set forth in Section 4.1(a).

 

1.44 “Know-How” shall mean information including unpatented Inventions, methods, technologies, data, processes, procedures, techniques, designs, plans, research tools, use of cell lines, reagents, formulations, use of equipment, assay techniques, clinical test design, protocols, product life cycle management strategies and operating conditions except to the extent that such information is publicly available or is otherwise protect by Patent or trade secret law.

 

1.45 “Licensed Product” shall mean PreHevbri.

 

1.46 “Licensed Territory” shall mean, unless any of the following countries is embargoed or otherwise restricted by Applicable Law: Australia, Bangladesh, Bhutan, Brunei, Cambodia, Christmas Island, Cocos (Keeling) Islands, Cook Islands, Fiji, Heard Island & McDonald Island, Hong Kong, India, Indonesia, Kiribati, Lao People’s Democratic Republic, mainland China, Macau, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Myanmar, Nauru, Nepal, New Zealand, Niue, Norfolk Island, Palau, Papua New Guinea, Philippines, Pitcairn, Samoa, Singapore, Solomon Islands, South Korea Sri Lanka, Taiwan, Timor-Leste, Tokelau, Tonga, Tuvalu, Vanuatu, Thailand, and Vietnam (each country, a “Region”).

 

1.47 “Manufacturing Technology” shall mean any process, technology, information, data, material, or documentation that is necessary or useful in the manufacture, formulation, vialing or release of the Licensed Product, including any assays or testing required to comply with GMP including process validation, product identity assays, in-process- control assays and any relevant standard operating procedures, and any standards, samples, and working cell bank vials.

 

1.48 “Marketing Approval” shall mean, with respect to any particular country or Region, all approvals, licenses, registrations or authorizations of any Regulatory Authority necessary to commercially distribute, sell or market a Licensed Product in such country or Region, including, where applicable, (a) pricing or reimbursement approval in such country or Region, (b) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto), (c) labeling approval, and (d) technical, medical and scientific licenses.

 

 

1.49 “Net Sales” shall mean, with respect to a Licensed Product, the gross amount invoiced during the applicable period with respect to the sale or other disposition of such Licensed Product in the Licensed Territory by Brii Bio, its Affiliates, or any Sublicensee to a Third Party in a bona fide arm’s length transaction less the following deductions actually incurred, allowed, paid, accrued, or specifically allocated in its financial statements for:

 

(a) customary and reasonable trade, quantity, and cash discounts, wholesaler allowances and inventory management fees; and

 

(b) customary and reasonable credits, rebates, and chargebacks (including those to managed-care entities, purchasing entities and government agencies), and allowances or credits to customers on account of rejections or returns (including wholesaler and retailer returns) or on account of retroactive price reductions affecting such Licensed Product.

 

Net Sales and all such amounts described in (a) and (b) above shall be determined in accordance with the books and records of Brii Bio, its Affiliates, or Sublicensees (as applicable), and maintained in accordance with GAAP. At any point during the Term, if VBI includes additional deductions in the Net Sales calculation for purposes of royalty payments to [**] or [**], VBI shall notify Brii to implement changes to the above calculation of Net Sales as well. For the avoidance of doubt, transfers or sales of Licensed Products between or among Brii Bio and its Affiliates, Distributors, or Sublicensees will not be included for purposes of calculating Net Sales, unless such purchaser is an end user. Net Sales will not include any Licensed Product supplied for use in clinical trials, for research or for other non-commercial uses, or as part of a compassionate use program (or other program for providing Licensed Product before it has received Marketing Approval in a Region).

 

If Brii Bio, its Affiliate or any Sublicensee sells Licensed Product as part of a combination of products, not all of which if sold individually would be Licensed Products, then Net Sales with respect to such combination products shall be determined by [**] the total Net Sales of such combined product by the fraction [**], where [**] is the [**] of the Licensed Product that is included in such combination product in the same dosage amount or quantities in the applicable Region during the applicable quarter if sold separately, and [**] is the sum of the [**] of all other products with which such Licensed Product is combined in such combination product, in the same dosage amount or quantities in the applicable Region during the applicable quarter if sold separately. If [**] cannot be determined because values for such Licensed Product or such other products with which such Licensed Product is combined are not available separately in a particular Region, the Parties shall discuss and make good faith efforts to agree to the value for [**] based on an equitable method of determining the same that takes into account, in the Licensed Territory, variations in potency, the relative contribution of each therapeutically active ingredient, and relative value to the end user by all clinical measures of each therapeutically active ingredient. If the Parties cannot come to agreement, then, prior to any sale of a combination product including the Licensed Product, the values for [**] shall be determined in accordance with the dispute resolution process in Section 16.1 with final resolution by expert determination in accordance with Section 16.3.

 

1.50 “NMPA” shall mean the National Medical Products Administration of the People’s Republic of China (formerly the China Food and Drug Administration) and any successor agency(ies) or authority thereto having substantially the same function.

 

1.51 “Party” shall mean VBI or Brii Bio individually, and “Parties” shall mean VBI and Brii Bio collectively.

 

1.52 “Patent(s)” shall mean, with respect to any jurisdiction, (a) any and all issued patents and patent applications, including all provisional applications, continuations, continuations-in-part, divisions and renewals, and all patents granted thereon, (b) patents-of- addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including patent term adjustments, patent term extensions, supplementary protection certificates or the equivalent thereof, and (c) other forms of government-issued rights substantially similar to any of the foregoing.

 

1.53 “Person” shall mean any individual, corporation, partnership, limited liability company, trust, Governmental Authority, or other legal entity of any nature whatsoever.

 

1.54 “Phase I Clinical Trial” shall mean a clinical study of a Licensed Product in humans the purpose of which is preliminary determination of pharmacokinetics, safety, and tolerability of a dosing regime and for which there may or may not be primary endpoints (as understood by the applicable Regulatory Authorities) in the protocol relating to efficacy.

 

1.55 “Phase II Clinical Trial” shall mean a clinical study of a Licensed Product in humans to assess the safety, dose ranging and efficacy or therapeutic benefit of such Licensed Product.

 

1.56 “Phase III Clinical Trial” shall mean a controlled clinical study, or a portion of a controlled study, in humans of the efficacy and safety of a Licensed Product, which study (in its entirety or portion, as applicable), is prospectively designed to demonstrate statistically whether such Licensed Product is effective and safe for use in a particular indication in a manner sufficient to file an application for Marketing Approval.

 

1.57 “Pre-clinical Studies” shall mean studies of a Licensed Product in animals for the purpose of assessing preliminary efficacy, toxicity, pharmacokinetic and safety information.

 

1.58 “PreHevbri” shall mean: (a) the three (3) antigen hepatitis vaccine that is known as PreHevbri^® (UK/EU/EEA)/PreHevbrio^® (U.S./CAN)/Sci-B-Vac^® (Israel), or any other future branded names, and that expresses the Pre-S1, Pre-S2, and S antigens of Hepatitis B virus; and (b) any vaccine that is a back-up, follow-on, or improved version of the vaccine described in the foregoing subsection (a) which is for the prevention of Hepatitis B and is Controlled by VBI (or its Affiliates) either as of the Effective Date or during the Term.

 

 

1.59 “Receiving Party” shall have the meaning set forth in Section 11.1.

 

1.60 “Region” shall have the meaning set forth in Section 1.46.

 

1.61 “Regulatory Authority” shall mean any national, regional, state, or local regulatory agency, department, bureau, commission, council, or other Governmental Authority whose review and/or approval is necessary for the clinical research, development, manufacture, packaging, use, storage, import, export, distribution, promotion, marketing, offer for sale, selling, pricing or reimbursement (as applicable) of Licensed Products, including, for the avoidance of doubt, the NMPA and the FDA.

 

1.62 “Regulatory Documentation” shall mean, with respect to the Licensed Product: (a) all submissions to any Regulatory Authority, including INDs, BLAs, Drug Master Files, correspondence with regulatory agencies (registrations and licenses, regulatory drug lists, advertising and promotion documents), period safety update reports, adverse event files, complaint files and manufacturing records and, if applicable, any updates or supplements to any of the foregoing; (b) any minutes or contact logs with respect to any telephone conferences conducted with any Regulatory Authority relating to the subject matter described in clause (a) of this sentence; and (c) all data including the subject matter described in clause (a), with respect to the testing, development, manufacture, or approval of the Licensed Product.

 

1.63 “Relevant Factors” shall mean all relevant factors that may affect the development, Marketing Approval or commercialization of a Licensed Product, including (as applicable): actual and potential issues of safety, efficacy or stability; product profile (including product modality, category and mechanism of action); stage of development or life cycle status; actual and projected development, Marketing Approval, manufacturing, and commercialization costs; any issues regarding the ability to manufacture or have manufactured the Licensed Product; the likelihood of obtaining Marketing Approvals (including satisfactory price approvals); the timing of such approvals; the current guidance and requirements for Marketing Approval for a Licensed Product and similar products and the current and projected regulatory status; labeling or anticipated labeling; the then-current competitive environment and the likely competitive environment at the time of projected entry into the market; past performance of the Licensed Product or similar products; present and future market potential; existing or projected pricing, sales, reimbursement and profitability; pricing or reimbursement changes in relevant countries; proprietary position, strength and duration of Patent protection and anticipated exclusivity; internal priorities for the Licensed Products compared to other products of such Party (excluding scenarios where there is a termination of activities related to the Licensed Product); and other relevant scientific, technical, operational and commercial factors.

 

1.64 “Royalty Report” shall have the meaning set forth in Section 9.7.

 

1.65 “Royalty Term” shall have the meaning set forth in Section 9.4

 

1.66 “Scigen Agreement” shall mean that certain Assignment Agreement between FDS Pharma LLP and Scigen Ltd dated February 4, 2012.

 

1.67 “Senior Executives” shall have the meaning set for in Section 16.1.

 

 

1.68 “SEC” shall mean the US Securities Exchange Commission.

 

1.69 “Secondary Manufacturer” shall have the meaning set forth in Section 7.3.

 

1.70 “Sublicense Consideration” shall mean any [**], [**], [**] and [**] that are received by Brii Bio during the Term from a Third Party Sublicensee in each Region of the Licensed Territory in connection with the grant or exercise of a sublicense pursuant to Section 3.3 herein, under the VBI Technology, in such Regions of the Licensed Territory. Notwithstanding anything to the contrary, Sublicense Consideration excludes any: (a) royalties, or profit share, paid to Brii Bio that in each case are based on the sale of any Licensed Product or consideration paid to Brii Bio for its purchase of Licensed Product (e.g., transfer pricing); (b) sale of equity securities of Brii Bio to the applicable Sublicensee; (c) payments for an acquisition of Brii Bio by the Sublicensee; (d) payments made by such Sublicensee to reimburse Brii Bio for costs actually incurred in research, development, manufacturing or commercialization of any Licensed Product; (e) reimbursement of costs and expenses incurred in prosecution, maintenance and enforcement of VBI Technology; or (f) amounts received by Brii Bio from such Sublicensee in consideration for a license to intellectual property rights (including Patents or Know-How) that are not the VBI Technology.

 

1.71 “Sublicensee” shall mean a Third Party or an Affiliate of Brii Bio, to whom Brii Bio or an Affiliate of Brii Bio has granted a sublicense under the VBI Technology to, offer for sale and sell Licensed Product in the Field in any country in the Licensed Territory. For clarity, the term “Sublicensee” shall not include any wholesalers that are not granted any sublicense under the VBI Technology to offer for sale and sell Licensed Product in the Field in the Licensed Territory.

 

1.72 “Term” shall have the meaning set forth in Section 15.1.

 

1.73 “Third Party” shall mean any Person other than VBI, Brii Bio and their respective Affiliates.

 

1.74 “Third Party Claims” shall have the meaning set forth in Section 14.1.

 

1.75 “Third Party Royalties” shall mean royalties payable by VBI under the [**] and the [**].

 

1.76 “United States” or “U.S.” shall mean the United States of America, along with its territories and possessions.

 

1.77 “VBI” shall have the meaning set forth in the Preamble.

 

1.78 “VBI-2601 Agreement” shall mean the Amended and Restated Collaboration and License Agreement between VBI and Brii Bio entered into as of the Effective Date.

 

1.79 “VBI Know-How” shall mean all Know-How that is owned or Controlled by VBI (or its Affiliates) as of the Effective Date or during the Term and that is necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export and otherwise commercialize the Licensed Products. For the avoidance of doubt, the “VBI Know-How” shall not include Joint Know-How.

 

1.80 “VBI Patents” shall mean all Patents that are owned or Controlled by VBI (or its Affiliates) as of the Effective Date or during the Term and that: (a) claim the composition of, matter of, or the method of making or using Licensed Products, or (b) are otherwise necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the Licensed Products. For the avoidance of doubt, the “VBI Patents” shall not include Joint Patents. The VBI Patents existing as of the Effective Date are set forth on Schedule A hereto; provided that, any Patent not included on Schedule A that otherwise meets the definition of a VBI Patent shall still be considered a VBI Patent notwithstanding its omission from Schedule A.

 

1.81 “VBI Technology” shall mean all VBI Know-How, VBI Patents, and VBI’s interest in Joint Patents and Joint Inventions.

 

 

1.82 “VBI Territory” shall mean all countries outside of the Licensed Territory.

 

Article 2
DESCRIPTION OF THE COLLABORATION

 

2.1 VBI wishes to outlicense the development and commercialization of Licensed Product in the Licensed Territory to Brii Bio.

 

Article 3
GRANT OF LICENSES

 

3.1 VBI License to Brii Bio. Subject to the terms and conditions of this Agreement, VBI hereby grants to Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers in accordance with Section 3.3, under the VBI Technology, for Brii Bio, its Affiliates and Sublicensees to:

 

(a) carry out its obligations pursuant to the Global Development Plan (as applicable);

 

(b) perform, or have performed, studies (including Pre-Clinical Studies or Clinical Trials) and regulatory and other activities as may be required to obtain and maintain Marketing Approval of Licensed Product in the Licensed Territory; and

 

(c) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize Licensed Product in the Field in the Licensed Territory; provided, however, that Brii Bio shall not practice its right to make Licensed Product unless there is a breach by VBI of the Supply Agreement.

 

3.2 Brii Bio License to VBI. Subject to the terms and conditions of this Agreement, Brii Bio hereby grants to VBI an exclusive, royalty-free license, with the right to sublicense in accordance with Section 3.3, under: (a) the Brii Bio Technology, solely to the extent that such Brii Bio Technology covers or claims the Licensed Product, or the manufacture or use thereof, and (b) Brii Bio’s interest in the Joint Technology; in each case, (x) solely to perform, or have performed, activities pursuant to the Global Development Plan (as applicable) anywhere in the world for the purpose of the exploitation of Licensed Products in the Field in the Licensed Territory by Brii Bio; and (y) research, development, make, have made, distribute, use, sell, offer for sale, have sold, import, export, or otherwise commercialize Licensed Product in the Field in the VBI Territory, provided further that VBI’s right to manufacture, have manufactured, and export Licensed Product will not in any way be limited geographically may expressly occur within the Licensed Territory or the VBI Territory.

 

3.3 Sublicenses. Brii Bio shall have the right to sublicense any or all rights granted to it under Section 3.1 in any Region in the Licensed Territory to any of its Affiliates or Third Parties through multiple tiers. VBI shall have the right to sublicense any or all rights granted to it under Section 3.2 to any of its Affiliates or Third Parties.

 

3.4 Rights Reserved. Except for the rights and licenses expressly granted in this Agreement, VBI retains all rights under its intellectual property, including the VBI Technology, and Brii Bio retains all rights under its intellectual property.

 

 

3.5 Provisions for Insolvency.

 

(a) Section 365(n) of the Bankruptcy Code. The license granted pursuant to Section 3.1 is, for all purposes of Section 365(n) of Title 11 of the United States Code, as amended (“Bankruptcy Code”), a license of rights to “intellectual property” as defined in the Bankruptcy Code. The Parties agree that Brii Bio, as licensee of such licenses under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code with respect to such licenses. Without limiting the generality of the foregoing, VBI and Brii Bio intend and agree that any sale of VBI’s assets under Section 363 of the Bankruptcy Code shall be subject to Brii Bio’s rights under Section 365(n) of the Bankruptcy Code, that Brii Bio cannot be compelled to accept a money satisfaction of its interests in the intellectual property licensed pursuant to this Agreement, and that any such sale therefore may not be made to a purchaser “free and clear” of Brii Bio’s rights under this Agreement and Section 365(n) of the Bankruptcy Code without the express, contemporaneous consent of Brii Bio.

 

(b) Transfers and Non-Interference Rights Permitted under Section 365(n). Subject to Section 3.5(b)(iii), if a case under the Bankruptcy Code is commenced by or against VBI, this Agreement is rejected as provided in the Bankruptcy Code, and Brii Bio elects to retain its rights hereunder as provided in Section 365(n) of the Bankruptcy Code, VBI (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall:

 

(i) provide to Brii Bio all such intellectual property licensed hereunder (including all embodiments thereof) held by VBI and such successors and assigns, or otherwise available to them, upon the Brii Bio’s written request. Whenever VBI or any of its successors or assigns provides to Brii Bio any of the intellectual property licensed hereunder (or any embodiment thereof) pursuant to this Section 3.5, Brii Bio shall have the right to perform VBI’s obligations hereunder with respect to such intellectual property, but neither such provision nor such performance by Brii Bio shall release VBI from liability resulting from rejection of the license or the failure to perform such obligations; and

 

(ii) not interfere with Brii Bio’s rights under this Agreement, or any agreement supplemental hereto, to such intellectual property (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity to the extent provided in Section 365(n) of the Bankruptcy Code.

 

(iii) Notwithstanding anything to the contrary elsewhere in this Agreement, VBI’s obligations under Section 3.5(b)(i), 3.5(b)(ii), and 3.5(b)(iv) shall be limited as necessary to ensure compliance with VBI’s obligations under the Ferring License; provided, however that, within one (1) year of the Effective Date, VBI shall use Commercially Reasonable Efforts to obtain all applicable consents that are required under the Ferring License to permit the transfer to such Brii Bio under Section 3.5(b)(i) and (ii).

 

(iv) As used in Section 3.5(b)(i) and (ii), “embodiments” of intellectual property within the meaning of Section 365(n) include laboratory notebooks, cell lines, vectors, reagents, assays, product samples and inventory, research studies and data, Regulatory Documentation and Marketing Approvals.

 

(c) Cumulative Remedies. All rights, powers, and remedies of Brii Bio provided herein are in addition to and not in substitution for any and all other rights, powers, and remedies now or hereafter existing at law or in equity (including the Bankruptcy Code) if a case under the Bankruptcy Code commences with respect to VBI.

 

3.6 Transfer of Regulatory Documentation.

 

(a) As soon as practical after the Effective Date, VBI shall (at no additional cost to Brii Bio) commence disclosing and making available to Brii Bio the Regulatory Documentation for the Licensed Product and the relevant VBI Know-How and additional materials that are reasonably required and available in connection with Brii Bio’s development, and commercialization, of Licensed Products (the “Initial Transfer”). VBI shall complete such Initial Transfer no later than thirty (30) days after the Effective Date.

 

(b) Beginning on the first anniversary of the completion of the Initial Transfer, and on each anniversary thereafter during the Term, VBI shall: (i) at least on an annual basis, provide Brii Bio with a description of any new Regulatory Documentation and new VBI Know-How, including any significant manufacturing process changes, developed since the last such summary that is necessary or reasonably useful for Brii Bio’s development, manufacture, and commercialization of Licensed Products during the Term, in the event that Brii Bio has elected to effect a Technology Transfer under 7.3; (ii) transfer any such Regulatory Documentation or Know-How to Brii Bio upon request; and (iii) provide Brii Bio with reasonable access to technical assistance regarding the Regulatory Documentation, at Brii Bio’s reasonable expense.

 

Article 4
GOVERNANCE

 

4.1 Joint Steering Committee.

 

(a) Establishment. Within thirty (30) days following the execution of this Agreement, VBI and Brii Bio shall establish a joint committee (“Joint Steering Committee” or “JSC”) to discuss and review the activities of the Parties under this Agreement with regard to the Clinical Trials in the Licensed Territory or any Global Clinical Trials.

 

(b) Duties. The JSC shall:

 

(i) promote and facilitate ongoing communication and exchange of information between the Parties regarding conduct of Clinical Trials in the Licensed Territory or the VBI Territory, or any Global Clinical Trials (as applicable);

 

(ii) prepare and review the initial, and subsequent revisions of, any Global Development Plan, including the budget;

 

(iii) review and discuss the results obtained during conduct of Clinical Trials in the Licensed Territory or the VBI Territory, or any Global Clinical Trials (as applicable);

 

(iv) discuss disputes that may arise between the Parties in the course of carrying out the terms of any Global Development Plan with a view of facilitating a mutually satisfactory resolution; and

 

(v) perform such other duties as are specifically assigned by the Parties to the Joint Steering Committee pursuant to this Agreement.

 

 

(c) Membership. The JSC shall be composed of six (6) members, three (3) of whom shall be nominated by VBI and three (3) of whom shall be nominated by Brii Bio. The JSC shall have two Chairpersons, one appointed by each Party to serve for a period of twelve (12) months. The meetings of the JSC shall be led, alternately by one Chairperson. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. Each Party may, with the consent of the other Party, such consent not to be unreasonably withheld or delayed, invite non-member, non-voting representatives of such Party to attend meetings of the JSC, provided that such attendees are subject to non-disclosure agreements and obligations of confidentiality at least as restrictive as those set forth in Article 11. The Alliance Manager of each Party will attend each meeting of the JSC as a non-voting participant.

 

(d) Meetings. All JSC meetings shall be held as often as the members may determine, but in any event JSC meetings shall occur not less than four (4) times per calendar year. Such meetings may be held in person, or by any means of telecommunications or video conference, as the members deem necessary or appropriate. A quorum for JSC meetings shall be four (4) members, with at least two (2) members from each Party.

 

(e) Decision-making of JSC. The JSC may make decisions with respect to any subject matter that is within the purview of the JSC’s duties. Except as expressly provided in this Agreement, all decisions of the JSC shall be made by unanimous vote or written consent, with VBI and Brii Bio each having, respectively, one (1) vote in all decisions. The JSC shall use reasonable efforts to resolve any disputes concerning the matters within its duties. If, with respect to a matter that is subject to the JSC’s duties the JSC cannot reach consensus, then the Chairperson of the JSC shall escalate the dispute for resolution to on behalf of VBI, the Chief Executive Officer of VBI and to, on behalf of Brii Bio, the Chief Executive Officer of Brii Bio (collectively, the “Senior Executives”). The Senior Executives shall use good faith efforts to resolve the matter referred to them within fifteen (15) days of such referral (which shall become the decision of the JSC). If the Senior Executives fail to resolve such matter within fifteen (15) Business Days after the date on which the matter is referred to such Senior Executives (unless a longer period is agreed to by the Parties), then:

 

(i) Brii Bio shall have final decision-making authority with respect to matters in dispute relating solely to the development, Marketing Approval, and commercialization of Licensed Products in the Licensed Territory, but excluding decisions that would reasonably be expected to have a material adverse impact on the development, Marketing Approval, and commercialization of Licensed Products in the VBI Territory;

 

(ii) VBI shall have final decision-making authority with respect to the development, Marketing Approval, and commercialization of Licensed Products in the VBI Territory, but excluding decisions that would reasonably be expected to have a material adverse impact on the development, Marketing Approval, and commercialization of Licensed Products in the Licensed Territory; and

 

 

(iii) with respect to all other matters in dispute, such matters shall be settled by expert determination pursuant to Section 16.3.

 

4.2 Alliance Manager. If the Parties establish the JSC, then each of the Parties will also appoint a single individual to manage development and regulatory obligations between the Parties (each, an “Alliance Manager”). The role of the Alliance Manager will be to act as a single point of contact between the Parties to ensure a successful relationship under this Agreement. The Alliance Managers will attend all JSC meetings as non-voting participants; provided that, an Alliance Manager may bring any matter to the attention of the JSC if such Alliance Manager reasonably believes that such matter warrants such attention. Each Party will designate its initial Alliance Manager promptly after the Effective Date and each Party may change its designated Alliance Manager at any time upon written notice to the other Party. Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager by written notice to the other Party. Each Alliance Manager will also: (a) be the point of first referral in all matters of conflict resolution; (b) provide a single point of communication for seeking consensus between the Parties regarding key strategy and plan issues; (c) identify and bring disputes to the attention of the JSC in a timely manner; and (d) take responsibility for ensuring that governance activities, such as the conduct of required JSC meetings and production of meeting minutes, occur as set forth in this Agreement, and that the relevant action items resulting from such meetings are appropriately carried out or otherwise addressed.

 

4.3 Minutes. Minutes for each of the Joint Steering Committee meetings shall be prepared by a VBI member or a Brii Bio member of the JSC alternately. The draft minutes shall be sent to all members of the JSC for comment promptly after each such meeting (but in no event more than fifteen (15) days after each such meeting). All actions noted in the minutes shall be reviewed and approved at subsequent meetings of the JSC; provided that if the Parties cannot agree as to the content of the minutes by the time the JSC next meets, such minutes shall be finalized to reflect any areas of disagreement.

 

4.4 Expenses. Each Party shall bear its own costs, including expenses incurred by the members nominated by it in connection with their activities as members of the JSC or as Chairperson.

 

4.5 Subcommittees. From time to time, the JSC may establish subcommittees to oversee particular projects or activities within the scope of authority of the JSC, as it deems necessary or advisable. Each subcommittee shall consist of such number of representatives of each Party as the JSC determines is appropriate from time to time and shall meet with such frequency as the JSC shall determine. All decisions of each subcommittee shall be made by unanimous vote or written consent, with VBI and Brii Bio each having, collectively, one vote in all decisions. If, with respect to a matter that is subject to a subcommittee’s decision-making authority, the subcommittee cannot reach unanimity, the matter shall be referred to the JSC, which shall resolve such matter in accordance with Section 4.1(e).

 

 

4.6 Scope of Governance; Limitation of Authority. Notwithstanding the creation of the JSC or any subcommittee, each Party shall retain the rights, powers and discretion granted to it hereunder, and neither the JSC nor any subcommittee shall be delegated or vested with rights, powers, or discretion unless such delegation or vesting is expressly provided herein, or the Parties expressly so agree in writing. Neither the JSC nor any subcommittee shall have the power to: (a) amend or modify this Agreement, or (b) waive either Party’s obligation to comply with the terms and conditions of this Agreement, and no decision of the JSC or any subcommittee shall be in contravention of any terms and conditions of this Agreement. It is understood and agreed that issues to be decided by the JSC or any subcommittee, as applicable, are only those specific issues within the JSC’s duties.

 

4.7 Dissolution. The JSC shall dissolve and cease to exist upon the completion of Clinical Trials and regulatory activity in the Licensed Territory.

 

Article 5
DEVELOPMENT ACTIVITIES

 

5.1 Development Reports. Brii Bio shall provide annual high-level development reports to VBI describing ongoing and planned pre-clinical and clinical development activities in the Licensed Territory, including post-marketing and Phase IV studies, to the extent not shared in the JSC.

 

5.2 Remedial Actions. Each Party shall promptly notify the other Party in writing if it obtains information indicating that any Licensed Products may be subject to any recall, corrective action, or other regulatory action by any Regulatory Authority (a “Remedial Action”). The Parties shall reasonably assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. Brii Bio shall have the sole discretion with respect to any matters relating to any Remedial Action in the Licensed Territory, including the decision to commence such Remedial Action and the control over such Remedial Action. The cost and expenses of any Remedial Action in the Licensed Territory shall be borne solely by Brii Bio, except to the extent any such Remedial Action is caused by the negligence, gross negligence, willful misconduct, or breach of this Agreement by VBI or its Affiliates. Brii Bio shall, and shall ensure that its Affiliates and sublicensees will, maintain adequate records to permit the Parties to trace the distribution, sale, and use of Licensed Products in the Licensed Territory.

 

5.3 Global Development. If either Party desires to conduct a Global Clinical Trial, then: (a) such Party shall so notify the other Party in writing; and (b) the Parties shall promptly meet to discuss in good faith the terms and conditions of a Global Clinical Trial over a period of thirty (30) days. In the event that the Parties both elect to proceed with such Global Clinical Trial, then the JSC will govern the conduct of Global Clinical Trials with the objective of obtaining clinical trial data to support applications for Marketing Approval in the Field for the Licensed Product in both the Licensed Territory and countries within the VBI Territory. If the Parties so decide to enter into such Global Clinical Trial, then the Parties shall mutually agree upon a Global Development Plan through the JSC, except that each Party shall bear its costs for the conduct of such Global Clinical Trial. Notwithstanding the foregoing: (x) the Parties may elect not to jointly conduct a Global Clinical Trial, in which event, neither Party shall thereafter have a right to conduct a Clinical Trial in the other Party’s respective territory; and (y) each Party may conduct Clinical Trials of the Licensed Product in its respective territory without needing to obtain any consent from the other Party, subject to Section 4.1(e).

 

 

Article 6
REGULATORY ACTIVITIES

 

6.1 Marketing Approval.

 

(a) Regulatory Plan. Brii Bio shall develop, in its sole discretion, a regulatory plan for each Licensed Product that describes the regulatory actions to be taken by Brii Bio to obtain Marketing Approval in the Field in the Licensed Territory with respect to such Licensed Product. The regulatory plan, and all future updates and revisions to the regulatory plan, will be presented and discussed at the JSC, and Brii Bio shall consider any comments in good faith.

 

(b) Diligence. Brii Bio shall use Commercially Reasonable Efforts to obtain and maintain Marketing Approval for the Licensed Product in at least one (1) Region in the Licensed Territory.

 

(c) Regulatory Submissions. Brii Bio, or its designated Affiliate, shall have the sole right to prepare, submit and own all Regulatory Documentation in the Licensed Territory, including applications for Marketing Approval in the Licensed Territory. For the avoidance of doubt, as soon as practicable in accordance with Applicable Law, VBI shall transfer any existing Marketing Approval(s) for Licensed Product in countries covered by the Licensed Territory, currently in VBI’s name, to Brii Bio. For the avoidance of doubt, Brii Bio shall have no rights to any Marketing Approvals for Licensed Product outside of the Licensed Territory, except to the extent under Section 6.4.

 

(d) Communications with Regulatory Authorities. Brii Bio shall have sole responsibility and authority to communicate with Regulatory Authorities in the Licensed Territory regarding the Clinical Trials and the Marketing Approvals for Licensed Product. VBI shall have sole responsibility and authority to communicate with Regulatory Authorities in the VBI Territory regarding the Clinical Trials and Marketing Approvals for Licensed Product.

 

(e) VBI Assistance. VBI shall, and shall cause its Affiliates to, provide all reasonable assistance, facilitation and support including providing all documents and data reasonably requested by Brii Bio in a timely manner and at Brii Bio’s cost to obtain and maintain Marketing Approvals for Licensed Product in the Licensed Territory and the applicable product importation licenses. Such documents shall include copies of any clinical study reports or clinical data regarding the Licensed Products in its possession and by providing comments on Regulatory Documentation to be filed by Brii Bio at Brii Bio’s request. For the avoidance of doubt, VBI shall not be obligated as a result of this Section 6.1(e) to develop or prepare additional information or materials beyond those that it has otherwise developed or prepared for its own purposes.

 

6.2 Exchange of Information. Brii Bio shall promptly provide to VBI copies of any communications received from, or sent to, any Regulatory Authority in the Licensed Territory, as applicable, with respect to the Clinical Trials, the Marketing Approval, or commercialization of Licensed Product in the Licensed Territory.

 

6.3 Coordination of Regulatory Activities. Brii Bio shall permit VBI to review and comment, in a timely manner, on Regulatory Documentation for submission in the Licensed Territory, as applicable, and the Parties shall use Commercially Reasonable Efforts to ensure that such Regulatory Documentation are consistent as between the Licensed Territory and VBI Territory.

 

 

6.4 Rights of Reference. Each Party shall have the right to cross reference, file or incorporate by reference any regulatory submission (or Regulatory Documentation) for any Licensed Product, or any component thereof (including all approvals), in order to support regulatory submissions that such Party may make for Licensed Product in its respective territory. If Brii Bio conducts a Clinical Trial in the Licensed Territory, VBI shall have the right to reference any data obtained by Brii Bio pursuant to such Clinical Trial. Brii Bio shall have the right to reference any data developed or obtained by VBI for Licensed Product outside of the Licensed Territory. For the avoidance of doubt, no Party shall be obligated as a result of this Section 6.4 to develop or prepare additional information or materials beyond those that it has otherwise developed or prepared for its own purposes.

 

6.5 Pharmacovigilance. As per Applicable Law, the holder of the Marketing Approvals are responsible for compliance with applicable laws and regulatory requirements regarding Licensed Product in the Licensed Territory. As such, Brii Bio shall, at its own expense, adopt and maintain a service responsible to handle pharmacovigilance (and medical information as discussed in Section 6.6) in the Licensed Territory concerning Licensed Product. Additionally, VBI shall be responsible, at its own expenses, for the creation and maintenance of the global safety database for Licensed Product. VBI shall be the sole owner of this global safety database. Within six (6) months after the Effective Date, the Parties shall enter into a pharmacovigilance and medical information agreement on terms no less stringent than those required by ICH guidelines, including: (a) providing detailed procedures regarding the maintenance of core safety information and the exchange of safety data relating to Licensed Product within appropriate timeframes and in an appropriate format to enable each Party to meet both expedited and periodic regulatory reporting requirements; and (b) ensuring compliance with the reporting requirements of all applicable Regulatory Authorities for the reporting of safety data in accordance with standards stipulated in the ICH guidelines, and all applicable regulatory and legal requirements regarding the management of safety data (“Pharmacovigilance Agreement”).

 

6.6 Medical Information. Brii Bio shall provide medical information services for the Licensed Product in the Licensed Territories pursuant to the Pharmacovigilance and Medical Information Agreement, including directing to Brii Bio’s address for medical information purposes any medical queries that concern Licensed Product from the Licensed Territory that are received by VBI.

 

6.7 Funding Obligation. Brii Bio shall bear one hundred percent (100%) of all costs and expenses relating to requesting and maintaining Marketing Approval for the Licensed Product in the Licensed Territory.

 

Article 7
SUPPLY OBLIGATIONS

 

7.1 Clinical Supply Obligations. VBI shall supply quantities of Licensed Product for use by Brii Bio in the conduct of Clinical Trials in the Licensed Territory, either itself or through a Secondary Manufacturer, subject to Section 7.3, and in accordance with the terms and conditions set forth in a separate supply agreement, which will be entered into as of the Effective Date (“Supply Agreement”). For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 7.1 until the Parties executed and enter into such separate Supply Agreement.

 

 

7.2 Commercial Supply. VBI shall supply quantities of Licensed Product for use by Brii Bio in the commercialization of Licensed Product in the Licensed Territory, either itself or through a Secondary Manufacturer, and in accordance with the terms and conditions set forth in the Supply Agreement, which will be entered into as of the Effective Date. For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 7.2 until the Parties executed and enter into such separate Supply Agreement.

 

7.3 Technology Transfer.

 

(a) Subject to Section 7.3(d), at any time during the Term, Brii Bio may elect to have VBI transfer manufacturing responsibility for clinical supply and commercial supply of Licensed Product in the Licensed Territory to Brii Bio or a Third Party manufacturer (to the extent permitted by Applicable Law) (the “Secondary Manufacturer”) by so notifying VBI in writing. Once Brii Bio has elected to have VBI initiate such transfer, then VBI will use Commercially Reasonable Efforts to effect a transfer of the Manufacturing Technology, and to fully enable such Secondary Manufacturer to manufacture Licensed Products for clinical or commercial use in the Licensed Territory, in accordance with the requirements set forth in this Section 7.3.

 

(b) VBI shall promptly, but in any event within forty-five (45) days of VBI’s receipt of such notice, commence a transfer of the Manufacturing Technology for the Licensed Product to the Secondary Manufacturer, including the transfer of any necessary samples or reference standards.

 

(c) Within ninety (90) days of VBI’s receipt of such notice, VBI shall commence meeting with such Secondary Manufacturer, providing training, technical support, and continued delivery of any Manufacturing Technology. Thereafter, VBI shall provide such services as necessary to complete the transfer of the Manufacturing Technology, including delivery of any materials or embodiments of Manufacturing Technology, participating in ongoing discussions, and providing in-person support and training. VBI’s contribution to the costs relating to the transfer of Manufacturing Technology shall be limited to the reasonable provision of the services of VBI staff members, for a maximum of two (2) years from the initiation of the transfer. Any additional obligations or costs required to effect such transfer of Manufacturing Technology to the Secondary Manufacturer shall be borne by Brii Bio. For the avoidance of doubt, nothing in this Section 7.3(c) shall require VBI to develop any new Manufacturing Technology applicable to the Licensed Product for use by the Secondary Manufacturer, provided that, on a calendar year basis, VBI shall provide to the Secondary Manufacturer any updates or improvements to the Manufacturing Technology relating to the Licensed Product that have been developed by VBI in the prior calendar year. Brii Bio acknowledges that, as between the Parties, all right, title and interest to such Manufacturing Technology belongs to VBI and that, subject to Section 7.3(d), the Secondary Manufacturer will be permitted to use such Manufacturing Technology solely for the purpose of manufacturing the Licensed Product for the clinical or commercial supply to Brii Bio under this Agreement.

 

 

(d) Notwithstanding anything to the contrary elsewhere in this Agreement, VBI’s obligations under this Section 7.3 shall be limited as necessary to ensure compliance with VBI’s obligations under the Ferring License; provided, however that, within thirty (30) days of receiving Brii Bio’s election to transfer manufacturing responsibility for clinical supply or commercial supply of Licensed Product in the License Territory to any Secondary Manufacturer, VBI shall use Commercially Reasonable Efforts to obtain all applicable consents that are required under the Ferring License to permit the technology transfer to such Secondary Manufacturer.

 

Article 8
COMMERCIALIZATION AND PROMOTION

 

8.1 Commercialization of Product.

 

(a) Brii Bio Responsibilities. Brii Bio shall have the exclusive right and responsibility for commercializing Licensed Products in the Field in the Licensed Territory in accordance with the terms and conditions of this Agreement. Commercialization of Licensed Products shall include, but not be limited to:

 

(i) establishing the commercialization and marketing strategy and tactics;

 

(ii) establishing pricing and reimbursement policies;

 

(iii) receiving, accepting, and filling orders;

 

(iv) bidding and listing;

 

(v) labeling;

 

(vi) advertising and detailing;

 

(vii) storage and distribution to customers;

 

(viii) controlling invoicing, processing orders, and collecting accounts receivable for sales; and

 

(ix) recording sales in its books of account for sales.

 

(b) Commercialization Plan; Commercialization Reports. Within a reasonable time prior to anticipated launch of a Licensed Product, Brii Bio shall prepare a non-binding high-level summary setting forth the material commercialization activities, including projected revenue targets, preliminary pricing, and unit forecast estimates proposed for such Licensed Product in the Field in the Licensed Territory. For each calendar year following the First Commercial Sale of such Licensed Product, Brii Bio shall, within forty-five (45) days after the end of such calendar year, provide to VBI a high-level report summarizing the commercialization activities performed by or on behalf of Brii Bio in such calendar year to enable VBI to assess Brii Bio’s compliance with this Section 8.1, including the commercialization obligation set forth in Section 8.1(c).

 

(c) No Commercial Diligence. Brii Bio may commercialize Licensed Product in the Field in the Licensed Territory in Brii Bio’s sole discretion (including whether or not to sublicense the Licensed Product in any Region in the Licensed Territory).

 

(d) VBI Rights. Nothing in this Agreement shall limit VBI’s exclusive rights to commercialize the Licensed Product in the VBI Territory.

 

 

8.2 Territory Compliance. Except as the Parties may otherwise agree in writing, VBI and its Affiliates: (a) shall not, directly or indirectly, commercialize Licensed Product in the Licensed Territory, whether inside or outside of the Field; and (b) shall promptly cease selling or distributing Licensed Product to any Third Party, or otherwise assisting any Third Party, who is commercializing or attempting to commercialize or distribute Licensed Product for any use in the Licensed Territory. Except as the Parties may otherwise agree in writing, Brii Bio and its Affiliates, Distributors and Sublicensees: (x) shall not, directly or indirectly, commercialize Licensed Product in the VBI Territory or outside the Field in the Licensed Territory; and (y) shall promptly cease selling or distributing Licensed Product to any Third Party, or otherwise assisting any Third Party, who is commercializing or attempting to commercialize or distribute Licensed Product in the VBI Territory or outside the Field in the Licensed Territory.

 

8.3 Compliance with Laws. Each Party agrees that it will comply in all material respects with all Applicable Laws, including Anti-Corruption Laws, and in accordance with appropriate or applicable standards of pharmaceutical product promotional practices, fair trade, fair competition, and business ethics in the commercialization of Licensed Products in such Party’s respective territory.

 

8.4 Competing Product. During the Term, VBI shall not conduct research or development activities directed towards, sell, or offer to sell, nor shall it authorize any Third Party to conduct research or development activities directed towards, or sell or offer to sell, any Competing Product for any use in any Region of the Licensed Territory.

 

Article 9
FINANCIAL TERMS

 

9.1 Up-Front Payment. In partial consideration of the rights granted by VBI to Brii Bio hereunder, and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI a one-time fee in the amount of two million Dollars ($2,000,000) (the “Up-Front Payment”) on or before ten (10) days after the Effective Date.

 

9.2 Regulatory Milestone.

 

(a) In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI the regulatory milestone payment set forth below after the regulatory milestone has been achieved by Brii Bio or its Affiliates:

 

Regulatory Milestone		Milestone Payment
[**] in mainland China for a Licensed Product		[**]

 

 

The milestone payment in this Section 9.2 shall be payable only upon the first achievement of such milestone by Brii Bio or its Affiliates, and no amounts shall be due for subsequent or repeated achievements of such milestone by Brii Bio or its Affiliates, or if such milestone is achieved by a sublicensee of Brii Bio or its Affiliates, whether the same or a different Licensed Product.

 

(b) Brii Bio shall promptly, but in any event no later than ten (10) days following achievement of the regulatory milestone by Brii Bio or any of its Affiliates, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment set forth above with respect to such regulatory milestone, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

9.3 Net Sales Milestones.

 

(a) In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI the following sales milestones on Net Sales by Brii Bio or its Affiliates:

 

Annual Net Sales in the Greater China Region		Milestone Payment
[**]		[**]
[**]		[**]
[**]		[**]

 

Annual Net Sales in the Aggregate Licensed Territory excluding the Greater China Region		Milestone Payment
[**]		[**]
[**]		[**]
[**]		[**]

 

Each milestone payment in this Section 9.3 shall be payable only once upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone.

 

(b) Brii Bio shall promptly, but in any event no later than ten (10) days following achievement of a sales milestone by Brii Bio or any of its Affiliates, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment set forth above with respect to such sales milestone, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

 

9.4 Royalty Payments.

 

(a) In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI a tiered royalty at the rate described below for the applicable amount of Net Sales of Licensed Product in the Licensed Territory:

 

Annual Net Sales in the Aggregate Licensed Territory		Royalty Rate
Less than [**]		[**]
Greater than or equal to [**]		[**]

 

The royalty shall be paid on aggregate Net Sales from all Regions, which are in an active Royalty Term, in the Licensed Territory. The “Royalty Term” in each Region is defined as the time from the date of the First Commercial Sale of such Licensed Product in such Region until the later of:

 

(i) ten (10) years from the date of First Commercial Sale of such Licensed Product in the applicable Region, or

 

(ii) termination or expiration of VBI’s obligation to pay Third Party Royalties with respect to sales of such Licensed Product in such Region.

 

9.5 Royalty Reduction. The amount of royalties payable by Brii Bio pursuant to Section 9.4 shall be reduced in the following circumstances:

 

(a) in the event that VBI negotiates a reduction in Third Party Royalties (e.g., through a reduced Third Party Royalty rate under the [**] or [**]) with respect to Licensed Products in the Field in the Licensed Territory, then the royalties payable by Brii Bio to VBI in Section 9.4 shall be reduced by fifty percent (50%) of the reduction in such Third Party Royalties provided to VBI; and

 

(b) in the event that royalties are payable by Brii Bio for a Licensed Product pursuant to Section 9.4(a)(ii), but not Section 9.4(a)(i), then the amount of royalties payable by Brii Bio for such Licensed Product shall be reduced to the amount payable by VBI under the [**] and [**], subject to any reduction in such amounts pursuant to Section 9.5(a) above.

 

9.6 Third Party Licenses.

 

(a) Royalty Re-Negotiation. VBI will use Commercially Reasonable Efforts during the Term to negotiate a reduction in the Third Party Royalties payable on Licensed Products. On the first anniversary of the Effective Date, and every six (6) months thereafter during the Term, VBI shall provide detailed written updates to Brii Bio with respect to the status of such re-negotiations.

 

(b) Stand-By Side Letter. VBI will use Commercially Reasonable Efforts to facilitate the negotiation of a stand-by side letter between [**] and Brii Bio by the twelve (12) month anniversary of the Effective Date, which stand-by side letter shall provide that, in the event of a termination of the [**] as a result of VBI’s material breach of such license or VBI’s bankruptcy or other insolvency event, [**] shall enter into a license agreement with Brii Bio for the Licensed Territory on substantially the same terms set forth in the [**].

 

9.7 Royalty Payments and Reports. Within forty-five (45) days after the end of each calendar quarter (or, for the last quarter in a calendar year, sixty (60) days after the end of such quarter) during the Royalty Term, Brii Bio shall make all royalty payments payable to VBI under this Agreement with respect to such quarter. Along with such payments, Brii Bio shall also provide a report containing reasonably detailed information regarding the calculation of royalties due pursuant to Article 9 including allowable deductions in the calculation of Net Sales of each Licensed Product on which royalties are paid (the “Royalty Report”).

 

 

9.8 Sublicense Consideration Payments. Brii Bio shall pay to VBI the applicable percentage of Sublicense Consideration (as set forth below and on a Region-by-Region basis) actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) during the Term based on the date when Brii Bio grants each sublicense in a Region in the Licensed Territory to the applicable Third Party Sublicensee. Notwithstanding anything to the contrary, if VBI receives a Sublicense Consideration payment under Section 9.8 that is based on a Net Sales milestone payment in a specific Region in the Licensed Territory, then Net Sales in such Region would be excluded from the Net Sales milestone achievement calculation in Section 9.3(a). VBI will not be entitled to both a Net Sales milestone payment under Section 9.3(a) and a Sublicense Consideration payment based on a Net Sales milestone under Section 9.8 for the same Region in the Licensed Territory.

 

(a) If the sublicense grant occurs in any Region in the Licensed Territory in the period beginning on [**] and before the first [**] in the [**] (excluding renewal of the [**] in [**] to the extent set forth in Section 13.2(l)) is obtained for the Licensed Product , then Brii Bio shall pay VBI [**] percent ([**]%)of all Sublicense Consideration from such Region actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from such Third Party Sublicensee; and

 

(b) If the sublicense grant occurs in any Region in the Licensed Territory in the period after the first [**] is obtained for the Licensed Product in the [**] (excluding renewal of the [**] in [**] to the extent set forth in Section 13.2(l), then Brii Bio shall pay VBI [**] percent ([**]%) of all Sublicense Consideration from such Region actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from such Third Party Sublicensee.

 

Brii Bio shall notify VBI in writing of the grant of such sublicense by Brii Bio promptly following the occurrence thereof, but in no event later than fifteen (15) days following the occurrence thereof, together with a written statement setting forth in reasonable detail the calculation of the Sublicense Consideration and sublicense payment due pursuant to this Section 9.8 (including all the deductions taken in such calculations). Brii Bio shall pay to VBI the applicable sublicense payment within thirty (30) days after Brii Bio’s receipt of the corresponding Sublicense Consideration.

 

9.9 No Projections or Guaranteed Revenue.

 

(a) Each Party acknowledges and agrees that: (i) nothing in this Agreement shall be construed as representing an estimate or projection of anticipated sales of any Licensed Product; and (ii) the milestone events and Net Sales set forth above or that have otherwise been discussed by the Parties are merely intended to define the milestone events and royalty obligations to VBI if such milestone events or Net Sales are achieved.

 

(b) VBI expressly acknowledges and agrees that it may not receive and, absent the achievement of a milestone event in Sections 9.2 or 9.3, the achievement of Net Sales of a Licensed Product, or the grant of a sublicense to a Third Party Sublicensee, will not be entitled to receive any further payments hereunder (including any milestone payments, royalties, or Sublicense Consideration) other than the consideration set forth in Section 9.1. The Parties expressly acknowledge and agree that the milestone payments, royalties, and Sublicense Consideration are contingent upon satisfaction of conditions provided for herein that may not be satisfied, and as a result, some or all of such payments may not become obligations of Brii Bio (or its assignees) and may therefore never be paid. VBI expressly acknowledges that: (i) the consideration set forth in Section 9.1; and (ii) the possibility of receiving milestone payments, royalties, and Sublicense Consideration in accordance with the terms set forth herein constitute sufficient consideration for entering into this Agreement and granting Brii Bio an exclusive license pursuant to Section 3.1. Neither Party has made any representation or warranty to the other that any such conditions will be satisfied. Accordingly, if such conditions to make any payment are not satisfied, no Party will have any recourse against the other Party hereunder solely as a result of such failure to pay unless there is an independent breach of this Agreement.

 

 

Article 10
PAYMENTS, BOOKS AND RECORDS

 

10.1 Payment Method. All payments to VBI under this Agreement shall be made by bank wire transfer in immediately available funds to an account in the name of VBI designated in writing by VBI. Payments hereunder shall be considered to be made as of the day on which they are received by VBI’s designated bank.

 

10.2 Payment Currency: Currency Conversion.

 

(a) United States Dollars. Unless otherwise expressly stated in this Agreement, all amounts specified to be payable under this Agreement are in Dollars and shall be paid in Dollars.

 

(b) Currency Conversion. For the purpose of computing the Net Sales for any Licensed Product sold in a currency other than Dollars, or Sublicense Consideration, such Net Sales or Sublicense Consideration shall be converted into Dollars each quarter using an exchange rate that is the arithmetic average of the daily exchange rates (obtained as described below) during such quarter. Each daily exchange rate shall be obtained from The Wall Street Journal, Eastern United States Edition, or, if not so available, as otherwise agreed by the Parties.

 

(c) Blocked Currency. Notwithstanding the provisions of Section 10.2, if by Applicable Law or fiscal policy of a Region, conversion into Dollars or transfer of funds of a convertible currency to the United States is restricted, forbidden or substantially delayed, then amounts accrued in such Region shall be paid to VBI in such Region in local currency by deposit in a local bank designated by VBI for a period no longer than one hundred and twenty (120) days, after which any payments due to VBI shall be paid in Dollars, unless the Parties otherwise agree.

 

10.3 Taxes.

 

(a) Cooperation and Coordination. The Parties acknowledge and agree that it is their mutual objective and intent to minimize, to the extent feasible, income and other taxes payable with respect to their collaborative efforts under this Agreement and that they shall use their reasonable efforts to cooperate and coordinate with each other to achieve such objective.

 

(b) Payment of Tax. A Party receiving a payment shall pay any and all taxes levied on such payment. If the taxing authorities of any relevant jurisdiction assert that amounts are required to be withheld from the payments due to a Party hereunder, or the tax laws in one (1) or more jurisdictions have changed so as to explicitly require such treatment, the Party made aware of such assertion or change in law shall inform the other Party within thirty (30) days and shall consult with the other Party regarding the consequences of such assertion or change. If Applicable Laws require that taxes be deducted and withheld from a payment, the remitting Party shall: (i) deduct those taxes from the payment; (ii) pay the taxes to the proper taxing authority; (iii) send evidence of the obligation together with proof of payment to the other Party within sixty (60) days following that payment; and (iv) shall provide such assistance as the other Party may reasonably require in obtaining any refund of such amounts to which the other Party may be entitled, to the extent that such assistance does not cause the remitting Party to incur any liability in respect of the taxes asserted to be due.

 

 

10.4 Records. Brii Bio shall keep, and cause its Affiliates, and Sublicensees, to keep complete true, and accurate, books of accounts and records for the purpose of determining, in a manner consistent with GAAP, the amounts payable to VBI pursuant to this Agreement. Such books and records shall be kept for such period of time required by law, but no less than at least three (3) years following the end of the calendar quarter to which they pertain. Such records shall be subject to inspection in accordance with Section 10.5.

 

10.5 Audits. Upon not less than sixty (60) days’ prior written notice, Brii Bio shall permit an independent, certified public accountant selected by VBI and reasonably acceptable to Brii Bio, which acceptance will not be unreasonably withheld or delayed (for the purposes of this Section 10.5, the “Auditor”), to audit or inspect those books or records of Brii Bio, its Affiliates, or Sublicensees that relate to Net Sales and Royalty Reports for the sole purpose of verifying the: (a) royalties payable hereunder in respect of Net Sales; (b) withholding taxes, if any, required by Applicable Law to be deducted as a payment by Brii Bio in respect of such Net Sales; and (c) exchange rates used in determining the amount of Dollars. Such Auditor shall be under reasonable written obligations of confidentiality to the audited party and shall disclose to VBI only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement. Notwithstanding the foregoing, provided that Brii Bio obtains an audit right for itself with respect to a Sublicensee’s records that is consistent with the terms of this Section 10.5, as well as the right to share the results of such audit with VBI, Brii Bio shall not be required to obtain from such Sublicensee a direct audit right for VBI. The Auditor shall send a copy of the report to Brii Bio at the same time it is sent to VBI. Such inspections may be made no more than once each calendar year and during normal business hours. VBI shall be responsible for the cost of any such audit, provided that if the Auditor determines that Brii Bio has underpaid any amounts payable to VBI hereunder by ten percent (10%) or more, Brii Bio shall pay the costs and expenses of such audit.

 

10.6 Late Payments. In the event that any payment due under this Agreement is not made when due, the payment shall accrue interest from the date due at a rate per annum equal to three percent (3%) above the U.S. Prime Rate (as set forth in the Wall Street Journal, Eastern Edition) for the date on which payment was due, calculated daily on the basis of a three hundred and sixty-five (365)-day year, or similar reputable data source; provided that, in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit the Party entitled to receive such payment from exercising any other rights it may have as a consequence of the lateness of any payment.

 

Article 11
CONFIDENTIALITY

 

11.1 Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, the Parties agree that the receiving Party (the “Receiving Party”) shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any confidential or proprietary information and materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise) which is disclosed to it by the other Party (the “Disclosing Party”) including, but not limited to, all Know How, Inventions and any other technical, regulatory or business information of whatever nature (collectively, “Confidential Information”). For purposes of this Agreement, (a) all VBI Know-How shall be Confidential Information of VBI and (b) all Brii Bio Know-How shall be Confidential Information of Brii Bio.

 

 

11.2 Exceptions. Notwithstanding Section 11.1 above, the obligations of confidentiality and non-use shall not apply to Confidential Information that, in each case as demonstrated by competent evidence:

 

(a) was already known to the Receiving Party or any of its Affiliates, other than under an obligation of confidentiality, at the time of disclosure;

 

(b) was generally available to the public or was otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

(c) became generally available to the public or otherwise part of the public domain after its disclosure by the Disclosing Party and other than through any act or omission of the Receiving Party or any of its Affiliates in breach of this Agreement;

 

(d) was subsequently lawfully disclosed to the Receiving Party or any of its Affiliates by a Person other than the Disclosing Party, and who, to the best knowledge of the Receiving Party, did not directly or indirectly receive such information directly or indirectly from the Disclosing Party under an obligation of confidence; or

 

(e) was independently developed by the Receiving Party or its Affiliate without use of or reference to any information or materials disclosed by the Disclosing Party.

 

11.3 Permitted Disclosures. Notwithstanding the provisions of Section 11.1, each Party may disclose Confidential Information belonging to the other Party as expressly permitted by this Agreement or if and to the extent such disclosure is reasonably necessary in the following instances:

 

(a) filing or prosecuting Patents as permitted by this Agreement;

 

(b) prosecuting or defending litigation as permitted by this Agreement;

 

(c) submission to a Regulatory Authority in connection with a Marketing Approval of a Licensed Product;

 

(d) complying with applicable court orders, Applicable Law or governmental regulations including the requirements of any securities exchange;

 

(e) to those of its employees, Affiliates, contractors, or agents who have a need to know such Confidential Information in order to enable the Receiving Party to carry out its obligations pursuant to this Agreement provided that such persons are subject to obligations of confidentiality and non-use at least equivalent in scope to the obligations set forth in this Article 11; or

 

 

(f) to existing or potential acquirers or merger candidates; investment bankers; existing or potential investors, venture capital firms or other financial institutions or investors for purposes of obtaining financing, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 11; and advisors; provided, however, that neither Party shall make such disclosure to a competitor of the other Party, without obtaining the Disclosing Party’s prior consent in writing; and provided further, that each Party will remain responsible for any failure by any of the foregoing individuals to treat such Confidential Information as required under Section 11.1 as if such individuals were parties directly bound to the requirements of this Article 11.

 

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information, it shall, except where impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information, but in no event less than reasonable efforts; provided, that any Confidential Information so disclosed shall still be subject to the restrictions on use set forth in this Article 11. In any event, the Parties agree to take all reasonable action to avoid disclosure of Confidential Information hereunder.

 

11.4 Confidentiality of this Agreement and its Terms. Except as otherwise provided in this Article 11, each Party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this Agreement without the prior written consent of the other Party hereto, which Agreement and terms shall be deemed the Confidential Information of both Parties.

 

11.5 Public Announcements and Filings. As soon as practicable following the Effective Date hereof, the Parties shall each issue a press release announcing the existence of this Agreement which is approved in writing by both Parties. For greater certainty, neither Party (nor its Affiliates) shall be obligated to consult with or obtain approval from the other Party with respect to any filings to the SEC, the NASDAQ stock exchange or any other stock exchange or Governmental Authority; provided that a disclosing Party shall give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information.

 

11.6 Prior Non-Disclosure Agreements. As of the Effective Date, the terms of this Article 11 shall supersede any prior non-disclosure, secrecy, or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including without limitation the Confidentiality Agreement effective July 9, 2018. Any information disclosed under such prior agreements shall be deemed disclosed under this Agreement.

 

11.7 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name or logotype of the other Party only (a) in connection with permitted disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by Applicable Law, or (c) as otherwise expressly permitted by this Agreement or agreed in writing by such other Party.

 

 

11.8 Publication. At least thirty (30) days prior to publishing, publicly presenting, and/or submitting for written or oral publication a manuscript, abstract or the like that includes information relating to any Global Development Plan, or Joint Invention that has not been previously published, each Party shall provide to the other Party a draft copy thereof for its review. The publishing Party shall consider in good faith any comments provided by the other Party during such thirty (30) day period. In addition, the publishing Party shall, at the other Party’s reasonable request, remove therefrom any Confidential Information of such other Party. If requested in writing by the non-publishing Party, the publishing Party shall withhold material from submission for publication or presentation for an additional thirty (30) days to allow for the filing of a Patent application or the taking of such other measures as may be required to establish and preserve proprietary rights in the information in the material being submitted for publication or presentation. The contribution of each Party shall be noted in all publications or presentations by acknowledgment or co-authorship, whichever is appropriate.

 

Article 12
INTELLECTUAL PROPERTY

 

12.1 Ownership of Intellectual Property.

 

(a) Inventions. Except as otherwise expressly set forth in this Agreement, ownership of Inventions, and any and all intellectual property rights therein, will be determined based on the principles of inventorship in accordance with United States patent laws.

 

(b) VBI Technology and Brii Bio Technology. Notwithstanding anything in Section 12.1 to the contrary: (i) VBI and its Affiliates have, and shall retain all right, title and interest in and to, the VBI Technology and any improvements thereto, and (ii) Brii Bio and its Affiliates have, and shall retain all right, title and interest in and to, the Brii Bio Technology and any improvement thereto. Each Party shall execute such documents, including assignments, as may be required to vest title in the owning Party in accordance with the foregoing.

 

(c) Joint Technology. The Parties shall jointly own all right, title and interest in all Joint Technology and hereby agree that each Party may only use such Joint Technology to the extent permitted by this Agreement. For the avoidance of doubt, neither Party shall have the right to practice the Joint Technology outside of the Field, without the advance, written consent of the other Party. Each Party shall execute such documents, including assignments, as may be required to vest title to all Joint Inventions and Joint Patents in both Parties.

 

(d) Assignment Obligation. Each Party will cause all employees of such Party who perform activities for such Party under this Agreement to be under an obligation to assign their rights in any Inventions and Know-How, whether or not patentable, resulting therefrom to such Party. With respect to any activities of a Party under this Agreement that are contracted to a Person that is not an employee, the Party retaining such contractor will include in the applicable contract an assignment to such Party of all rights in Inventions and Know-How made by such contractor resulting from such activities.

 

 

12.2 Patent Prosecution and Maintenance.

 

(a) VBI Patents.

 

(i) Initial Right. VBI shall have the first right to prepare, file, register, prosecute and maintain all VBI Patents in the Licensed Territory and shall bear the costs associated therewith. VBI shall retain patent counsel suitable to coordinate and direct the filing and prosecution of VBI Patents both in and outside of the Licensed Territory and shall keep Brii Bio fully informed of progress with regard to the preparation, filing, prosecution, and maintenance of the VBI Patents in the Licensed Territory. Specifically, VBI shall: (A) provide Brii Bio with a draft of any filing of a patent application at least ten (10) days prior to filing and VBI shall consider in good faith any comments or revisions suggested by Brii Bio or its counsel; (B) consult with Brii Bio regarding filing strategy and Regions where VBI Patents should be filed and maintained; (C) promptly provide Brii Bio with a copy of each patent application as filed, together with a notice of its filing date and application number; (D) provide periodic status reports to Brii Bio regarding the status of each patent application or patent in each VBI Patent family in the Licensed Territory; (E) provide Brii Bio with a copy of any examiner’s report that raise substantive patentability issues and consult with Brii Bio regarding responding to the same and shall consider in good faith any comments, strategies, and the like proposed by Brii Bio; and (F) promptly notify Brii Bio of the issuance of a VBI Patent in the Licensed Territory.

 

(ii) Step-In Right. In the event that VBI elects not to prepare, file, register, prosecute, or maintain any VBI Patent in the Licensed Territory, VBI shall provide reasonable prior written notice to Brii Bio of such intention (which notice shall, to the extent possible, be given no later than sixty (60) calendar days prior to the next deadline for any action that must be taken with respect to such VBI Patent in the relevant patent office). In such case, at Brii Bio’s sole discretion, upon written notice from Brii Bio, Brii Bio will have the right but not the obligation to assume responsibility for registration, prosecution, and/or maintenance of any such VBI Patent in the Licensed Territory at Brii Bio’s cost and expense, and shall pay any required fees to maintain such VBI Patents in the applicable Region. If Brii Bio elects to assume such rights with respect to a VBI Patent, Brii Bio shall keep VBI reasonably informed in accordance with the criteria set forth in Section 12.2(a)(i)(A) – (F) above.

 

(b) Joint Patents.

 

(i) Initial Responsibility. Brii Bio shall be responsible for the preparation, filing, prosecution, and maintenance of Joint Patents in the Licensed Territory, subject to the rest of this Section 12.2(b). In carrying out its obligations pursuant to this Section 12.2(b), Brii Bio shall retain patent counsel, which patent counsel will be instructed to copy both VBI and Brii Bio on all correspondence relating to the Joint Patents.

 

(ii) Cooperation. For any Joint Patents, Brii Bio shall keep VBI fully informed of progress with regard to the preparation, filing, prosecution, and maintenance of the Joint Patents in the Licensed Territory. Brii Bio shall:

 

(1) provide VBI with a draft of any first filing of a patent application at least thirty (30) days prior to filing and Brii Bio shall consider and adopt in good faith any comments or revisions suggested by VBI or its counsel;

 

(2) consult with VBI regarding filing strategy and jurisdictions where Joint Patents should be filed and maintained provided, however, that VBI shall be responsible for the preparation, filing, prosecution, and maintenance of Joint Patents outside of the Licensed Territory;

 

 

(3) promptly provide VBI with a copy of each patent application as filed, together with a notice of its filing date and application number;

 

(4) provide periodic status reports to VBI regarding the status of each Patent application or Patent in each Joint Patent family;

 

(5) provide VBI with a copy of any examiner’s report that raises substantive patentability issues and consult with VBI regarding responding to the same and shall consider and adopt in good faith any comments, strategies, and the like proposed by VBI; and

 

(6) promptly notify VBI of the issuance of a Joint Patent.

 

(iii) Option of VBI to Prosecute, Maintain and Enforce. In the event that Brii Bio desires to give up responsibility for the prosecution or maintenance of any Joint Patent, Brii Bio shall provide reasonable prior written notice to VBI of such intention (which notice shall, to the extent possible, be given no later than sixty (60) calendar days prior to the next deadline for any action that must be taken with respect to such Joint Patent in the relevant patent office). In such case, at VBI’s sole discretion, upon written notice to Brii Bio, VBI may elect to assume responsibility for prosecution and/or maintenance of any such Joint Patent, and VBI shall thereafter keep Brii Bio reasonably informed in accordance with the criteria set for in Section 12.2(b)(ii).

 

(iv) Costs for Joint Patents. Brii Bio will bear the costs associated with preparation, filing, prosecution, and maintenance of Joint Patents except for the costs associated with filing, prosecution, and maintenance in the VBI Territory, which will be borne by VBI. The Party incurring costs associated with preparation, filing, prosecution, and maintenance of Joint Patents of behalf of the other Party will issue an invoice to the other Party on a quarterly basis (as applicable), setting out such Party’s share of the costs incurred during the prior quarter and providing copies of supporting invoices or other documentation. Each such invoice will be payable within thirty (30) days of receipt and the provisions of Article 10 shall apply to such payments.

 

(v) Withdrawal of Support. In the event that a Party decides to cease paying the costs associated with the preparation, filing, prosecution, and maintenance of any Joint Patents in its respective territory, such Party shall advise the other Party of such decision in writing. Upon receipt of such notice, the recipient Party may elect to abandon the Joint Patents identified in the notice, or may elect to assume sole responsibility for the ongoing costs of such Joint Patent, in which event the Party wishing to cease sharing in the costs shall forthwith execute an assignment of its entire right, title and interest in such Joint Patents to the recipient Party, and the assigning Party shall cease being responsible for its share of the costs associated with any Joint Patents listed on the assignment effective as of the date of the assignment. In the event that the Party relinquishing responsibility for the costs of a Joint Patent has responsibility for prosecution and maintenance of such Joint Patent, that Party will be deemed to have given up responsibility for such prosecution and maintenance as of the date of the notice referred to in this Section 12.2(b).

 

(c) Brii Bio Patents. Brii Bio shall have the sole right to prepare, file, prosecute and maintain the Brii Bio Patents on a worldwide basis.

 

 

12.3 Infringement by Third Parties.

 

(a) Notice. In the event that either VBI or Brii Bio becomes aware of any infringement or threatened infringement in writing by a Third Party of the VBI Patents, or the Joint Patents, it will notify the other Party in writing to that effect. Any such notice shall include any available evidence to support an allegation of infringement or threatened infringement by such Third Party.

 

(b) Licensed Territory. Subject to this Section 12.3(b), Brii Bio shall have the first right (but not the obligation), as between VBI and Brii Bio, to bring and control any action or proceeding with respect to infringement of any VBI Patent in the Licensed Territory or Joint Patent in the Licensed Territory. VBI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice, and VBI and its counsel will reasonably cooperate with Brii Bio and its counsel in strategizing, preparing and presenting any such action or proceeding provided, however, that Brii Bio may not make any submissions in any such action challenging the validity of a VBI Patent without the prior consent of VBI, such consent not to be unreasonably withheld. If Brii Bio fails to bring an action or proceeding with respect to infringement of any VBI Patent in the Licensed Territory, or Joint Patent in the Licensed Territory, within (i) sixty (60) days following the notice of alleged infringement or (ii) ten (10) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, then VBI shall have the right (but not the obligation) to bring and control any such action, and Brii Bio shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement, any recovery or damages realized as a result of such action or proceeding shall be used first to pay the legal costs of both Parties associated with the enforcement action and second to compensate Brii Bio for losses directly associated the infringement. Any additional recovery or damages shall be shared equally between the Parties. In the event that the legal costs associated with an enforcement action exceed the amount recovered in such action, then Brii shall pay any such additional costs.

 

(c) Cooperation. In the event a Party brings an infringement action in accordance with this Section 12.3, the other Party shall cooperate fully, including, if required to bring such action, the furnishing of a power of attorney or being named as a party to such action.

 

(d) Brii Bio Patents. Brii Bio shall have the sole right to bring and control any action or proceeding with respect to infringement of any Brii Bio Patent on a worldwide basis.

 

12.4 Infringement of Third Party Rights. Each Party shall promptly notify the other in writing of any written allegation by a Third Party that the activity of either of the Parties pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party. Subject to Article 14, Brii Bio shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by Brii Bio’s activities in the Licensed Territory and VBI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. VBI shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by VBI’s activities and Brii Bio shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.

 

 

12.5 Consent for Settlement. Neither Party shall enter into any settlement or compromise of any action or proceeding under this Article 12 which would in any manner (a) limit the scope, validity or enforcement of any of the VBI Patents in the Licensed Territory, (b) admit fault or wrongdoing on the part of the other Party, or (c) impose any obligations or restriction on the other Party (whether financial or otherwise) without the prior written consent of such other Party.

 

12.6 Patent Term Extensions. Brii Bio shall have final decision making authority with respect to any decisions related to Patent term extensions for VBI Patents in the Licensed Territory, and for Joint Patents in the Licensed Territory.

 

12.7 Trademarks. VBI, or its Affiliates shall own and be responsible for all trademarks, trade names, branding, logos, and domain names related to Licensed Products in the VBI Territory and shall be responsible for selecting, registering, enforcing, defending, and maintaining the same. Brii Bio, or its Affiliates shall own and be responsible for all trademarks, trade names, branding, logos, and domain names related to Licensed Products in the Licensed Territory and shall be responsible for selecting, registering, enforcing, defending, and maintaining the same.

 

12.8 Maintenance of Patents. During the Term, each Party shall take all steps required to maintain in good standing any Patents licensed to the other Party hereunder.

 

Article 13
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

13.1 Mutual Representations, Warranties and Covenants. Each Party hereby represents and warrants to the other Party, as of the Effective Date, and covenants (as applicable) as follows:

 

(a) Duly Organized. Such Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof.

 

(b) Due Authorization; Binding Agreement. This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with the terms hereof subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

 

(c) Consents. Such Party has obtained, or is not required to obtain, the consent, approval, order, or authorization of any Third Party, or has completed, or is not required to complete any registration, qualification, designation, declaration, or filing with, any Regulatory Authority or Governmental Authority, in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement.

 

(d) No Conflicting Grant of Rights. The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way and (b) do not conflict with, violate or breach, or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.

 

 

(e) Right to Grant Licenses. Such Party has the right to grant (or cause its Affiliates to grant) the licenses contemplated under this Agreement and has not granted, assigned, transferred, or conveyed, and will not during the Term, grant, assign, transfer or convey any right, title or interest in, (i) in the case of VBI, any of the VBI Technology and (ii) in case of Brii Bio, its interest in the Brii Bio Technology, in any such case which grant, assignment, transfer or conveyance would conflict with the rights granted to the other Party hereunder.

 

(f) Employee/Contractor Agreements. All of such Party’s employees or contractors acting on its behalf pursuant to this Agreement are and will be obligated under a binding written agreement to assign to such party or its designee all VBI Technology and to comply with obligations of confidentiality and non-use consistent with those set forth in Article 11.

 

(g) Debarment. Such Party is not debarred under the FDA, NMPA or similar Regulatory Authority in any other jurisdiction and it does not, and will not during the Term, employ or use the services of any Person who is debarred, in connection with the development, manufacture or commercialization of Licensed Products. In the event that either Party becomes aware of the debarment or threatened debarment of any Person providing services to such Party, including the Party itself and its Affiliates, contractors, Sublicensees, Distributors, which directly or indirectly relate to activities under this Agreement, the other Party shall be immediately notified in writing.

 

(h) Compliance. As of the Effective Date, each Party is in material compliance with all Applicable Laws with respect to the subject matter of this agreement, and during the Term, each Party covenants to the other that in the performance of its obligations under this Agreement, such Party shall comply with, and shall cause its and its Affiliates’ employees and Sublicensees to comply, with all Applicable Laws.

 

(i) No Third Party Rights. Neither Brii Bio nor VBI is a party to or otherwise bound by any written contract or agreement, or to such Party’s knowledge, oral agreement, that would result in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any claim in or with respect to, any Inventions or Patents of such Party except as disclosed on Schedule 13 hereto.

 

13.2 Additional Representations, Warranties and Covenants of VBI. VBI represents and warrants to Brii Bio as of the Effective Date, or covenants, as applicable, that:

 

(a) Right to Grant License. Except for VBI’s obligations pursuant to the Ferring License and the Scigen Agreement, no royalties, license fees or other payments are required to be paid to any Third Party in connection with the manufacture, use, sale, or importation of Licensed Products in the Field in the Licensed Territory.

 

(b) Ownership. VBI is the sole and exclusive owner of, or Controls, the VBI Technology under which the license granted pursuant to Section 3.1 herein is provided to Brii Bio by VBI.

 

 

(c) VBI Patents. (i) Schedule A is a true, complete and correct list of the VBI Patents existing as of the Effective Date; (ii) the VBI Patents are to the best of VBI’s knowledge, valid and enforceable; (iii) no Third Party has made any claim against VBI or its Affiliates asserting the invalidity, unenforceability, or non-infringement of any VBI Patents (including, by way of example, through the institution or written threat of institution of interference, nullity, opposition, inter partes or post-grant review or similar invalidity proceedings before the United States Patent and Trademark Office or any analogous foreign Regulatory Authority); (iv) the VBI Patents are being diligently prosecuted in the respective patent offices in in accordance with Applicable Law; and (v) the VBI Patents have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for such payments.

 

(d) Non-Infringement by Third Parties. To VBI’s knowledge, no Third Party is infringing or misappropriating or threatening to infringe or misappropriate any VBI Technology.

 

(e) Non-Infringement of Third Party Rights. Neither VBI nor any of its Affiliates have received any written notice from any Person, or has knowledge of, any actual or threatened claim or assertion that the use or practice of the VBI Patents, infringes or misappropriates the intellectual property rights of a Third Party.

 

(f) Claims; Judgements; Settlements. Except as disclosed in Schedule B, there are no claims, judgments or settlements against or pending, or amounts with respect thereto, owed by VBI or any of its Affiliates, with respect to the VBI Technology under which the license granted pursuant to Section 3.1 herein is provided to Brii Bio by VBI and VBI has not received written notice threatening any such claims, judgments or settlements.

 

(g) Employee Agreements. All current and former employees and consultants of VBI and its Affiliates who are or have been substantively involved in the design, review, evaluation, or development of the VBI Patents have executed written contracts or are otherwise obligated to assign their rights to VBI or its designee.

 

(h) No Third Party Rights. VBI is not a party to or otherwise bound by any written contract or agreement, or to VBI’s knowledge, any oral agreement, that will result in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any claim in or with respect to, any VBI Technology exclusively licensed to Brii Bio hereunder except as disclosed on Schedule 13 hereto.

 

(i) Manufacture of Licensed Product. VBI shall manufacture, store, and transfer the Licensed Product supplied pursuant to Sections 7.1 and 7.2 in accordance with the terms and conditions set forth in a separate Supply Agreement. For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 13.2 until the Parties executed and enter into such separate Supply Agreement.

 

(j) No Other Technology. To VBI’s knowledge, the VBI Technology in existence as of the Effective Date comprises all of the intellectual property rights used by or on behalf of VBI and its Affiliates in the research, development, and manufacturing of the Licensed Product.

 

 

(k) Ferring License and Scigen Agreement. VBI is not in breach of its obligations under the Ferring License or the Scigen Agreement, and during the Term, VBI shall take all actions necessary to maintain the Ferring License or the Scigen Agreement in good standing, and shall not materially breach the Ferring License or the Scigen Agreement. In the event that Ferring or Scigen notifies VBI during the Term that VBI is in material breach of the Ferring License or the Scigen Agreement, VBI shall promptly notify Brii Bio and, to the extent VBI fails to cure such breach, Brii Bio shall have the right to do so.

 

(l) Renewal of [**] Registration. VBI will take Commercially Reasonable Efforts to obtain the renewal of the registration [**] for Licensed Product in [**], and until such time, will be responsible for all expenses and activities associated with such registration renewal, even as such expenses and activities continue beyond the [**]. Immediately upon VBI’s receipt of [**] for Licensed Product in [**], VBI will initiate the transfer of such [**] to Brii Bio. The renewal of the [**] in [**] shall not be considered the first [**] in the Licensed Territory for purposes of Section 9.8, the Sublicense Consideration Payment. If discussed and agreed to at the JSC, Brii Bio shall have the right to work with VBI to obtain the renewal of the [**] in [**]. For the avoidance of doubt, regardless of whether Brii Bio elects to work with VBI to obtain the renewal of the [**] in [**] or not, the renewal of the [**] in [**] shall not be considered the first [**] in the Licensed Territory for purposes of Section 9.8.

 

(m) Release of Israeli Government Lien. VBI will take Commercially Reasonable Efforts to release the 11/16/2014 lien held against certain equipment in the Rehovot facility, an effort which has already begun.

 

13.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR ANY OTHER AGREEMENT CONTEMPLATED HEREUNDER, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW OR OTHERWISE AND EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OR ENFORCEABILITY OF PATENTS OR NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THE PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE LICENSED PRODUCT.

 

Article 14
INDEMNIFICATION

 

14.1 Indemnification of VBI. Brii Bio shall indemnify and hold harmless VBI and its Affiliates, and its and their directors, officers, employees and agents of such entities (the “VBI Indemnitees”) from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’ fees and other expenses of litigation) (“Losses”) from any claims, actions, suits or proceedings brought by a Third Party (a “Third Party Claims”) incurred by any VBI Indemnitee, arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by Brii Bio or its Affiliates or Sublicensees in the Licensed Territory; (b) gross negligence or willful misconduct by or on behalf of Brii Bio or its Affiliates in performing any activities in connection with this Agreement; and (c) any material breach of any representations, warranties or covenants by Brii Bio under this Agreement; except, in each case ((a) – (c)), to the extent such Third Party Claims fall within the scope of the indemnification obligations of VBI set forth in Section 14.2.

 

 

14.2 Indemnification of Brii Bio. VBI shall indemnify and hold harmless each of Brii Bio and its Affiliates and its and their directors, officers, employees and agents of such entities (the “Brii Bio Indemnitees”), from and against any and all Losses from any Third Party Claim incurred by any Brii Bio Indemnitee arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by VBI or its Affiliates in the VBI Territory; (b) gross negligence or willful misconduct by or on behalf of VBI or its Affiliates in performing any activities in connection with this Agreement; and (c) any material breach of any representations, warranties or covenants by VBI under this Agreement; except, in each case ((a) – (c)) to the extent such Third Party Claims fall within the scope of the indemnification obligations of Brii Bio set forth in Section 14.1.

 

14.3 Procedure. A Party that intends to claim indemnification under this Article 14 (the “Indemnitee”) shall promptly notify the indemnifying Party (the “Indemnitor”) in writing of any Third Party Claim, in respect of which the Indemnitee intends to claim such indemnification. The Indemnitee shall provide the Indemnitor with reasonable assistance, at the Indemnitor’s expense, in connection with the defense of the Third Party Claim for which indemnity is being sought. The Indemnitee may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnitor shall have the right to assume and conduct the defense of the Third Party Claim with counsel of its choice, which counsel shall be reasonably acceptable to Indemnitee. The Indemnitor shall not settle any Third Party Claim without the prior written consent of the Indemnitee, not to be unreasonably withheld. So long as the Indemnitor is actively defending the Third Party Claim in good faith, the Indemnitee shall not settle any such Third Party Claim without the prior written consent of the Indemnitee. If the Indemnitor does not assume and conduct the defense of the Third Party Claim as provided above, (a) the Indemnitee may defend against, and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner the Indemnitee may deem reasonably appropriate (and the Indemnitee need not consult with, or obtain any consent from, the Indemnitor in connection therewith), and (b) the Indemnitor will remain responsible to indemnify the Indemnitee as provided in this Article 14. The failure to deliver written notice to the Indemnitor within thirty (30) days after the commencement of any action with respect to a Third Party Claim shall only relieve the Indemnitor of its indemnification obligations under this Article 14 if and to the extent the Indemnitor is actually prejudiced thereby.

 

14.4 Insurance. Each Party, at its own expense, shall maintain product liability and other appropriate insurance (including D&O insurance) in an amount consistent with industry standards, for a company in a similar position to such Party, during the Term, which shall include, but not be limited, to ten million Dollars ($10,000,000). Each Party shall provide the other Party with written notice at least thirty (30) days prior to any cancellation, nonrenewal or material change in the insurance described above. Each Party shall provide a certificate of insurance evidencing such coverage to the other Party upon request. Each Party shall provide a certificate of insurance evidencing its D&O insurance to the other Party annually. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 14.

 

 

Article 15
TERM AND TERMINATION

 

15.1 Term. This Agreement shall commence on the Effective Date, and unless terminated earlier as provided in this Article 15, shall continue in full force and effect on a Region-by-Region and Licensed Product-by-Licensed Product basis until the last-to-expire Royalty Term in the last Region in the Licensed Territory (the “Term”). Upon expiration (but not an earlier termination) of this Agreement in a Region of the Licensed Territory, the license granted to Brii Bio under Section 3.1 shall become perpetual, non-exclusive, fully paid-up, and royalty free in the Field in such Region in the Licensed Territory.

 

15.2 Early Termination. Each Party shall have the right to terminate this Agreement in its entirety before the end of the Term:

 

(a) upon written notice by either Party if the other Party is in material breach of this Agreement and has not cured such breach within sixty (60) days (or thirty (30) days for a breach payment obligations) after receiving notice from the terminating Party requesting cure of the breach. Any such termination shall become effective at the end of such sixty (60) or thirty (30) day period, as applicable, unless the breaching Party has cured any such breach or default prior to the end of such period; provided that, such time periods shall be tolled during the pendency of any good faith dispute that has been deferred to resolution pursuant to Article 16 with respect to the validity of such allegation of breach; or

 

(b) at any time if the other Party shall (i) file in any court or agency pursuant to any statute or regulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets, (ii) propose an out-of-court restructuring of substantially all indebtedness outside the ordinary course of business, (iii) be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof, (iv) propose or be a party to any dissolution or liquidation, (v) make an assignment for the benefit of its creditors, or (vi) admit in writing its inability generally to pay its debts as they fall due in the general course.

 

15.3 Other Brii Bio Termination Rights.

 

(a) Voluntary Termination. Brii Bio shall have the right in its sole and absolute discretion, to terminate this Agreement, either with respect to a Region or in its entirety, upon one hundred and eighty (180) days prior written notice to VBI for convenience, without cause, and for any or no reason.

 

(b) Termination for Safety Reasons. Brii Bio may terminate this Agreement at any time during the Term immediately upon providing written notice to VBI if a 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 (6) consecutive months.

 

15.4 Other VBI Termination Right. VBI shall have the right to terminate this Agreement immediately upon written notice to Brii Bio if Brii Bio or any of its Affiliates, Distributors or Sublicensees 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 VBI Patent.

 

 

15.5 Effects of Termination.

 

(a) VBI Technology. Upon any termination of this Agreement, the licenses granted by VBI to Brii pursuant to Section 3.1 shall automatically terminate.

 

(b) Joint Patents, Joint Inventions, and Joint Know-How. Effective upon termination of this Agreement:

 

(i) Brii Bio shall automatically be deemed to, and hereby does, grant to VBI an exclusive, irrevocable, perpetual royalty-free right and license under Brii Bio’s interest in any Joint Technology in the Field in the VBI Territory; and

 

(ii) VBI shall automatically be deemed to, and hereby does, grant to Brii Bio an exclusive, royalty-free right and licensed under VBI’s interest in the Joint Technology in the Field in the Licensed Territory.

 

15.6 Clinical Trials Upon Termination. In the event there are any on-going Clinical Trials of the Licensed Product in the Field in the Licensed Territory as of the date of termination hereof, the Parties shall negotiate in good faith and adopt a plan to wind-down such Clinical Trials in an orderly fashion or, at VBI’s election, promptly transition such development activities to VBI or its designee, with due regard for patient safety and the rights of any subjects that are participants in any Clinical Trials and take any actions it deems reasonably necessary or appropriate to avoid any human health or safety problems and in compliance with all Applicable Laws.

 

15.7 Brii Bio Regulatory Filings (including Marketing Approval). Upon termination of this Agreement, at VBI’s request and to the extent not already held by VBI, Brii Bio shall assign or cause to be assigned to VBI or its designee (or to the extent not assignable in accordance with Applicable Law, Brii Bio shall take all reasonable actions to make available to VBI or its designee the benefits of all Regulatory Documentation and Marketing Approvals for the Licensed Products in the Licensed Territory) at no cost to VBI, unless such termination is the result of VBI’s material breach of this Agreement pursuant to Section 15.2(a), in which case VBI shall bear the cost of such assignment.

 

15.8 Clinical Supply. Immediately upon termination of this Agreement, Brii Bio shall, at its own cost, return to VBI any unused Licensed Product supplied by VBI for use in Clinical Trials hereunder.

 

 

15.9 Inventory. Upon termination of this Agreement, Brii Bio, its Affiliates, Distributors and Sublicensees, shall have the option to continue, to the extent that Brii Bio, its Affiliates, Distributors and Sublicensees have stocks of Licensed Product remaining, to fulfill orders received from customers for Licensed Products in the Field in the Licensed Territory until up to thirty (30) days after VBI notifies Brii Bio in writing that VBI intends to commercialize such Licensed Product or has secured an alternative Distributor or licensee for the Licensed Product, but in no event for more for than six (6) months after the date of notice of termination. For Licensed Product sold by Brii Bio or its Affiliates, Distributors or Sublicensees after the effective date of a termination Brii Bio shall continue to pay royalties on the amount of Net Sales pursuant to Article 9. Notwithstanding the foregoing, Brii Bio and its Affiliates, Distributors and Sublicensees shall cease such activities in the Licensed Territory upon sixty (60) days written notice given by VBI at any time after the effective date of a termination requesting that such activities (or portion thereof) cease. In the case where VBI has given notice to Brii Bio requesting the cessation of activities pursuant to the provision of this Section, Brii Bio shall notify VBI of an estimate of the quantity of Licensed Product and its shelf life remaining in the inventory of Brii Bio, its Affiliates, Distributors or Sublicensees and VBI shall have the right to purchase any such quantities of Licensed Product from Brii Bio at a price mutually agreed by the Parties.

 

15.10 Transition. Brii Bio shall use Commercially Reasonable Efforts to cooperate with VBI or its designee to effect a smooth and orderly transition in the development, sale and marketing, promotion and commercialization of Licensed Product in the Licensed Territory following termination of this Agreement.

 

15.11 Return of Confidential Information. Upon termination or expiration of this Agreement, each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s possession or control containing Confidential Information of the other Party; provided that such Party may keep one (1) copy of such materials for archival purposes only subject to continuing confidentiality obligations.

 

15.12 [**] and [**]. In the event of a termination of this agreement by Brii Bio pursuant to Section 15.2(a) or Section 15.2(b), then VBI shall use Commercially Reasonable Efforts to facilitate a direct license for Brii Bio under the [**] and the [**].

 

Article 16
DISPUTE RESOLUTION AND GOVERNING LAW

 

16.1 Dispute Resolution Process. The Parties recognize that disputes as to certain matters may from time to time arise during the Term that relate to interpretation of a Party’s rights and/or obligations hereunder or any alleged breach of this Agreement. If the Parties cannot resolve any such dispute within thirty (30) days after written notice of a dispute from one (1) Party to another, either Party may, by written notice to the other Party, have such dispute referred to the Chief Executive Officer of each respective Party, or such person with decision-making authority at a level of at least a senior vice president (collectively, the “Senior Executives”). The Senior Executives shall negotiate in good faith to resolve the dispute within thirty (30) days. During such period of negotiations, any applicable time periods under this Agreement shall be tolled. If the Senior Executives are unable to resolve the dispute within such time period then either Party may submit the dispute as follows:

 

(a) for final resolution of matters not expressly referred to expert determination hereunder, by binding arbitration in accordance with Section 16.2(b). Notwithstanding anything in this Article 16 to the contrary, VBI and Brii Bio shall each have the right to apply to any court of competent jurisdiction for appropriate interim or provisional relief, as necessary to protect the rights or property of that Party;

 

(b) for final resolution of matters designated hereunder to be resolved by expert determination, by expert determination in accordance with Section 16.3.

 

 

16.2 Arbitration.

 

(a) If the parties are unable to resolve such dispute through the procedures described in Section 16.1, then, except in the case of a dispute, controversy or claim that concerns: (i) the validity or infringement of a Patent, trademark or copyright; or (ii) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory, the dispute shall be resolved by expedited binding arbitration before a panel of three (3) independent and neutral experienced arbitrators, one chosen by VBI, one chosen by Brii Bio and the third chosen by the foregoing two (2) arbitrators. Each Party shall select its arbitrator within ten (10) days of one party notifying the other party that it is exercising its rights under this Section 16.2(a), and the two (2) arbitrators shall select the third arbitrator within five (5) days of their selection. Any such arbitration proceeding shall be administered by the Expedited Procedure Rules, irrespective of the amount in dispute, of International Court of Arbitration of the International Chamber of Commerce, with limited discovery, in accordance with its then current rules governing commercial disputes; provided, that, such rules shall be modified by this Section 16.2(a), to the extent any such modifications are necessary.

 

(b) Any arbitration shall be conducted in the English language and applicable arbitration association shall use New York as the governing law for this Agreement and the parties’ obligations hereunder. Within ten (10) days after the arbitrators are selected, the Parties will each submit to the arbitrators, and to one another, a written statement of their respective positions regarding the alleged dispute. The Parties will also provide the arbitrators a copy of this Agreement, as may be amended at such time. Each party will have ten (10) days from receipt of the other party’s submission to provide to the arbitrator a written response thereto. Neither party may have any communication (either written or oral) with the arbitrators other than for the sole purpose of engaging the arbitrator at the outset or as expressly permitted in this Section 16.2(b); provided, that the arbitrator will have the right to meet with the parties, either alone or together, as necessary in the arbitrator’s opinion to make a determination. Based on the materials submitted, the arbitrators will determine whether any discovery process is necessary, and, if it is, the parameters of such process with the intent of resolving the arbitration as expeditiously as possible (e.g., limiting the number of depositions and the time discovery is permitted to take). The Parties and arbitrators shall employ procedures designed to resolve the conflict by arbitration within twelve (12) months of the dispute being referred for arbitration.

 

16.3 Expert Determination. For final resolution of matters designated hereunder to be resolved by expert determination, the Parties hereby agree that such decision shall be conducted expeditiously by an independent expert selected unanimously by the Parties. Either Party may initiate the expert determination by giving written notice to the other Party. If the Parties are unable to agree upon an expert within ten (10) days after receipt of the notice of request for an expert determination, then, the International Centre for Expertise of the International Chamber of Commerce (ICC) shall appoint such expert. The expert, once appointed, shall have no ex parte communications with either Party concerning the expert determination or the underlying dispute. The Parties agree to cooperate fully in the expeditious conduct of such expert determination and to provide the expert with access to all facilities, books, records, documents, information, and personnel necessary to make a fully informed decision in an expeditious manner. Before issuing a final decision, the expert shall issue a draft report and allow the parties to the dispute to comment on it. The expert shall endeavor to resolve the dispute within thirty (30) days (but no later than sixty (60) days) after his or her appointment, taking into account the circumstances requiring an expeditious resolution of the matter in dispute. The expert’s decision shall be final and binding on the Parties. The costs of the expert determination shall be shared by the Parties, regardless of the outcome of the determination.

 

 

16.4 Governing Law; Litigation; Exclusive Venue. This Agreement and all questions regarding its existence, validity, interpretation, breach, or performance, shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles. Any dispute shall be finally settled in a United States Federal Court of competent jurisdiction (or state court if no Federal Court has jurisdiction) located in the State of New York, United States, and the Parties hereby waive any objection to the personal jurisdiction and venue of such courts.

 

Article 17
GENERAL PROVISIONS

 

17.1 Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, earthquakes, extreme weather, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not), terrorism, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any Governmental Authority (each of the foregoing, a “Force Majeure Event”). The non- performing Party shall notify the other Party of such force majeure within ten (10) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non- performing Party shall use commercially reasonable efforts to remedy its inability to perform; provided, however, that in the event the suspension of performance continues for sixty (60) days after the date of the occurrence, the Parties shall meet to discuss in good faith how to proceed in order to accomplish the goals outlined in this Agreement.

 

17.2 Waiver of Breach. No delay or waiver by either Party of any condition or term in any one (1) or more instances shall be construed as a further or continuing waiver of such condition or term or of another condition or term.

 

17.3 Further Assurances. Each Party agrees to execute, acknowledge, and deliver such further instruments, and to perform all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

17.4 Amendment. No amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by both Parties hereto.

 

17.5 Severability. In the event any provision of this Agreement should be held invalid, illegal, or unenforceable, the Parties shall negotiate, in good faith a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties. All other provisions of this Agreement shall remain in full force and effect in such jurisdiction.

 

 

17.6 Entire Agreement. This Agreement (including the Schedules attached hereto) constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all previous agreements and understandings, negotiations, writings, and commitments, either oral or written, in respect to the subject matter hereof. Each of the Parties acknowledges and agrees that, in entering into this Agreement, it does not rely on, and shall have no remedy in respect of, any statement, representation, warranty or understanding (whether negligently or innocently made) of any Person (whether party to this Agreement or not) other than as expressly set out in this Agreement.

 

17.7 Notices. Any notice or communication required or permitted under this Agreement shall be in writing in the English language, delivered personally, sent by email (and promptly confirmed by personal delivery, registered mail, or overnight courier), sent by courier, or sent by registered mail, postage prepaid to the following addresses of the Parties (or such other address for a Party as may be at any time thereafter specified by like notice):

 

To VBI: VBI Vaccines Inc. 160 2nd Street, Floor 3 Cambridge, MA 02142 Attention: Chief Executive Officer Email: [**]

To Brii Bio: Brii Biosciences Limited One City Center, Suite 5-110 110 Corcoran Street Durham, NC 27701 Attention: Zhi Hong Email: [**]

 

Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by courier; (b) on the next Business Day if sent by email; and/or (c) on the fifth (5^th) Business Day following the date of mailing if sent by mail. Notices hereunder will not be deemed sufficient if provided only between or among each Party’s representatives on the Joint Steering Committee.

 

17.8 Assignment. This Agreement shall not be assigned or otherwise transferred, nor may any right or obligations hereunder be assigned or transferred, by either Party without the prior written consent of the other Party; except that either Party may assign or otherwise transfer this Agreement without the consent of the other Party to an Affiliate or to an entity that acquires all or substantially all of the business or assets of the assigning Party relating to the subject matter of this Agreement, whether by merger, acquisition or otherwise, provided that the acquiring Person assumes this Agreement in writing or by operation of law. Subject to the foregoing, this Agreement shall inure to the benefit of each Party, its successors and permitted assigns. Any assignment of this Agreement in contravention of this Section 17.8 shall be null and void.

 

17.9 Relationship of the Parties. The Parties shall be independent contractors of one another and nothing in this Agreement or any action which may be taken pursuant to its terms is intended, or shall be deemed, to establish a partnership, joint venture, or agency between the Parties. Neither Party shall have the authority to make any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other Party. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

 

17.10 Headings. The heading of the Articles and Sections of this Agreement are included for convenience of reference and shall not affect its meaning or interpretation.

 

17.11 Survival. The following provisions shall survive any termination of this Agreement: 10.5, 12.1, 12.2(b), 12.2(c), 12.5, 15.5 through 15.12, and Article 1 (as applicable), Article 11, Article 14, Article 16 and Article 17.

 

17.12 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Executed signature pages of this Agreement may be scanned and delivered electronically and such signatures shall be deemed to bind each Party hereto as if they were original signatures.

 

17.13 Interpretation. Except where the context expressly requires otherwise: (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa); (b) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (e) any reference herein to any person or entity shall be construed to include the person’s or entity’s successors and assigns; (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (g) all references herein to Sections, or Schedules shall be construed to refer to Sections, or Schedules of this Agreement, and references to this Agreement include all Schedules hereto; (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement; (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise, including by e-mail; (j) unless stated otherwise, references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof; (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or”; and (l) references to any Articles include Sections and subsections that are part of the related Section (e.g., a section numbered “Section 3.6” would be part of “Article 3”, and references to “Section 3.6” would also refer to material contained in the subsection described as “Section 3.6(a)”).

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

 

VBI VACCINES INC.

 

By:	/s/ Jeff R. Baxter
Name:	Jeff R. Baxter
Title:	Chief Executive Officer

 

BRII BIOSCIENCES LIMITED

 

By:	/s/ Zhi Hong
Name:	Zhi Hong
Title:	Chief Executive Officer

 

[Signature Page to Collaboration and License Agreement]

 

 

Schedule A

 

VBI Patents

 

No Patents as of the Effective Date.

 

Schedule B

 

Claims; Judgments; Settlements

 

[**]

 

Schedule 13

 

Disclosures

 

[**]

 

 

 

Exhibit 10.4

 

[**]  Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.

 

AMENDED & RESTATED COLLABORATION AND

LICENSE AGREEMENT

 

This AMENDED & RESTATED COLLABORATION AND LICENSE AGREEMENT (“Agreement”) is entered into as of July 5, 2023 (the “Effective Date”) between VBI VACCINES INC., a company organized under the laws of the Province of British Columbia, Canada (“VBI”), and having a principal place of business at 310 Hunt Club Road, Suite 201, Ottawa ON K1V 1C1, and BRII BIOSCIENCES LIMITED, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”), having its registered office at Vistra (Cayman) Limited, PO Box 3119, Grand Pavilion Hibiscus Way, 802 West Bay Road Grand Cayman KYI-1205.

 

WHEREAS

 

A. VBI has developed a new recombinant protein based immunotherapeutic for use in treatment of Hepatitis B;

 

B. Brii Bio obtained from VBI certain exclusive rights and licenses to have made, use, sell, offer for sale, and import VBI’s Hepatitis B recombinant protein based immunotherapeutic in the Field (as defined below) in specific regions pursuant to the Collaboration and License Agreement (“Original License Agreement”) that was entered into as of December 4, 2018 (“Original Effective Date”); and

 

C. Brii Bio desires to expand the territory for its exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI’s Hepatitis B recombinant protein based immunotherapeutic in the Field, and VBI is willing to grant to Brii Bio such expanded rights and licenses on the terms and conditions that are amended and restated and that are set forth in this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, VBI and Brii Bio hereby agree as follows:

 

Article 1

DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings set out in this Article 1 unless the context clearly and unambiguously dictates otherwise.

 

1.1 “Adjuvant” shall mean a substance that modifies or enhances the body’s immune response to an antigen.

 

1.2 “Affiliate” of a Party shall mean any company, partnership, or other entity that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but for only so long as such control exists. For the purposes of this definition, “control” shall mean (i) direct or indirect beneficial ownership of at least fifty percent (50%) of the voting share capital or other equity interest in such Person or (ii) the power to direct the management of such Person by contract or otherwise.

 

 

1.3 “Agreement” has the meaning set forth in the Preamble.

 

1.4 “Applicable Laws” shall mean the applicable provisions of any and all national, state, and local laws, statutes, rules, regulations, administrative codes, ordinances, judgments, decrees, directives, injunctions, orders, permits (including Marketing Approvals) of or from any court, Regulatory Authority or Governmental Authority having jurisdiction over or related to the subject matter.

 

1.5 “Anti-Corruption Laws” shall mean (a) the U.S. Foreign Corrupt Practices Act of 1977, (b) the U.K. Bribery Act 2010, (c) the Peoples Republic of China (PRC) Anti-Unfair Competition Law, and (d) the criminal code of each Region in the Licensed Territory.

 

1.6 “BLA” shall mean a Biologics License Application filed pursuant to the requirements of the FDA under Section 351(k) of the Public Health Services Act (Title 42, U.S.C., Chapter 6A) and 12 C.F.R., Section 601.2, to obtain Marketing Approval for a biological product in the United States, or the equivalent application or filing in another country (as applicable).

 

1.7 “Brii Bio” shall have the meaning set forth in the Preamble.

 

1.8 “Brii Bio Adjuvant” shall mean a novel Adjuvant, having not yet achieved [**] alone or for which a [**] is required, or [**], or [**] of such Adjuvants used by Brii Bio in the execution of development activities hereunder. Such Brii Bio Adjuvant shall be designated by Brii Bio in its sole discretion.

 

1.9 “Brii Bio Know-How” shall mean Know-How owned or Controlled by Brii Bio as of the Effective Date or developed during the Term independent of activities under this Agreement excluding any Joint Know-How.

 

1.10 “Brii Bio Patents” shall mean Patents owned or Controlled by Brii Bio as of the Effective Date or during the Term that cover or claim the Brii Bio Know-How.

 

1.11 “Brii Bio Technology” shall mean the Brii Bio Know-How and the Brii Bio Patents.

 

1.12 “Business Day” shall mean a day other than a Saturday or Sunday or any public holiday in the United States or China. For the avoidance of doubt, references in this Agreement to “days” shall mean calendar days.

 

1.13 “Clinical Trial” shall mean a study in which human subjects or patients are dosed with a drug, whether approved or investigational, including any Phase I Clinical Trial, Phase II Clinical Trial, Phase III Clinical Trial, or any study required to be conducted following Marketing Approval as a condition to maintaining such approval.

 

 

1.14 “Commercially Reasonable Efforts” shall mean, with respect to a Party and an obligation to conduct a particular activity pertaining to the research, development, manufacturing or commercialization obligations hereunder, that level of efforts and resources reasonably required to carry out such obligation consistent with the efforts commonly used by such Party with respect to a biopharmaceutical product which is of similar market potential and at a similar stage in its development or product life, and all other Relevant Factors. Notwithstanding the foregoing, to the extent that the performance of a Party’s obligations hereunder is impaired by the other Party’s failure to perform its obligations hereunder, the determination of whether such first Party has used Commercially Reasonable Efforts in performing a given obligation will be determined in the context of such other Party’s failure. The Parties understand that the level of effort may change over time, reflecting changes in the status of a Product. Furthermore, Commercially Reasonable Efforts will not mean that a Party commits that it will actually accomplish an applicable task, or that it will devote thereto efforts or resources beyond those that a prudent commercial enterprise would devote, even though remaining motivated to do so as described above.

 

1.15 “Competing Product” shall mean a therapeutic vaccine that is for the (i) [**] or [**] of persons infected with Hepatitis B or (ii) treatment of Hepatitis B and that has the same (or similar) [**]. For the avoidance of doubt, [**] as defined in the [**] shall not be considered a competing product under this Agreement, provided it is only developed, marketed, or promoted by VBI for any prophylactic indication for which [**] has obtained [**].

 

1.16 “Confidential Information” shall have the meaning set forth in Section 11.1.

 

1.17 “Confidentiality Agreement” shall mean that certain letter agreement dated July 9, 2018 between VBI and Brii Bio.

 

1.18 “Control” or “Controlled” shall mean, with respect to any Know-How, Patent or other intellectual property right, the legal authority or right (whether by ownership, license or otherwise but without taking into account any rights granted by one Party to the other Party under the terms of this Agreement) of a Party or its Affiliates to grant access, a license or a sublicense of or under such Know-How, Patent or other intellectual property rights to another Party hereto, or to otherwise disclose proprietary or trade secret information to such other Party, without breaching the terms of any agreement with a Third Party, or misappropriating the proprietary or trade secret information of a Third Party, in each case in existence as of the time such Party or its Affiliates would first be required hereunder to grant the other Party such access, license or sublicense.

 

1.19 “Disclosing Party” shall have the meaning set forth in Section 11.1.

 

1.20 “Distributor” shall mean a Third Party to whom Brii Bio has granted the right to market, detail, promote, advertise, sell, and/or distribute Licensed Product in the Licensed Territory.

 

1.21 “Dollar” or “$” shall mean the legal tender of the United States.

 

1.22 “Effective Date” shall have the meaning set forth in the Preamble hereto.

 

 

1.23 “Europe” shall mean the European Union, European Economic Area, and the United Kingdom, as it exists as of the Effective Date, and any countries or territories that subsequently join the European Union or become signatories to the Agreement on the European Economic Area. For clarity, any countries or territories that exit the European Union or the Agreement on the European Economic Area after the Effective Date shall remain part of the Europe for purposes of this Agreement. As of the Effective Date, the European Union includes the following countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden. As of the Effective Date, the European Economic Area includes the European Union and Iceland, Liechtenstein, and Norway.

 

1.24 “EU5” shall mean the following countries in Europe: United Kingdom, Germany, France, Spain, and Italy.

 

1.25 “FDA” shall mean the United States Food and Drug Administration or its successor.

 

1.26 “Ferring” shall have the meaning set forth in Section 1.27.

 

1.27 “Ferring License” shall mean that certain License Agreement that was made as of September 1, 2021, by and among Ferring International Center S.A. (“Ferring”), SciVac Ltd, and VBI, as amended or restated.

 

1.28 “Field” shall mean the diagnosis and treatment of Hepatitis B.

 

1.29 “First Commercial Sale” shall mean with respect to a Licensed Product in any Region in the Licensed Territory, the first sale for monetary value for use or consumption of such Licensed Product in such Region after Marketing Approval for such Licensed Product has been obtained in such Region.

 

1.30 “Force Majeure Event” shall have the meaning set forth in Section 17.1.

 

1.31 “GAAP” shall mean generally accepted accounting principles in the United States, or internationally, as appropriate, consistently applied and shall mean the international financial reporting standards (“IFRS”) at such time as IFRS becomes the generally accepted accounting standard and Applicable Laws require that a Party use IFRS.

 

1.32 “Good Manufacturing Practices” or “GMP” shall mean the then-current good manufacturing practices required by the FDA, as set forth in the United States Federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder, for the manufacture and testing of pharmaceutical materials, and comparable laws or regulations applicable to the manufacture and testing of pharmaceutical materials in jurisdictions outside the United States, as they may be updated from time to time. Good Manufacturing Practices shall include applicable quality guidelines promulgated under the ICH.

 

1.33 “Governmental Authority” shall mean any multinational, federal, national, state, provincial or local entity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative, or taxing authority or functions of any nature over any of the activities contemplated by this Agreement.

 

1.34 “Greater China Region” shall mean the following countries: mainland China, Hong Kong, Taiwan, and Macau.

 

 

1.35 “ICH” shall mean the International Conference on Harmonization (of Technical Requirements for Registration of Pharmaceuticals for Human Use).

 

1.36 “IFRS” shall have the meaning set forth in Section 1.31.

 

1.37 “IND” shall mean an Investigational New Drug Application (including any amendments thereto) filed with the FDA pursuant to 21 C.F.R. §312 before commencement of clinical trials of a pharmaceutical product, or any comparable filings with Regulatory Authorities.

 

1.38 “Inventions” shall mean any and all inventions, discoveries, improvements, processes, and techniques discovered, conceived, or first reduced to practice in the course of activities conducted under this Agreement by, or on behalf of a Party during the Term whether or not patentable or included in any claim of Patents and Patent applications, including all rights, title, and interest in and to the intellectual property rights therein.

 

1.39 “Joint Inventions” shall mean (a) any and all Inventions that are discovered, conceived, or first reduced to practice jointly by the Parties (or their Affiliates) in the course of carrying out any activities conducted under this Agreement; and (b) any Novel Composition. For the avoidance of doubt, “Joint Inventions” shall exclude any Inventions to the extent such Inventions comprise improvements to the VBI Technology or the Brii Bio Technology.

 

1.40 “Joint Know-How” shall mean (a) Know-How that is developed jointly by the Parties or by Third Parties acting on their behalf in the performance of any activities conducted under this Agreement and that is necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export and otherwise commercialize the Licensed Products, and (b) any Know-How that is developed by either Party or jointly by the Parties or by Third Parties acting on their behalf during the conduct of activities to the extent specifically related to the Brii Bio Adjuvant or any Novel Composition.

 

1.41 “Joint Patents” shall mean all Patents claiming any Joint Inventions. The Joint Patents existing as of the Effective Date are set forth on Schedule A-1 hereto.

 

1.42 “Joint Technology” shall mean the Joint Know-How and the Joint Patents.

 

1.43 “Know-How” shall mean information including unpatented Inventions, methods, technologies, data, processes, procedures, techniques, designs, plans, research tools, use of cell lines, reagents, formulations, use of equipment, assay techniques, clinical test design, protocols, product life cycle management strategies and operating conditions except to the extent that such information is publicly available or is otherwise protect by Patent or trade secret law.

 

1.44 “Licensed Compound” shall mean the Hepatitis B antigen containing the S, Pre-S1 and Pre-S2 proteins, which is produced in a CHO cell line owned or Controlled by VBI or an Affiliate of VBI.

 

1.45 “Licensed Product” shall mean VBI-2601 or a Novel Composition (as applicable).

 

1.46 “Licensed Territory” shall mean the entire world (each country of which, a “Region”).

 

 

1.47 “Manufacturing Technology” shall mean any process, technology, information, data, material, or documentation that is necessary or useful in the manufacture, formulation, vialing or release of the Licensed Compound and Licensed Product, including any assays or testing required to comply with GMP including process validation, product identity assays, in-process- control assays and any relevant standard operating procedures, and any standards, samples, and working cell bank vials.

 

1.48 “Marketing Approval” shall mean, with respect to any particular country or Region, all approvals, licenses, registrations or authorizations of any Regulatory Authority necessary to commercially distribute, sell or market a Licensed Product in such country or Region, including, where applicable, (a) pricing or reimbursement approval in such country or Region, (b) pre- and post-approval marketing authorizations (including any prerequisite manufacturing approval or authorization related thereto), (c) labeling approval, and (d) technical, medical and scientific licenses.

 

1.49 “Net Sales” shall mean, with respect to a Licensed Product, the gross amount invoiced during the applicable period with respect to the sale or other disposition of such Licensed Product, if not sold as a [**] or [**] that includes the Licensed Product, in the Licensed Territory by Brii Bio, its Affiliates, or any Sublicensee to a Third Party in a bona fide arm’s length transaction less the following deductions actually incurred, allowed, paid, accrued or specifically allocated in its financial statements for:

 

(a) customary and reasonable trade, quantity, and cash discounts, wholesaler allowances and inventory management fees; and

 

(b) customary and reasonable credits, rebates, and chargebacks (including those to managed-care entities, purchasing entities and government agencies), and allowances or credits to customers on account of rejections or returns (including wholesaler and retailer returns) or on account of retroactive price reductions affecting such Licensed Product.

 

Notwithstanding anything to the contrary, if a Licensed Product is sold as a combination product or regimen that includes the Licensed Product, then the portion of such sale attributable to the Licensed Product will be Attributable Net Sales and not be Net Sales.

 

Net Sales and all such amounts described in (a) and (b) above shall be determined in accordance with the books and records of Brii Bio, its Affiliates, or Sublicensees (as applicable), maintained in accordance with GAAP. At any point during the Term, if VBI includes additional deductions in the Net Sales calculation for purposes of royalty payments to [**] or [**], VBI shall notify Brii Bio to implement changes to the above calculation of Net Sales as well. For the avoidance of doubt, transfers, or sales of Licensed Products between or among Brii Bio and its Affiliates, or Sublicensees will not be included for purposes of calculating Net Sales, unless such purchaser is an end user. Net Sales will not include any Licensed Product supplied for use in clinical trials, for research or for other non-commercial uses, or as part of a compassionate use program (or other program for providing Licensed Product before it has received Marketing Approval in a country).

 

1.50 “Attributable Net Sales” shall mean Net Sales attributable to a Licensed Product, if Brii Bio, its Affiliate or any Sublicensee sells such Licensed Product as part of a combination of products or combination regimen. If not all of the elements of the combination of products or combination regimen are sold individually, then Net Sales with respect to such combination products shall be determined by [**] the total Net Sales of such combination product or combination regimen by the fraction [**], where [**] is the [**] of the Licensed Product that is included in such combination product or regimen in the same dosage amount or quantities in the applicable Region during the applicable quarter if sold separately, and [**] is the sum of the [**] of all other products with which such Licensed Product is combined in such combination product or combination regimen, in the same dosage amount or quantities in the applicable Region during the applicable quarter if sold separately. If [**] cannot be determined because values for such Licensed Product or such other products with which such Licensed Product is combined are not available separately in a particular Region, the Parties shall discuss and make good faith efforts to agree to the value for [**] based on an equitable method of determining the same that takes into account, in the Licensed Territory, variations in potency, the relative contribution of each therapeutically active ingredient, and relative value to the end user by all clinical measures of each therapeutically active ingredient. If the Parties cannot come to agreement, then, prior to any sale of a combination product or combination regimen including the Licensed Product, the values for [**] shall be determined in accordance with the dispute resolution process in Section 16.1 with final resolution by expert determination in accordance with Section 16.3. In determining [**], using any of the factors described in this Section, the price of [**], including [**], shall not be used, or considered in any way. Notwithstanding anything to the contrary, if a Licensed Product is sold as a combination product or combination regimen that includes the Licensed Product, then the portion of such sale attributable to the Licensed Product will be Attributable Net Sales and not be Net Sales.

 

1.51 “NMPA” shall mean the National Medical Products Administration of the People’s Republic of China (formerly the China Food and Drug Administration) and any successor agency(ies) or authority thereto having substantially the same function.

 

1.52 “Novel Composition” shall mean a new recombinant protein based immunotherapeutic formulation which includes the Licensed Compound and a Brii Bio Adjuvant.

 

1.53 “Party” shall mean VBI or Brii Bio individually, and “Parties” shall mean VBI and Brii Bio collectively.

 

1.54 “Patent(s)” shall mean, with respect to any jurisdiction, (a) any and all issued patents and patent applications, including all provisional applications, continuations, continuations-in-part, divisions and renewals, and all patents granted thereon, (b) patents-of- addition, reissues, reexaminations and extensions or restorations by existing or future extension or restoration mechanisms, including patent term adjustments, patent term extensions, supplementary protection certificates or the equivalent thereof, and (c) other forms of government-issued rights substantially similar to any of the foregoing.

 

1.55 “Person” shall mean any individual, corporation, partnership, limited liability company, trust, Governmental Authority, or other legal entity of any nature whatsoever.

 

1.56 “Phase I Clinical Trial” shall mean a clinical study of a Licensed Product in humans the purpose of which is preliminary determination of pharmacokinetics, safety, and tolerability of a dosing regime and for which there may or may not be primary endpoints (as understood by the applicable Regulatory Authorities) in the protocol relating to efficacy.

 

 

1.57 “Phase II Clinical Trial” shall mean a clinical study of a Licensed Product in humans to assess the safety, dose ranging and efficacy or therapeutic benefit of such Licensed Product.

 

1.58 “Phase III Clinical Trial” shall mean a controlled clinical study, or a portion of a controlled study, in humans of the efficacy and safety of a Licensed Product, which study (in its entirety or portion, as applicable), is prospectively designed to demonstrate statistically whether such Licensed Product is effective and safe for use in a particular indication in a manner sufficient to file an application for Marketing Approval.

 

1.59 “Pre-clinical Studies” shall mean studies of a Licensed Product in animals for the purpose of assessing preliminary efficacy, toxicity, pharmacokinetic and safety information.

 

1.60 “PreHevbri Agreement” shall mean the Collaboration and License Agreement between VBI and Brii Bio entered into as of the Effective Date.

 

1.61 “Receiving Party” shall have the meaning set forth in Section 11.1.

 

1.62 “Region” shall have the meaning set forth in Section 1.46.

 

1.63 “Regulatory Authority” shall mean any national, regional, state, or local regulatory agency, department, bureau, commission, council, or other Governmental Authority whose review and/or approval is necessary for the clinical research, development, manufacture, packaging, use, storage, import, export, distribution, promotion, marketing, offer for sale, selling, pricing or reimbursement (as applicable) of Licensed Products, including, for the avoidance of doubt, the NMPA and the FDA.

 

1.64 “Regulatory Documentation” shall mean, with respect to the Licensed Product: (a) all submissions to any Regulatory Authority, including INDs, BLAs, Drug Master Files, correspondence with regulatory agencies (registrations and licenses, regulatory drug lists, advertising and promotion documents), period safety update reports, adverse event files, complaint files and manufacturing records and, if applicable, any updates or supplements to any of the foregoing; (b) any minutes or contact logs with respect to any telephone conferences conducted with any Regulatory Authority relating to the subject matter described in clause (a) of this sentence; and (c) all data including the subject matter described in clause (a), with respect to the testing, development, manufacture, commercialization, or approval of the Licensed Product requested or required by any Regulatory Authority.

 

1.65 “Relevant Factors” shall mean all relevant factors that may affect the development, Marketing Approval or commercialization of a Licensed Product, including (as applicable): actual and potential issues of safety, efficacy or stability; product profile (including product modality, category and mechanism of action); stage of development or life cycle status; actual and projected development, Marketing Approval, manufacturing, and commercialization costs; any issues regarding the ability to manufacture or have manufactured the Licensed Compound or a Licensed Product; the likelihood of obtaining Marketing Approvals (including satisfactory price approvals); the timing of such approvals;

 

 

the current guidance and requirements for Marketing Approval for a Licensed Product and similar products and the current and projected regulatory status; labeling or anticipated labeling; the then-current competitive environment and the likely competitive environment at the time of projected entry into the market; past performance of the Licensed Product or similar products; present and future market potential; existing or projected pricing, sales, reimbursement and profitability; pricing or reimbursement changes in relevant countries; proprietary position, strength and duration of Patent protection and anticipated exclusivity; internal priorities for the Licensed Products compared to other products of such Party (excluding scenarios where there is a termination of activities related to the Licensed Product); and other relevant scientific, technical, operational and commercial factors.

 

1.66 “Royalty Report” shall have the meaning set forth in Section 9.7.

 

1.67 “Royalty Term” shall have the meaning set forth in Section 9.4(a)(iii).

 

1.68 “Scigen Agreement” shall mean that certain Assignment Agreement between FDS Pharma LLP and Scigen Ltd dated February 4, 2012.

 

1.69 “Secondary Manufacturer” shall have the meaning set forth in Section 7.3(a).

 

1.70 “Senior Executives” shall have the meaning set for in Section 16.1.

 

1.71 “SEC” shall mean the US Securities Exchange Commission.

 

1.72 “Sublicense Consideration” shall mean the [**], [**], and/or [**] made with respect to such sublicense that is received by Brii Bio during the Term from the Third Party Sublicensee(s) in the U.S. or in the first EU5 country (subject to Section 9.8) in connection with the grant or exercise of a sublicense pursuant to Section 3.2 herein in the U.S. or EU5. Notwithstanding anything to the contrary, Sublicense Consideration excludes any: (a) milestone payments; (b) royalties, or profit share, paid to Brii Bio that in each case are based on the sale of any Licensed Product or consideration paid to Brii Bio for its purchase of Licensed Product (e.g., transfer pricing); (c) sale of equity securities of Brii Bio to the applicable Sublicensee; (d) payments for an acquisition of Brii Bio by the Sublicensee; (e) payments made by such Sublicensee to reimburse Brii Bio for costs actually incurred in research, development, manufacturing or commercialization of any Licensed Product; (f) reimbursement of costs and expenses incurred in prosecution, maintenance and enforcement of VBI Technology; or (g) amounts received by Brii Bio from such Sublicensee in consideration for a license to intellectual property rights (including Patents or Know-How) that are not the VBI Technology.

 

1.73 “Sublicensee” shall mean a Third Party or an Affiliate of Brii Bio, to whom Brii Bio or an Affiliate of Brii Bio has granted a sublicense under the VBI Technology to, offer for sale and sell Licensed Product in the Field in any country in the Licensed Territory. For clarity, the term “Sublicensee” shall not include any wholesalers that are not granted any sublicense under the VBI Technology to offer for sale and sell Licensed Product in the Field in the Licensed Territory.

 

1.74 “Term” shall have the meaning set forth in Section 15.1.

 

1.75 “Third Party” shall mean any Person other than VBI, Brii Bio and their respective Affiliates.

 

1.76 “Third Party Claims” shall have the meaning set forth in Section 14.1.

 

1.77 “Third Party Royalties” shall mean royalties payable by VBI under the [**] and the [**].

 

1.78 “United States” or “U.S.” shall mean the United States of America, along with its territories and possessions.

 

1.79 “VBI” shall have the meaning set forth in the Preamble.

 

1.80 “VBI-2601” shall mean: (a) a recombinant protein based therapeutic vaccine for use in treating Hepatitis B that incorporates the Licensed Compound; and (b) any recombinant protein based therapeutic vaccine that is a back-up, follow-on, or improved version of the therapeutic vaccine described in the foregoing subsection (a), including a recombinant protein based therapeutic vaccine with a different adjuvant that is Controlled by VBI (or its Affiliates) which is for use in treating Hepatitis B and is Controlled by VBI (or its Affiliates) either as of the Effective Date or during the Term. For the avoidance of doubt, VBI’s approved preventative vaccine PreHevbri, as defined in the PreHevbri Agreement, shall not fall under this definition.

 

 

1.81 “VBI Know-How” shall mean all Know-How that is owned or Controlled by VBI (or its Affiliates), as of the Effective Date or during the Term, and that is necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export and otherwise commercialize the Licensed Compounds or Licensed Products. For the avoidance of doubt, the “VBI Know-How” shall not include Joint Know-How.

 

1.82 “VBI Patents” shall mean all Patents that are owned or Controlled by VBI (or its Affiliates), as of the Effective Date or during the Term, and that: (a) claim the composition of matter of, or the method of making or using Licensed Compounds or Licensed Products; or (b) are otherwise necessary or useful to research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the Licensed Compounds or Licensed Products. For the avoidance of doubt, the “VBI Patents” shall not include Joint Patents. The VBI Patents existing as of the Effective Date are set forth on Schedule A-2 hereto; provided that, any Patent not included on Schedule A-2 that otherwise meets the definition of a VBI Patent shall still be considered a VBI Patent notwithstanding its omission from Schedule A-2.

 

1.83 “VBI Technology” shall mean all VBI Know-How, VBI Patents, and VBI’s interest in Joint Patents and Joint Inventions.

 

Article 2

DESCRIPTION OF THE RELATIONSHIP

 

2.1 Description. VBI wishes to outlicense the development and commercialization of Licensed Product in the Licensed Territory to Brii Bio, and Brii Bio will have the right to develop the Licensed Product for further clinical development in support of an application for Marketing Approval in the Licensed Territory.

Article 3

GRANT OF LICENSES

 

3.1 VBI License to Brii Bio. Subject to the terms and conditions of this Agreement, VBI hereby grants to Brii Bio an exclusive, royalty-bearing license, with the right to grant sublicenses through multiple tiers in accordance with Section 3.2 under the VBI Technology for Brii Bio, its Affiliates and Sublicensees to:

 

(a) perform, or have performed, studies (including Pre-Clinical Studies or Clinical Trials) and regulatory and other activities as may be required to obtain and maintain Marketing Approval of the Licensed Products in the Licensed Territory; and

 

(b) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the Licensed Products in the Field in the Licensed Territory.

 

 

3.2 Sublicenses. Brii Bio shall have the right to sublicense any or all rights granted to it under Section 3.1 in any Region in the Licensed Territory to any of its Affiliates or Third Parties through multiple tiers.

 

3.3 Rights Reserved. Except for the rights and licenses expressly granted in this Agreement, VBI retains all rights under its intellectual property, including the VBI Technology, and Brii Bio retains all rights under its intellectual property.

 

3.4 Option for License Outside the Field. For the duration of the Term, VBI shall have an option to negotiate with Brii Bio an exclusive license under Brii Bio’s interest in the Joint Technology for use outside the Field. In the event that VBI wishes to exercise its option pursuant to this Section 3.4, VBI shall provide written notice to Brii Bio thereof, and within thirty (30) days of Brii Bio’s receipt of such notice, the Parties shall commence negotiating in good faith the terms of such license agreement, which agreement shall include adjuvant licensing terms consistent with market terms and conditions. If the Parties fail to reach agreement on the terms of such exclusive license agreement within one hundred and eighty (180) days after such discussions commence, then, provided that the Parties have negotiated in good faith during such one hundred and eighty (180) day period, Brii Bio shall have no further obligation to negotiate with VBI the terms of such exclusive license.

 

3.5 Provisions for Insolvency.

 

(a) Section 365(n) of the Bankruptcy Code. The license granted pursuant to Section 3.1 is, for all purposes of Section 365(n) of Title 11 of the United States Code, as amended (“Bankruptcy Code”), a license of rights to “intellectual property” as defined in the Bankruptcy Code. The Parties agree that Brii Bio, as licensee of such licenses under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code with respect to such licenses. Without limiting the generality of the foregoing, VBI and Brii Bio intend and agree that any sale of VBI’s assets under Section 363 of the Bankruptcy Code shall be subject to Brii Bio’s rights under Section 365(n) of the Bankruptcy Code, that Brii Bio cannot be compelled to accept a money satisfaction of its interests in the intellectual property licensed pursuant to this Agreement, and that any such sale therefore may not be made to a purchaser “free and clear” of Brii Bio’s rights under this Agreement and Section 365(n) of the Bankruptcy Code without the express, contemporaneous consent of Brii Bio.

 

(b) Transfers and Non-Interference Rights Permitted under Section 365(n). Subject to Section 3.5(b)(iii), if a case under the Bankruptcy Code is commenced by or against VBI, this Agreement is rejected as provided in the Bankruptcy Code, and Brii Bio elects to retain its rights hereunder as provided in Section 365(n) of the Bankruptcy Code, VBI (in any capacity, including debtor-in-possession) and its successors and assigns (including a trustee) shall:

 

(i) provide to Brii Bio all such intellectual property licensed hereunder (including all embodiments thereof) held by VBI and such successors and assigns, or otherwise available to them, upon the Brii Bio’s written request. Whenever VBI or any of its successors or assigns provides to Brii Bio any of the intellectual property licensed hereunder (or any embodiment thereof) pursuant to this Section 3.5, Brii Bio shall have the right to perform VBI’s obligations hereunder with respect to such intellectual property, but neither such provision nor such performance by Brii Bio shall release VBI from liability resulting from rejection of the license or the failure to perform such obligations; and

 

(ii) not interfere with Brii Bio’s rights under this Agreement, or any agreement supplemental hereto, to such intellectual property (including such embodiments), including any right to obtain such intellectual property (or such embodiments) from another entity to the extent provided in Section 365(n) of the Bankruptcy Code.

 

(iii) Notwithstanding anything to the contrary elsewhere in this Agreement, VBI’s obligations under Section 3.5(b)(i), 3.5(b)(ii), and 3.5(b)(iv)shall be limited as necessary to ensure compliance with VBI’s obligations under the Ferring License; provided, however that, within one (1) year of the Effective Date, VBI shall use Commercially Reasonable Efforts to obtain all applicable consents that are required under the Ferring License to permit the transfer to such Brii Bio under Section 3.5(b)(i) and (ii).

 

(iv) As used in Section 3.5(b)(i) and (ii), “embodiments” of intellectual property within the meaning of Section 365(n) include laboratory notebooks, cell lines, vectors, reagents, assays, product samples and inventory, research studies and data, Regulatory Documentation and Marketing Approvals.

 

(c) Cumulative Remedies. All rights, powers, and remedies of Brii Bio provided herein are in addition to and not in substitution for any and all other rights, powers, and remedies now or hereafter existing at law or in equity (including the Bankruptcy Code) if a case under the Bankruptcy Code commences with respect to VBI.

 

3.6 Transfer of Regulatory Documentation.

 

(a) As soon as practical after the Effective Date, VBI shall (at no additional cost to Brii Bio) commence disclosing and making available to Brii Bio the Regulatory Documentation for the Licensed Product and the relevant VBI Know-How, including any additional materials that are reasonably required and available in connection with Brii Bio’s development and commercialization of Licensed Products (the “Initial Transfer”). VBI shall complete such Initial Transfer no later than thirty (30) days after the Effective Date.

 

(b) Beginning on the first anniversary of the completion of the Initial Transfer, and on each anniversary thereafter during the Term, VBI shall: (i) at least on an annual basis, provide Brii Bio with a description of any new Regulatory Documentation and new VBI Know-How including any significant manufacturing process changes, developed since the last such summary that is necessary or reasonably useful for Brii Bio’s development, manufacture, and commercialization of Licensed Products during the Term, in the event that Brii Bio has elected to effect a Technology Transfer under 7.3; (ii) transfer any such Regulatory Documentation and new VBI Know-How to Brii Bio upon request; and (iii) provide Brii Bio with reasonable access to technical assistance regarding the Regulatory Documentation, at Brii Bio’s reasonable expense.

 

Article 4

GOVERNANCE

 

4.1 Dissolution of Joint Steering Committee. The Joint Steering Committee that was created under the Original License Agreement shall automatically dissolve and cease to exist upon the Effective Date.

 

 

Article 5

DEVELOPMENT ACTIVITIES

 

5.1 Development Reports. Brii Bio shall provide annual high-level development reports to VBI describing ongoing and planned development activities (including the progress and finalization of the first new Phase II clinical protocol for the Licensed Product) until such time as a first Marketing Approval is obtained in the Licensed Territory.

 

5.2 Remedial Actions. Each Party shall promptly notify the other Party in writing if it obtains information indicating that any Licensed Products may be subject to any recall, corrective action, or other regulatory action by any Regulatory Authority (a “Remedial Action”). The Parties shall reasonably assist each other in gathering and evaluating such information as is necessary to determine the necessity of conducting a Remedial Action. Brii Bio shall have the sole discretion with respect to any matters relating to any Remedial Action in the Licensed Territory, including the decision to commence such Remedial Action and the control over such Remedial Action. The cost and expenses of any Remedial Action in the Licensed Territory shall be borne solely by Brii Bio, except to the extent any such Remedial Action is caused by the negligence, gross negligence, willful misconduct, or breach of this Agreement by VBI or its Affiliates. Brii Bio shall, and shall ensure that its Affiliates and sublicensees will, maintain adequate records to permit the Parties to trace the distribution, sale, and use of Licensed Products in the Licensed Territory.

 

5.3 VBI Termination Right for Inaction by Brii Bio. If Brii Bio terminates or otherwise ceases efforts to develop, seek to obtain marketing and regulatory approvals for, and to commercialize VBI-2601 for a period of eighteen (18) consecutive months, VBI shall have a right to terminate under Section 15.2(a).

 

Article 6

REGULATORY ACTIVITIES

 

6.1 Marketing Approval.

 

(a) Regulatory Plan. Brii Bio shall develop, in its sole discretion, a regulatory plan for each Licensed Product that describes the regulatory actions to be taken by Brii Bio to obtain Marketing Approval in the Field in the Licensed Territory with respect to such Licensed Product.

 

(b) Diligence. Brii Bio shall use Commercially Reasonable Efforts to obtain and maintain Marketing Approval for at least one (1) Licensed Product in at least the US and Greater China.

 

(c) Regulatory Submissions. Brii Bio, or its designated Affiliate, shall have the sole right to prepare, submit and own all Regulatory Documentation in the Licensed Territory, including applications for Marketing Approval in the Licensed Territory. For the avoidance of doubt, as soon as practicable in accordance with Applicable Law, VBI shall transfer any existing Marketing Approval(s) for the Licensed Product currently in VBI’s name to Brii Bio.

 

(d) Communications with Regulatory Authorities. Brii Bio shall have sole responsibility and authority to communicate with Regulatory Authorities in the Licensed Territory regarding the Clinical Trials and the Marketing Approvals.

 

 

(e) VBI Assistance. VBI shall, and shall cause its Affiliates to, provide all reasonable assistance, facilitation and support including providing all documents and data, and translations thereof, reasonably requested by Brii Bio in a timely manner and at Brii Bio’s cost to obtain and maintain Marketing Approvals in the Licensed Territory and the applicable product importation licenses. Such documents shall include copies of any clinical study reports or clinical data regarding the Licensed Products in its possession and by providing comments on Regulatory Documentation to be filed by Brii Bio at Brii Bio’s request. For the avoidance of doubt, VBI shall not be obligated as a result of this Section 6.1(e) to develop or prepare additional information or materials beyond those that it has otherwise developed or prepared for its own purposes.

 

6.2 Exchange of Information. VBI shall promptly provide to Brii Bio with copies of any communications, and translations thereof, received from, or sent to, any Regulatory Authority in the Licensed Territory, with respect to the Clinical Trials, the Marketing Approval, or the Licensed Products.

 

6.3 Rights of Reference. Brii Bio shall have the right to cross reference, file or incorporate by reference any Regulatory Documentation for any Licensed Product, or any component thereof (including all Marketing Approvals), in order to support regulatory submissions that Brii Bio may make for a Licensed Product in the Licensed Territory. For the avoidance of doubt, VBI shall not be obligated as a result of this Section 6.3 to develop or prepare additional information or materials beyond those that it has otherwise developed or prepared for its own purposes.

 

6.4 Pharmacovigilance. VBI shall transfer to Brii Bio the currently existing global safety database for Licensed Product (at Brii Bio’s reasonable expense), and Brii Bio shall thereafter be responsible, at its own expenses, for the maintenance of such global safety database for Licensed Product. Brii Bio shall be the sole owner of this global safety database. As per Applicable Law, the holder of the Marketing Approvals are responsible for compliance with Applicable Laws and regulatory requirements regarding VBI-2601 in the Licensed Territory. As such, Brii Bio shall, at its own expense, adopt and maintain a service responsible to handle pharmacovigilance in the Licensed Territory concerning VBI-2601.

 

6.5 Funding Obligation. Brii Bio shall bear one hundred percent (100%) of all costs and expenses relating to requesting and maintaining Marketing Approval for the Licensed Product in the Licensed Territory.

 

Article 7

SUPPLY OBLIGATIONS

 

7.1 Clinical Supply Obligations. VBI shall supply quantities of Licensed Product for use by Brii Bio in the conduct of Clinical Trials in the Licensed Territory, either itself or through a Secondary Manufacturer, subject to Section 7.3 and in accordance with the terms and conditions set forth in a separate supply agreement, which will be entered as of the Effective Date (“Supply Agreement”). For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 7.1 until the Parties executed and enter into such separate Supply Agreement.

 

 

7.2 Commercial Supply. VBI shall supply quantities of Licensed Product for use by Brii Bio in the commercialization of Licensed Product in the Licensed Territory, either itself or through a Secondary Manufacturer, and in accordance with the terms and conditions set forth the Supply Agreement. For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 7.2 until the Parties executed and enter into such Supply Agreement.

 

7.3 Technology Transfer.

 

(a) Subject to Section 7.3(d), at any time during the Term, Brii Bio may elect to have VBI transfer manufacturing responsibility for clinical supply and commercial supply of Licensed Product in the License Territory to Brii Bio or a Third Party manufacturer (to the extent permitted by Applicable Law) (the “Secondary Manufacturer”) by so notifying VBI in writing. Once Brii Bio has elected to have VBI initiate such transfer, then VBI will use Commercially Reasonable Efforts to effect a transfer of the Manufacturing Technology, and to fully enable such Secondary Manufacturer to manufacture Licensed Products for clinical or commercial use in the Licensed Territory, in accordance with the requirements set forth in this Section 7.3.

 

(b) VBI shall promptly, but in any event within forty-five (45) days of VBI’s receipt of such notice commence a transfer of the Manufacturing Technology for the Licensed Product to the Secondary Manufacturer, including the transfer of any necessary samples or reference standards.

 

(c) Within ninety (90) days of VBI’s receipt of such notice, VBI shall commence meeting with such Secondary Manufacturer, providing training, technical support, and continued delivery of any Manufacturing Technology. Thereafter, VBI shall provide such services as necessary to complete the transfer of the Manufacturing Technology, including delivery of any materials or embodiments of Manufacturing Technology, participating in ongoing discussions, and providing in-person support and training. VBI’s contribution to the costs relating to the transfer of Manufacturing Technology shall be limited to the reasonable provision of the services of VBI staff members, for a maximum of two (2) years from the initiation of the transfer. Any additional obligations or costs required to effect such transfer of Manufacturing Technology to the Secondary Manufacturer shall be borne by Brii Bio. For the avoidance of doubt, nothing in this Section 7.3(c) shall require VBI to develop any new Manufacturing Technology applicable to the Licensed Product for use by the Secondary Manufacturer, provided that, on a calendar year basis, VBI shall provide to the Secondary Manufacturer any updates or improvements to the Manufacturing Technology relating to the Licensed Product that have been developed by VBI in the prior calendar year. Brii Bio acknowledges that, as between the Parties, all right, title and interest to such Manufacturing Technology belongs to VBI and that, subject to Section 7.3(d), the Secondary Manufacturer will be permitted to use such Manufacturing Technology solely for the purpose of manufacturing the Licensed Product for the clinical or commercial supply to Brii Bio under this Agreement.

 

(d) Notwithstanding anything to the contrary elsewhere in this Agreement, VBI’s obligations under this Section 7.3 shall be limited as necessary to ensure compliance with VBI’s obligations under the Ferring License; provided, however that, within thirty (30) days of receiving Brii Bio’s election to transfer manufacturing responsibility for clinical supply or commercial supply of Licensed Product in the License Territory to any Secondary Manufacturer, VBI shall use Commercially Reasonable Efforts to obtain all applicable consents that are required under the Ferring License to permit the technology transfer to such Secondary Manufacturer.

 

 

Article 8

 

COMMERCIALIZATION AND PROMOTION

 

8.1 Commercialization of Product.

 

(a) Brii Bio Responsibilities. Brii Bio shall have the exclusive right and responsibility for commercializing Licensed Products in the Field in the Licensed Territory in accordance with the terms and conditions of this Agreement. Commercialization of Licensed Products shall include, but not be limited to:

 

(i) establishing the commercialization and marketing strategy and tactics;

 

(ii) establishing pricing and reimbursement policies;

 

(iii) receiving, accepting, and filling orders;

 

(iv) bidding and listing;

 

(v) labeling;

 

(vi) advertising and detailing;

 

(vii) storage and distribution to customers;

 

(viii) controlling invoicing, processing orders, and collecting accounts receivable for sales; and

 

(ix) recording sales in its books of account for sales.

 

(b) Commercialization Plan; Commercialization Reports. Within a reasonable time prior to anticipated launch of a Licensed Product, Brii Bio shall prepare a high-level summary setting forth the material commercialization activities planned for such Licensed Product in the Field in the Licensed Territory. For each calendar year following the First Commercial Sale of such Licensed Product, Brii Bio shall, within forty-five (45) days after the end of such calendar year, provide to VBI a high-level report summarizing the commercialization activities performed by or on behalf of Brii Bio in such calendar year to enable VBI to assess Brii Bio’s commercialization obligations set forth in this Article 8, including the commercialization obligation set forth in Section 8.1(c).

 

(c) Diligence. Brii Bio shall use Commercially Reasonable Efforts to commercialize at least one (1) Licensed Product in the Field in at least the US and Greater China in accordance with the provisions of this Agreement.

 

8.2 Territory Compliance. VBI and its Affiliates: (a) shall not, directly or indirectly, commercialize any Licensed Product in the Licensed Territory, whether inside or outside of the Field; and (b) shall promptly cease selling or distributing any Licensed Product to any Third Party, or otherwise assisting any Third Party, who is commercializing or attempting to commercialize or distribute any Licensed Product in the Licensed Territory.

 

 

8.3 Compliance with Laws. Each Party hereby agrees that it will comply in all material respects with all Applicable Laws, including Anti-Corruption Laws, and in accordance with appropriate or applicable standards of pharmaceutical product promotion practices, fair trade, fair competition, and business ethics in performance of its obligations hereunder, including the commercialization of Licensed Products in the Licensed Territory.

 

8.4 Competing Product. During the Term, VBI shall not conduct research or development activities directed towards, sell, or offer to sell, nor shall it authorize any Third Party to conduct research or development activities directed towards, or sell or offer to sell, any Competing Product for any use in any Region of the Licensed Territory.

 

Article 9

FINANCIAL TERMS

 

9.1 Up-Front Payment. In partial consideration of the rights granted by VBI to Brii Bio hereunder, and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI a one-time fee in the amount of five million Dollars ($5,000,000) (the “Up-Front Payment”) on or before ten (10) days after the Effective Date.

 

9.2 Regulatory and Commercial Milestones.

 

(a)

In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI the regulatory and commercial milestone payments set forth below:

 

Regulatory and Commercial Milestone		Milestone Payment if Licensed Product is VBI-2601		Milestone Payment if Licensed Product is a Novel Composition
Initiation of the [**] for a Licensed Product in mainland China		[**]		[**]
[**] in mainland China for a Licensed Product		[**]		[**]
[**] of a Licensed Product in the United States		[**]		[**]
[**] of a Licensed Product in a Region that is not the United States or mainland China		[**]		[**]

 

 

For the purposes of this Section 9.2, “initiation” means the date the first patient is dosed with a Licensed Product in the [**]. Each milestone payment in this Section 9.2 shall be payable only upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone, whether for the same or a different Licensed Product.

 

(b) Brii Bio shall promptly, but in any event no later than ten (10) days following achievement of a regulatory milestone by Brii Bio or any of its Affiliates, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment set forth above with respect to such regulatory milestone, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

9.3 Net Sales Milestones.

 

(a)

In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI the following sales milestones on Net Sales by Brii Bio or its Affiliates:

 

Annual Net Sales in the Greater China Region		Milestone Payment
[**]		[**]
[**]		[**]
[**]		[**]

 

Annual Aggregate Net Sales in the Licensed Territory excluding the Greater China Region		Milestone Payment
[**]		[**]
[**]		[**]
[**]		[**]

 

Each milestone payment in this Section 9.3 shall be payable only once upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone. For the avoidance of doubt, for the purpose of this Section 9.3(a) above, the annual Net Sales milestone thresholds are triggered by total Net Sales, as defined in Section 1.49.

 

(b) Brii Bio shall promptly, but in any event no later than ten (10) days following achievement by Brii Bio or any of its Affiliates of a milestone based on Net Sales, inform VBI of such achievement. Thereafter, VBI shall promptly invoice Brii Bio for the payment set forth above with respect to such milestone based on Net Sales, and Brii Bio shall pay such invoice within thirty (30) days of receipt.

 

 

(c) Brii Bio shall promptly, but in any event no later than ten (10) days following receipt of each milestone that is based on annual Net Sales and that is from the first Third Party Sublicensee in the U.S., inform VBI of such sales milestone and the amount. Thereafter, VBI shall promptly invoice Brii Bio for VBI’s [**] percent ([**]%) share of such sales milestone (minus any taxes owed by Brii Bio in connection with such milestone payment), and Brii Bio shall pay such invoice within thirty (30) days of receipt. Notwithstanding anything to the contrary, if VBI receives a Net Sales milestone payment under Section 9.3(c) in a specific Region, then Net Sales in such Region will be excluded from the Net Sales milestone achievement calculations included in Section 9.3(a). VBI will not be entitled to both a payment under Sections 9.3(a) and 9.3(c) in the same Region.

 

9.4 Royalty Payments.

 

(a) In partial consideration of the rights granted by VBI to Brii Bio hereunder and subject to the terms and conditions set forth in this Agreement, Brii Bio shall pay to VBI a royalty of [**] percent ([**]%) of Net Sales or Attributable Net Sales, as applicable, of each Licensed Product in each Region from the date of the First Commercial Sale of such Licensed Product in such Region until the later of:

 

(i) expiration, invalidation or lapse of the last VBI Patent claiming such Licensed Product,

 

(ii) ten (10) years from the date of First Commercial Sale of such Licensed Product in the applicable Region, or

 

(iii) termination or expiration of VBI’s obligation to pay Third Party Royalties with respect to sales of such Licensed Product in such Region (the “Royalty Term”).

 

9.5 Royalty Reduction. The amount of royalties payable by Brii Bio pursuant to Section 9.4 shall be reduced in the following circumstances:

 

(a) in the event that VBI negotiates a reduction in Third Party Royalties (e.g., through a reduced Third Party Royalty rate under the [**] or [**]) with respect to Licensed Products in the Field in the Licensed Territory, then the royalties payable by Brii Bio to VBI in Section 9.4 shall be reduced by [**] percent ([**]%) of the reduction in such Third Party Royalties provided to VBI; and

 

(b) in the event that royalties are payable by Brii Bio for a Licensed Product pursuant to Section 9.4(a)(iii), but not Section 9.4(a)(i) or 9.4(a)(ii), then the amount of royalties payable by Brii Bio for such Licensed Product shall be reduced to the amount payable by VBI under the [**] and [**], subject to any reduction in such amounts pursuant to Section 9.5(a) above.

 

9.6 Third Party Licenses.

 

(a) Royalty Re-Negotiation. VBI will use Commercially Reasonable Efforts during the Term to negotiate a reduction in the Third Party Royalties payable on Licensed Products. On the first anniversary of the Effective Date, and every six (6) months thereafter during the Term, VBI shall provide detailed written updates to Brii Bio with respect to the status of such re-negotiations.

 

(b) Stand-By Side Letter. VBI will use Commercially Reasonable Efforts to facilitate the negotiation of a stand-by side letter between [**] and Brii Bio by the twelve (12) month anniversary of the Effective Date, which stand-by side letter shall provide that, in the event of a termination of the [**] as a result of VBI’s material breach of such license or VBI’s bankruptcy or other insolvency event, [**] shall enter into a license agreement with Brii Bio for the Licensed Territory on substantially the same terms set forth in the [**].

 

9.7 Royalty Payments and Reports. Within forty-five (45) days after the end of each calendar quarter (or, for the last quarter in a calendar year, sixty (60) days after the end of such quarter) during the Royalty Term, Brii Bio shall make all royalty payments payable to VBI under this Agreement with respect to such quarter. Along with such payments, Brii Bio shall also provide a report containing reasonably detailed information regarding the calculation of royalties due pursuant to Article 9 including allowable deductions in the calculation of Net Sales of each Licensed Product on which royalties are paid (the “Royalty Report”).

 

 

9.8 Sublicense Consideration Payments. Brii Bio shall pay to VBI the applicable percentage of Sublicense Consideration (as set forth below) actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) during the Term based on the date when Brii Bio grants the first sublicense that has a licensed territory in the U.S. or EU5 (in separate agreements), or in the U.S. and EU5, or worldwide, (in the same agreement) and that is granted to the first Third Party Sublicensee as follows:

 

(a) If the sublicense grant occurs in the period beginning on [**] and ending [**] months after the first new [**] for the Licensed Product is finalized by Brii Bio, then Brii Bio shall pay VBI:

 

(i) [**] percent ([**]%) of all Sublicense Consideration actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from the first sublicense that has a licensed territory in the U.S. that is granted to a Third Party. In the event that the first sublicense covering the U.S. is granted contemporaneously, but in separate agreements, with a first sublicense in EU5, the Sublicense Consideration will apply to the agreement that has the [**]; or

 

(ii) [**] percent ([**]%) of all Sublicense Consideration actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from the first sublicense that has a licensed territory in the U.S. and EU5, or worldwide, and that is granted to a Third Party in a single agreement.

 

(b) If the sublicense grant occurs in the period beginning after the [**] anniversary of the date that the first new [**] for the Licensed Product is finalized by Brii Bio and before the [**] month anniversary of the date that the first new [**] for the Licensed Product is finalized by Brii Bio[**], then Brii Bio shall pay VBI:

 

(i) [**] percent ([**]%) of all Sublicense Consideration actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from the first sublicense that has a licensed territory in the U.S. that is granted to a Third Party. In the event that the first sublicense covering the U.S. is granted contemporaneously, but in separate agreements, with a first sublicense in EU5, the Sublicense Consideration will apply to the agreement that has the [**]; or

 

(ii) [**] percent ([**]%) of all Sublicense Consideration actually received by Brii Bio (minus any taxes owed by Brii Bio in connection with such Sublicense Consideration) from the first sublicense that has a licensed territory in the U.S. and EU5, or worldwide, and that is granted to a Third Party in a single agreement.

 

(c) If the sublicense grant occurs after the [**] anniversary of the date that the first new [**] for the Licensed Product is finalized by Brii Bio, regardless of the licensed territory, then Brii Bio shall pay VBI [**] percent ([**]%) of all Sublicense Consideration actually received by Brii Bio.

 

Brii Bio shall notify VBI in writing of the grant of such Sublicense by Brii Bio promptly following the occurrence thereof, but in no event later than fifteen (15) days following the occurrence thereof, together with a written statement setting forth in reasonable detail the calculation of the Sublicense Consideration and sublicense payment due pursuant to this Section 9.8 (including all the deductions taken in such calculations). Brii Bio shall pay to VBI the applicable sublicense payment within thirty (30) days after Brii Bio’s receipt of the corresponding Sublicense Consideration.

 

 

9.9 No Projections or Guaranteed Revenue.

 

(a) Each Party acknowledges and agrees that: (i) nothing in this Agreement shall be construed as representing an estimate or projection of anticipated sales of any Licensed Product; and (ii) the milestone events and Net Sales set forth above or that have otherwise been discussed by the Parties are merely intended to define the milestone events and royalty obligations to VBI if such milestone events or Net Sales are achieved.

 

(b) VBI expressly acknowledges and agrees that it may not receive and, absent the achievement of a milestone event in Sections 9.2 or 9.3, the achievement of Net Sales of a Licensed Product, or the grant of a sublicense to a Third Party Sublicensee, will not be entitled to receive any further payments hereunder (including any milestone payments, royalties, or Sublicense Consideration) other than the consideration set forth in Section 9.1. The Parties expressly acknowledge and agree that the milestone payments, royalties, and Sublicense Consideration are contingent upon satisfaction of conditions provided for herein that may not be satisfied, and as a result, some or all of such payments may not become obligations of Brii Bio (or its assigns) and may therefore never be paid. VBI expressly acknowledges that: (i) the consideration set forth in Section 9.1; and (ii) the possibility of receiving milestone payments, royalties, and Sublicense Consideration in accordance with the terms set forth herein constitute sufficient consideration for entering into this Agreement and granting Brii Bio an exclusive license granted pursuant to Section 3.1 herein. Neither Party has made any representation or warranty to the other that any such conditions will be satisfied. Accordingly, if such conditions to make any payment are not satisfied, no Party will have any recourse against the other Party hereunder solely as a result of such failure to pay unless there is an independent breach of this Agreement.

 

Article 10

PAYMENTS, BOOKS AND RECORDS

 

10.1 Payment Method. All payments to VBI under this Agreement shall be made by bank wire transfer in immediately available funds to an account in the name of VBI designated in writing by VBI. Payments hereunder shall be considered to be made as of the day on which they are received by VBI’s designated bank.

 

10.2 Payment Currency: Currency Conversion.

 

(a) United States Dollars. Unless otherwise expressly stated in this Agreement, all amounts specified to be payable under this Agreement are in Dollars and shall be paid in Dollars.

 

(b) Currency Conversion. For the purpose of computing the Net Sales for any Licensed Product sold in a currency other than Dollars, or Sublicense Consideration, such Net Sales or Sublicense Consideration shall be converted into Dollars each quarter using an exchange rate that is the arithmetic average of the daily exchange rates (obtained as described below) during such quarter. Each daily exchange rate shall be obtained from The Wall Street Journal, Eastern United States Edition, or, if not so available, as otherwise agreed by the Parties.

 

(c) Blocked Currency. Notwithstanding the provisions of Section 10.2, if by Applicable Law or fiscal policy of a Region, conversion into Dollars or transfer of funds of a convertible currency to the United States is restricted, forbidden or substantially delayed, then amounts accrued in such Region shall be paid to VBI in such Region in local currency by deposit in a local bank designated by VBI for a period no longer than one hundred and twenty (120) days, after which any payments due to VBI shall be paid in Dollars, unless the Parties otherwise agree.

 

 

10.3 Taxes.

 

(a) Cooperation and Coordination. The Parties acknowledge and agree that it is their mutual objective and intent to minimize, to the extent feasible, income and other taxes payable with respect to their collaborative efforts under this Agreement and that they shall use their reasonable efforts to cooperate and coordinate with each other to achieve such objective.

 

(b) Payment of Tax. A Party receiving a payment shall pay any and all taxes levied on such payment. If the taxing authorities of any relevant jurisdiction assert that amounts are required to be withheld from the payments due to a Party hereunder, or the tax laws in one (1) or more jurisdictions have changed so as to explicitly require such treatment, the Party made aware of such assertion or change in law shall inform the other Party within thirty (30) days and shall consult with the other Party regarding the consequences of such assertion or change. If Applicable Laws require that taxes be deducted and withheld from a payment, the remitting Party shall: (i) deduct those taxes from the payment; (ii) pay the taxes to the proper taxing authority; (iii) send evidence of the obligation together with proof of payment to the other Party within sixty (60) days following that payment; and (iv) shall provide such assistance as the other Party may reasonably require in obtaining any refund of such amounts to which the other Party may be entitled, to the extent that such assistance does not cause the remitting Party to incur any liability in respect of the taxes asserted to be due.

 

10.4 Records. Brii Bio shall keep, and cause its Affiliates and Sublicensees to keep, complete, true, and accurate books of accounts and records for the purpose of determining, in a manner consistent with GAAP, the amounts payable to VBI pursuant to this Agreement. Such books and records shall be kept for such period of time required by law, but no less than at least three (3) years following the end of the calendar quarter to which they pertain. Such records shall be subject to inspection in accordance with Section 10.5.

 

10.5 Audits. Upon not less than sixty (60) days’ prior written notice, Brii Bio shall permit an independent, certified public accountant selected by VBI and reasonably acceptable to Brii Bio, which acceptance will not be unreasonably withheld or delayed (for the purposes of this Section 10.5, the “Auditor”), to audit or inspect those books or records of Brii Bio, its Affiliates, or Sublicensees that relate to Net Sales and Royalty Reports for the sole purpose of verifying the: (a) royalties payable hereunder in respect of Net Sales; (b) withholding taxes, if any, required by Applicable Law to be deducted as a payment by Brii Bio in respect of such Net Sales; and (c) exchange rates used in determining the amount of Dollars. Such Auditor shall be under reasonable written obligations of confidentiality to the audited party and shall disclose to VBI only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement. Notwithstanding the foregoing, provided that Brii Bio obtains an audit right for itself with respect to a Sublicensee’s records that is consistent with the terms of this Section 10.5, as well as the right to share the results of such audit with VBI, Brii Bio shall not be required to obtain from such Sublicensee a direct audit right for VBI. The Auditor shall send a copy of the report to Brii Bio at the same time it is sent to VBI. Such inspections may be made no more than once each calendar year and during normal business hours. VBI shall be responsible for the cost of any such audit, provided that if the Auditor determines that Brii Bio has underpaid any amounts payable to VBI hereunder by ten percent (10%) or more, Brii Bio shall pay the costs and expenses of such audit.

 

 

10.6 Late Payments. In the event that any payment due under this Agreement is not made when due, the payment shall accrue interest from the date due at a rate per annum equal to three percent (3%) above the U.S. Prime Rate (as set forth in the Wall Street Journal, Eastern Edition) for the date on which payment was due, calculated daily on the basis of a three hundred and sixty-five (365)-day year, or similar reputable data source; provided that, in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit the Party entitled to receive such payment from exercising any other rights it may have as a consequence of the lateness of any payment.

Article 11

CONFIDENTIALITY

 

11.1 Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, the Parties agree that the receiving Party (the “Receiving Party”) shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement any confidential or proprietary information and materials, patentable or otherwise, in any form (written, oral, photographic, electronic, magnetic, or otherwise) which is disclosed to it by the other Party (the “Disclosing Party”) including, but not limited to, all Know How, Inventions and any other technical, regulatory or business information of whatever nature (collectively, “Confidential Information”). For purposes of this Agreement, (a) all VBI Know-How shall be Confidential Information of VBI and (b) all Brii Bio Know-How shall be Confidential Information of Brii Bio.

 

11.2 Exceptions. Notwithstanding Section 11.1 above, the obligations of confidentiality and non-use shall not apply to Confidential Information that, in each case as demonstrated by competent evidence:

 

(a) was already known to the Receiving Party or any of its Affiliates, other than under an obligation of confidentiality, at the time of disclosure;

 

(b) was generally available to the public or was otherwise part of the public domain at the time of its disclosure to the Receiving Party;

 

(c) became generally available to the public or otherwise part of the public domain after its disclosure by the Disclosing Party and other than through any act or omission of the Receiving Party or any of its Affiliates in breach of this Agreement;

 

(d) was subsequently lawfully disclosed to the Receiving Party or any of its Affiliates by a Person other than the Disclosing Party, and who, to the best knowledge of the Receiving Party, did not directly or indirectly receive such information directly or indirectly from the Disclosing Party under an obligation of confidence; or

 

(e) was independently developed by the Receiving Party or its Affiliate without use of or reference to any information or materials disclosed by the Disclosing Party.

 

 

11.3 Permitted Disclosures. Notwithstanding the provisions of Section 11.1, each Party may disclose Confidential Information belonging to the other Party as expressly permitted by this Agreement or if and to the extent such disclosure is reasonably necessary in the following instances:

 

(a) filing or prosecuting Patents as permitted by this Agreement;

 

(b) prosecuting or defending litigation as permitted by this Agreement;

 

(c) submission to a Regulatory Authority in connection with a Marketing Approval of a Licensed Product;

 

(d) complying with applicable court orders, Applicable Law or governmental regulations including the requirements of any securities exchange;

 

(e) to those of its employees, Affiliates, contractors, or agents who have a need to know such Confidential Information in order to enable the Receiving Party to carry out its obligations pursuant to this Agreement provided that such persons are subject to obligations of confidentiality and non-use at least equivalent in scope to the obligations set forth in this Article 11; and

 

(f) to existing or potential acquirers or merger candidates; investment bankers; existing or potential investors, venture capital firms or other financial institutions or investors for purposes of obtaining financing, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 11; and advisors; provided, however, that neither Party shall make such disclosure to a competitor of the other Party, without obtaining the Disclosing Party’s prior consent in writing; and provided further, that each Party will remain responsible for any failure by any of the foregoing individuals to treat such Confidential Information as required under Section 11.1 as if such individuals were parties directly bound to the requirements of this Article 11.

 

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information, it shall, except where impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information, but in no event less than reasonable efforts; provided, that any Confidential Information so disclosed shall still be subject to the restrictions on use set forth in this Article 11. In any event, the Parties agree to take all reasonable action to avoid disclosure of Confidential Information hereunder.

 

11.4 Confidentiality of this Agreement and its Terms. Except as otherwise provided in this Article 11 each Party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this Agreement without the prior written consent of the other Party hereto, which Agreement and terms shall be deemed the Confidential Information of both Parties.

 

11.5 Public Announcements and Filings. As soon as practicable following the Effective Date hereof, the Parties shall each issue a press release announcing the existence of this Agreement which is approved in writing by both Parties. For greater certainty, neither Party (nor its Affiliates) shall be obligated to consult with or obtain approval from the other Party with respect to any filings to the SEC, the NASDAQ stock exchange or any other stock exchange or Governmental Authority; provided that a disclosing Party shall give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information.

 

 

11.6 Prior Non-Disclosure Agreements. As of the Effective Date, the terms of this Article 11 shall supersede any prior non-disclosure, secrecy, or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including without limitation the Confidentiality Agreement effective July 9, 2018. Any information disclosed under such prior agreements shall be deemed disclosed under this Agreement.

 

11.7 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name or logotype of the other Party only (a) in connection with permitted disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by Applicable Law, or (c) as otherwise expressly permitted by this Agreement or agreed in writing by such other Party.

 

11.8 Publication. At least thirty (30) days prior to publishing, publicly presenting, and/or submitting for written or oral publication a manuscript, abstract or the like that includes information relating to any Joint Invention that has not been previously published, each Party shall provide to the other Party a draft copy thereof for its review. The publishing Party shall consider in good faith any comments provided by the other Party during such thirty (30) day period. In addition, the publishing Party shall, at the other Party’s reasonable request, remove therefrom any Confidential Information of such other Party. If requested in writing by the non-publishing Party, the publishing Party shall withhold material from submission for publication or presentation for an additional thirty (30) days to allow for the filing of a Patent application or the taking of such other measures as may be required to establish and preserve proprietary rights in the information in the material being submitted for publication or presentation. The contribution of each Party shall be noted in all publications or presentations by acknowledgment or co-authorship, whichever is appropriate.

 

Article 12

INTELLECTUAL PROPERTY

 

12.1 Ownership of Intellectual Property.

 

(a) Inventions. Except as otherwise expressly set forth in this Agreement, ownership of Inventions, and any and all intellectual property rights therein, will be determined based on the principles of inventorship in accordance with United States patent laws.

 

(b) VBI Technology and Brii Bio Technology. Notwithstanding anything in Section 12.1 to the contrary: (i) VBI and its Affiliates have, and shall retain all right, title and interest in and to, the VBI Technology and any improvements thereto; and (ii) Brii Bio and its Affiliates have, and shall retain all right, title and interest in and to, the Brii Bio Technology and any improvements thereto. Each Party shall execute such documents, including assignments, as may be required to vest title in the owning Party in accordance with the foregoing.

 

 

(c) Joint Technology. The Parties shall jointly own all right, title and interest in all Joint Technology and hereby agree that each Party may only use such Joint Technology to the extent permitted by this Agreement. For the avoidance of doubt, neither Party shall have the right to practice the Joint Technology outside of the Field unless and until the Parties have negotiated a license pursuant to Section 3.4 Each Party shall execute such documents, including assignments, as may be required to vest title to all Joint Inventions and Joint Patents in both Parties.

 

(d) Assignment Obligation. Each Party will cause all employees of such Party who perform activities for such Party under this Agreement to be under an obligation to assign their rights in any Inventions and Know-How, whether or not patentable, resulting therefrom to such Party. With respect to any activities of a Party under this Agreement that are contracted to a Person that is not an employee, the Party retaining such contractor will include in the applicable contract an assignment to such Party of all rights in Inventions and Know-How made by such contractor resulting from such activities.

 

12.2 Patent Prosecution and Maintenance.

 

(a) VBI Patents.

 

(i) Initial Right. VBI shall have the first right to prepare, file, register, prosecute, and maintain all VBI Patents in the Licensed Territory and shall bear the costs associated therewith. VBI shall retain patent counsel suitable to coordinate and direct the filing and prosecution of VBI Patents both in and outside of the Licensed Territory and shall keep Brii Bio fully informed of progress with regard to the preparation, filing, prosecution, and maintenance of the VBI Patents in the Licensed Territory. Specifically, VBI shall: (A) provide Brii Bio with a draft of any filing of a patent application at least ten (10) days prior to filing and VBI shall consider in good faith any comments or revisions suggested by Brii Bio or its counsel; (B) consult with Brii Bio regarding filing strategy and Regions where VBI Patents should be filed and maintained; (C) promptly provide Brii Bio with a copy of each patent application as filed, together with a notice of its filing date and application number; (D) provide periodic status reports to Brii Bio regarding the status of each patent application or patent in each VBI Patent family in the Licensed Territory; (E) provide Brii Bio with a copy of any examiner’s report that raise substantive patentability issues and consult with Brii Bio regarding responding to the same and shall consider in good faith any comments, strategies, and the like proposed by Brii Bio; and (F) promptly notify Brii Bio of the issuance of a VBI Patent in the Licensed Territory.

 

(ii) Step-In Right. In the event that VBI elects not to prepare, file, register, prosecute or maintain any VBI Patent in the Licensed Territory, VBI shall provide reasonable prior written notice to Brii Bio of such intention (which notice shall, to the extent possible, be given no later than sixty (60) calendar days prior to the next deadline for any action that must be taken with respect to such VBI Patent in the relevant patent office). In such case, at Brii Bio’s sole discretion, upon written notice from Brii Bio, Brii Bio will have the right but not the obligation to assume responsibility for registration, prosecution, and/or maintenance of any such VBI Patent in the Licensed Territory at Brii Bio’s cost and expense, and shall pay any required fees to maintain such VBI Patents in the applicable Region. If Brii Bio elects to assume such rights with respect to a VBI Patent, Brii Bio shall keep VBI reasonably informed in accordance with the criteria set forth in Section 12.2(a)(i)(A) – (F) above.

 

 

(b) Joint Patents.

 

(i) Initial Responsibility. As regards the Joint Patents existing as of the Effective Date set forth on Schedule A-1 hereto, VBI will instruct its patent counsel to send copies of its files for the Joint Patents, and transfer responsibility for prosecution and maintenance of the Joint Patents to patent counsel retained by Brii Bio. Henceforth, Brii Bio shall be responsible for the preparation, filing, prosecution, and maintenance of Joint Patents, subject to the rest of this Section 12.2(b). In carrying out its obligations pursuant to this Section 12.2(b), Brii Bio shall retain patent counsel registered to practice before the U.S. Patent and Trademark Office, which patent counsel will be instructed to copy both VBI and Brii Bio on all correspondence relating to the Joint Patents.

 

(ii) Cooperation. For any Joint Patents, Brii Bio shall keep VBI fully informed of progress with regard to the preparation, filing, prosecution, and maintenance of the Joint Patents in and outside of the Licensed Territory. Brii Bio shall:

 

(1) promptly provide VBI with a copy of each patent application as filed, together with a notice of its filing date and serial number;

 

(2) provide periodic status reports to VBI regarding the status of each Patent application or Patent in each Joint Patent family;

 

(3) provide VBI with a copy of any examiner’s report that raise substantive patentability issues and consult with VBI regarding responding to the same and shall consider in good faith any comments, strategies, and the like proposed by VBI; and

 

(4) promptly notify VBI of the issuance of a Joint Patent.

 

(iii) Option of VBI to Prosecute, Maintain and Enforce. In the event that Brii Bio desires to give up responsibility for the prosecution or maintenance of any Joint Patent, Brii Bio shall provide reasonable prior written notice to VBI of such intention (which notice shall, to the extent possible, be given no later than sixty (60) calendar days prior to the next deadline for any action that must be taken with respect to such Joint Patent in the relevant patent office). In such case, at VBI’s sole discretion, upon written notice from VBI, VBI may elect to assume responsibility for prosecution and/or maintenance of any such Joint Patent, and VBI shall thereafter keep Brii Bio reasonably informed in accordance with the criteria set for in Section 12.2(b)(ii)

 

(iv) Costs for Joint Patents. Brii Bio will bear the costs associated with preparation, filing, prosecution, and maintenance of Joint Patents. The Party incurring costs associated with preparation, filing, prosecution, and maintenance of Joint Patents of behalf of the other Party will issue an invoice to the other Party on a quarterly basis (as applicable), setting out such Party’s share of the costs incurred during the prior quarter and providing copies of supporting invoices or other documentation. Each such invoice will be payable within thirty (30) days of receipt and the provisions of Article 8 shall apply to such payments.

 

 

(v) Withdrawal of Support. In the event that a Party decides to cease paying the costs associated with the preparation, filing, prosecution, and maintenance of any Joint Patents in its respective territory, such Party shall advise the other Party of such decision in writing. Upon receipt of such notice, the recipient Party may elect to abandon the Joint Patents identified in the notice, or may elect to assume sole responsibility for the ongoing costs of such Joint Patent, in which event the Party wishing to cease sharing in the costs shall forthwith execute an assignment of its entire right, title and interest in such Joint Patents to the recipient Party, and the assigning Party shall cease being responsible for its share of the costs associated with any Joint Patents listed on the assignment effective as of the date of the assignment. In the event that the Party relinquishing responsibility for the costs of a Joint Patent has responsibility for prosecution and maintenance of such Joint Patent, that Party will be deemed to have given up responsibility for such prosecution and maintenance as of the date of the notice referred to in this Section 12.2(b).

 

(c) Brii Bio Patents. Brii Bio shall have the sole right to prepare, file, prosecute and maintain the Brii Bio Patents on a worldwide basis.

 

12.3 Infringement by Third Parties.

 

(a) Notice. In the event that either VBI or Brii Bio becomes aware of any infringement or threatened infringement by a Third Party of the VBI Patents or the Joint Patents, it will notify the other Party in writing to that effect. Any such notice shall include any available evidence to support an allegation of infringement or threatened infringement by such Third Party.

 

(b) Licensed Territory. Subject to this Section 12.3(b), Brii Bio shall have the first right (but not the obligation), as between VBI and Brii Bio, to bring and control any action or proceeding with respect to infringement of any VBI Patent or Joint Patent in the Licensed Territory. VBI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice, and VBI and its counsel will reasonably cooperate with Brii Bio and its counsel in strategizing, preparing, and presenting any such action or proceeding provided, however, that Brii Bio may not make any submissions in any such action challenging the validity of a VBI Patent without the prior consent of VBI, such consent not to be unreasonably withheld. If Brii Bio fails to bring an action or proceeding with respect to infringement of any VBI Patent or Joint Patent in the Licensed Territory within (i) sixty (60) days following the notice of alleged infringement or (ii) ten (10) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, then VBI shall have the right (but not the obligation) to bring and control any such action, and Brii Bio shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement, any recovery or damages realized as a result of such action or proceeding shall be used first to pay the legal costs of both Parties associated with the enforcement action and second to compensate Brii Bio for losses directly associated the infringement. Any additional recovery or damages shall be shared equally between the Parties. In the event that the legal costs associated with an enforcement action exceed the amount recovered in such action, then Brii Bio shall pay any such additional costs.

 

(c) Cooperation. In the event a Party brings an infringement action in accordance with this Section 12.3, the other Party shall cooperate fully, including, if required to bring such action, the furnishing of a power of attorney or being named as a party to such action.

 

(d) Brii Bio Patents. Brii Bio shall have the sole right to bring and control any action or proceeding with respect to infringement of any Brii Bio Patent on a worldwide basis.

 

 

12.4 Infringement of Third Party Rights. Each Party shall promptly notify the other in writing of any allegation by a Third Party that the activity of either of the Parties pursuant to this Agreement infringes or may infringe the intellectual property rights of such Third Party. VBI shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by VBI’s activities and Brii Bio shall have the right, at its own expense, to be represented in any such action by counsel of its own choice. Subject to Article 14, Brii Bio shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights by Brii Bio’s activities and VBI shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.

 

12.5 Consent for Settlement. Neither Party shall enter into any settlement or compromise of any action or proceeding under this Article 12 which would in any manner (a) limit the scope, validity, or enforcement of any of the VBI Patents or Joint Patents, (b) admit fault or wrongdoing on the part of the other Party, or (c) impose any obligations or restriction on the other Party (whether financial or otherwise) without the prior written consent of such other Party.

 

12.6 Patent Term Extensions. Brii Bio shall have final decision making authority with respect to any decisions related to Patent term extensions for VBI Patents and Joint Patents in the Licensed Territory. Notwithstanding the foregoing, the Parties shall coordinate their activities with respect to any Patent term extension with respect to all Joint Patents in order to secure the optimal protection for each Licensed Product available under Applicable Law.

 

12.7 Trademarks. Brii Bio, or its Affiliates shall own and be responsible for all trademarks, trade names, branding, logos, and domain names related to Licensed Products and shall be responsible for selecting, registering, enforcing, defending, and maintaining the same.

 

Article 13

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

13.1 Mutual Representations, Warranties and Covenants. Each Party hereby represents and warrants to the other Party, as of the Effective Date, and covenants (as applicable) as follows:

 

(a) Duly Organized. Such Party is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof.

 

(b) Due Authorization; Binding Agreement. This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with the terms hereof subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

 

(c) Consents. Such Party has obtained, or is not required to obtain, the consent, approval, order, or authorization of any Third Party, or has completed, or is not required to complete any registration, qualification, designation, declaration, or filing with, any Regulatory Authority or Governmental Authority, in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement.

 

 

(d) No Conflicting Grant of Rights. The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way and (b) do not conflict with, violate or breach, or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.

 

(e) Right to Grant Licenses. Such Party has the right to grant (or cause its Affiliates to grant) the licenses contemplated under this Agreement and has not granted, assigned, transferred, or conveyed, and will not during the Term, grant, assign, transfer or convey any right, title or interest in: (i) in the case of VBI, any of the VBI Technology or its interest in the Joint Technology; and (ii) in case of Brii Bio, its interest in the Brii Bio Technology or the Joint Technology, in any such case which grant, assignment, transfer or conveyance would conflict with the rights granted to the other Party hereunder.

 

(f) Employee/Contractor Agreements. All of such Party’s employees or contractors acting on its behalf pursuant to this Agreement are and will be obligated under a binding written agreement to assign to such party or its designee all VBI Technology and Joint Inventions (as applicable) and to comply with obligations of confidentiality and non-use consistent with those set forth in Article 11

 

(g) Debarment. Such Party is not debarred under the FDA, NMPA or similar Regulatory Authority in any other jurisdiction and it does not, and will not during the Term, employ or use the services of any Person who is debarred, in connection with the development, manufacture or commercialization of Licensed Products. In the event that either Party becomes aware of the debarment or threatened debarment of any Person providing services to such Party, including the Party itself and its Affiliates, contractors, Sublicensees, Distributors, which directly or indirectly relate to activities under this Agreement, the other Party shall be immediately notified in writing.

 

(h) Compliance. As of the Effective Date, each Party is in material compliance with all Applicable Laws with respect to the subject matter of this agreement, and during the Term, each party covenants to the other that in the performance of its obligations under this Agreement, such Party shall comply with, and shall cause its and its Affiliates’ employees and Sublicensees to comply, with all Applicable Laws.

 

(i) No Third Party Rights. Neither Brii Bio nor VBI is a party to or otherwise bound by any written contract, agreement, or to their knowledge, oral agreement, that would result in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any claim in or with respect to, any Joint Inventions or Joint Patents, except as disclosed on Schedule 13 hereto.

 

13.2 Additional Representations, Warranties and Covenants of Brii Bio. Brii Bio represents and warrants to VBI as of the Effective Date that, to Brii Bio’s knowledge, there are no Third Party intellectual property rights that cover or claim the Brii Bio Adjuvant and that there are no Brii Bio Patents that cover or claim the Brii Bio Adjuvant existing as of the Effective Date.

 

 

13.3 Additional Representations, Warranties and Covenants of VBI. VBI represents and warrants to Brii Bio as of the Effective Date, or covenants, as applicable that:

 

(a) Right to Grant License. Except for VBI’s obligations pursuant to the Ferring License and the Scigen Agreement, no royalties, license fees or other payments are required to be paid to any Third Party in connection with the manufacture, use, sale, or importation of Licensed Products in the Field in the Licensed Territory.

 

(b) Ownership. VBI is the sole and exclusive owner of, or Controls, the VBI Technology under which the license granted pursuant to Section 3.1 herein is provided to Brii Bio by VBI.

 

(c) VBI Patents. (i) Schedule A-2 is a true, complete and correct list of the VBI Patents existing as of the Effective Date; (ii) the VBI Patents are to the best of VBI’s knowledge, valid and enforceable; (iii) no Third Party has made any claim against VBI or its Affiliates asserting the invalidity, unenforceability, or non-infringement of any VBI Patents (including, by way of example, through the institution or written threat of institution of interference, nullity, opposition, inter partes or post-grant review or similar invalidity proceedings before the United States Patent and Trademark Office or any analogous foreign Regulatory Authority); (iv) the VBI Patents are being diligently prosecuted in the respective patent offices in in accordance with Applicable Law; and (v) the VBI Patents have been filed and maintained properly and correctly and all applicable fees have been paid on or before the due date for such payments.

 

(d) Non-Infringement by Third Parties. To VBI’s knowledge, no Third Party is infringing or misappropriating or threatening to infringe or misappropriate any VBI Technology.

 

(e) Non-Infringement of Third Party Rights. Neither VBI nor any of its Affiliates has received any written notice from any Person, or has knowledge of, any actual or threatened claim or assertion that the use or practice of the VBI Patents, infringes or misappropriates the intellectual property rights of a Third Party.

 

(f) Claims; Judgements; Settlements. Except as disclosed in Schedule B, there are no claims, judgments, or settlements against or pending, or amounts with respect thereto, owed by VBI or any of its Affiliates, with respect to the VBI Technology under which the license as granted pursuant to Section 3.1 herein is provided to Brii Bio by VBI and VBI has not received written notice threatening any such claims, judgments, or settlements.

 

(g) Employee Agreements. All current and former employees and consultants of VBI and its Affiliates who are or have been substantively involved in the design, review, evaluation, or development of the VBI Patents have executed written contracts or are otherwise obligated to assign their rights to VBI or its designee.

 

(h) No Third Party Rights. VBI is not a party to or otherwise bound by any written contract or agreement, or to VBI’s knowledge, any oral agreement that will result in any Third Party obtaining any interest in, or that would give to any Third Party any right to assert any claim in or with respect to, any VBI Technology exclusively licensed to Brii Bio hereunder except as disclosed on Schedule 13 hereto.

 

 

(i) Manufacture of Licensed Product. VBI shall manufacture, store, and transfer the Licensed Product supplied pursuant to Article 7 in accordance with applicable Licensed Product specifications and all Applicable Laws, including GMP. For the avoidance of doubt, VBI shall not be obligated to supply pursuant to this Section 13.3 until the Parties executed and enter into the Supply Agreement.

 

(j) No Other Technology. To VBI’s knowledge, the VBI Technology in existence as of the Effective Date comprises all of the intellectual property rights used by or on behalf of VBI and its Affiliates in the research, development, and manufacturing of the Licensed Compound and VBI-2601.

 

(k) Ferring License and Scigen Agreement. VBI is not in breach of its obligations under the Ferring License or the Scigen Agreement, and during the Term, VBI shall take all actions necessary to maintain the Ferring License or the Scigen Agreement in good standing, and shall not materially breach the Ferring License or the Scigen Agreement. In the event that Ferring or Scigen notifies VBI during the Term that VBI is in material breach of the Ferring License or the Scigen Agreement, VBI shall promptly notify Brii Bio and, to the extent VBI fails to cure such breach, Brii Bio shall have the right to do so.

 

13.4 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR ANY OTHER AGREEMENT CONTEMPLATED HEREUNDER, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW OR OTHERWISE AND EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE OR ANY WARRANTY AS TO THE VALIDITY OR ENFORCEABILITY OF PATENTS OR NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR THE PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE LICENSED PRODUCT.

 

Article 14

INDEMNIFICATION

 

14.1 Indemnification of VBI. Brii Bio shall indemnify and hold harmless VBI and its Affiliates, and its and their directors, officers, employees and agents of such entities (the “VBI Indemnitees”) from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’ fees and other expenses of litigation) (“Losses”) from any claims, actions, suits or proceedings brought by a Third Party (a “Third Party Claims”) incurred by any VBI Indemnitee, arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by Brii Bio or its Affiliates or Sublicensees in the Licensed Territory; (b) gross negligence or willful misconduct by or on behalf of Brii Bio or its Affiliates in performing any activities in connection with this Agreement; and (c) any material breach of any representations, warranties or covenants by Brii Bio under this Agreement; except, in each case ((a) – (c)), to the extent such Third Party Claims fall within the scope of the indemnification obligations of VBI set forth in Section 14.2.

 

 

14.2 Indemnification of Brii Bio. VBI shall indemnify and hold harmless each of Brii Bio and its Affiliates and its and their directors, officers, employees and agents of such entities (the “Brii Bio Indemnitees”), from and against any and all Losses from any Third Party Claim incurred by any Brii Bio Indemnitee arising from, or occurring as a result of: (a) the development, manufacture, use, handling, storage, sale or other disposition of Licensed Product by VBI or its Affiliates; (b) gross negligence or willful misconduct by or on behalf of VBI or its Affiliates in performing any activities in connection with this Agreement; and (c) any material breach of any representations, warranties or covenants by VBI under this Agreement; except, in each case ((a) – (c)) to the extent such Third Party Claims fall within the scope of the indemnification obligations of Brii Bio set forth in Section 14.1.

 

14.3 Procedure. A Party that intends to claim indemnification under this Article 14 (the “Indemnitee”) shall promptly notify the indemnifying Party (the “Indemnitor”) in writing of any Third Party Claim, in respect of which the Indemnitee intends to claim such indemnification. The Indemnitee shall provide the Indemnitor with reasonable assistance, at the Indemnitor’s expense, in connection with the defense of the Third Party Claim for which indemnity is being sought. The Indemnitee may participate in and monitor such defense with counsel of its own choosing at its sole expense; provided, however, the Indemnitor shall have the right to assume and conduct the defense of the Third Party Claim with counsel of its choice, which counsel shall be reasonably acceptable to Indemnitee. The Indemnitor shall not settle any Third Party Claim without the prior written consent of the Indemnitee, not to be unreasonably withheld. So long as the Indemnitor is actively defending the Third Party Claim in good faith, the Indemnitee shall not settle any such Third Party Claim without the prior written consent of the Indemnitee. If the Indemnitor does not assume and conduct the defense of the Third Party Claim as provided above, (a) the Indemnitee may defend against, and consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim in any manner the Indemnitee may deem reasonably appropriate (and the Indemnitee need not consult with, or obtain any consent from, the Indemnitor in connection therewith), and (b) the Indemnitor will remain responsible to indemnify the Indemnitee as provided in this Article 14 The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any action with respect to a Third Party Claim shall only relieve the Indemnitor of its indemnification obligations under this Article 14 if and to the extent the Indemnitor is actually prejudiced thereby.

 

14.4 Insurance. Each Party, at its own expense, shall maintain product liability and other appropriate insurance (including D&O insurance) in an amount consistent with industry standards, for a company in a similar position to such Party, during the Term, which shall include, but not be limited to ten million Dollars ($10,000,000). Each Party shall provide the other Party with written notice at least thirty (30) days prior to any cancellation, nonrenewal or material change in the insurance described above. Each Party shall provide a certificate of insurance evidencing such coverage to the other Party upon request. Each Party shall provide a certificate of insurance evidencing its D&O insurance annually. It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article 14

 

 

Article 15

TERM AND TERMINATION

 

15.1 Term. This Agreement shall commence on the Effective Date, and unless terminated earlier as provided in this Article 15, shall continue in full force and effect on a Region-by-Region and Licensed Product-by-Licensed Product basis until the last-to-expire Royalty Term in the last Region in the Licensed Territory (the “Term”). Upon expiration (but not an earlier termination) of this Agreement in a Region of the Licensed Territory, the license granted to Brii Bio under Section 3.1 shall become perpetual, non-exclusive, fully paid-up, and royalty free in the Field in such Region in the Licensed Territory.

 

15.2 Early Termination. Each Party shall have the right to terminate this Agreement in its entirety before the end of the Term:

 

(a) upon written notice by either Party if the other Party is in material breach of this Agreement and has not cured such breach within sixty (60) days (or thirty (30) days for a breach payment obligations) after notice from the terminating Party requesting cure of the breach. Any such termination shall become effective at the end of such sixty (60) or thirty (30) day period, as applicable, unless the breaching Party has cured any such breach or default prior to the end of such period; provided that, such time periods shall be tolled during the pendency of any good faith dispute that has been deferred to resolution pursuant to Article 16 with respect to the validity of such allegation of breach; or

 

(b) at any time if the other Party shall: (i) file in any court or agency pursuant to any statute or regulation of any jurisdiction a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of that Party or of its assets; (ii) propose an out-of-court restructuring of substantially all of VBI’s indebtedness outside the ordinary course of business; (iii) be served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within sixty (60) days after the filing thereof; (iv) propose or be a party to any dissolution or liquidation, (v) make an assignment for the benefit of its creditors; or (vi) admit in writing its inability generally to pay its debts as they fall due in the general course.

 

15.3 Other Brii Bio Termination Rights.

 

(a) Voluntary Termination. Brii Bio shall have the right in its sole and absolute discretion, to terminate this Agreement, either with respect to a Region or in its entirety, upon one hundred and eighty (180) days prior written notice to VBI for convenience, without cause, and for any or no reason.

 

(b) Termination for Safety Reasons. Brii Bio may terminate this Agreement at any time during the Term immediately upon providing written notice to VBI if a 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 (6) consecutive months.

 

 

15.4 Other VBI Termination Right. VBI shall have the right to terminate this Agreement immediately upon written notice to Brii Bio if:

 

(a) Brii Bio or any of its Affiliates, Distributors or Sublicensees 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 VBI Patent.

 

15.5 Effects of Termination.

 

(a) VBI Technology. Upon any termination of this Agreement, the licenses granted pursuant to Section 3.1 herein provided to Brii Bio by VBI shall automatically terminate.

 

(b) Joint Patents, Joint Inventions and Joint Know How. Effective upon termination of this Agreement, VBI shall automatically be deemed to, and hereby does, grant to Brii Bio an exclusive, royalty free right and license under VBI’s interest in the Joint Technology in the Field in the Licensed Territory, which, for greater certainty, shall include a license to use the Brii Bio Adjuvant in the Field.

 

15.6 Clinical Trials Upon Termination. In the event there are any on-going Clinical Trials of the Licensed Product in the Field in the Licensed Territory as of the date of termination hereof, the Parties shall negotiate in good faith and adopt a plan to wind-down such Clinical Trials in an orderly fashion or, at VBI’s election, promptly transition such development activities to VBI or its designee, with due regard for patient safety and the rights of any subjects that are participants in any Clinical Trials and take any actions it deems reasonably necessary or appropriate to avoid any human health or safety problems and in compliance with all Applicable Laws.

 

15.7 Brii Bio Regulatory Filings (including Marketing Approval). Upon termination of this Agreement, at VBI’s request and to the extent not already held by VBI, Brii Bio shall assign or cause to be assigned to VBI or its designee (or to the extent not assignable in accordance with Applicable Law, Brii Bio shall take all reasonable actions to make available to VBI or its designee the benefits of all Regulatory Documentation and Marketing Approvals for the Licensed Products in the Licensed Territory) at no cost to VBI, unless such termination is the result of VBI’s material breach of this Agreement pursuant to Section 15.2(a) in which case VBI shall bear the cost of such assignment.

 

15.8 Clinical Supply. Immediately upon termination of this Agreement, Brii Bio shall, at its own cost, return to VBI any unused Licensed Product supplied by VBI for use in Clinical Trials hereunder.

 

15.9 Inventory. Upon termination of this Agreement, Brii Bio, its Affiliates, Distributors and Sublicensees, shall have the option to continue, to the extent that Brii Bio, its Affiliates, Distributors and Sublicensees have stocks of Licensed Product remaining, to fulfill orders received from customers for Licensed Products in the Field in the Licensed Territory until up to thirty (30) days after VBI notifies Brii Bio in writing that VBI intends to commercialize such Licensed Product or has secured an alternative Distributor or licensee for the Licensed Product, but in no event for more for than six (6) months after the date of notice of termination. For Licensed Product sold by Brii Bio or its Affiliates, Distributors or Sublicensees after the effective date of a termination Brii Bio shall continue to pay royalties on the amount of Net Sales pursuant to Article 9 Notwithstanding the foregoing, Brii Bio and its Affiliates, Distributors and Sublicensees shall cease such activities in the Licensed Territory upon sixty (60) days written notice given by VBI at any time after the effective date of a termination requesting that such activities (or portion thereof) cease. In the case where VBI has given notice to Brii Bio requesting the cessation of activities pursuant to the provision of this Section, Brii Bio shall notify VBI of an estimate of the quantity of Licensed Product and its shelf life remaining in the inventory of Brii Bio, its Affiliates, Distributors or Sublicensees and VBI shall have the right to purchase any such quantities of Licensed Product from Brii Bio at a price mutually agreed by the Parties.

 

 

15.10 Transition. Brii Bio shall use Commercially Reasonable Efforts to cooperate with VBI or its designee to effect a smooth and orderly transition in the development, sale and marketing, promotion and commercialization of Licensed Product in the Licensed Territory following termination of this Agreement.

 

15.11 Return of Confidential Information. Upon termination or expiration of this Agreement, each Party shall promptly return to the other Party, or delete or destroy, all relevant records and materials in such Party’s possession or control containing Confidential Information of the other Party; provided that such Party may keep one (1) copy of such materials for archival purposes only subject to a continuing confidentiality obligations.

 

15.12 [**] and [**]. In the event of a termination of this agreement by Brii Bio pursuant to Section 15.2(a) or Section 15.2(b) then VBI shall use Commercially Reasonable Efforts to facilitate a direct license for Brii Bio under the [**]and the [**].

 

Article 16

DISPUTE RESOLUTION AND GOVERNING LAW

 

16.1 Dispute Resolution Process. The Parties recognize that disputes as to certain matters may from time to time arise during the Term that relate to interpretation of a Party’s rights and/or obligations hereunder or any alleged breach of this Agreement. If the Parties cannot resolve any such dispute within thirty (30) days after written notice of a dispute from one (1) Party to another, either Party may, by written notice to the other Party, have such dispute referred to the Chief Executive Officer of each respective Party, or such person with decision-making authority at a level of at least a senior vice president (collectively, the “Senior Executives”). The Senior Executives shall negotiate in good faith to resolve the dispute within thirty (30) days. During such period of negotiations, any applicable time periods under this Agreement shall be tolled. If the Senior Executives are unable to resolve the dispute within such time period then either Party may submit the dispute as follows:

 

(a) for final resolution of matters not expressly referred to expert determination hereunder, by binding arbitration in accordance with Section 16.2(b) Notwithstanding anything in this Article 16 to the contrary, VBI and Brii Bio shall each have the right to apply to any court of competent jurisdiction for appropriate interim or provisional relief, as necessary to protect the rights or property of that Party;

 

(b) for final resolution of matters designated hereunder to be resolved by expert determination, by expert determination in accordance with Section 16.3.

 

 

16.2 Arbitration.

 

(a) If the parties are unable to resolve such dispute through the procedures described in Section 16.1 then, except in the case of a dispute, controversy or claim that concerns: (i) the validity or infringement of a Patent, trademark or copyright; or (ii) any antitrust, anti-monopoly or competition law or regulation, whether or not statutory, the dispute shall be resolved by expedited binding arbitration before a panel of three (3) independent and neutral experienced arbitrators, one chosen by VBI, one chosen by Brii Bio and the third chosen by the foregoing two (2) arbitrators. Each Party shall select its arbitrator within ten (10) days of one party notifying the other party that it is exercising its rights under this Section 16.2(a), and the two (2) arbitrators shall select the third arbitrator within five (5) days of their selection. Any such arbitration proceeding shall be administered by the Expedited Procedure Rules, irrespective of the amount in dispute, of International Court of Arbitration of the International Chamber of Commerce, with limited discovery, in accordance with its then current rules governing commercial disputes; provided, that, such rules shall be modified by this Section 16.2(a), to the extent any such modifications are necessary.

 

(b) Any arbitration shall be conducted in the English language and applicable arbitration association shall use New York as the governing law for this Agreement and the parties’ obligations hereunder. Within ten (10) days after the arbitrators are selected, the Parties will each submit to the arbitrators, and to one another, a written statement of their respective positions regarding the alleged dispute. The Parties will also provide the arbitrators a copy of this Agreement, as may be amended at such time. Each party will have ten (10) days from receipt of the other party’s submission to provide to the arbitrator a written response thereto. Neither party may have any communication (either written or oral) with the arbitrators other than for the sole purpose of engaging the arbitrator at the outset or as expressly permitted in this Section 16.2(b); provided, that the arbitrator will have the right to meet with the parties, either alone or together, as necessary in the arbitrator’s opinion to make a determination. Based on the materials submitted, the arbitrators will determine whether any discovery process is necessary, and, if it is, the parameters of such process with the intent of resolving the arbitration as expeditiously as possible (e.g., limiting the number of depositions and the time discovery is permitted to take). The Parties and arbitrators shall employ procedures designed to resolve the conflict by arbitration within twelve (12) months of the dispute being referred for arbitration.

 

16.3 Expert Determination. For final resolution of matters designated hereunder to be resolved by expert determination, the Parties hereby agree that such decision shall be conducted expeditiously by an independent expert selected unanimously by the Parties. Either Party may initiate the expert determination by giving written notice to the other Party. If the Parties are unable to agree upon an expert within ten (10) days after receipt of the notice of request for an expert determination, then, the International Centre for Expertise of the International Chamber of Commerce (ICC) shall appoint such expert. The expert, once appointed, shall have no ex parte communications with either Party concerning the expert determination or the underlying dispute. The Parties agree to cooperate fully in the expeditious conduct of such expert determination and to provide the expert with access to all facilities, books, records, documents, information, and personnel necessary to make a fully informed decision in an expeditious manner. Before issuing a final decision, the expert shall issue a draft report and allow the parties to the dispute to comment on it. The expert shall endeavor to resolve the dispute within thirty (30) days (but no later than sixty (60) days) after his or her appointment, taking into account the circumstances requiring an expeditious resolution of the matter in dispute. The expert’s decision shall be final and binding on the Parties. The costs of the expert determination shall be shared by the Parties, regardless of the outcome of the determination.

 

 

16.4 Governing Law; Litigation; Exclusive Venue. This Agreement and all questions regarding its existence, validity, interpretation, breach, or performance, shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles. Any dispute shall be finally settled in a United States Federal Court of competent jurisdiction (or state court if no Federal Court has jurisdiction) located in the State of New York, United States, and the Parties hereby waive any objection to the personal jurisdiction and venue of such courts.

 

Article 17

GENERAL PROVISIONS

 

17.1 Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, earthquakes, extreme weather, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not) or terrorism, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any Governmental Authority (each of the foregoing, a “Force Majeure Event”). The non- performing Party shall notify the other Party of such force majeure within ten (10) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is necessary and the non- performing Party shall use commercially reasonable efforts to remedy its inability to perform; provided, however, that in the event the suspension of performance continues for sixty (60) days after the date of the occurrence, the Parties shall meet to discuss in good faith how to proceed in order to accomplish the goals outlined in this Agreement.

 

17.2 Waiver of Breach. No delay or waiver by either Party of any condition or term in any one (1) or more instances shall be construed as a further or continuing waiver of such condition or term or of another condition or term.

 

17.3 Further Assurances. Each Party agrees to execute, acknowledge, and deliver such further instruments, and to perform all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

 

17.4 Amendment. No amendment or modification of any provision of this Agreement shall be effective unless in writing and signed by both Parties hereto.

 

17.5 Severability. In the event any provision of this Agreement should be held invalid, illegal, or unenforceable, the Parties shall negotiate, in good faith a valid, legal, and enforceable substitute provision that most nearly reflects the original intent of the Parties. All other provisions of this Agreement shall remain in full force and effect in such jurisdiction.

 

 

17.6 Entire Agreement. This Agreement (including the Schedules attached hereto) constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all previous agreements and understandings, negotiations, writings, and commitments, either oral or written, in respect to the subject matter hereof. For clarity, the Original License Agreement will govern from the Original Effective Date up to the Effective Date, and this Agreement will govern as of the Effective Date. Each of the Parties acknowledges and agrees that, in entering into this Agreement, it does not rely on, and shall have no remedy in respect of, any statement, representation, warranty or understanding (whether negligently or innocently made) of any Person (whether party to this Agreement or not) other than as expressly set out in this Agreement.

 

17.7 Notices. Any notice or communication required or permitted under this Agreement shall be in writing in the English language, delivered personally, sent by email (and promptly confirmed by personal delivery, registered mail, or overnight courier), sent by courier, or sent by registered mail, postage prepaid to the following addresses of the Parties (or such other address for a Party as may be at any time thereafter specified by like notice):

 

To VBI:   VBI Vaccines Inc. 160 2nd Street, Floor 3 Cambridge, MA 02142 Attention: Chief Executive Officer Email: [**]

To Brii Bio:   Brii Biosciences Limited One City Center, Suite 5-110 110 Corcoran Street Durham, NC 27701 Attention: Zhi Hong Email: [**]

 

Any such notice shall be deemed to have been given: (a) when delivered if personally delivered; (b) on the next Business Day if sent by email; and/or (c) on the fifth (5^th) Business Day following the date of mailing if sent by mail or courier.

 

17.8 Assignment. This Agreement shall not be assigned or otherwise transferred, nor may any right or obligations hereunder be assigned or transferred, by either Party without the prior written consent of the other Party; except that either Party may assign or otherwise transfer this Agreement without the consent of the other Party to an Affiliate or to an entity that acquires all or substantially all of the business or assets of the assigning Party relating to the subject matter of this Agreement, whether by merger, acquisition or otherwise, provided that the acquiring Person assumes this Agreement in writing or by operation of law. Subject to the foregoing, this Agreement shall inure to the benefit of each Party, its successors and permitted assigns. Any assignment of this Agreement in contravention of this Section 17.8 shall be null and void.

 

17.9 Relationship of the Parties. The Parties shall be independent contractors of one another and nothing in this Agreement or any action which may be taken pursuant to its terms is intended, or shall be deemed, to establish a partnership, joint venture, or agency between the Parties. Neither Party shall have the authority to make any statements, representations, or commitments of any kind, or to take any action, which shall be binding on the other Party. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.

 

 

17.10 Headings. The heading of the Articles and Sections of this Agreement are included for convenience of reference and shall not affect its meaning or interpretation.

 

17.11 Survival. The following provisions shall survive any termination of this Agreement: 10.5, 12.1, 12.2(b), 12.2(c), 12.5, 15.5 through 15.12 and Article 1 (as applicable), Article 11 Article 14 Article 16 and Article 17.

 

17.12 Counterparts. This Agreement may be executed in two (2) counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Executed signature pages of this Agreement may be scanned and delivered electronically and such signatures shall be deemed to bind each Party hereto as if they were original signatures.

 

17.13 Interpretation. Except where the context expressly requires otherwise: (a) the use of any gender herein shall be deemed to encompass references to either or both genders, and the use of the singular shall be deemed to include the plural (and vice versa); (b) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”; (d) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (e) any reference herein to any person or entity shall be construed to include the person’s or entity’s successors and assigns; (f) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (g) all references herein to Sections, or Schedules shall be construed to refer to Sections, or Schedules of this Agreement, and references to this Agreement include all Schedules hereto; (h) the word “notice” means notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement; (i) provisions that require that a Party, the Parties or any committee hereunder “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter, approved minutes or otherwise, including by e-mail; (j) unless stated otherwise, references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof; (k) the term “or” shall be interpreted in the inclusive sense commonly associated with the term “and/or”; and (l) references to any Articles include Sections and subsections that are part of the related Section (e.g., a section numbered “Section 3.5” would be part of “Article 3”, and references to “Section 3.5” would also refer to material contained in the subsection described as “Section 3.5(a)”).

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective

Date.

 

VBI VACCINES INC.

 

By:	/s/ Jeff R. Baxter
Name:	Jeff R. Baxter
Title:	Chief Executive Officer

 

BRII BIOSCIENCES LIMITED

 

By:	/s/ Zhi Hong
Name:	Zhi Hong
Title:	Chief Executive Officer

 

[Signature Page to A&R Collaboration and License Agreement]

 

 

Schedule A-1

Joint Patents

 

[**]

 

Schedule A-2

VBI Patents

 

[**]

 

Schedule B

Claims; Judgments; Settlements

 

[**]

 

Schedule 13

Disclosures

 

[**]

 

 

Exhibit 10.5

 

[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.

 

SUPPLY AGREEMENT

 

This SUPPLY AGREEMENT (the “Agreement”) is entered into as of July 5, 2023 (the “Effective Date”) by and between BRII BIOSCIENCES LIMITED, an exempted company organized under the laws of the Cayman Islands (“Brii Bio”), having its registered office at Vistra (Cayman) Limited, PO Box 3119, Grand Pavilion Hibiscus Way, 802 West Bay Road Grand Cayman KYI-1205, on the one hand, and VBI VACCINES INC., a company organized under the laws of the Province of British Columbia, Canada (“VBI”), having a registered office at 160 Second Street, 3^rd Floor, Cambridge MA 02142 on the other hand. Brii Bio and VBI are each referred to individually as a “Party” and together as the “Parties”.

 

BACKGROUND

 

WHEREAS, the Parties entered into that certain Amended & Restated Collaboration and License Agreement on the same Effective Date as this Agreement (the “VBI-2601 Agreement”), the terms of which are incorporated herein by reference, to permit Brii Bio to develop and commercialize VBI-2601 Products and Novel Composition Products under an exclusive license from VBI, under the terms and conditions thereof;

 

WHEREAS, the Parties entered into that certain Collaboration and License Agreement on the same Effective Date as this Agreement (the “PreHevbri Agreement”), the terms of which are incorporated herein by reference, to permit Brii Bio to develop and commercialize PreHevbri Products under an exclusive license from VBI, under the terms and conditions thereof; and

 

WHEREAS, pursuant to the “License Agreements”, VBI agreed to Manufacture and supply Product under the terms and conditions of the License Agreements and a Supply Agreement, such as this one, for the clinical and commercial supply of Product.

 

NOW, THEREFORE, in consideration of the mutual covenants of the Parties set forth in this Agreement, the Parties hereto agree as follows:

 

 

1. Definitions

 

Capitalized terms used herein but not otherwise defined herein will have their respective meanings set forth in the License Agreements. In addition, unless this Agreement expressly provides to the contrary, the following terms, whether used in the singular or plural, have the respective meanings set forth below:

 

	1.1.	“Applicable Laws” means the applicable provisions of any and all national, state, and local laws, statutes, rules, regulations, administrative codes, ordinances, judgments, decrees, directives, injunctions, orders, permits (including Marketing Approvals) of or from any court, Regulatory Authority or Governmental Authority having jurisdiction over or related to the subject matter.
	1.2.	“Background IP” means Intellectual Property existing at the Effective Date of this Agreement or developed independently of the activities under this Agreement that is under the control of either Party and that is reasonably necessary, relevant or otherwise useful for performing the activities under this Agreement. For the purposes of this definition “control” means ownership and/or the right to grant access or licenses to Third Parties.
	1.3.	“Batch” means a specific quantity of Product that is intended to have uniform character and quality within specified limits and is produced according to a single cycle of Manufacture.
	1.4.	“Brii Bio Results” means all Information, Products and tangible biological, chemical, and physical materials generated, acquired, discovered, conceived, developed, or derived by VBI (whether alone or with others) as a result of the Manufacturing, or otherwise arising out of or in connection with the Manufacturing, with the exception of VBI Results.
	1.5.	“Brii-VBI Pro-Rata Allocation” means the ratio that will be used to determine facility allocation between VBI’s retained rights and requirements to PreHevbri and PreHevbrio and Brii Bio’s licensed rights, in the Territory, to PreHevbri and VBI-2601, inclusive of both clinical and commercial supply. Initially and for all allotments determined on or before the date that is six (6) months from the Effective Date such allocation shall be borne solely by VBI. Thereafter, the ratio will be negotiated in good faith between the Parties and based on Brii Bio’s [**] (Sections 10.1 and 10.2 herein) and VBI’s [**] and [**] of [**] and [**]. Any disagreement between the Parties with respect to such allocation shall be finally determined by the JMC.
	1.6.	“Business Day” means a day other than a Saturday or Sunday or any public holiday in the United States. Any references in this Agreement to “days” shall mean calendar days.
	1.7.	“Change Cost” means costs to duly implement a Change, including but not limited to development, qualification, validation, capital expenditure, release and stability testing, packaging, artwork, and regulatory submissions costs.
	1.8.	“Change Implementation Documentation” has the meaning as defined in Section 9.1.
	1.9.	“Changes” means any changes to the Specifications, manufacturing processes, formulation, packaging, labeling, testing procedures, supply and raw material sources, the Facility, or any other change affecting the Marketing Authorization.

 

 

	1.10.	“Clinical Development Manufacturing Costs” means the fully-burdened cost incurred by VBI in Manufacturing the Products for clinical supply in accordance with this Agreement and consistent with the Quality Agreement, and shall include (i) the actual cost of material used for Manufacturing such Product, direct labor incurred in Manufacturing such Product, outsourced testing costs, and overhead and other manufacturing costs identified to the JMC, in each case that are specifically attributable to the Manufacture of such Product and supported by appropriate documentation, and (ii) to the extent that such Product is Manufactured by a Third Party CMO the actual, out-of-pocket cost paid by VBI or its Affiliates to the Third Party CMO for the Manufacture and supply thereof (including packaging and labeling), determined in accordance with the books and records of VBI or its Affiliates maintained in accordance with GAAP. Clinical Development Manufacturing Costs will not include any allocation of idle capacity. The Clinical Development Manufacturing Costs shall be subject to the price reductions and limits set forth on Exhibit D and Exhibit E, and in each case the cost will be rounded up to the nearest Dollar for purpose of calculating the final markup.
	1.11.	“Commercial Manufacturing Costs” means the fully-burdened cost incurred by VBI in Manufacturing the Products for commercial supply in accordance with this Agreement and consistent with the Quality Agreement, and shall include (i) the actual cost of material used for Manufacturing such Product, direct labor incurred in Manufacturing such Product, outsourced testing costs, overhead and other manufacturing costs identified to the JMC, in each case that are specifically attributable to the Manufacture of such Product and supported by appropriate documentation, and (ii) to the extent that such Product is Manufactured by a Third Party CMO the actual, out-of-pocket cost paid by VBI or its Affiliates to the Third Party CMO for the Manufacture and supply thereof (including packaging and labeling), determined in accordance with the books and records of VBI or its Affiliates maintained in accordance with GAAP.
	1.12.	“Complaint” means any notification of dissatisfaction received from any Brii Bio Affiliate, Brii Bio customers and/or Governmental Authority.
	1.13.	“Equipment” means vessels, bioreactors, tooling, machines and, in general, all equipment needed to Manufacture in accordance with this Agreement.
	1.14.	“Facility” has the meaning as defined in Section 2.2.
	1.15.	“Failed Product” has the meaning as defined in Section 11.2.
	1.16.	“Governmental Authority” means any multinational, federal, national, state, provincial or local entity, office, commission, bureau, agency, political subdivision, instrumentality, branch, department, authority, board, court, arbitral or other tribunal, official or officer, exercising executive, judicial, legislative, police, regulatory, administrative, or taxing authority or functions of any nature over any of the activities contemplated by this Agreement.
	1.17.	“Information” means any inventions (whether patentable or not), data, instructions, ideas, software, algorithms, discoveries, procedures, methods, techniques, formulae, biological sequences, advice, and any other knowledge each in whatever form.

 

 

	1.18.	“Intellectual Property” means all Patents, trademarks, utility certificates and models, inventors’ certificates, copyrights, database rights, designs, domain names, trade secrets, Know-How and any other proprietary rights, priority rights, prior user rights and all other rights of a like nature in each case whether registered or unregistered and in any jurisdiction.
	1.19.	“Know-How” means any Know-How as defined in the License Agreements, as applicable.
	1.20.	“KPIs” means the key performance indicators as set out in Exhibit A.
	1.21.	“Latent Defect” means any defect (including non-conformity with the Specifications) to Products, as demonstrated by Brii Bio or its designee, (i) existing at the time of Brii Bio or its designee’s acceptance of the relevant delivery; (ii) not reasonably discoverable by Brii Bio or its designee by carrying out the agreed upon testing and inspection methods at delivery set forth in the Quality Agreement; and (iii) which becomes apparent following such acceptance.
	1.22.	“License Agreements” means the PreHevbri Agreement and VBI-2601 Agreement.
	1.23.	“Licensed Territory” means: (a) with respect to the VBI-2601 Product, and/or the Novel Composition Product, the Licensed Territory (as defined in the VBI-2601 Agreement); or (b) with respect to the PreHevbri Product, the Licensed Territory (as defined in the PreHevbri Agreement).
	1.24.	“Manufacturing Date” means, with respect to each Product manufactured under this Agreement, the date on which the relevant Product is fully produced and packaged (where applicable) in accordance with its Specifications.
	1.25.	“Manufacture” / “Manufacturing” means all steps and operations involved in the production of Products, including, as the case may be, pharmaceutical or biological product formulation, conversion of active pharmaceutical or biological ingredients into Product, packaging, serialization, labelling, and testing of Products, and such other services as may be defined in the Quality Agreement, and storage of VBI Materials and Products until delivery thereof to Brii Bio or a party designated by Brii Bio.
	1.26.	“Marketing Authorization” means, with respect to any particular country or region in the Territory, all approvals, licenses, registrations or authorizations of any Regulatory Authority necessary to commercially distribute, sell, or market a Licensed Product in such country or region, including, where applicable: (a) pricing or reimbursement approval in such country or region, (b) pre- and post-approval marketing authorizations (including an prerequisite manufacturing approval or authorization related thereto), (c) labeling approval, and (d) technical, medical, and scientific licenses.
	1.27.	“PreHevbri Product” means the Licensed Product as defined in the PreHevbri Agreement.

 

 

	1.28.	“Product” means a finished VBI-2601 Product or PreHevbri Product Manufactured as required by Brii Bio pursuant to this Agreement, the License Agreements, and the Quality Agreement.
	1.29.	“Purchase Order” has the meaning set forth in Section 10.4.
	1.30.	“Quality Agreement” has the meaning set forth in Section 8.1.
	1.31.	“Qualified Offering” means the first underwritten public offering of common stock by VBI resulting in a minimum of aggregate gross proceeds of five million Dollars ($5,000,000), before commissions and expenses, but excluding Brii Bio’s three million Dollars ($3,000,000) investment in a concurrent registered direct offering of VBI common stock.
	1.32.	“Recall” means a recall, correction or market withdrawal relating to Product (whether required by a Governmental Authority or voluntary) and shall include any post-sale warning or mailing of information.
	1.33.	“Release Documents” means the certificate of analysis and the certificate of conformity as contemplated in the Quality Agreement.
	1.34.	“Relocation” has the meaning as defined in Section 2.2.
	1.35.	“Required Change” means a Relocation or Change mandated by Applicable Laws or regulations or GMP or by any Governmental Authority.
	1.36.	“Results” means the Brii Bio Results and the VBI Results, collectively.
	1.37.	“Specifications” means: (a) the specifications regarding the Manufacturing, testing, and supply of Product to Brii Bio as set forth in Exhibit B attached hereto and/or the Quality Agreement; and (b) any specifications that are described in the foregoing subsection (a) and that are Changed pursuant to the terms of the Agreement.
	1.38.	“Term” has the meaning set forth in Article 22.
	1.39.	“VBI-2601 Product” means the Licensed Product as defined in the VBI-2601 Agreement.
	1.40.	“VBI Materials” means, collectively, those raw materials, ingredients, analytical reagents, other reagents, disposables, excipients and packaging and labelling components, held or acquired by VBI as required to complete Manufacturing of Product for Brii Bio, under this Agreement and according to the Specifications.
	1.41.	“VBI Results” means Information and tangible biological, chemical, and physical materials arising from the activities performed under this Agreement which are strictly improvements to and/or modifications of the VBI Background IP and which are severable therefrom, and do not incorporate and which can be used independently of (i) Brii Bio Know-How, or (ii) Confidential Information of Brii Bio.

 

 

2. OBJECT AND SCOPE

 

2.1.

VBI shall Manufacture and supply the Product to Brii Bio in accordance with (i) all Applicable Laws and regulations and regulatory requirements, including as applicable for drug and vaccine product, manufacturing and registration, and licenses, such as GMP and applicable Marketing Authorizations and manufacturing authorizations, Pharmacopoeia requirements, and ICH guidelines, taking Brii Bio’s requirements and technical guidelines into account; (ii) the Specifications; (iii) the Quality Agreement; (iv) this Agreement (including but not limited to its Exhibits); and (v) the License Agreements. In the event of any inconsistencies between any of the above, the following order of priority shall apply:

 

	(a)	all mandatory Applicable Laws, regulations, and licenses, such as GMP requirements and regulatory laws, and Marketing Authorizations and manufacturing authorizations;
	(b)	the License Agreements;
	(c)	the Specifications;
	(d)	the Quality Agreement, in respect of matters relating to the allocation of pharmaceutical responsibilities;
	(e)	this Agreement; and
	(f)	the Quality Agreement, in respect of other matters.

 

	2.2.	All Product to be Manufactured by VBI under the Agreement are currently Manufactured at VBI’s Facility located at Gad Feinstein Rd., Rehovot, Israel 7610303 (the “Facility”), which VBI shall at all times, qualify and maintain under its own responsibility and at its own cost in accordance with Applicable Law. VBI shall not have the right to Manufacture at or from [**] unless it has obtained the prior written approval from Brii Bio, which consent shall not be unreasonably withheld (the “Relocation”). When seeking Brii Bio’s approval, VBI shall provide Brii Bio with the Relocation rationale, a plan detailing the transition methodology and a detailed breakdown of all anticipated costs relating to the Relocation. VBI shall perform a quality and EHS&S audit of the [**] and share the audit reports with Brii Bio (including current corrective action and preventive action status). Brii Bio has the right to perform an audit of the [**] itself at its own cost and in compliance with the [**] policies and procedures. If Brii Bio, at its discretion, assesses that the results of this audit do not comply with the necessary standards, Brii Bio may refuse its consent. All decisions relating to costs, timelines, and responsibilities relating to any Relocation which is required for VBI to expand its capacity to Manufacture Product under this Agreement will be discussed by the JMC and approved by the Senior Executives of the Parties.
	2.3.	If VBI wishes to use a CMO to have Manufactured any Product, VBI shall first offer such Manufacturing opportunity to Brii Bio, and Brii Bio shall have thirty (30) days to respond regarding whether it wishes to be engaged as a CMO. If Brii Bio responds to VBI within such thirty (30) day period that Brii Bio wishes to be engaged as a CMO, then the Parties will promptly negotiate in good faith and agree upon the terms of Manufacturing. If Brii Bio responds to VBI within such thirty (30) day period that Brii Bio does not wish to be engaged as a CMO, or if Brii Bio fails to respond within such thirty (30) day period, then VBI may, at its sole cost and expense, use a Third Party as its CMO; provided that, VBI obtains Brii Bio’s prior written consent thereto (not to be unreasonable withheld, conditioned or delayed) prior to engaging such CMO for such services.

 

 

3. Joint Manufacturing Committee.

 

	3.1.	Establishment. The Parties shall promptly, but no later than thirty (30) days after the Effective Date, convene in Israel to establish and convene a joint manufacturing committee (“JMC”) to provide a forum for the Parties to periodically meet in person or virtually (but not less than once per calendar quarter) to: (a) oversee the interactions between the Parties under this Agreement; (b) provide advice and oversight for Manufacturing during the development and commercialization of Products; (c) discuss the Commercial Manufacturing Costs and Clinical Development Manufacturing Costs for Products; (d) discuss quality issues related to Products, including failed Batches of drug substance, failed Batches of drug product, and the environmental monitoring excursion rate; (e) oversee VBI’s related cost reduction efforts for the Products; and (f) perform such other tasks as expressly set forth in this Agreement.
	3.2.	Membership. The JMC shall be composed of an equal number of one or more individuals appointed by each Party. The Parties may also mutually agree to include members who are not employees of either Party, on the condition that (prior to joining the JMC) each member of the JMC that is not an employee of either Party shall be bound by a consulting agreement containing confidentiality, invention ownership and other provisions at least as protective of each Party as the provisions in this Agreement. Any member of the JMC that is an employee of a Party may designate a substitute to attend and perform the functions of that member at any meeting of the JMC, and the Parties will mutually agree on a replacement for any non-Party member of the JMC. Each Party may replace its appointed member at any time by providing written notice to the other members of the JMC.
	3.3.	Subcommittees. From time to time, the JMC may establish subcommittees to oversee particular projects or activities within the scope of authority of the JMC, as it deems necessary or advisable. Each subcommittee shall consist of such number of representatives of each Party as the JMC determines is appropriate from time to time and shall meet with such frequency as the JMC shall determine. All decisions of each subcommittee shall be made by unanimous vote or written consent, with VBI and Brii Bio each having, collectively, one vote in all decisions. If, with respect to a matter that is subject to a subcommittee’s decision-making authority, the subcommittee cannot reach unanimity, the matter shall be referred to the JMC, which shall resolve such matter in accordance with Section 27.15.
	3.4.	Limitation on Authority. Notwithstanding the creation of the JMC, each Party shall retain the rights, powers and discretion granted to it hereunder, and neither the JMC, nor any subcommittee, shall be delegated or vested with rights, powers, or discretion unless such delegation or vesting is expressly provided herein, or the Parties expressly so agree in writing. The JMC shall have no power to: (i) amend or modify this Agreement or the License Agreements; (ii) waive any Party’s obligation to comply with the terms and conditions of this Agreement or the License Agreements; (iii) require any Party to breach any obligation or agreement that such other Party may have with or to a Third Party prior to the Effective Date; or (iv) require any Party to perform any activities that are materially different or greater in scope than those expressly provided for under the Agreement or the License Agreements. Furthermore, no decision of the JMC shall be in contravention of any terms and conditions of this Agreement or the License Agreements. No member of the JMC shall be a third-party beneficiary of this Agreement or the License Agreements. If, with respect to a matter that is subject to the JMC’s decision-making authority, the JMC cannot reach unanimous consensus, the matter shall be resolved in accordance with Section 27.15.

 

 

3.5.

Annual Meeting. Once each calendar year during the Term, the JMC shall organize annual physical meetings to discuss the operational aspects relating to the execution of this Agreement, compliance with KPIs, and management of issues communicated between the Parties. The Parties may mutually agree to invite to such annual meetings employees of each Party who are not members of the JMC that have sufficient decision-making authority or experience and qualifications to facilitate discussions and activities within the scope of the annual meeting. With the prior agreement of the Parties, the frequency of the meetings may be increased and the meetings may be organized through other media (e.g., teleconferences or videoconferences). Each Party shall bear its own costs in relation with all meetings organized under this Section 3.5.

 

4. Exclusivity

 

4.1.

Exclusivity. During the Term, VBI agrees to Manufacture the Product exclusively for Brii Bio in the applicable Licensed Territory. This provision shall not apply to VBI’s retained rights to Product and its manufacture with respect to VBI’s own supply and commercialization requirements.

 

5. Equipment and Personnel

 

5.1.

Unless expressly otherwise agreed upon in writing between the Parties, and excluding requirements to expand capacity of Rehovot Site under Section 5.2, VBI agrees to provide, purchase, install, qualify, and maintain under its own responsibility and at its own cost all Equipment necessary for the Manufacturing. Brii Bio shall have the right to assess (and verify compliance with) the qualification approach as part of an audit in accordance with Article 13.

 

 

	5.2.	The Parties agree that any CAPEX required for the expansion in capacity of the Facility, which are expected to be operational within six (6) months from the Effective Date shall be borne by solely by VBI, and for longer term CAPEX investments with an anticipated horizon beyond six (6) months from the Effective Date, the Parties may elect to negotiate in good faith to apply the anticipated Brii-VBI Pro-Rata Allocation expected to be in effect at the point in which the CAPEX investment becomes operational. The election to commence any capital expansion projects shall be determined by the JMC and commence once financed in accordance with the foregoing; provided that, the total value of any capital expansion projects approved by the JMC shall not exceed [**]. Any capital expansion projects in excess of [**] must be approved by both the JMC and in writing by both CEOs of Brii Bio and VBI. For purposes of this Agreement, CAPEX shall mean any expenditure by VBI for (a) an asset which will be used in a year or years subsequent to the year in which the expenditure is made and which asset is properly classified in relevant financial statements of VBI as equipment, real property, a fixed asset or a similar type of capitalized asset in accordance with GAAP or (b) an asset relating to or acquired in connection with an acquired business, and any and all acquisition costs related to (a) or (b) above.
	5.3.	VBI shall maintain any and all Equipment in good condition throughout the Term. VBI warrants that such Equipment shall at all times comply with all Applicable Laws and regulations, the Specifications, the License Agreements, this Agreement, the Quality Agreement, and other requirements agreed upon in writing by the Parties. Such Equipment may only be used by VBI as follows:

 

	(a)	in addition to Article 26, VBI shall in no event use such Equipment for the handling, manufacturing, or processing of cytotoxics, hormones, and penicillin or other toxic materials;
	(b)	in addition to Article 26, if VBI uses such Equipment for the handling, manufacturing, or processing of biologics (other than Products) or vaccines (other than Products), then use on Equipment must be in accordance with Applicable Laws and regulations; and
	(c)	the process and Equipment chain for the Product and filling and packaging equipment will be used in accordance with Applicable Laws and regulations.

 

For the avoidance of doubt, VBI is responsible for the Equipment, including its maintenance, breakage, repair, safety, qualification/requalification, and calibration. VBI shall bear the sole cost and expense in bringing such Equipment or Manufacturing processes in compliance with all Applicable Law and regulatory requirements, solely for Product for VBI Territories, including relocating the manufacturing of products other than the Product if requested or required by any Applicable Law or Regulatory Authority. All Equipment shall be covered by an appropriate insurance. The expense in bringing such Equipment or Manufacturing process in compliance with all Applicable Law and regulatory requirements, solely for Product for Brii Bio Territories, shall be shared by Brii Bio either according to the VBI-Brii Pro-Rata Allocation or mutual agreement at the JMC. If the requirements and Applicable Law are for Product in both VBI and Brii Bio Territories, the JMC will determine responsibilities, cost allocations, and process.

 

 

5.4.

VBI shall under its own responsibility and at its own costs retain sufficient qualified personnel to Manufacture and supply the Product to Brii Bio in accordance with the terms and conditions hereof.

 

6. VBI Materials

 

	6.1.	Unless expressly otherwise agreed upon in writing between the Parties, VBI shall purchase any and all VBI Materials under its own responsibility and at its own cost in such quantities as are necessary for the Manufacturing in accordance with the forecasts provided pursuant to Section 10.1.
	6.2.	VBI shall, when entering into arrangements with its suppliers, make sure such arrangements contain appropriate terms reducing the risk of a failure to supply including but not limited to sufficient supply guarantees from suppliers of VBI Materials for the Manufacturing.
	6.3.	Prior to VBI changing any VBI Materials or making any changes of its current manufacturers of VBI Materials, VBI shall seek prior written consent from Brii Bio (which shall not be unreasonably denied). Brii Bio shall have the right to consult with VBI regarding the purchase of VBI Materials from its current manufacturers, or such other Third Party manufacturers approved by Brii Bio, and VBI shall consider in good faith implementing any changes requested by Brii Bio.
	6.4.	VBI represents and warrants that any and all VBI Materials shall comply with the Specifications and the Quality Agreement and other requirements agreed upon by the Parties in writing. At the request of any Governmental Authority or Regulatory Authority, VBI shall send physical samples of any VBI Materials to Brii Bio or such Governmental Authority or Regulatory Authority for review.
	6.5.	For the avoidance of doubt, nothing included in any agreement between VBI and any of its suppliers shall be binding upon Brii Bio, except as has been previously reviewed by and signed by Brii Bio.

 

7. Storage

 

7.1.

While held at VBI’s Facility, VBI shall provide adequate and safe storage for VBI Materials and Products in compliance with GMP, requirements imposed by Governmental Authority and all Applicable Laws, and the requirements of the Quality Agreement and Specification. The location of VBI’s warehouse in which VBI Materials and Products are stored, must at all times be known to Brii Bio. VBI shall maintain inventory of Products in accordance at all time with Applicable Law and under conditions necessary to support Product having the maximum shelf-life remaining upon delivery to Brii Bio.

 

 

7.2

VBI will ship Product to Brii Bio as soon as possible after packaging and release, to enable in-country release process to initiate.  Once VBI ships Product to Brii Bio, Brii Bio will be responsible for the storage of Products in the Licensed Territory in compliance with requirements imposed by Governmental Authority and all Applicable Laws, and the requirements of the Quality Agreement and Specification.

 

8. Quality

 

	8.1.	Quality Agreement. Brii Bio or its Affiliate and VBI will enter into a Quality Assurance Agreement (“Quality Agreement”) regarding the commercial and clinical quality of Product within ninety (90) days of the Effective Date. The Quality Agreement will set forth the standards, expectations, allocation of tasks, and responsibilities of the Parties with respect to quality control and assurance, inspection preparedness and quality risk management for Products Manufactured under this Agreement and the License Agreements. The Quality Agreement will be reviewed by the Parties on a periodic basis and amended as necessary to be an accurate reflection of the quality obligations for each Party regarding Product. For the avoidance of doubt, such amendment will be of no effect unless set forth in a signed writing between the Parties.
	8.2.	Sample Retention. In accordance with GMP, the Quality Agreement, and Applicable Law, VBI will take and retain, for such period and in such quantities as may be required thereunder samples from the Manufacturing process produced under this Agreement.

 

9. Changes

 

9.1.

Changes other than Required Changes.

 

(a)

Brii Bio Changes. In the event Brii Bio wishes to effect a Change which is not a Required Change, Brii Bio shall advise VBI in writing of such Change and VBI shall provide a calculation of the Change Costs and the timing for implementation as well as the amount and discard cost of any VBI Materials rendered obsolete because of the Change and support such information with sufficient documentation (together, “Change Implementation Documentation”) within sixty (60) Business Days after the date at which such Change has been communicated by Brii Bio to VBI. In case Brii Bio approves the Change Implementation Documentation (in its sole discretion), VBI shall implement such Change within the approved timeframe and Brii Bio shall bear the approved Change Cost (which Brii Bio may elect to apply credit against the Prepayment Amount), except if such Change is the result of VBI failing to comply with its obligations under this Agreement in which case the Change Costs shall be borne by VBI.

 

 

	(b)	Brii Bio shall reimburse VBI for a Change requested by it (in cases not the result of the negligence, gross negligence or willful misconduct of VBI nor VBI’s failure to comply materially with its obligations under this Agreement), at VBI’s acquisition cost, for that amount of inventory of VBI Materials so rendered obsolete but never more than the amount of VBI Materials that VBI is required to keep in stock as set forth in Article 10. Brii Bio shall notify VBI whether Brii Bio wishes to, at its option, have such VBI Materials delivered to Brii Bio in the manner Brii Bio directs, or have VBI destroy such VBI Materials at reasonable cost to be reimbursed by Brii Bio.
	(c)	VBI Changes. In the event VBI wishes to effect a Change which is not a Required Change, VBI shall advise Brii Bio in writing of such requested Change and provide Brii Bio with the Change Implementation Documentation. In case Brii Bio approves (in its sole discretion) the Change and Change Implementation Documentation, VBI shall implement such Change within the approved timeframe and VBI shall bear the Change Costs.
	(d)	VBI shall in each case comply with the procedures for Change implementation in the Quality Agreement.
	(e)	In case a Change that is initiated by VBI after the date that is six (6) months from the Effective Date is beneficial to both Parties and is not otherwise required to be implemented by VBI under this Agreement or the License Agreements (i.e., for Brii Bio effectively resulting in a price reduction for the Manufacturing and/or the supply of the Product to Brii Bio above what is contemplated hereunder), at VBI’s request, Brii Bio may enter into good faith discussions with VBI to attempt to agree to a sharing of the Change Costs (according to the VBI-Brii Pro-Rata Allocation or according to a ratio to be agreed by the Parties in writing).

 

9.2.

Required Changes.

 

(a)

In the event a of a Required Change, the Party becoming aware thereof shall promptly notify the other and provide the other with all relevant documents delivered to it by the Governmental Authority. VBI shall provide Brii Bio with the Change Implementation Documentation promptly in accordance with the requirements set forth by the Governmental Authority. VBI shall implement such Required Change within the timeframe required by the Governmental Authority. VBI shall bear the Change Costs. However (and to the extent the relevant Required Change is not the result of VBI failing to comply with its obligations under this Agreement), if the implementation of the Required Change by VBI is solely relevant for the Manufacturing or, as the case may be, the supply of the Product to Brii Bio in the Licensed Territories hereunder, Brii Bio shall bear Change Costs according to the VBI-Brii Pro-Rata Allocation, except for changes relating specifically to the Product and severable from VBI’s retained rights in PreHevbrio and PreHevbri, in which case Brii Bio will bear one hundred percent (100%) of the Change Costs, and Brii Bio may, upon written notice to VBI, apply all or some portion of the Prepayment Amount to cover such Change Costs.

 

 

	(b)	If the implementation of the Required Change by VBI is solely relevant for the Manufacturing or, as the case may be, the supply of the Product to Brii Bio in the Licensed Territories hereunder and except in case such Required Change is the result of VBI failing to comply with its obligations under this Agreement, Brii Bio shall reimburse VBI, at one hundred per cent (100%) of VBI’s acquisition cost, for that amount of inventory of VBI Materials so rendered obsolete but never more than the amount of VBI Materials that VBI is required to keep in stock as set forth in Section 15.11.
	(c)	VBI shall in each case comply with the procedures for Required Change implementation in the Quality Agreement.
	(d)	In case a Required Change, which is not solely relevant for the Manufacturing or, as the case may be, the supply of the Product to Brii Bio hereunder, is beneficial to both Parties and is not otherwise required to be implemented by VBI under this Agreement or the License Agreements (i.e. for Brii Bio effectively resulting in a price reduction for the Manufacturing and/or the supply of the Product to Brii Bio above what is contemplated hereunder), at VBI’s request, Brii Bio may enter into good faith discussions with VBI to attempt to agree to a sharing of the Change Costs (sharing ratio to be agreed), and with respect to any Change Cost to be borne by Brii Bio, Brii Bio may, upon written notice to VBI, apply all or some portion of the Prepayment Amount to cover such Change Costs.

 

9.3.

In the event that VBI is unable to supply Product that meets any Change within the relevant timing for implementation referred to above, Article 25 shall apply.

 

10. Forecasting, Purchase Orders and Delivery of Products

 

	10.1.	Clinical Product Forecast. Commencing with the first calendar year following the Effective Date, each calendar month of the Term, Brii Bio shall provide VBI with a rolling forecast setting forth Product supply purchase requirements for Brii Bio’s clinical use during the following [**], together with a firm, binding order for [**] of such forecast. Thereafter, Brii Bio will submit to VBI an updated rolling forecast not later than [**] covering the next [**]. The [**] of each forecast shall constitute a binding commitment for Brii Bio to purchase forecasted quantities.
	10.2.	Commercial Product Forecast. Six (6) months prior to the projected First Commercial Sale, [**], Brii Bio shall provide VBI a rolling forecast setting forth Product supply purchase requirements for the commercial sale of Products during the following [**], together with a firm, binding order for [**] of such forecast. Thereafter, Brii Bio will submit to VBI an updated rolling forecast not later than [**] covering [**]. The first [**] of each forecast shall constitute a binding commitment for Brii Bio to purchase forecasted quantities.

 

 

	10.3.	If Brii Bio wishes to increase the quantities of Product to be delivered for either clinical or commercial use as compared with the binding portion of any forecast, the Parties discuss in good faith the possibility for VBI to Manufacture and supply such excess. However, VBI shall not have any obligation to Manufacture and/or supply in excess of the binding portion of such forecast. The Parties acknowledge that Brii Bio is not obligated to buy any minimum or specific quantity or value of Product under this Agreement, except with respect to any safety stock pursuant to Section 15.11 and any the quantities included in the binding forecast or in a Purchase Order (subject to Article 24).
	10.4.	Unless otherwise agreed by the Parties, each binding forecast in Section 10.1 and Section 10.2 shall serve as a purchase order (each, a “Purchase Order”).  The Parties shall agree upon a form of Purchase Order, which at a minimum shall include, but not limited to, a PO Number, Bill-to, sold-to and ship-to address, correct terms of sale included, name of purchaser, including phone, fax and email information, freight instructions including carrier and date of PO issue. VBI shall deliver the quantities provided for in a relevant Purchase Order on or before the date of delivery set forth in such Purchase Order, but not earlier than two weeks prior to such date. VBI shall schedule its manufacturing operations so that all Product delivered hereunder shall have the maximum remaining shelf-life possible. In any event, Product delivered to Brii Bio for sale in mainland China shall have a remaining shelf life of at least [**], unless otherwise agreed upon, in writing, between the Parties. For Regions in the Licensed Territory outside of mainland China, the JMC will discuss the in-country release timeline to determine an acceptable Product shelf-life in each Region, except that, in no event shall the minimum acceptable remaining shelf-life of Product for any Region be less than [**] percent ([**]%). The Parties will work together on regulatory submission strategy in the Territory to reduce the duration of the release timelines and increase approved shelf life.
	10.5.	FOR THE AVOIDANCE OF DOUBT, NO ADDITIONAL OR DIFFERENT TERMS OFFERED BY BRII BIO IN A PURCHASE ORDER OR OTHERWISE, SHALL BE OR BECOME PART OF THIS OR ANY OTHER AGREEMENT BETWEEN THE PARTIES, AND ANY SUCH TERMS ARE HEREBY REJECTED, UNLESS SAID ADDITIONAL OR DIFFERENT TERMS ARE AGREED TO IN A WRITTEN AGREEMENT SIGNED BY THE PARTIES. IF THE TERMS OF THIS AGREEMENT CONFLICT WITH ANY RELATED DOCUMENTS INCLUDING A PURCHASE ORDER, THE TERMS AND CONDITIONS OF THIS AGREEMENT CONTROL, UNLESS OTHERWISE AGREED TO IN WRITING BY THE PARTIES.

 

 

	10.6.	The Product shall be delivered to Brii Bio in suitable packaging, so as to permit safe storage and transport. Where appropriate, VBI shall ensure that the Product is monitored using temperature loggers, which Brii Bio shall handle in accordance with the requirements set forth in the Quality Agreement.
	10.7.	Brii Bio agrees and accepts that due to the particularity of the Product, the quantity of Product supplied to Brii Bio may differ by plus/minus five percent (+/- 5%) from the ordered and confirmed quantity and that the actual delivered quantity of Product will be invoiced.
	10.8.	The Products shall be delivered DAP (Incoterms© 2020) to such place as designated by Brii Bio on a Purchase Order or as otherwise in accordance with this Agreement. All charges for labelling, packing, hauling, storage, bar coding, and transportation (including any related import tax or value-added tax) are included in the price. All shipments must be accompanied by a packing slip which describes the articles, states the Purchase Order number, and shows the shipment’s destination, and other documents supporting the import/export of the Products or otherwise required by the Quality Agreement. VBI agrees to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with Brii Bio’s instructions.
	10.9.	In the event that VBI fails to meet the agreed timely delivery schedule increased with a remedy period of fifteen (15) Business Days, the price shall be reduced with two per cent (2%) per week of delay for such Products, with a maximum of ten per cent (10%), unless such delay is due to Brii Bio not complying with its obligations under this Agreement.

 

11. Testing and Release Documents; Failed Product; Rejects

 

	11.1.	VBI shall verify compliance of each Product with the requirements set forth in Article 2 above after the Manufacturing Date of the Product. VBI shall send the completed Release Documents and any other documents and materials as required in the Quality Agreement prior to Product delivery at Brii Bio’s designated place and time as specified in the Purchase Orders.
	11.2.	VBI shall re-perform any Product that is not in compliance with the requirements set forth in Article 2 above, or is lost or damaged prior to delivery to Brii Bio (“Failed Product”) as soon as possible at no additional charge to Brii Bio, and in no case later than one hundred twenty (120) calendar days following, as the case may be, (i) VBI acknowledging that the relevant Product is a Failed Product; or (ii) receipt by VBI of Brii Bio’s notice of rejection in accordance with Section 11.3.
	11.3.	Brii Bio has the right to reject any Failed Product or any batch containing such Failed Product. Brii Bio shall notify its rejection in writing within fourteen (14) calendar days (i) of receipt of Failed Product by Brii Bio or Brii Bio’s designee in case of a visible defect, or (ii) of Brii Bio’s discovery in case of a Latent Defect or of Brii Bio being informed of a Latent Defect. In the case of Brii Bio being informed of a Latent Defect by a Regulatory Authority, such Latent Defect will be finally confirmed. Disputes relating to any such rejection shall be settled by an independent laboratory appointed by Brii Bio and reasonably acceptable to VBI. If Product is confirmed to be Failed Product by the independent laboratory, the costs of the independent laboratory shall be borne by VBI. In all other cases, the costs of the independent laboratory shall be borne by Brii Bio.

 

 

	11.4.	VBI shall respond to any rejection, defect notice or any quality-related complaint from Brii Bio in a timely manner. VBI shall conduct an analysis of the causes of any such complaint and shall report to Brii Bio on any corrective action taken, and shall at all times take reasonable account of Brii Bio’s suggestions related to such corrective action or other quality-related matters. Brii Bio shall return any shipments of Product (or portions thereof) rejected pursuant to this Section 11.4 to VBI. The expenses for such return shall be at the expense of the Party deemed to be responsible for the Failed Product pursuant to the terms of this Agreement.
	11.5.	All Failed Product shall, following prior consultation with and approval of Brii Bio, be removed (if applicable) and disposed of by VBI in accordance with all Applicable Laws and instructions of Governmental Authority. The disposal cost shall be at the expense of the Party deemed to be responsible therefor pursuant to the terms of this Agreement. VBI shall make all documentation relating to such disposition available to Brii Bio upon Brii Bio’s request.
	11.6.	For the avoidance of doubt, any remedies provided for in this Article 11 are without prejudice to any other remedies that Brii Bio may have under this Agreement or in law or equity.

 

12. KPIs

 

	12.1.	KPIs. Unless otherwise expressly agreed in writing, VBI shall at all times comply with the KPIs in the Manufacturing and supply of the Product to Brii Bio.  Promptly following Brii Bio delivering the first supply forecast to VBI, the JMC shall agree on KPI targets and penalties for the applicable KPI targets.
	12.2.	VBI shall continuously monitor the observance of all KPIs. Within ten (10) Business Days from the beginning of any calendar month, VBI shall furnish Brii Bio with a report on the achievement of all monthly KPIs in the previous month, at no cost. In addition, within twenty (20) Business Days from the beginning of any calendar year, VBI shall furnish Brii Bio with a report on the achievement of all yearly KPIs in the previous year, at no cost
	12.3.	If, without the prior approval of Brii Bio, VBI fails to comply with any (monthly or yearly) KPI as set forth in Exhibit A the relevant KPI penalty shall apply as set forth in said Exhibit unless VBI demonstrates to the satisfaction of Brii Bio that such failure is due to a reason that is entirely out of its control.

 

 

	12.4.	In addition to Section 12.3, if VBI fails to comply with any KPI during a total of three (3) months within a six (6) months period (for monthly KPIs) or during one (1) year (for yearly KPIs), VBI shall submit to Brii Bio, within thirty (30) calendar days following the occurrence of such non-compliance, a plan setting out the causes of such non-compliance, the remedial efforts to be undertaken by VBI, the timing for such remedial efforts to be implemented and the preventive measures VBI shall take to avoid such non-compliance in the future (the “Remedy Plan”).  In case such KPI is not complied with for an additional three months within the next six (6) months period (for monthly KPIs) or for two additional years within the next three (3) years (for yearly KPIs), such event shall be considered as a material breach and Brii Bio shall have the right to terminate the Agreement, without any additional compensation due to VBI.
	12.5.	All other rights or remedies which Brii Bio may have under this Agreement or Applicable Law (including damage claims or its right to terminate the Agreement in accordance with Section 22.4) shall remain unaffected, and shall not be limited, by Sections 12.3 to 12.4. In addition, any of the above shall be without prejudice to any other action or measure that Parties may agree upon during the JMC’s annual meeting as set out in Section 3.5.

 

13. Audit

 

	13.1.	Upon Brii Bio’s request, but no more than once per year without agreement by VBI (except with respect to audits conducted for sufficient cause shown), VBI shall permit, and cause its CMOs to permit, the presence of at least two Brii Bio or Brii Bio Affiliate person-in-plant, each of whom shall be permitted to observe key Manufacturing events during the VBI Manufacturing process. Subject to Article 15, each such observation shall be for a period not to exceed seven (7) days.
	13.2.	During such time that any Product is Manufactured by or on behalf of VBI, VBI grants Brii Bio, and with respect to any CMO of VBI, will secure for Brii Bio the right, in each case, at reasonable times, with reasonable prior written notice, and for a reasonable period of time, to inspect VBI’s or such CMO’s production facilities (no more frequently than once per calendar year without cause, and at any time for cause) to: (a) perform a prequalification audit; (b) confirm VBI’s or such CMO’s compliance with GMP, good pharmacovigilance practices, the Specifications, and Applicable Law; and (c) review relevant Manufacturing records with respect to Products, in each case, in accordance with the Quality Agreement.
	13.3.	If Brii Bio observes a condition that causes it to reasonably believe that any Products are not being Manufactured in accordance with GMP, good pharmacovigilance practices, the Specifications or Applicable Law, then the Parties will discuss on any appropriate corrective actions to address such noncompliance, and if an agreement is reached, VBI will and will cause such CMO to implement any such corrective action, in each case, in accordance with the Quality Agreement.
	13.4.	A failure by VBI to initiate the agreed upon corrective actions to ultimately remedy or cause the remedy of such noncompliance within thirty (30) calendar days of agreement at the JMC and to fully implement such corrective actions within the timeline agreed upon at the JMC shall be deemed a material breach of this Agreement upon which Brii Bio shall have the right to terminate this Agreement, without incurring any liability for such termination. VBI acknowledges that the provisions of this Article 13 granting Brii Bio certain audit rights shall in no way relieve VBI of any of its obligations under this Agreement, nor shall such provisions require Brii Bio to conduct any such audits.

 

 

	13.5.	The Quality Agreement may contain more detailed provisions with respect to such inspections.
	13.6.	Each Party shall bear its own costs relating to such audit.
	13.7.	VBI shall permit and cooperate with any audits or inspections of a Governmental Authority in accordance with Section 15.7.
	13.8.	Following any audit or inspection by a Government Authority or Regulatory Authority, a finding of non-compliance pursuant to an audit performed under this Article 13, or for other sufficient cause agreed to at the JMC, VBI shall permit one named employee of Brii Bio, its Affiliates or its designee (the “Brii Bio Representative”) to be present at the Facility during normal working hours during the Term, for a period of time as agreed to at the JMC. VBI shall provide to the Brii Bio Representative reasonable office space (including necessary furniture and internet access) within the Facility during the Term. The Brii Bio Representative shall have access to those areas of the Facility that relate to the Manufacturing, provided that the scope of the activities of the Brii Bio Representative shall be limited to the following activities that are related to the initial audit, inspection, finding of non-compliance or other sufficient cause:

 

	(a)	observing and monitoring the Manufacturing;
	(b)	reviewing VBI’s inventory of VBI Materials, Products and work-in-progress relating to Products;
	(c)	inspecting records that VBI is required to keep and to make available to Brii Bio in accordance with the Quality Agreement or this Agreement; and
	(d)	participating in discussions between the Parties relating to the management of Brii Bio’s forecast demand, selling unit balancing, timings of production and delivery.

 

14. Price; INVOICING AND PAYMENT

 

14.1.

Products Manufactured and supplied pursuant to this Agreement shall be supplied to Brii Bio at VBI’s Commercial Manufacturing Costs and Clinical Development Manufacturing Costs. Brii Bio shall only pay for the costs of successfully released batches of Product (and not for any batches of Product not released, such as due to any non-compliance as set forth herein). The Commercial Manufacturing Costs and Clinical Development Manufacturing Costs shall be subject to the price reductions set forth on Exhibit D and Exhibit E, and in each case the cost will be rounded up to the nearest Dollar for purpose of calculating the final markup.

 

 

	14.2.	VBI agrees to use its Commercially Reasonable Efforts to achieve year over year a reduction of the cost of manufacturing. VBI shall put in place an appropriate cost improvement program and targets shall be reviewed annually during ad hoc meetings, with concrete actions documented. Should the cost improvement plan imply a new investment, the Parties shall discuss upfront in good faith about how to allocate the relevant cost between them. All cost reductions (including any reduction in manufacturing cost due to increased Brii Bio orders) resulting from the cost improvement plan shall result in an appropriate price reduction.
	14.3.	Except if otherwise provided for in this Agreement, the price shall remain fixed for the Term.
	14.4.	Invoice and Payment Procedure.

 

	(a)	Product. Unless Brii Bio provides alternate written instructions, VBI shall invoice Brii Bio or its designated Affiliate the price in U.S. Dollars upon release by Brii Bio and shipment of Product to the address communicated by Brii Bio on a Purchase Order. As applicable, each such invoice shall contain the amount credited against the total Prepayment Amount and the total Prepayment Amount outstanding. Once the Prepayment Amount is achieved, subsequent invoices submitted by VBI shall be paid by Brii Bio within thirty (30) days from the date of the invoice. VBI shall submit all invoices and Brii Bio shall make all payments in accordance with Article 10 of the VBI-2601 Agreement for the VBI-2601 Products and Novel Composition Products Manufactured and supplied under this Agreement and in accordance with Article 10 of the PreHevbri Agreement for the PreHevbri Products Manufactured and supplied under this Agreements.
	(b)	Non-Product Authorized Payment Amounts. Unless Brii Bio provides alternate written instructions, for any non-Product amounts authorized by Brii Bio under this Agreement, VBI shall provide to Brii Bio or its designated Affiliate an invoice within seven (7) days after the end of each calendar month detailing, in U.S. Dollars, the charges incurred for the preceding month and the portion of such charges attributable to Brii Bio, together with all necessary supporting documents for such invoice. VBI shall be paid by Brii Bio for all undisputed amounts within thirty (30) days from the date of Brii Bio’s receipt of the invoice. At Brii Bio’s election any amount due to VBI under any such invoice may be credited against the Prepayment Amount.

 

14.5.

Advance Payment Condition. If, within ninety (90) days following the Effective Date, VBI achieves a Qualified Offering, Brii Bio will provide to VBI an amount equal to five million Dollars ($5,000,000) as an advance payment for the clinical and commercial manufacture and supply of Product under this Agreement, and Brii Bio’s obligations under this Agreement (the “Prepayment Amount”). The Prepayment Amount will be fully creditable against any amount that is payable by Brii Bio to VBI under this Agreement, including purchases made by Brii Bio under any Purchase Order. VBI shall use the Prepayment Amount solely to fulfill its obligations under this Agreement.

 

 

14.6.

Advance Payment Product Price. VBI and Brii Bio agree that the price applicable to Product purchased and creditable against the Prepayment Amount shall be equal to: (a) per PreHevbrio Product will not exceed [**] Dollars ($[**]) as indicated in the package insert and product presentation; and (b) per VBI-2601 Product will not exceed [**] Dollars and [**] Cents ($[**]) as indicated in the package insert and product presentation.

 

15. REGULATORY; SAFETY STOCK; INVENTORY

 

	15.1.	Licenses. Except as provided under Section 15.2. hereafter, VBI shall be responsible for obtaining and maintaining any and all licenses or permits required by any Governmental Authority in the Territory in order to enable VBI to Manufacture and supply the Product to Brii Bio in full compliance with this Agreement (including but not limited to the Quality Agreement). For the avoidance of doubt, such licenses or permits shall include the FDA, EMA, NMPA, and the Pharmaceutical and Medical Device Agency (“PMDA”) in the Territory. At Brii Bio’s reasonable request, VBI will provide to Brii Bio copies of all such licenses and approvals.
	15.2.	Marketing Authorization. Brii Bio or a party designated by Brii Bio shall be responsible for obtaining and maintaining, at its own costs, the Marketing Authorization for the Products from any Governmental Authorities as required by the Applicable Laws in the applicable Licensed Territory. VBI shall provide Brii Bio or a party designated by Brii Bio, who shall be subject to terms of confidentiality no less stringent than those set forth herein, with all information relating to the Manufacturing and supply of the Product (including the current CTD Module 3) to Brii Bio as reasonably required to enable Brii Bio or the party designated by Brii Bio to obtain and maintain such Marketing Authorization in the Licensed Territory.
	15.3.	At the request of Brii Bio, VBI shall provide Brii Bio technical source reports for any requested aspect of the Manufacturing and supply of the Product to Brii Bio, with sufficient detail to enable Brii Bio to use these as a basis to draft regulatory documentation or dossiers for global submissions to meet requirements of any Governmental Authority in the Licensed Territory. VBI shall provide Brii Bio with other relevant documentation for submission to the Governmental Authorities in the Licensed Territory as required, including but not limited to certificates of analysis, GMP certifications, manufacturing licenses, and batch manufacturing records, stability data and related site SOPs, and manufacturing process diagrams and descriptions, analytical procedures. All such documentation shall be provided according to agreed timelines and in the agreed format. The foregoing shall be without prejudice to the records and information management requirements set forth in Section 26.3.

 

 

	15.4.	In the case of receipt of requests/questions for documentation made by any Governmental Authority in the Licensed Territory, VBI shall provide documentation to Brii Bio in accordance with agreed timelines and in agreed format enabling Brii Bio to appropriately and timely respond to such requests/questions.
	15.5.	For any regulatory related matter, Brii Bio or the relevant Marketing Authorization holder (if other than Brii Bio) shall retain control and be responsible for any communication with the Governmental Authorities in the first instance as the Marketing Authorization holder.
	15.6.	In the eventuality that VBI is required to submit regulatory documents containing Confidential Information to any Governmental Authority in the Licensed Territory, which cannot be provided to Brii Bio for submission, e.g. a “closed part” of an active master file or a detailed/full site master file, VBI shall notify with Brii Bio to ensure that VBI’s documents are submitted directly to the Governmental Authorities, to the extent feasible are in line with Brii Bio’s timelines for submission of other documents that form part of the overall submission.
	15.7.	Government Inspections, Seizures and Recalls. VBI shall be responsible, at its sole cost and expense, for conducting all activities required to obtain and maintain any regulatory approvals necessary for the Manufacture and supply of the Product under this Agreement and shall, at all times, comply with regulations and Applicable Laws. If any Governmental Authority in the Licensed Territory or any other competent authority conducts or gives notice (to VBI, its CMO, or to Brii Bio) of its intent to conduct any audit or inspection at any offices or facilities (including Manufacturing Facility) of VBI or any CMO where such audit or inspection relates to any Products in a Licensed Territory, then VBI will ensure Brii Bio is promptly notified, and to the extent such audit or inspection relates to a Product and to the extent practicable and not prohibited by Applicable Law, secure for Brii Bio the right to participate in any such audit or inspection. If any Governmental Authority seizes Product or requests a Recall of Product, VBI shall notify Brii Bio immediately (and at the latest within twenty-four (24) hours). VBI shall notify Brii Bio on a day-to-day basis of any relevant finding of such on-going inspection. VBI shall promptly provide Brii Bio with copies of any reports issued or decisions notified by such Governmental Authority relating to the Product or that could impact VBI’s ability to Manufacture at the Facility. At the request of Brii Bio, VBI shall promptly send to Brii Bio or to a party designated by Brii Bio retained samples of Products seized by such Governmental Authority. Notice to Brii Bio under this Agreement does not relieve VBI of any notification requirements or other obligations to take action under Applicable Law and regulations.

 

 

	15.8.	VBI shall support Brii Bio in the handling of Complaints and Recalls. Support shall be provided by VBI immediately and requests for information shall be provided by VBI within twenty-four (24) hours of such request by Brii Bio, or as otherwise agreed between the Parties. Details regarding the roles and responsibilities of the Parties in regard to Complaints and Recalls are set forth in the Quality Agreement.
	15.9.	In case the Complaint or Recall is due to Failed Product, VBI shall bear all costs of such Complaint or Recall and shall support Brii Bio and, if other than Brii Bio, the relevant Marketing Authorization holder in the Complaint and Recall handling free of charge. In all other cases, Brii Bio or its designee shall bear the costs of the Complaint or Recall and VBI shall have the right to charge reasonable fees for its support to Brii Bio and, if other than Brii Bio, the relevant Marketing Authorization holder in the Complaint and Recall handling.
	15.10.	Public Tenders. At the request of Brii Bio, VBI shall provide within the reasonable timeframes set forth by Brii Bio any assistance, certificates and documentation related to the Manufacturing and supply of the Product to Brii Bio and necessary or useful for Brii Bio and/or its Affiliates to duly submit for and follow-up on public tender procedures in the Licensed Territories.
	15.11.	Safety Stock. At any time during the Term, VBI shall maintain an inventory of materials, including cell banks (master cell banks and working cell banks), reference standards, raw materials, culture media, chemicals, reagents, excipients, packaging materials, and other consumables in quantities sufficient to ensure timely delivery of Product according to the forecast delivered in accordance with Sections 10.1 and 10.2.
	15.12.	Inventory. Brii Bio shall be entitled to conduct physical inventory counts at Facility once yearly at no cost and, in its reasonable opinion, to request VBI to change its inventory of Product and any VBI Materials with replenishment lead-times longer than six (6) months, upon providing the reasons therefor. Once per calendar quarter, VBI shall provide Brii Bio with a reconciliation sheet containing an inventory overview (VBI Materials with replenishment lead-times longer than six (6) months, WIP, Product).
	15.13.	This safety stock obligation shall be without prejudice to the obligation of VBI to order and store such VBI Materials as it deems appropriate to fulfil its obligations hereunder.

 

16. Insurance

 

	16.1.	Insurance requirements. VBI shall comply with the insurance requirements set forth in Exhibit C.
	16.2.	No effect of insurance coverage on liability. The required insurance coverage set forth in Section 16.1 shall be primary and non-contributing with respect to any other insurance that may be maintained by a Party, and shall in no way be deemed to or construed so as to limit the liability of a Party in any way. Notwithstanding any provision contained herein, it is agreed by the Parties that, its employees, agents, representatives, consultants, subcontractors, and suppliers, are not insured by the other Party, and are not covered under any policy of insurance that the other Party has obtained or has in place.

 

 

16.3.

Documentation and notification. Upon request of either Party, the other Party shall promptly provide the requesting Party with certificates of insurance evidencing the insurance policies above. The Parties agree that they shall promptly, and in no case later than fifteen (15) calendar days prior to the effective date of any change, notify the other Party in writing of any changes in the foregoing insurances, including, any cancellation or material modification of any policy.

 

17. Warranties

 

17.1.

In addition to the other warranties made in this Agreement and the License Agreements, VBI represents and warrants that:

 

	(a)	it has and shall have throughout the Term the required expertise, permits and approvals to perform its obligations under the Agreement in a timely and professional manner, to the best of Brii Bio’s interests.
	(b)	It shall carry out the Manufacturing and supply of the Product to Brii Bio in accordance with this Agreement, including but not limited to the standards set forth or referred to in Article 2.
	(c)	VBI further represents and warrants that it shall comply with, and all Products shall be in compliance with, all statutes, laws, ordinances, and regulations, including, if applicable, those enforced by the United States Food and Drug Administration (including compliance with good manufacturing practices) and International Standards Organization Rules 9,000 et seq.
	(d)	VBI agrees to comply with the applicable provisions of any Federal or state law and all executive orders, rules and regulations issued thereunder. If any Product is ordered by Brii Bio under U.S. government contracts, VBI agrees that all applicable federal statutes and regulations applying to Brii Bio as a contractor are accepted and binding upon VBI insofar as VBI may be deemed a subcontractor.
	(e)	All Product supplied in connection with this Agreement shall be manufactured and provided in accordance and conformity with the Specifications and in compliance with this Agreement.
	(f)	EXCEPT AS EXPRESSLY SET FORTH HEREIN, VBI DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED WITH RESPECT TO THE PRODUCTS, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

 

17.2.

Each Party represents and warrants the following:

 

(a)

the Parties’ execution, delivery, and performance of this Agreement:

 

	(i)	have been authorized by all necessary corporate action;
	(ii)	do not violate the terms of any law, regulation, industry standards or codes, or court order to which such Party is subject or the terms of any agreement to which the Party or any of its assets may be subject; and
	(iii)	are not subject to the consent or approval of any Third Party, or if required , consent has been received by such Third Party;

 

	(b)	this Agreement is a valid and binding obligation of the representing Party, enforceable against such Party in accordance with its terms; and
	(c)	it is not subject to any pending or threatened litigation or governmental action which could interfere with the Party’s performance of its obligations hereunder.

 

18. Confidential information

 

18.1.

Article 11 and Section 15.11 of the VBI-2601 Agreement will govern the confidentiality obligations of the Parties with respect to activities performed under this Agreement in connection with the VBI-2601 Product. Article 11 and Section 15.11 of the PreHevbri Agreement will govern the confidentiality obligations of the Parties with respect to activities performed under this Agreement in connection with the PreHevbri Product. In the event activities performed hereunder in connection with the Product contain Confidential Information covering both (a) the PreHevbri Product, and (b) the VBI-2601 Product, then the confidentiality obligations that are most protective of the disclosing party’s rights shall govern the activities performed under this Agreement with respect to such Confidential Information.

 

19. Intellectual Property

 

19.1.

Ownership.

 

	(a)	Nothing in this Agreement shall affect a Party’s rights to its Background IP nor imply grant of any license to a Party’s Background IP unless expressly set forth herein.
	(b)	Sole Inventions. Each Party shall solely own any and all Inventions and Know-How developed, conceived, generated, and reduced to practice solely by it, its Affiliates or its or their employees, agents, or independent contractors during the Term and without in the course of performing activities under this Agreement.
	(c)	Notwithstanding any provision of this Agreement, the Parties hereby acknowledge that the existing applicable License Agreement(s) as to the Product between the Parties will control the ownership and use of any and all Intellectual Property rights related thereto, provided that Brii Brio hereby grants a non-exclusive, royalty-free right for VBI and its Affiliates and permitted subcontractors and designees to use any of Brii Brio’s Background IP or Brii Brio Results to carry out the obligations as set forth in, and for the duration of the term of, this Agreement.

 

 

19.2.

Grant of Rights.

 

(a)

Solely to the extent that VBI Background IP and/or VBI Results are necessary for the use or sale of the applicable Product manufactured and supplied under this Agreement, VBI hereby grants to Brii Bio a perpetual, worldwide, irrevocable, non-exclusive, fully paid-up license for a time period during which the relevant Intellectual Property is protected under the laws of any relevant jurisdiction, with the right to grant sublicenses as permitted under the applicable License Agreement to such Background IP and/or VBI Results, as the case may be, solely for such use or sale. For the avoidance of doubt, Brii Bio may not commercially exploit such VBI Background IP and/or VBI Results, as the case may be, independently of the use or sale of such applicable Products.

 

	19.3.	Enforcement, Protection, Prosecution and Maintenance of Intellectual Property. The obligations and rights of each Party with respect to the enforcement, protection, prosecution, and maintenance of any Intellectual Property rights created and jointly owned, licensed, or transferred hereunder shall be governed by the relevant License Agreement. For such Intellectual Property arising out of or relating to the VBI-2601 Product or Novel Composition Product, Article 12 of the VBI-2601 Agreement shall govern, for all such Intellectual Property out of or relating to the PreHevbri Product, Article 12 of the PreHevbri Agreement shall govern.
	19.4.	Third Party Rights and Warranties. VBI hereby represents and warrants (a) as of the Effective Date that the performance of the activities under this Agreement do not infringe or misappropriate any Third Party Intellectual Property rights, proprietary Information or any tangible biological, chemical, or physical materials of any Third Party; and (b) that it is entitled and appropriately authorized to enter into this Agreement and to perform their obligations under this Agreement free of any restrictions or encumbrances.
	19.5.	Third Party Infringement. In the event that, during the Term, either Party becomes aware of any pending or threatened infringement of any Third-Party Intellectual Property rights arising from activities under this Agreement, including without limitation related to the manufacture or commercialization of any applicable Product, such Party shall notify the other Party thereof in writing without delay.

 

20. Liability and Indemnification

 

20.1.

Article 14 of the VBI-2601 Agreement will exclusively govern the indemnity mechanisms and obligations with respect to any Losses from any Third-Party Claims arising hereunder from, or occurring as a result of, the VBI-2601 Product or Novel Composition Product. Article 14 of the PreHevbri Agreement will exclusively govern the indemnity mechanisms and obligations with respect to any Losses from any Third-Party Claims arising hereunder from, or occurring as a result of, the PreHevbri Product.

 

 

20.2.

WITH THE EXCEPTION OF CLAIMS ARISING UNDER THE INDEMNITY OBLIGATIONS SET FORTH HEREIN , NEITHER PARTY SHALL BE LIABLE TOWARDS THE OTHER FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT OR PUNITIVE DAMAGES WHATSOEVER, INCLUDING BUT NOT LIMITED TO FINANCIAL LOSS, LOST PROFITS, LOSS OF OPPORTUNITY OR DAMAGE TO REPUTATION. NOTHING IN THIS AGREEMENT SHALL EXCLUDE OR LIMIT A PARTY’S LIABILITY FOR PERSONAL INJURY OR DEATH OR FOR FRAUD, FRAUDULENT MISREPRESENTATION, BREACH OF ARTICLE 18, 19 OR 27.3, WILLFUL MISCONDUCT AND/OR GROSS NEGLIGENCE.

 

21. Sub-contracting

 

	21.1.	Prior to VBI outsourcing or assigning any of its obligations hereunder to one or more sub-contractors the Manufacturing or supply of the Product to Brii Bio under this Agreement, VBI shall first seek consent from the JMC in accordance with Article 3. VBI shall ensure that such sub-contractors are able to provide at least the same quality of services as expected from VBI under this Agreement. VBI shall inform Brii Bio of the identity, legal form, and registered address of all sub-contractors.
	21.2.	VBI remains responsible towards Brii Bio for the full and proper Manufacturing and supply of Product to Brii Bio in accordance with the Agreement. Any sub-contracting shall not create any kind of contractual relationship between Brii Bio and the sub-contractor. VBI shall endeavor that each sub-contract contains provisions that demand Manufacturing and, as the case may be, supply of Product to Brii Bio is in strict compliance with all relevant provisions of this Agreement, the Quality Agreement, and the Specifications (including but not limited to the right for Brii Bio to audit the subcontractor as it has the right to audit the VBI).

 

22. Term and Termination

 

	22.1.	Term. This Agreement will take effect as of the Effective Date and, unless earlier terminated pursuant to this Article 22, will remain in effect until all Manufacturing obligations of VBI pursuant to the License Agreements are completed or earlier as agreed to by the Parties.
	22.2.	Termination Upon Termination of the License Agreements. This Agreement will automatically terminate: (a) for the PreHevbri Product on the termination of the PreHevbri Agreement; and (b) for the VBI-2601 Product on the termination of the VBI-2601 Agreement.

 

 

	22.3.	Termination by Brii Bio. Brii Bio may terminate, without liability or additional compensation, this Agreement, in whole or in part: (a) if Brii Bio, or its designee, is unable to obtain or maintain Marketing Authorization in the Licensed Territory for either Product due to a failure by VBI to comply with all regulations and Applicable Laws in connection with such Product, or to provide information necessary for Brii Bio to obtain the Marketing Authorization in the Licensed Territory for such Product, and within six (6) months of the first occurrence of such noncompliance, VBI fails to complete all corrective actions to ultimately, and finally remedy such noncompliance; (b) immediately upon written notice (unless expressly otherwise provided), in the event Brii Bio decides to withdraw the Product from sale in the Licensed Territory, whether because of Brii Bio’s decision to (partially or completely) stop the sale of the Product or to sell the rights to the Product to a Third Party; (c) immediately upon written notice (unless expressly otherwise provided) in the event Brii Bio decides to withdraw the Product from Clinical Trials, whether because of Brii Bio’s decision to (partially or completely) stop the research or commercialization of the Product or to sell the rights to the Product to a Third Party; (d) pursuant to Sections 12.4, 13.4, 25.2, and Article 24; (e) immediately, with no need for a formal termination notice, in case VBI is dissolved or liquidated, files or has filed against it a petition under any bankruptcy or insolvency law, makes an assignment for the benefit of its creditors or has a receiver appointed for all or substantially all of its property, or experiences an event analogous to any of the foregoing in any jurisdiction in which any of its assets are situated; or (f) at any time for convenience upon giving one hundred (120) calendar days prior written notice.
	22.4.	Termination by either Party. Either Party may terminate this Agreement upon written notice by either Party if the other Party is in material breach of this Agreement and has not cured such breach within sixty (60) days after notice from the terminating Party requesting cure of the breach. Any such termination shall become effective at the end of such sixty (60) day period, unless the breaching Party has cured any such breach or default prior to the end of such period; provided that, such time periods shall be tolled during the pendency of any good faith dispute that has been deferred to resolution with respect to the validity of such allegation of breach.
	22.5.	Survival. Except as otherwise expressly set forth in this Agreement, expiration or termination of this Agreement for any reason will not relieve a Party of any obligation accruing prior to such expiration or termination. Further, the provisions of Articles 1 (only to the extent the applicable License Agreement is still in effect), 16, 15, 17, 18, 19, 20, 22, 23, 27.14, 27.15 and the provisions of the Quality Agreement will survive any termination or expiration of this Agreement. The foregoing shall be without prejudice to any provision that by its nature is intended to survive expiration or termination of this Agreement in order to give effect to the intent of the Parties, which provisions shall survive the expiration or termination of this Agreement.

 

 

23. Effects of Expiration or Termination

 

23.1.

Upon expiration or termination of the present Agreement, VBI shall, subject to any instructions from Brii Bio pursuant to the provisions of Section 23.2:

 

	(a)	Immediately cease the supply of Product to Brii Bio for any Purchase Order;
	(b)	Immediately cease to use any Confidential Information and Intellectual Property of Brii Bio and, at Brii Bio’s option, either return or destroy such Confidential Information and Intellectual Property, including any samples, Bii Bio Results, and materials;
	(c)	Immediately return to Brii Bio all Confidential Information, the cost of which shall be borne by the Party responsible for the default causing the termination or, if such is not applicable the requesting Party; and
	(d)	As soon as reasonably practicable, render adequate and final accounts to Brii Bio with respect to any transaction under the present Agreement to which it has not yet rendered an accounting to Brii Bio.

 

	23.2.	As soon as reasonably practicable, deliver to Brii Bio all Product duly manufactured in accordance with this Agreement.
	23.3.	Furthermore, Brii Bio may require VBI to complete any Manufacturing (including but not limited to stability testing and assistance for Product manufactured and/or supplied prior to termination) for which binding Purchase Orders have been delivered and accepted and the completion of such Manufacturing shall remain subject to the conditions of this Agreement; and/or instruct VBI to return VBI’s stock of unfinished Product and reimburse (except in case the Agreement was terminated for cause due to VBI) VBI at manufacturing cost for such unfinished Product. In case of termination pursuant to Section 22.3, Brii Bio shall reimburse VBI for any VBI Materials in stock to the extent (i) not exceeding the safety stock obligations set forth in this Agreement; and (ii) VBI duly documents that such VBI Materials cannot be used for any of its or its Affiliates’ activities, provided that such nonuse is due to reasons beyond VBI’s or VBI’s failure to comply with the terms of this Agreement. If any such VBI Materials in stock can be used by VBI or any of its Affiliates or the nonuse is attributable to the action or inaction of VBI in contravention of this Agreement, then VBI shall reimburse Brii Bio for any prepaid amounts related thereto.
	23.4.	In case of termination or expiration of this Agreement for whatever reason, subject to the License Agreements, VBI shall upon Brii Bio’s request, take all necessary actions (including but not limited to providing Brii Bio with copies of relevant records and granting access to Facility) and shall in general provide all reasonable assistance to Brii Bio or its designee to effect a successful transfer of the process of the Manufacturing to another manufacturing site of Brii Bio’s choice. Brii Bio shall reimburse VBI for any actual and duly documented costs incurred in providing such assistance on a time and material basis, unless the Agreement was terminated for cause due to VBI in which case VBI shall bear all such costs.

 

 

23.5.

Nothing in this Agreement shall relieve any Party from any liability or obligation for any matter, undertaking or condition pursuant to this Agreement which has not been done, observed, or performed by that Party before this Agreement has ceased to have effect with respect to such Party.

 

24. Force Majeure

 

24.1.

Force Majeure. Neither Party hereto shall be liable to the other Party for failure or delay in meeting any obligation hereunder due to unexpected circumstances beyond such Party’s reasonable control, such as but not limited to strikes (other than with respect to the Facility), lockouts (other than with respect to the Facility), acts of God, riots, war, terrorism, fire, flood, embargoes, failure of power, acts of government (“Force Majeure Event”), provided that the Party affected shall immediately inform the other Party about a Force Majeure Event and its impact. VBI shall provide Brii Bio with a business interruption and resumption plan. In the case of a Force Majeure Event, the affected Party, shall undertake its best efforts to eliminate, cure and overcome any such causes and resume performance of its covenants with all possible speed in accordance with such plan. In the event that a Force Majeure Event persists for more than three (3) months, the non-affected Party shall be entitled to terminate the Agreement without incurring any liability therefore.

 

25. SUPPLY Failure AND SUPPLY RIGHT FOR BUSINESS CONTINUITY

 

	25.1.	Supply Requirements. VBI shall Manufacture and supply to Brii Bio the Product in the form and the amounts and by the dates described on a Purchase Order. Parties acknowledge that the continuity of supply in accordance with Brii Bio’s Purchase Orders and agreed upon lead times is of the essence.
	25.2.	Failure to Supply . Notwithstanding, and on a Product-by-Product basis, if: (a) VBI is unable to Manufacture or supply at least the Batches of such Products as set forth in the applicable Purchase Order by the respective deadline for such Purchase Order as set forth therein; or (b) VBI delivers any Batch of Product that fails to conform to the Specifications, was not Manufactured in compliance with the Quality Agreement, or does not meet any Regulatory Authority’s requirements (“Non-conforming Product”) in such quantities as set forth in the applicable Purchase Order, then each of (a) and (b) shall be deemed a “Supply Failure”. If: (x) VBI is unable to cure such Supply Failure within one hundred and twenty (120) days of written notice of same from Brii Bio; or (y) there are three (3) Supply Failures within any twelve (12) month period, regardless of whether VBI has cured such Supply Failure within one hundred and twenty (120) days of such notice of such Supply Failure by Brii Bio, then in each case ((x) or (y)), Brii Bio shall be entitled, upon written notice to VBI, to terminate this Agreement, in its sole discretion, without liability to VBI or to reduce the price of the applicable Product that is subject to such Supply Failure by two per cent (2%) per week of delay for such Product, with a maximum of ten per cent (10%).

 

 

25.3.

Investigation. VBI will document and notify Brii Bio of any deviation, event or condition that has the potential to adversely affect the quality, purity, identity, or strength of Product as described in the Quality Agreement. VBI will conduct an investigation of any such deviation, event, condition, or out of Specification result. The Parties will agree on any corrective and preventative actions needed if any following such investigation related to the Product.

 

26. Standards of Operation

 

	26.1.	Use of Dangerous Products. VBI warrants that it does not and shall not, during the Term manufacture or otherwise handle any Beta lactam containing antibiotics or any other products generally recognized as dangerous or toxic in the Facility, except with the prior written consent of Brii Bio. Should Brii Bio give such consent, VBI agrees to keep such products completely separate from Products.
	26.2.	Adverse Events. VBI shall inform Brii Bio promptly of any actual or anticipated significant adverse event (e.g., fires, explosions, accidental discharges, labor issues, or strikes) and of any serious health effects or fatalities in the Facility that may adversely impact VBI’s ability to Manufacture or supply Product to Brii Bio or that may, in VBI’s reasonable opinion, adversely affect the reputation of Brii Bio or its Affiliates; VBI shall also inform Brii Bio promptly of any allegations or findings of violations of Applicable Law specifically relating to the Manufacturing or supply of Product to Brii Bio in respect of the environment, health, safety and/or employment. In such event, VBI shall develop corrective action plans for approval by Brii Bio, acting reasonably, including (without limitation) corrective actions with respect to adhering to the Policies.
	26.3.	Records and Information Management Requirements. All records and information, in any format, that VBI receives from, creates, or edits on behalf of Brii Bio or Brii Bio’s Affiliates will be referred to herein as “Brii Bio’s Records and Information”. For avoidance of doubt, “Brii Bio’s Records and Information” does not include records and information created by VBI as part of VBI business processes (e.g., invoices, internal reports, etc.).

 

	(a)	Brii Bio’s Records and Information constitute the Confidential Information of Brii Bio. VBI shall maintain, manage, and protect Brii Bio’s Records and Information in accordance with this Agreement, the Quality Agreement, and all Applicable Laws and regulations.
	(b)	VBI shall manage Brii Bio’s Records and Information such that Brii Bio’s Records and Information is not intermingled with records and information generated and managed by VBI for other customers.

 

 

	(c)	VBI may retain electronic data backups of Brii Bio’s Records and Information only as long as required for disaster recovery, record retention requirements, or Manufacturing.
	(d)	VBI shall comply with any request from Brii Bio to preserve Brii Bio’s Records and Information (or parts thereof). VBI shall deliver promptly Brii Bio’s Records and Information requested to be searched, retrieved, and produced, in the format directed by Brii Bio, all as part of the Manufacturing VBI provides under this Agreement.
	(e)	When a transfer of Brii Bio’s Records and Information from VBI is required, or upon termination or expiration of the Agreement, and at Brii Bio’s discretion, VBI shall (i) transfer Brii Bio’s Records and Information to Brii Bio or an entity specified by Brii Bio in the format directed by Brii Bio, (ii) take no action on Brii Bio’s Records and Information until written notification from Brii Bio confirming accurate and complete transfer is received, and, (iii) obtain Brii Bio’s written approval to destroy or permanently delete Brii Bio’s Records and Information, and VBI shall certify in writing that Brii Bio’s Records and Information has been destroyed or permanently deleted as specified by Brii Bio. VBI shall not destroy or permanently delete Brii Bio’s Records and Information without Brii Bio’s written approval. Brii Bio shall confirm Records and Information are not subject to any pending preservation obligation or retention requirement.
	(f)	In consultation with Brii Bio, VBI shall identify Brii Bio’s Records and Information and implement documented procedures to deliver to Brii Bio or an entity specified by Brii Bio, Brii Bio’s Records and Information and supporting documentation in the format directed by Brii Bio.

 

27. Miscellaneous

 

	27.1.	Severability. If any of the provisions of this Agreement are held to be or rendered void or unenforceable, the Parties agree that the same shall not result in the nullity or unenforceability of the remaining provisions of this Agreement, but that they shall use their best efforts to replace such provision with a valid and enforceable provision which shall achieve, to the extent possible, the economic, business, or other purpose of said void or unenforceable provision.
	27.2.	Assignment. This Agreement may only be assigned or transferred by a Party in accordance with the provisions set forth in the License Agreements. In the event of an assignment or transfer of the License Agreements, this Agreement shall automatically be assigned or transferred pursuant to such assignment or transfer. In the event of an assignment or transfer of only the VBI-2601 Agreement or the PreHevbri Agreement, then this Agreement shall be assigned or transferred solely with respect to such Product governed by such transferred or assigned VBI-2601 Agreements or the PreHevbri Agreement, as the case may be.

 

 

	27.3.	Independent Contractor. Neither Party nor its employees or representatives are under any circumstances to be considered as employees or agents or representatives of the other Party. Nothing in this Agreement creates any agency, joint venture, partnership, or other form of joint enterprise, employment, or fiduciary relationship between the Parties. They have no authority or power to bind the other Party or contract in the other party’s name.
	27.4.	Publications. No Party shall originate any publicity, news release or public announcements, written or oral, whether to the public or press, stockholders or otherwise, relating to the execution or existence of this Agreement, the subject matter of this Agreement, any of the terms of this Agreement or any amendment hereto, or any Intellectual Property rights or Confidential Information of the other Party without the prior written consent of the other relevant Party.
	27.5.	Entire Agreement. This Agreement, including its Exhibits, which are incorporated herein, together with the License Agreements and the separate Quality Agreement constitute the full and complete statement of the agreement of the Parties with respect to the specific subject matter hereof and supersedes all prior agreements, representations, warranties, understandings, relationships, whether written or oral, between the Parties, with respect to the specific subject matter hereof.
	27.6.	Headings. The Article and Section headings in this Agreement are for convenience only and shall not in any way affect the meaning or interpretation of this Agreement.
	27.7.	Counterparts; Electronic Signatures. This Agreement may be executed in two or more counterparts by original signature, facsimile, or PDF files, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Electronically executed or electronically transmitted signatures shall be considered as original signatures and shall have the full force and effect of original signatures.
	27.8.	No Benefit to Third Parties. The representations, warranties, covenants, and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they will not be construed as conferring any rights on any other persons.
	27.9.	Further Assurance. Each Party shall at the reasonable request of the other do or procure the doing of all such further acts, and execute or procure the valid execution of all such documents, as may from time to time be necessary in the requesting Party’s reasonable opinion to give full effect to this Agreement and to vest in the requesting Party the full benefit of the assets, right sand benefits to be transferred to the requesting Party under this Agreement.

 

 

	27.10.	Waivers. No delay or omission by either Party hereto to exercise any right occurring upon any non-compliance or default by the other Party with respect to any of the terms of this Agreement shall impair any such right or power or be construed to be a waiver of such right. A waiver by either of the Parties hereto of any of the covenants, conditions, or agreements to be performed by the other shall not be construed to be a waiver of any succeeding breach of this Agreement or of any covenant, condition or agreement contained in this Agreement. This Agreement may not be amended or modified except in writing signed by each of the Parties to the Agreement.
	27.11.	Costs. Each of the Parties shall pay its own costs incurred in connection with the negotiation, preparation, and implementation of this Agreement.
	27.12.	Notices. All notices given by one Party to the other Party under this Agreement with respect to the VBI-2601 Product will follow the procedures and be delivered to the addresses set forth in Section 17.7 of the VBI-2601 Agreements. All notices given by one Party to the other Party under this Agreement with respect to the PreHevbri Product will follow the procedures and be delivered to the addresses set forth in Section 17.7 of the PreHevbri Agreement.
	27.13.	Anti-Corruption Laws. Neither Party shall perform any actions that are prohibited by local and other anti-corruption laws (including but not limited to the U.S. Foreign Corrupt Practices Act) that may be applicable to one or both Parties. Without limiting the foregoing, neither Party shall make any payments, or offer or transfer anything of value, to any government official or government employee, to any political party official or candidate for political office or to any other third party related to the transaction in a manner that would violate such laws.
	27.14.	Governing Law. This Agreement and all questions regarding the existence, validity, interpretation, performance, and breach shall be governed by and construed and enforced under the laws of the State of New York, United States, without giving effect to the conflicts or choice of laws provision thereof. The United Nations Convention on Contracts for the International Sale of Goods (1980) shall not apply to the interpretation of this Agreement.
	27.15.	Dispute Resolution Process. The procedures set forth in Article 16 of the VBI-2601 Agreement will be the exclusive mechanism for resolving any dispute, controversy, or claim between the Parties that may arise from this Agreement relating to any activities or obligations pertaining to the VBI-2601 Product or Novel Composition Product, including all questions regarding the existence, validity, interpretation, performance, and breach of this Agreement. The procedures set forth in Article 16 of the PreHevbri Agreement will be the exclusive mechanism for resolving any dispute, controversy, or claim between the Parties that may arise from this Agreement relating to any activities or obligations pertaining to the PreHevbri Product, including all questions regarding the existence, validity, interpretation, performance, and breach of this Agreement.

 

[Signature page follows.]

 

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the last date of signature. 

 

BRII BIOSCIENCES LIMITED			VBI VACCINES INC.
By:	/s/ Zhi Hong		By:	/s/ Jeff R. Baxter
Name:	Zhi Hong		Name:	Jeff R. Baxter
Title:	Chief Executive Officer		Title:	Chief Executive Officer

 

 

Exhibit A

KPIs

 

[**]

 

 

Exhibit B
SPECIFICATIONS

 

[**]

 

PreHevbri Drug Substance Specifications

 

 

PreHevbri Drug Product Specifications

 

[**]

 

 

VBI-2601 Drug Substance Specifications

 

[**]

 

 

VBI-2601 Drug Product Specifications

 

[**]

 

 

Exhibit C
INSURANCE REQUIREMENTS 

 

VBI shall procure and maintain, at all times and at its own expense, and ensure that its contractors, subcontractors, and consultants procure and maintain, during the Term or as otherwise specified below, the types of insurance(s) specified below.

 

A. Public and Product Liability

 

VBI shall maintain coverage including coverage for product liability/completed operations with limits of not less than US$10,000,000 each occurrence and US$10,000,000 annual aggregate. Limits may be achieved via a combination of primary and umbrella/excess insurance. VBI’s policy shall be specifically endorsed or include a provision Brii Bio, its subsidiaries, and its directors, officers, and employees, as Additional Insureds. Such insurance coverage shall remain in effect for at least three (3) years after termination of the Agreement.

 

B. Employers Liability

 

VBI shall maintain Employers Liability Insurance (or local equivalent) to the maximum extent allowed and always in accordance with Applicable Law covering all employees who are to provide Manufacturing Services under this Agreement.

 

C. Professional Liability/Errors & Omissions

 

VBI shall maintain coverage on a Professional Liability Form (or equivalent) in the amount of no less than [**] per claim with a [**] annual aggregate. Such insurance coverage shall remain in effect for at least three (3) years after termination of the Agreement.

 

D. Cyber Liability Insurance

 

VBI shall maintain Cyber Liability Insurance (or equivalent) in the amount of no less than [**] per claim with a [**] aggregate. Such coverage shall remain in effect for at least three (3) years after termination of the Agreement and include worldwide coverage for network security/data protection liability, including coverage for financial loss resulting or arising from:

 

	●	Acts, errors, or omissions, in rendering technology/professional services and/or in connection with the services provided under the Agreement:
	●	Violation or infringement of any right of privacy, including breach of security and breach of security/privacy laws, rules or regulations globally, now, or hereinafter constituted or amended;
	●	Data theft, damage, unauthorized disclosure, destruction, or corruption, including without limitation, unauthorized access, unauthorized use, identity theft, theft of personally identifiable information or confidential corporate information in whatever form, transmission of a computer virus or other type of malicious code; and participation in a denial of service attack on third party computer systems; and
	●	Loss or denial of service.

 

Such coverage must include technology/professional liability, breach of contract, privacy and security liability, privacy regulatory defense and payment of civil fines, payment of credit card provider penalties, and breach response costs (including without limitation, notification costs, forensics, credit protection services, call center services, identity theft protection services, and crisis management/public relations services) and may not include cyber terrorism exclusion.

 

 

E. All Risk Property Insurance

 

VBI shall maintain All Risk Property Insurance in an amount not less than the full replacement cost of VBI’s property.

 

F. Automobile Liability Insurance

 

VBI shall maintain Automobile Liability Insurance to the maximum extent allowed and always in accordance with Applicable Law.

 

G. Miscellaneous

 

	1.	Where permitted by law and allowed by insurance, VBI’s policies for each of the coverages set forth above shall specifically endorsed to or include a provision waive any rights of subrogation against Brii Bio and its Affiliates, and their directors, officers, and employees.
	2.	VBI shall supply Brii Bio with above proof of insurance and forms, including any endorsements, as required upon the signing of this Agreement or upon written request, but Brii Bio’s failure to demand such proof or forms shall not waive Brii Bio’s rights to such coverage as specified herein.
	3.	All insurance companies for each of the coverage set forth above must be rated A or better with a financial rating of VII or better in the most recent A.M. Best’s Rating Guide.
	4.	All insurance policies for each of the coverages set forth above or VBI shall provide for thirty (30) calendar days’ prior written notice to Brii Bio of any cancellation, nonrenewal or material change of coverage.
	5.	All VBI insurance will be primary with no right of contribution by Brii Bio, its Affiliates, or their respective insurers. VBI will be solely and fully responsible for any deductibles or self-insured retentions under any required coverage. VBI will remain liable for any insurance obligation not satisfied; however, this requirement will in no way restrict or reduce any indemnification obligations contained elsewhere in this Agreement.

 

 

Exhibit D
PREHEVBRI PRODUCT Price adjustment 

 

[**]

 

 

Exhibit E
VBI-2601 PRODUCT price adjustment 

 

[**]

 

 

 

Exhibit 10.6

 

[**] Certain information has been excluded pursuant to Regulation S-K, Item 601(b)(10)(iv) from this document because it is both not material and is the type that the registrant treats as private or confidential.

 

LETTER AGREEMENT

 

This LETTER AGREEMENT (the “Agreement”) is entered into as of July 5, 2023 (the “Effective Date”) between VBI VACCINES INC., a company organized under the laws of the Province of British Columbia, Canada (“VBI”), VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation (“VBI CA”), SCIVAC LTD., an Israeli corporation and a subsidiary of VBI (“SciVac”), and BRII BIOSCIENCES LIMITED, an exempted company organized under the laws of the Cayman Islands (“Brii Bio” and together with VBI and SciVac, each a “Party” and together the “Parties”).

 

WHEREAS

 

A. VBI and Brii Bio have entered into that certain (i) Amended & Restated Collaboration and License Agreement (the “VBI-2601 Agreement”), to permit Brii Bio to develop and commercialize VBI-2601 (as defined in the VBI-2601 Agreement) under an exclusive global license from VBI, under the terms and conditions thereof; (ii) Collaboration and License Agreement (the “PreHevbri Agreement” and, together with the VBI-2601 Agreement, the “License Agreements”), to permit Brii Bio to develop and commercialize PreHevbri (as defined in the PreHevbri License) in Asia Pacific, excluding Japan, under an exclusive license from VBI, under the terms and conditions thereof; and (iii) Supply Agreement (the “Supply Agreement”) for the clinical and commercial supply of Product (as defined in the respective License Agreement and including the VBI-2601 Products and PreHevbri Product) to be manufactured at the Rehovot Facility (as defined below), with each such agreement entered into with the same Effective Date as this Agreement;

 

B. VBI and VBI CA , as Borrowers, and SciVac entered into that certain Loan and Guaranty Agreement, dated as of May 22, 2020, as amended by the First Amendment to Loan and Guaranty Agreement, dated as of May 17, 2021 and that Second Amendment to Loan and Guaranty Agreement, dated as of September 14, 2022, and that Third Amendment to Loan and Guaranty Agreement, on or about the date hereof (the “Third Amendment”), and as such agreement may be amended, restated, supplemented or otherwise modified from time to time in the future (collectively, the “Loan Agreement”) with, among others, K2HV, as a lender and any other lenders thereunder, and K2HV, as administrative agent. The obligations under the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement) are secured by a first priority lien on substantially all of the assets of VBI, VBI CA, SciVac and the other Loan Parties (as defined in the Loan Agreement) (including a pledge of the shares of SciVac by VBI, which has rights in and is the lessor with respect to the Rehovot Facility), which includes or will in accordance with the Loan Agreement, be amended to include intellectual property

 

C. K2HV, VBI, and Brii Bio have entered into that certain Letter Agreement of even date herewith (the “K2HV Letter Agreement”); and

 

 

D. In connection with the foregoing, each of VBI, VBI CA and SciVac wishes to provide Brii Bio certain rights as contemplated by this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

Article 1
DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings set out in this Article 1 unless the context clearly and unambiguously dictates otherwise; provided that capitalized terms used but not defined in this Agreement have the meanings set forth in the License Agreements. References to specific sections of the Loan Agreement refer to the sections thereof as in effect as of the date hereof.

 

1.1 “Affiliate” of a Party shall mean any company, partnership, or other entity that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but for only so long as such control exists. For the purposes of this definition, “control” shall mean (i) direct or indirect beneficial ownership of at least fifty percent (50%) of the voting share capital or other equity interest in such Person; (ii) the power to direct the management of such Person by contract or otherwise or (iii) the power to control the Rehovot Facility and/or Cell Line Rights, including for avoidance of doubt the sale of the ownership of or voting rights to the capital stock of SciVac (which currently has rights in and is the lessor with respect to the Rehovot Facility).

 

1.2 “Available Operating Cash” shall have the meaning set forth in Section 3.1.

 

1.3 “Bankruptcy Proceeding” shall have the meaning set forth in Section 6.1.

 

1.4 “Business Day” shall mean a day other than a Saturday or Sunday or any public holiday in the United States. For the avoidance of doubt, references in this Agreement to “days” shall mean calendar days.

 

1.5 “Collateral” shall have the meaning set forth in Section 5.1(a).

 

1.6 “Control” or “Controlled” shall mean, any direct or indirect control or ownership of the Rehovot Facility and/or Cell Line Rights, including for avoidance of doubt the sale of the ownership of or voting rights to the capital stock of SciVac (which currently owns the Rehovot Facility).

 

1.7 “Controlled Wind Down” shall mean any controlled liquidation or asset sale involving VBI or its subsidiaries (including SciVac).

 

1.8 “CHO Cell Line” shall mean the HBsAg-producing Chinese Hamster Ovary (CHO) Cell Line [**] licensed by VBI and SciVac pursuant to the Ferring License.

 

 

1.9 “Dollar” or “$” shall mean the legal tender of the United States.

 

1.10 “Effective Date” shall have the meaning set forth in the preamble.

 

1.11 “Exercise Notice” shall have the meaning set forth in Section 6.3(a).

 

1.12 “Existing Government Lien” shall mean the 11/16/2014 lien held by the Israel Innovation Authority against certain equipment in the Rehovot Facility.

 

1.13 “Ferring” means Ferring International Center S.A.

 

1.14 “Ferring and SciGen Direct Licenses” shall mean the direct licenses by and between Brii Bio and Ferring International Center S.A. and SciGen (as applicable), that will be issued, if needed, pursuant to the License Agreements.

 

1.15 “Ferring License” shall mean that certain License Agreement that was made as of September 1, 2021, by and among Ferring, SciVac, and VBI, as amended or restated.

 

1.16 “Ferring Side Letter” shall mean the proposed stand-by side letter between [**] and Brii Bio contemplated by Section 9.6(b) of the [**] providing that if the [**] is terminated as a result of VBI’s material breach of such license or VBI’s bankruptcy or other insolvency event, [**] will enter into a license agreement with Brii Bio for the Licensed Territory on substantially the same terms set forth in the [**].

 

1.17 “Intellectual Property” shall mean all Patents, trademarks, utility certificates and models, inventors’ certificates, copyrights, database rights, designs, domain names, trade secrets, Know-How (as defined in the License Agreements) and any other proprietary rights, priority rights, prior user rights and all other rights of a like nature in each case whether registered or unregistered and in any jurisdiction.

 

1.18 “K2HV Letter Agreement” shall have the meaning set forth in the preamble

 

1.19 “K2HV” shall have the meaning set forth in the preamble.

 

1.20 “K2HV Collateral Documents” shall mean (i) that certain Security Agreement, dated as of May 22, 2020 as , as amended, restated, supplemented or otherwise modified), by and among K2HV, VBI and VBI CA, (ii) that certain Fixed Charge Agreement, dated as of May 22, 2020, by and between SciVac and K2HV, and (iii) that certain Floating Charge Agreement, dated as of May 22, 2020, by and between SciVac and K2HV, in each case with respect to clauses (i) through (iii), as amended, restated, supplemented or otherwise modified in accordance with the Third Amendment on or following the date hereof.

 

1.21 “Licenses” shall have the meaning set forth in the preamble.

 

1.22 “Licensed Product” shall mean PreHevbri and VBI-2601.

 

1.23 “Loan Agreement” shall have the meaning set forth in the preamble.

 

 

1.24 “Party” and “Parties” shall have the meaning set forth in the preamble.

 

1.25 “Permitted Transfer Period” shall have the meaning set forth in Section 6.4.

 

1.26 “Person” shall mean any individual, corporation, partnership, limited liability company, trust, Governmental Authority, or other legal entity of any nature whatsoever.

 

1.27 “PreHevbri” shall have the meaning set forth in the PreHevbri Agreement.

 

1.28 “PreHevbri Agreement” shall have the meaning set forth in the preamble.

 

1.29 “Rehovot Facility” shall mean the manufacturing facility located in Rehovot, Israel, the facility designated as the manufacturing facility pursuant to the Supply Agreement (including any expansion or relocation thereof as contemplated by the Supply Agreement), and all of SciVac’s right, title and interest therein as lessor or in related assets located at such facility. “ROFO” shall have the meaning set forth in Section 6.1(a).

 

1.30 “ROFO Period” has the meaning set forth in Section 6.3(b).

 

1.31 “SciGen Agreement” shall mean that certain Assignment Agreement between FDS Pharma LLP and SciGen dated February 4, 2012.

 

1.32 “Specified Notice Materials” shall have the meaning set forth in Section 3.2.

 

1.33 “Subordination Agreement” shall mean the Subordination Agreement between K2HV and Brii Bio pursuant to which, among other things, the Security Interest granted to Brii Bio in certain IP collateral related to VBI-2601 and PreHevbri shall be subordinated to the lien in such IP collateral granted to K2HV under the K2HV Collateral Documents in form and substance satisfactory to K2HV and consistent with the terms set forth in the K2HV Letter Agreement.

 

1.34 “Third Party” shall mean any Person other than VBI, Brii Bio, and their respective Affiliates.

 

1.35 “Transfer” means any direct or indirect transfer of the ownership or Control of the Rehovot Facility and/or Cell Line Rights to a Third Party, including for avoidance of doubt the sale of the capital stock of SciVac (which currently owns or has rights to the Rehovot Facility) or a merger, consolidation or the like involving VBI, or the sale of all or substantially all the assets of SciVac or VBI.

 

1.36 “Transfer Notice” shall have the meaning set forth in Section 6.2.

 

1.37 “UCC” shall have Uniform Commercial Code as in effect in the State of New York.

 

1.38 “VBI” shall have the meaning set forth in the preamble.

 

1.39 “VBI CA” shall have the meaning set forth in the preamble.

 

 

1.40 “VBI-2601” shall have the meaning set forth in the VBI-2601 Agreement.

 

1.41 “VBI-2601 Agreement” shall have the meaning set forth in the preamble.

 

1.42 “United States” or “U.S.” shall mean the United States of America, along with its territories and possessions.

 

Article 2
REPRESENTATIONS AND WARRANTIES

 

2.1 Authorization; Enforcement. Each Party has the requisite corporate authority to enter into and to consummate the transactions contemplated by this Agreement and each of the related agreements to which it is a party and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery by the Parties of this Agreement and each of the each of the related agreements to which it is party and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Party and no further consent or action is required by each Party’s board of directors or its stockholders.

 

Article 3
information rights

 

3.1 Available Operating Cash Information. On or prior to July 15, 2023, and immediately following a Qualified Offering, VBI will provide to Brii Bio VBI’s estimated consolidated cash-on-hand available to fund ongoing operating activities (“Available Operating Cash”). Thereafter, if VBI has less than [**] of Available Operating Cash, until such balance exceeds [**] and within 30 Business Days of each calendar month, VBI will provide Brii Bio a calculation in reasonable detail of VBI’s Available Operating Cash. During any period where VBI has less than [**] of Available Operating Cash, Brii Bio may also request in good faith, and VBI will promptly provide Brii Bio, an interim calculation of VBI’s Available Operating Cash (including such balance following a Qualified Offering (as defined in the Supply Agreement)).

 

3.2 Information Rights. At any time VBI has less than [**] of Available Operating Cash, VBI will provide Brii Bio within the period specified below or, if not specified, promptly:

 

(a) within five Business Days of delivery to its board of directors, copies of all manufacturing information, financial statements, notices and other related materials that it provides to its board of directors;

 

(b) at Brii Bio’s discretion, monthly or quarterly calls with Brii Bio’s CEO, CFO, and CTO (as necessary);

 

(c) copies of (x) all notices of default, acceleration or the exercise of rights or remedies received or delivered by VBI under the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement); and (y) the “Specified Notice Materials” which include:

 

(i) within 5 Business Days of delivery each monthly compliance certificate required to be delivered to K2HV pursuant to Section 6.2(c) of the Loan Agreement, VBI’s CEO and CFO certification in agreed form that K2HV and VBI agree there are no unresolved defaults noted in the most recent compliance certificate;

 

 

(ii) all notices of pending or threatened legal action of the type required to be delivered by VBI to K2HV pursuant to Section 6.2(h) of the Loan Agreement (as in effect on the date hereof), provided that such notice pertains to either PreHevbri or VBI-2601 or any matter that could have a material adverse impact on VBI or its ability to reasonably perform in all material respects its obligations under the License Agreements or the Supply Agreement;

 

(iii) all notices from governmental authorities required to be delivered by VBI to K2HV pursuant to Section 6.2(m) of the Loan Agreement (as in effect on the date hereof); provided that such notice pertains to either PreHevbri or VBI-2601 or any matter that could have a material adverse impact on VBI or its ability to reasonably perform in all material respects its obligations under the License Agreements or the Supply Agreement,

 

(iv) all notices with respect to new licenses required to be delivered by VBI to K2HV pursuant to Section 6.7 of the Loan Agreement (as in effect on the date hereof), provided that such notice pertains to the CHO Cell Line or production of PreHevbri;

 

(v) all notices of changes of jurisdiction, name, organizational type or organizational number or similar changes required to be delivered by VBI to K2HV pursuant to Section 7.2 of the Loan Agreement (as in effect on the date hereof); and

 

(vi) all notices of certain new locations required to be delivered pursuant to the Loan Agreement or the K2HV Collateral Documents (as in effect on the date hereof), provided that such notice pertains to the CHO Cell Line or production of PreHevbri.

 

Article 4
obligations under other related agreements

 

VBI will comply with its obligations to use commercially reasonable efforts (as specified in the relevant agreements) under (i) Section 9.6(b) of each of the License Agreements to obtain the Ferring Side Letter, (ii) Section 15.12 to obtain the Ferring and SciGen Direct Licenses and (iii) Section 13.2(m) of the PreHevbri Agreement to remove the Existing Government Lien.

 

Article 5
brii Bio security interest

 

5.1 Collateral.

 

(a) To secure the prompt performance of all of VBI’s obligations under the License Agreements and the Supply Agreement, each of VBI, VBI CA, and SciVac hereby collaterally assigns and grants to Brii Bio a security interest in, all of its respective right, title and interest in and to its respective personal property, whether now or hereafter existing, whether tangible or intangible, whether now owned or hereafter acquired and wherever the same may be located (the “Collateral”):

 

(i) all Intellectual Property to the extent related to the Licensed Product;

 

 

(ii) Intellectual Property rights with respect to PreHevbri and VBI-2601;

 

(iii) the [**] relating to the [**];

 

(iv) the [**] relating to the [**]; and

 

(v) all proceeds of the foregoing (such as, by way of example and not by limitation, license royalties and proceeds of infringement suits).

 

(b) Notwithstanding the foregoing, the Collateral does not include (i) any permit, lease, license, contract, or agreement to which VBI, VBI CA and SciVac (as applicable) is a party or any of its rights or interests thereunder if and only to the extent that the grant of a security interest hereunder (a) is prohibited by or a violation of any law, rule or regulation applicable to such entity or (b) shall constitute or result in a breach of a term or provision of, or the termination or a default under the terms of, such permit, lease, license, contract or agreement (other than to the extent that any such law, rule, regulation, term or provision would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction or any other applicable law (including any debtor relief law or principle of equity), or (ii) any “intent-to-use” trademark application; provided further, however, that at all times the Collateral shall include all Accounts and all proceeds of the foregoing.

 

(c) Each category of Collateral set forth above shall have the meaning set forth in the UCC. Each of VBI, VBI CA and SciVac hereby authorizes Brii Bio to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without its signature.

 

(d) Each of VBI, VBI CA and SciVac shall: (a) give Brii Bio at least 30 days’ prior written notice of any change in its name, identity or corporate structure; (b) give Brii Bio at least 30 days’ prior written notice of any reincorporation, reorganization or other action that results in a change of its jurisdiction of organization; (c) promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Brii Bio may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Brii Bio to exercise and enforce its rights and remedies hereunder with respect to any Collateral; and (d) do any and all acts which are necessary or desirable to preserve and maintain all rights in all Collateral.

 

5.2 Secured Party Authorized. If any of VBI, VBI CA or SciVac materially fails to perform any agreement contained herein, Brii Bio may itself perform, or cause performance of, such agreement, and the reasonable expenses of Brii Bio incurred in connection therewith shall be payable by VBI. The powers conferred on Brii Bio hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, Brii Bio shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. Brii Bio shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Brii Bio accords its own property.

 

 

5.3 Attorney-in-fact. Each of VBI, VBI CA and SciVac hereby irrevocably appoints Brii Bio as its attorney-in-fact, with full authority in the place and stead of VBI, VBI CA and SciVac (as applicable) and in the name thereof, Brii Bio or otherwise, from time to time in Brii Bio’s discretion to take any action and to execute any instrument that Brii Bio may deem necessary or advisable to accomplish the purposes of this Article V.

 

5.4 Remedies. If any default under this Agreement shall have occurred and be continuing, Brii Bio may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral), and also may (a) require VBI, VBI CA and SciVac (as applicable) to, and each such entity hereby agrees that it will at its expense and upon request of Brii Bio forthwith, assemble all or part of the Collateral as directed by Brii Bio and make it available to Brii Bio at a place to be designated by Brii Bio that is reasonably convenient to both parties, and (b) to enforce any rights or remedies of a secured lender under Article 9 of the UCC Collateral or any other applicable law. In addition to, and not by way of limitation of, the granting of a security interest in the Collateral pursuant hereto, VBI, VBI CA and SciVac (as applicable), effective upon the occurrence of a default under this Agreement, hereby assigns, transfers and conveys to Brii Bio the nonexclusive right and license to use all intellectual property that relate to the Collateral, together with any goodwill associated therewith, all to the extent necessary to enable Brii Bio to realize on the Collateral in accordance with this Agreement and to enable any transferee or assignee of the Collateral to enjoy the benefits of the Collateral.

 

5.5 Release of Liens

 

(a) Brii Bio will release its lien in the Collateral, or the applicable portion thereof, under the following circumstances:

 

(i) A merger, consolidation, or sale of all or substantially all the assets of VBI (including the Collateral) or a disposition of all or any part of the Collateral and, in each case, the acquiror is not an Affiliate of VBI and assumes all of VBI’s obligations under the applicable license agreement(s) and, to the extent applicable, the PreHevbri/VBI-2601 License Agreements, to the extent K2HV releases or causes to be released its liens thereon (except in such case if K2HV or its Affiliates continues to be a holder of secured obligations to the purchaser or successor in such transaction);

 

(ii) VBI’s debt and other obligations under the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), including all principal, accrued interest and fees and final payment, are paid in full (other than through a refinancing by a new lender(s)); and

 

 

(iii) With respect to PreHevbri, K2HV releases or causes to be released from the K2HV Facility Security Interest all or a part of the Collateral in order to permit VBI to enter into an out-license to or other strategic transaction with a Third Party and involving a Region not subject to Brii Bio’s PreHevbri license agreement (as and to the extent then in effect).

 

(iv) In the event of termination of the License Agreements.

 

(b) The Security Interest granted pursuant to the foregoing is subject to the terms of the Subordination Agreement. If the obligations pursuant to the Loan Agreement and the other Loan Documents are refinanced by a new lender or lenders, Brii Bio will enter into a silent second lien subordination agreement substantially similar terms to the Subordination Agreement with such new lender(s).

 

Article 6
RIGHT OF FIRST OFFER

 

6.1 Right of First Offer (ROFO). In connection with (x) a VBI or K2HV Controlled Wind Down outside of a voluntary or involuntary case commenced by or against VBI under the United States Bankruptcy Code or (y) any other similar proceeding in any court of competent jurisdiction under applicable foreign law for relief of debtors or affecting creditors’ rights generally (a “Bankruptcy Proceeding”), VBI hereby grants Brii Bio a Right of First Offer (“ROFO”) on the term and conditions set forth in this Article 6 on any Transfer on both: (i) the Rehovot Facility; and (ii) VBI’s rights under those agreements relating to CHO Cell Line, subject to the provisions of the Ferring Agreement and the SciGen Agreement (the “Cell Line Rights”).

 

6.2 Transfer Notice. In connection with any VBI or K2HV Controlled Wind Down outside of a Bankruptcy Process VBI will promptly provide Brii Bio written notice (a “Transfer Notice”) of its intent to Transfer the Rehovot Facility and/or Cell Line Rights.

 

6.3 Exercise Notice.

 

(a) Brii Bio may exercise its ROFO by providing notice thereof (an “Exercise Notice”) to VBI (with a copy to K2HV) within ten 10 Business Days of receiving the Transfer Notice and prior to the end of such period Brii Bio must provide VBI and K2HV in writing the proposed detailed terms for Brii Bio’s acquisition of the Rehovot Facility and/or Cell Line Rights.

 

(b) If Brii Bio delivers such Exercise Notice, Brii Bio and VBI will enter into up to an additional 10-business-day exclusive negotiation period (provided that the total exclusivity period from the date of the Transfer Notice shall not exceed 15 Business Days, the “ROFO Period”) with regard to a Transfer of the Rehovot Facility and/or Cell-Line Rights to Brii Bio. Following delivery of an Exercise Notice through the date that proposed terms for Brii Bio’s acquisition are delivered, Brii Bio may conduct diligence (with VBI and K2HV’s cooperation)

 

 

6.4 Permitted Transfer. If (i) Brii Bio does not timely deliver an Exercise Notice or (ii) Brii Bio and VBI or K2HV (as applicable) are unable to enter into an agreement on the terms for a Transfer of the Rehovot Facility or Cell Line Rights to Brii Bio, subject only to negotiation and finalization of related transaction documentation (but not subject to further diligence requirements) within the ROFO Period, then VBI/K2HV (as applicable) may during the following 180-day period (the “Permitted Transfer Period”) negotiate a Transfer of the Rehovot Facility and/or Cell Line Rights to a Third Party, provided that, nothing shall prohibit Brii Bio from subsequently providing one or more alternative proposals to VBI/K2HV for the Transfer of the Rehovot Facility/Cell Line Rights, after the expiration of the exclusive ROFO Period and VBI/K2HV may continue to engage in non-exclusive negotiation and consider in good faith alternative proposals delivered by Brii Bio from time to time. If VBI/K2HV (as applicable) does not Transfer the Rehovot Facility/Cell Line Rights to either Brii Bio or a Third Party during the Permitted Transfer Period (or has not entered into definitive transaction documents with respect to a Transfer, subject only to satisfaction of closing conditions), Brii Bio’s ROFO shall be reinstated or apply de novo to any subsequent proposed Transfer (as applicable).

 

6.5 Extension of ROFO Period. If Brii Bio and VBI/K2HV agree on terms for a Transfer (subject only to finalization of related transaction documentation) within the ROFO Period, the exclusive negotiation period shall be extended by 15 business days for finalization of transaction documentation.

 

6.6 Third Party Acquirer. If Brii Bio is not the acquirer of the Rehovot Facility and any direct or indirect acquiror of the Rehovot Facility is not otherwise obligated to perform in all material respects under the Supply Agreement (including as a result of merger or consolidation of VBI, applicable law or the like), each of VBI and K2HV (as contemplated in the K2HV Letter Agreement) shall use commercially reasonable efforts to cause any such acquiror of the Rehovot Facility to, in connection with such Transfer, concurrently enter into a supply agreement with Brii Bio for VBI-2601 and PreHevbri on substantially similar terms as the Supply Agreement as in effect on the Effective Date thereof, as from time to time amended, provided that imposing such requirement on prospective purchasers will not materially adversely impact the ability of VBI or K2HV to sell the Rehovot Facility or the terms of such sale (including the consideration to K2HV), and provided further that any amendment or modification to the Supply Agreement that imposes materially more burdensome terms, reduces compensation to VBI, or otherwise results in the agreement being materially less favorable to VBI, shall require K2HV’s consent.

 

6.7 Certain Limitations in Favor of K2HV. The ROFO provisions granted under this Article 6 to Brii Bio are subject to K2HV’s rights set forth in the K2HV Letter Agreement, including K2HV’s consent rights set forth therein and UCC Article 9 foreclosure rights (in each case subject to the terms and limitations set forth in the K2HV Letter Agreement).

 

6.8 Bankruptcy and Insolvency Laws of Non-U.S. Jurisdictions. The ROFO granted by VBI under this Article 6 and the similar rights granted by K2HV under the K2HV Letter Agreement contemplate (i) applicability of the U.S. Bankruptcy laws and considerations in connection with a Controlled Wind Down and (ii) the unenforceability of the ROFO in connection with Controlled Wind Down governed by U.S. Bankruptcy laws and considerations. To the extent the bankruptcy or insolvency laws (including relevant rules and regulations) of any other jurisdiction are relevant or are required to be implemented, Brii Bio, K2HV and VBI (including SciVac) will negotiate in good faith and seek to implement and take such commercially reasonable actions as are appropriate to implement the ROFO for Brii Bio’s benefit to the extent consistent with the bankruptcy or insolvency laws of such other jurisdiction.

 

 

6.9 Refinancing. In connection with any third-party refinancing of VBI’s obligations under the K2HV facility (including the Loan Agreement), VBI will use commercially reasonable efforts to have the relevant refinancing lender(s) enter into an agreement substantially similar to the K2HV Letter Agreement.

 

Article 7
GENERAL PROVISIONS

 

7.1 Fees and Expenses. Each Party shall pay the fees and expenses of its advisers, counsel, accountants, and other experts, if any, and all other expenses incurred by such Party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.

 

7.2 Entire Agreement. This Agreement, together with the K2HV Letter Agreement, the Subordination Agreement, the License Agreements, and the Supply Agreement, contain the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters, which the Parties acknowledge have been merged into such documents, exhibits and schedules.

 

7.3 Notices. Any notice or communication required or permitted under this Agreement shall be in writing in the English language, delivered personally, sent by email (and promptly confirmed by personal delivery, registered mail, or overnight courier), sent by courier, or sent by registered mail, postage prepaid to the following addresses of the Parties (or such other address for a Party as may be at any time thereafter specified by like notice):

 

To VBI:	To: SciVac
VBI Vaccines Inc.	VBI Vaccines Inc.
160 2nd Street, Floor 3	160 2nd Street, Floor 3
Cambridge, MA 02142	Cambridge, MA 02142
Attention: Chief Executive Officer	Attention: Chief Executive Officer
Email: [**]	Email: [**]
To VBI CA:
	To Brii Bio:
VBI Vaccines Inc.	Brii Biosciences Limited
160 2nd Street, Floor 3	One City Center, Suite 5-110
Cambridge, MA 02142	110 Corcoran Street
Attention: Chief Executive Officer	Durham, NC 27701
Email: [**]	Attention: Zhi Hong
	Email: [**]

 

 

7.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

 

7.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the Parties to express their mutual intent, and no rules of strict construction will be applied against any Party.

 

7.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns.

 

7.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the Parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

7.8 Governing Law; Venue; Waiver of Jury Trial. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE PARTIES HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE PARTIES, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.

 

 

7.9 Term. This Agreement has the same term as the Licenses and shall remain in effect for the term of the Licenses.

 

7.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each Party and delivered to the other Party, it being understood that both Parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or email attachment, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or email-attached signature page were an original thereof.

 

7.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the Parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

7.12 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Parties will be entitled to seek specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

 

VBI VACCINES INC.

 

By:	/s/ Jeff R. Baxter
Name:	Jeff R. Baxter
Title:	Chief Executive Officer

 

BRII BIOSCIENCES LIMITED

 

By:	/s/ Zhi Hong
Name:	Zhi Hong
Title:	Chief Executive Officer

 

Solely with respect to Articles 5 and 6

 

VARIATION BIOTECHNOLOGIES INC.

 

By:	/s/ Jeff R. Baxter
Name:	Jeff R. Baxter
Title:	Chief Executive Officer

 

SCIVAC LTD.

 

By:	/s/ Jeff R. Baxter
Name:	Jeff R. Baxter
Title:	Chief Executive Officer

 

 

 

 

Exhibit 10.7

 

 

855 Boylston Street, 10th Floor

Boston, MA 02116

October 27, 2023

Variation Biotechnologies Inc.

310 Hunt Club Road East, Suite 201

Ottawa Ontario Canada K1V 1C1

Attention: Nell H. Beattie

 

Re: Extension of Delivery Due Date for Compliance Certificate for period ended 9/30/23

 

Ladies and Gentlemen:

 

Reference is made to the Loan and Guaranty Agreement dated as of the date hereof (including the exhibits and other attachments thereto, as amended, restated, supplemented or otherwise modified in accordance with its terms, the “Loan Agreement”) among Variation Biotechnologies Inc., a Canadian federal corporation (“Borrower Representative” or “you”), VBI Vaccines Inc., a British Columbia corporation (“Parent”, and together with Borrower Representative and any other Person party to the Loan Agreement as a borrower from time to time, “Borrowers” and each, a “Borrower”), certain other Loan Parties party thereto, K2 HEALTHVENTURES LLC, as administrative agent for the Lender (in such capacity, together with its successors and assigns), and as a lender (together with other lenders from time to time party thereto, collectively, “Lenders”, and each, a “Lender”), and ANKURA TRUST COMPANY, LLC, as collateral agent for Lenders (in such capacity, together with its successors, “Collateral Trustee”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

 

This letter agreement (as amended, restated, supplemented or otherwise modified from time to time, this “Letter Agreement”) confirms our understanding to extend the due date to deliver the Compliance Certificate for the period ending September 30, 2023, from October 30, 2023, to November 6, 2023 (the “Extension Date”). Lenders agree that until the Extension Date the Lenders will refrain from declaring an Event of Default under the Loan Agreement and/or the other Loan Documents.

 

This Letter Agreement shall not be deemed to (a) constitute a consent to any future amendment, waiver or modification of any term or condition of any Loan Document, (b) create a course of dealing with respect to delivery of any future delivery of Compliance Certificate or compliance with any other term of the Loan Documents, or (c) otherwise prejudice any right or remedy which Collateral Trustee, Administrative Agent or any Lender may now have or may have in the future under or in connection with any Loan Document. This Letter Agreement is a Loan Document subject to the general terms and conditions applicable to the Loan Documents, including as set forth in Section 12 of the Loan Agreement.

 

[remainder of page intentionally left blank]

 

 

	Sincerely,
	K2 HEALTHVENTURES LLC
	as Administrative Agent and Lender
	By:	/s/ Anup Arora
	Name:	Anup Arora
	Its:	Managing Director and Chief Investment Officer

 

 

Please confirm that the foregoing is our mutual understanding by signing and returning an executed counterpart of this Letter Agreement.

 

Variation Biotechnologies Inc.
By	/s/ Jeff Baxter
Name:	Jeff Baxter
Title:	President and Chief Executive Officer
VBI Vaccines Inc.
By	/s/ Jeff Baxter
Name:	Jeff Baxter
Title:	President and Chief Executive Officer

 

 

 

 

Exhibit 10.8

 

 

855 Boylston Street, 10th Floor

Boston, MA 02116

 

November 3, 2023

 

Variation Biotechnologies Inc.

310 Hunt Club Road East, Suite 201

Ottawa Ontario Canada K1V 1C1

Attention: Nell H. Beattie

 

Re:	Extension No. 2 of Delivery Due Date for Compliance Certificate for period ended 9/30/23 Ladies and Gentlemen:

 

Reference is made to the Loan and Guaranty Agreement dated as of the date hereof (including the exhibits and other attachments thereto, as amended, restated, supplemented or otherwise modified in accordance with its terms, the “Loan Agreement”) among VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation (“Borrower Representative” or “you”), VBI VACCINES INC., a British Columbia corporation (“Parent”, and together with Borrower Representative and any other Person party to the Loan Agreement as a borrower from time to time, “Borrowers” and each, a “Borrower”), certain other Loan Parties party thereto, K2 HEALTHVENTURES LLC, as administrative agent for the Lender (in such capacity, together with its successors and assigns), and as a lender (together with other lenders from time to time party thereto, collectively, “Lenders”, and each, a “Lender”), and ANKURA TRUST COMPANY, LLC, as collateral agent for Lenders (in such capacity, together with its successors, “Collateral Trustee”). Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Loan Agreement.

 

This letter agreement (as amended, restated, supplemented or otherwise modified from time to time, this “Letter Agreement”) confirms our understanding to further extend the due date to deliver the Compliance Certificate for the period ending September 30, 2023, from November 6, 2023, to November 13, 2023 (the “Extension Date”). Lenders agree that until the Extension Date the Lenders will refrain from declaring an Event of Default under the Loan Agreement and/or the other Loan Documents.

 

This Letter Agreement shall not be deemed to (a) constitute a consent to any future amendment, waiver or modification of any term or condition of any Loan Document, (b) create a course of dealing with respect to delivery of any future delivery of Compliance Certificate or compliance with any other term of the Loan Documents, or (c) otherwise prejudice any right or remedy which Collateral Trustee, Administrative Agent or any Lender may now have or may have in the future under or in connection with any Loan Document. This Letter Agreement is a Loan Document subject to the general terms and conditions applicable to the Loan Documents, including as set forth in Section 12 of the Loan Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

[SIGNATURE PAGE TO EXTENSION LETTER]

 

	Sincerely,
	K2 HEALTHVENTURES LLC
	as Administrative Agent and Lender
	By:	/s/ Anup Arora
	Name:	Anup Arora
	Its:	Managing Director and Chief Investment Officer

 

 

Please confirm that the foregoing is our mutual understanding by signing and returning an executed counterpart of this Letter Agreement.

 

VARIATION BIOTECHNOLOGIES INC.
By	/s/ Jeff Baxter
Name:	Jeff Baxter
Title:	President and Chief Executive Officer
VBI VACCINES INC.
By	/s/ Jeff Baxter
Name:	Jeff Baxter
Title:	President and Chief Executive Officer

 

 

 

Exhibit 10.9

 

FORBEARANCE AGREEMENT

 

This FORBEARANCE AGREEMENT (this “Forbearance Agreement”) is entered into as of November 13, 2023 (“Effective Date”) by and among VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation (“Borrower Representative”), VBI VACCINES INC., a British Columbia corporation (“Parent”, and together with Borrower Representative, and any other Person from time to time party to the Agreement (as defined below) as a borrower, collectively, “Borrowers”, and each, a “Borrower”), each of the parties set forth on the signature page hereto as guarantors (together with any other Person from time to time party to the Agreement as a guarantor, collectively, “Guarantors” and each, a “Guarantor”), the lenders party hereto (together with any other lender from time to time under the Agreement, collectively, “Lenders”, and each, a “Lender”) constituting Required Lenders (as defined in the Agreement (as defined below)), and K2 HEALTHVENTURES LLC, as administrative agent for Lenders (in such capacity, together with its successors, “Administrative Agent”).

 

RECITALS

 

A. Reference is made to (i) that certain Loan and Guaranty Agreement, dated as of May 22, 2020 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) by and among Borrowers, Guarantors, Lenders, Administrative Agent and ANKURA TRUST COMPANY, LLC, as collateral trustee for Lenders (in such capacity, together with its successors, “Collateral Trustee”).

 

B. Certain Events of Default, as described on Schedule 1 attached hereto, have occurred (the “Specified Defaults”).

 

C. Borrowers have requested a forbearance with respect to the Specified Defaults and the undersigned Lenders, constituting Required Lenders, have agreed, to so forbear subject to the terms and conditions in this Forbearance Agreement.

 

AGREEMENT

 

1. Forbearance. Borrowers hereby acknowledge that the Specified Defaults have occurred. Administrative Agent and Lenders, although under no obligation to do so, hereby agree to forbear from exercising (or causing to be exercised) Secured Parties’ rights and remedies under the Loan Documents or applicable law with respect to the Specified Defaults, from the date hereof through and including the Forbearance Expiration Date (as defined on Schedule 2 hereto, and such period, the “Forbearance Period”) subject to compliance by Loan Parties with the terms and conditions specified on Schedule 2 hereto of this Forbearance Agreement and the other Loan Documents. The Forbearance Period shall immediately terminate if an Event of Default other than the Specified Defaults occurs, including any Event of Default caused by a breach of the terms of this Forbearance Agreement.

 

2. Representations. To induce Administrative Agent and Required Lenders to enter into this Forbearance Agreement, each Loan Party hereby represent and warrant as follows:

 

2.1 The representations and warranties contained in the Agreement and in other Loan Documents are true and correct in all material respects as of the date of this Forbearance Agreement (except for such representations and warranties referring to another date, which representations and warranties are true and correct in all material respects as of such date).

 

2.2 Other than the Specified Defaults, no Event of Default has occurred and is continuing.

 

2.3 Each Loan Party has the power and authority to execute and deliver this Forbearance Agreement and to perform its obligations under the Agreement and other Loan Documents to which it is a party.

 

2.4 The execution and delivery by each Loan Party of this Forbearance Agreement and the performance by each Loan Party of their respective obligations under the Agreement and the other Loan Documents to which it is a party, (a) have been duly authorized by all necessary action on the part of such Loan Party, and (b) do not and will not contravene (i) any material Requirement of Law, (ii) any material contractual restriction in any material agreement with a Person binding on such Loan Party, (iii) any order, judgment or decree of any Governmental Authority binding on such Loan Party, or (iv) the Operating Documents operating of such Loan Party.

 

 

2.5 The execution and delivery by each Loan Party of this Forbearance Agreement and the performance by each Loan Party of their respective obligations under the Agreement and the other Loan Documents to which it is a party, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any Governmental Authority, except as already has been obtained or made.

 

2.6 This Forbearance Agreement has been duly executed and delivered by each Loan Party and is the binding obligation of each Loan Party, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application relating to or affecting creditors’ rights and by general equitable principles.

 

3. Conditions. As a condition to the effectiveness of this Forbearance Agreement, Administrative Agent shall have received, in form and substance satisfactory to Administrative Agent in its sole discretion, the following:

 

3.1 this Forbearance Agreement, duly executed by the Loan Parties; and

 

3.2 payment of all fees and Lender Expenses due on the Effective Date in accordance with the Agreement, as amended.

 

4. Affirmations.

 

4.1 Each Loan Party hereby reaffirms and ratifies and confirms in all respects, the Agreement and each other Loan Document to which it is a party and agrees and acknowledges that the Agreement and each other Loan Document to which it is a party, remains in full force and effect.

 

4.2 Each of the Loan Parties agrees and acknowledges that the security interest as granted pursuant to the Pledge and Security Agreement, the Canadian Security Documents or the Israeli Security Documents, as applicable, continues to secure the Obligations from the Closing Date without novation, and this Forbearance Agreement is not intended to be, and shall not constitute, a novation.

 

4.3 The Guarantors agree and acknowledge the terms of this Forbearance Agreement and confirm that the guaranty pursuant to Section 13 of the Agreement remains in full force and effect as of the date hereof with respect to the Obligations.

 

5. General release

 

5.1 For good and valuable consideration, each Loan Party hereby forever relieves, releases, and discharges Administrative Agent, Collateral Trustee and each Lender (collectively, “Secured Parties”) and their respective present or former employees, officers, directors, agents, representatives, attorneys, and each of them (in each case, in his, her or its capacity as such with respect to such Secured Party), from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution of this Forbearance Agreement (collectively “Released Claims”). Without limiting the foregoing, the Released Claims shall include any and all liabilities or claims arising out of or in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing.

 

5.2 By entering into this release, each Loan Party recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of such Loan Party hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected; accordingly, if such Loan Party should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, such Loan Party shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Each Loan Party acknowledges that it is not relying upon and has not relied upon any representation or statement made by any Secured Party with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.

 

 

5.3 This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Each Loan Party acknowledges that the release contained herein constitutes a material inducement to Secured Parties to enter into this Forbearance Agreement, and that Secured Parties would not have done so but for Secured Parties’ expectation that such release is valid and enforceable in all events.

 

5.4 Each Loan Party hereby represents and warrants to Secured Parties, and each Secured Party is relying thereon, as follows:

 

5.4.1 Except as expressly stated in this Forbearance Agreement, neither any Secured Party nor any agent, employee or representative of Secured Parties has made any statement or representation to such Loan Party regarding any fact relied upon by Loan Party in entering into this Forbearance Agreement.

 

5.4.2 Such Loan Party has made such investigation of the facts pertaining to this Forbearance Agreement and all of the matters appertaining thereto, as it deems necessary.

 

5.4.3 The terms of this Forbearance Agreement are contractual and not a mere recital.

 

5.4.4 This Forbearance Agreement has been carefully read by such Loan Party, the contents hereof are known and understood by such Loan Party, and this Forbearance Agreement is signed freely, and without duress, by such Loan Party.

 

5.4.5 Such Loan Party is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Each Loan Party shall indemnify Secured Parties, defend and hold it harmless from and against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.

 

6. Governing Law. Sections 11 and 12 of the Agreement is incorporated herein, provided that references to the “Agreement” shall be understood to refer to this Forbearance Agreement.

 

7. General Provisions

 

7.1 Unless otherwise defined, all initially capitalized terms in this Forbearance Agreement shall be as defined in the Agreement. The Agreement and this Forbearance Agreement shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. The execution, delivery, and performance of this Forbearance Agreement shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Secured Parties under the Agreement, as in effect prior to the date hereof. Each Loan Party ratifies and reaffirms the continuing effectiveness of all agreements entered into in connection with the Agreement. No course of dealing on the part of Secured Parties or its officers, nor any failure or delay in the exercise of any right by Secured Parties, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Secured Parties’ failure at any time to require strict performance by Loan Party s of any provision shall not affect any right of Secured Parties thereafter to demand strict compliance and performance. Each Loan Party hereby acknowledges that the Obligations due and owing to Secured Parties are without setoff, recoupment, defense or counterclaim, in law or in equity, of any nature or kind. All security interests granted to Collateral Trustee by a Loan Party under any Loan Document are hereby reaffirmed by such Loan Party. Except as expressly set forth herein, the terms of the Loan Documents remain in effect.

 

7.2 This Forbearance Agreement and the Loan Documents represent the entire agreement with respect to this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Forbearance Agreement and the Loan Documents merge into this Forbearance Agreement and the Loan Documents.

 

7.3 This Forbearance Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

 

7.4 This Forbearance Agreement shall constitute a Loan Document. Accordingly, the provisions of Section 11 of the Agreement shall likewise apply to this Forbearance Agreement.

 

7.5 Each of Schedule 1 (Specified Defaults) and Schedule 2 (Forbearance Terms) may be modified with the approval of the Required Lenders and Administrative Agent in their sole and absolute discretion, and agreed to by the Loan Parties, by attaching hereto a modified Schedule 1 or Schedule 2, as applicable, duly executed by each of the parties hereto, which modified schedules shall indicate the effective date of such modification. Any such modification shall be effective from the effective date indicated in such modified schedule, and any such modification in any instance, shall not establish any course of dealing or obligate Lenders or Administrative Agent to agree to any future modification thereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

[SIGNATURE PAGE TO FORBEARANCE AGREEMENT]

 

IN WITNESS WHEREOF, the parties hereto have caused this Forbearance Agreement to be executed as of the date set forth above.

 

BORROWERS:
VARIATION BIOTECHNOLOGIES INC., a Canadian federal corporation
By	/s/ Jeffrey Baxter
Name:	Jeffrey Baxter
Title:	Chief Executive Officer

 

VBI VACCINES INC., a British Columbia corporation
By	/s/ Jeffrey Baxter
Name:	Jeffrey Baxter
Title:	Chief Executive Officer

 

GUARANTORS:
SCIVAC LTD., an Israeli corporation
By	/s/ Jeffrey Baxter
Name:	Jeffrey Baxter
Title:	Chief Executive Officer

 

VBI VACCINES (DELAWARE) INC., a Delaware corporation
By	/s/ Jeffrey Baxter
Name:	Jeffrey Baxter
Title:	Chief Executive Officer

 

VARIATION BIOTECHNOLOGIES (US), INC., a
Delaware corporation
By	/s/ Jeffrey Baxter
Name:	Jeffrey Baxter
Title:	Chief Executive Officer

 

 

[SIGNATURE PAGE TO FORBEARANCE AGREEMENT]

 

	ADMINISTRATIVE AGENT:
	K2 HEALTHVENTURES LLC
	By:	/s/ Anup Arora
	Name:	Anup Arora
	Title:	Chief Investment Officer

 

	LENDER:
	K2 HEALTHVENTURES LLC
	By:	/s/ Anup Arora
	Name:	Anup Arora
	Title:	Chief Investment Officer

 

 

SCHEDULE 1 SPECIFIED DEFAULTS

 

1. Failure to achieve Revenue for the measurement period ended September 30, 2023 in the amount required pursuant to Section 6.10.

 

 

SCHEDULE 2 FORBEARANCE TERMS

 

Forbearance Expiration Date: November 28, 2023

 

Forbearance Conditions:

 

1. Forbearance Period Termination. The Borrower shall provide immediate written notice to the Administrative Agent of any event or condition that would result in a termination of the Forbearance Period.

 

2. Update Calls. Loan Parties shall make management available to participate in conference call with Administrative Agent from time to time upon request by Administrative Agent, to participate in discussions on such matters concerning the Loan Parties (including as to financial data, reports, and projections), as Administrative Agent may reasonably request.

 

3. 13-Week Cash Flow Budget. Borrower Representative shall deliver to Administrative Agent not later than 5:00 p.m., Eastern Time, on each Wednesday (the “Delivery Date”) following the Effective Date:

 

(a) cash flow forecast and sources and uses budget for the 13-week period commencing at such time and in the form agreed to by the Loan Parties and the Administrative Agent prior to the Delivery Date (the “13- Week Cash Flow Budget”), which shall be prepared in consultation with and reviewed by Advisor; and

 

(b) an accounts payable aging report, in form satisfactory to Administrative Agent.

 

Notwithstanding anything to the contrary herein, the parties understand and agree that the initial 13-Week Cash Flow Budget due the day after the Effective Date shall be subject to updates for certain expected expenditures not yet incorporated as discussed among the parties prior to the Effective Date, provided that Borrower Representative shall endeavor to provide information regarding such updates as promptly as practicable and Administrative Agent shall not unreasonably withhold approval to such updates.

 

4. Budget Variance Report. Not later than 5:00 p.m., Eastern Time, on every Wednesday, Borrower Representative shall deliver to Administrative Agent a report, in form and substance reasonably satisfactory to Administrative Agent, for the immediately preceding four-week period (or such shorter period commencing on the first week following the Effective Date covered by a 13-Week Cash Flow Budget delivered in accordance with the above), which shall be prepared in consultation with and reviewed by Advisor that (i) sets forth the variances for the Loan Parties (as a percentage and as a dollar amount) between the actual cash uses and the corresponding projected amounts reflected in the 13-Week Cash Flow Budget then in effect for the corresponding period.

 

5. Other Information Requested. Borrower Representative shall deliver any other financial or other information with respect to the business of the Loan Parties or other matters upon request by Administrative Agent no later than the Business Day following receipt of such request.

 

6. Adherence with 13-Week Cash Flow Budget. Loan Parties shall not permit total cash uses for any two week period to exceed the amount set forth in the 13-Week Cash Flow Budget for such two week period, as applicable by more than 10% without prior written approval by Administrative Agent, provided that for purposes of the foregoing, Lender Expenses and any legal expenses of the Loan Parties incurred in connection with the Loan Documents or other fees and expenses as approved by Administrative Agent as of the Effective Date or from time to time thereafter may be disregarded.

 

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Jeffrey Baxter, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of VBI Vaccines Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2023
/s/ Jeffrey Baxter
Jeffrey Baxter
President and Chief Executive Officer (Principal Executive Officer)

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Nell Beattie, certify that:

 

1.	I have reviewed this quarterly report on Form 10-Q of VBI Vaccines Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 14, 2023
/s/ Nell Beattie
Nell Beattie
Chief Financial Officer and Head of Corporate Development (Principal Financial and Accounting Officer)

 

 

Exhibit 32.1

 

CERTIFICATION

 

In connection with the quarterly report of VBI Vaccines Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Jeffrey Baxter, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

Date: November 14, 2023
/s/ Jeffrey Baxter
Jeffrey Baxter
Chief Executive Officer (Principal Executive Officer)

 

 

Exhibit 32.2

 

CERTIFICATION

 

In connection with the quarterly report of VBI Vaccines Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission (the “Report”), I, Nell Beattie, Chief Financial Officer and Head of Corporate Development (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

Date: November 14, 2023
/s/ Nell Beattie
Nell Beattie
Chief Financial Officer and Head of Corporate Development (Principal Financial and Accounting Officer)

 

v3.23.3

Cover - shares	9 Months Ended
	Sep. 30, 2023	Nov. 14, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	001-37769
Entity Registrant Name	VBI Vaccines Inc/BC
Entity Central Index Key	0000764195
Entity Tax Identification Number	00-0000000
Entity Incorporation, State or Country Code	A1
Entity Address, Address Line One	160 Second Street
Entity Address, Address Line Two	Floor 3
Entity Address, City or Town	Cambridge
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02142
City Area Code	617
Local Phone Number	830-3031
Title of 12(b) Security	Common Shares, no par value per share
Trading Symbol	VBIV
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		23,687,695

v3.23.3

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
CURRENT ASSETS
Cash	$ 35,454	$ 62,629
Accounts receivable, net	353	94
Inventory, net	7,540	6,599
Prepaid expenses	2,930	2,309
Other current assets	3,870	6,059
Total current assets	50,147	77,690
NON-CURRENT ASSETS
Other long-term assets	1,094	1,355
Property and equipment, net	9,423	12,253
Right of use assets	2,396	3,316
Intangible assets, net	35,603	58,345
Goodwill	2,121	2,127
Total non-current assets	50,637	77,396
TOTAL ASSETS	100,784	155,086
CURRENT LIABILITIES
Accounts payable	7,008	12,973
Other current liabilities	11,923	22,588
Current portion of deferred revenues	6,970	409
Current portion of long-term debt, net of debt discount	50,299
Current portion of lease liability	994	972
Total current liabilities	77,194	36,942
NON-CURRENT LIABILITIES
Deferred revenues, net of current portion	1,748	2,204
Long-term debt, net of debt discount		48,888
Lease liability, net of current portion	1,426	2,365
Liabilities for severance pay	530	524
Total non-current liabilities	3,704	53,981
COMMITMENTS AND CONTINGENCIES (NOTE 14)
STOCKHOLDERS’ EQUITY
Common shares (unlimited authorized; no par value) (September 30, 2023 - issued and outstanding 23,339,220; December 31, 2022 - issued and outstanding 8,608,539)	453,901	442,312
Additional paid-in capital	105,955	90,020
Accumulated other comprehensive income	42,462	21,440
Accumulated deficit	(582,432)	(489,609)
Total stockholders’ equity	19,886	64,163
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 100,784	$ 155,086

v3.23.3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common stock, shares authorized	Unlimited	Unlimited
Common stock, no par value	$ 0	$ 0
Common stock, shares issued	23,339,220	8,608,539
Common stock, shares outstanding	23,339,220	8,608,539

v3.23.3

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Revenues, net	$ 6,624	$ 317	$ 7,829	$ 789
Operating expenses:
Cost of revenues	2,525	2,672	9,564	7,948
Research and development	1,532	4,983	7,975	12,988
Sales, general and administrative	9,036	14,220	33,237	40,234
Impairment charges	3,600		23,600
Total operating expenses	16,693	21,875	74,376	61,170
Loss from operations	(10,069)	(21,558)	(66,547)	(60,381)
Interest expense, net	(1,543)	(958)	(4,680)	(2,799)
Foreign exchange loss	(8,832)	(2,693)	(21,596)	(28,982)
Loss before income taxes	(20,444)	(25,209)	(92,823)	(92,162)
Income tax expense
NET LOSS	(20,444)	(25,209)	(92,823)	(92,162)
Deemed dividend on certain warrants	(862)		(862)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	(21,306)	(25,209)	(93,685)	(92,162)
Other comprehensive income (loss)	7,753	(494)	21,022	23,845
COMPREHENSIVE LOSS	$ (12,691)	$ (25,703)	$ (71,801)	$ (68,317)
Net loss per share of common shares, basic	$ (1.01)	$ (2.93)	$ (7.30)	$ (10.71)
Net loss per share of common shares, diluted	$ (1.01)	$ (2.93)	$ (7.30)	$ (10.71)
Weighted-average number of common shares outstanding, basic	21,166,818	8,608,539	12,840,633	8,608,530
Weighted-average number of common shares outstanding, diluted	21,166,818	8,608,539	12,840,633	8,608,530

v3.23.3

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2021	$ 442,235	$ 81,583	$ (1,565)	$ (378,371)	$ 143,882
Balance, shares at Dec. 31, 2021	8,608,298
Stock-based compensation	$ 25	2,477			2,502
Net loss				(21,254)	(21,254)
Currency translation adjustments			5,103		5,103
Adjustments for prior periods from adoption of ASU 2020-06		(2,746)		2,065	(681)
Common shares issued upon exercise of options	$ 12				12
Common shares issued up on exercise of options, shares	241
Balance at Mar. 31, 2022	$ 442,272	81,314	3,538	(397,560)	129,564
Balance, shares at Mar. 31, 2022	8,608,539
Balance at Dec. 31, 2021	$ 442,235	81,583	(1,565)	(378,371)	143,882
Balance, shares at Dec. 31, 2021	8,608,298
Net loss					(92,162)
Balance at Sep. 30, 2022	$ 442,300	87,705	22,280	(468,468)	83,817
Balance, shares at Sep. 30, 2022	8,608,539
Balance at Mar. 31, 2022	$ 442,272	81,314	3,538	(397,560)	129,564
Balance, shares at Mar. 31, 2022	8,608,539
Stock-based compensation	$ 14	2,443			2,457
Net loss				(45,699)	(45,699)
Currency translation adjustments			19,236		19,236
Balance at Jun. 30, 2022	$ 442,286	83,757	22,774	(443,259)	105,558
Balance, shares at Jun. 30, 2022	8,608,539
Stock-based compensation	$ 14	2,398			2,412
Net loss				(25,209)	(25,209)
Currency translation adjustments			(494)		(494)
Warrant issued in connection with debt amendment		1,550			1,550
Balance at Sep. 30, 2022	$ 442,300	87,705	22,280	(468,468)	83,817
Balance, shares at Sep. 30, 2022	8,608,539
Balance at Dec. 31, 2022	$ 442,312	90,020	21,440	(489,609)	64,163
Balance, shares at Dec. 31, 2022	8,608,539
Stock-based compensation	$ 10	2,001			2,011
Net loss				(27,751)	(27,751)
Currency translation adjustments			6,599		6,599
Balance at Mar. 31, 2023	$ 442,322	92,021	28,039	(517,360)	45,022
Balance, shares at Mar. 31, 2023	8,608,539
Balance at Dec. 31, 2022	$ 442,312	90,020	21,440	(489,609)	64,163
Balance, shares at Dec. 31, 2022	8,608,539
Net loss					(92,823)
Balance at Sep. 30, 2023	$ 453,901	105,955	42,462	(582,432)	19,886
Balance, shares at Sep. 30, 2023	23,339,220
Balance at Mar. 31, 2023	$ 442,322	92,021	28,039	(517,360)	45,022
Balance, shares at Mar. 31, 2023	8,608,539
Stock-based compensation		1,674			1,674
Net loss				(44,628)	(44,628)
Currency translation adjustments			6,670		6,670
Balance at Jun. 30, 2023	$ 442,322	93,695	34,709	(561,988)	8,738
Balance, shares at Jun. 30, 2023	8,608,539
Stock-based compensation		1,500			1,500
Net loss				(20,444)	(20,444)
Currency translation adjustments			7,753		7,753
Common shares issued in financing transactions, net of issuance costs	$ 22,339				22,339
Common shares issued in financing transactions, net of issuance costs, shares	14,730,681
Warrants issued in connection with financing transactions	$ (10,760)	10,760
Balance at Sep. 30, 2023	$ 453,901	$ 105,955	$ 42,462	$ (582,432)	$ 19,886
Balance, shares at Sep. 30, 2023	23,339,220

v3.23.3

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (92,823)	$ (92,162)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,516	1,541
Stock-based compensation	5,185	7,371
Amortization of debt discount	1,411	1,237
Loss on extinguishment of long-term debt		172
Impairment charges	23,600
Inventory reserve	1,547	1,401
Change in operating right of use assets	975	1,010
Unrealized foreign exchange loss	21,891	28,410
Net change in operating working capital items:
Change in accounts receivable	(264)	(127)
Change in inventory	(3,026)	(5,174)
Change in prepaid expenses	(649)	(407)
Change in other current assets	2,120	(667)
Change in other long-term assets	151	(174)
Change in accounts payable	(5,923)	7,606
Change in deferred revenues	6,485	30
Change in other current liabilities	(10,051)	(3,715)
Payments made on operating lease liabilities	(971)	(1,001)
Net cash flows used in operating activities	(48,826)	(54,649)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(697)	(2,892)
Net cash flows used in investing activities	(697)	(2,892)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of commons shares for cash	23,908
Share issuance costs	(1,482)
Proceeds from debt financing		20,000
Debt issuance costs		(563)
Proceeds from issuance of common shares for cash, upon exercise of options		12
Net cash flows provided by financing activities	22,426	19,449
Effect of exchange rates on cash	(78)	(52)
CHANGE IN CASH FOR THE PERIOD	(27,175)	(38,144)
CASH, BEGINNING OF PERIOD	62,629	121,694
CASH, END OF PERIOD	35,454	83,550
Supplementary information:
Interest paid	4,550	2,067
Non-cash investing and financing activities:
Adjustments for prior periods from adoption of ASU 2020-06		681
Warrant issued in connection with financing transactions	10,760
Warrants issued in connection with debt amendment		1,550
Capital expenditures included in accounts payable and other current liabilities	67	283
Share issuance costs included in other current liabilities	$ 154	$ 67

v3.23.3

NATURE OF BUSINESS AND CONTINUATION OF BUSINESS	9 Months Ended
	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF BUSINESS AND CONTINUATION OF BUSINESS	1. NATURE OF BUSINESS AND CONTINUATION OF BUSINESS   Corporate Overview   VBI Vaccines Inc. (the “Company” or “VBI”) was incorporated under the laws of British Columbia, Canada on April 9, 1965.   The Company and its wholly owned subsidiaries, VBI Vaccines (Delaware) Inc., a Delaware corporation (“VBI DE”); VBI DE’s wholly owned subsidiary, Variation Biotechnologies (US), Inc., a Delaware corporation (“VBI US”); Variation Biotechnologies, Inc. a Canadian company and the wholly owned subsidiary of VBI US (“VBI Cda”); SciVac Ltd. an Israeli company (“SciVac”); SciVac Hong Kong Limited (“SciVac HK”); and VBI Vaccines B.V, a Netherlands company (“VBI BV”), are collectively referred to as the “Company”, “we”, “us”, “our”, or “VBI”.   The Company’s registered office is located at Suite 1700, Park Place, 666 Burrard Street, Vancouver, BC V6C 2X8 with its principal office located at 160 Second Street, Floor 3, Cambridge, MA 02142. In addition, the Company has manufacturing facilities located in Rehovot, Israel and research facilities located in Ottawa, Ontario, Canada.   Reverse Stock Split   The Company effected a 1-for-30 reverse stock split (the “Reverse Stock Split”) of its issued and outstanding common shares effective as of April 12, 2023, pursuant to which every 30 of the Company’s issued and outstanding common shares were automatically converted into one common share without any change in the par value per share. All share and per share amounts, including common shares underlying stock options, restricted stock units, and warrants, and applicable exercise prices, have been retroactively adjusted for all periods presented herein to give effect to the Reverse Stock Split as required in accordance with United States of America generally accepted accounting principles (“U.S. GAAP”). Per the requirements of the Business Corporations Act (British Columbia), under which the Company is regulated, if fractional shares held by registered shareholders were to be converted into whole shares, each fractional share remaining after the completion of the Reverse Stock Split that was less than half of a share was cancelled and each fractional share that was at least half of a share was rounded up to one whole share. No shareholders received cash in lieu of fractional shares.   Principal Operations   VBI is a commercial-stage biopharmaceutical company driven by immunology in the pursuit of prevention and treatment of disease. Through its innovative approach to virus-like particles (“VLPs”), including a proprietary enveloped VLP (“eVLP”) platform technology and a proprietary mRNA-launched eVLP (“MLE”) platform technology, VBI develops vaccine candidates that mimic the natural presentation of viruses, designed to elicit the innate power of the human immune system. VBI is committed to targeting and overcoming significant infectious diseases, including hepatitis B (“HBV”), COVID-19 and coronaviruses, and cytomegalovirus (“CMV”), as well as aggressive cancers including glioblastoma (“GBM”). VBI is headquartered in Cambridge, Massachusetts, with research operations in Ottawa, Canada, and a research and manufacturing site in Rehovot, Israel.   2023 Organizational Changes   As announced on April 4, 2023, the Company reduced its internal workforce by 30-35%, which began in April and was completed by the end of September 2023. As a result of this and other reductions in spend, VBI expects its operating expenses from normal business to be 30-35% lower in the second half of 2023 as compared with the second half of 2022.     COVID-19 Endemic   In May 2023, the World Health Organization determined that COVID-19 no longer fit the definition of a public health emergency and the U.S. government announced its plan to let the declaration of a public health emergency associated with COVID-19 expire on May 11, 2023. COVID-19 is expected to remain a serious endemic threat for an indefinite future period and may continue to adversely affect the global economy, and we are unable to predict 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. The effects of the COVID-19 endemic, including but not limited to supply chain issues, global shortages of supplies, material and products, volatile market conditions and rising global inflation may continue to disrupt or delay our business operations, including with respect to efforts relating to potential business development transactions, and it could continue to disrupt the marketplace which could have an adverse effect on our operations.   Liquidity and Going Concern   The Company faces a number of risks, including but not limited to, uncertainties regarding the success of the development and commercialization of its products, demand and market acceptance of the Company’s products, and reliance on major customers. The Company anticipates that it will continue to incur significant operating costs and losses in connection with the development and commercialization of its products.   The Company has an accumulated deficit of $582,432 and cash of $35,454 as of September 30, 2023. Cash outflows from operating activities were $48,826 for the nine months ended September 30, 2023.   The Company will require significant additional funds to conduct clinical and non-clinical trials, achieve and maintain regulatory approvals, and commercially launch and sell our approved products. Additional financing may be obtained from the issuance of equity securities, the issuance of additional debt, government or non-governmental organization grants or subsidies, and/or revenues from potential business development transactions, if any. There is no assurance the Company will manage to obtain these sources of financing, if required. If we are unable to obtain additional financing, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. The above conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from this uncertainty.   On August 26, 2022, we 1) filed a registration statement on Form S-3 (File No. 333-267109), which included a base prospectus which covers the offering, issuance and sale of up to $300,000 of common shares, warrants, units and/or subscription rights; and 2) entered into an Open Market Sale Agreement with Jefferies LLC (“Jefferies”), pursuant to which we may offer and sell our common shares having an aggregate price of up to $125,000 from time to time through Jefferies, acting as agent or principal (the “ATM Program”). During the third quarter of 2023, the Company issued 467,045 common shares under the ATM Program, for total gross proceeds of $373 at a weighted average price of $0.80 per share. The Company incurred $54 in sales agent commissions and share issuance costs related to the common shares issued in the quarter ended September 30, 2023, resulting in net proceeds of $319. As of September 30, 2023, approximately $124,627 of common shares remained available for issuance under the ATM Program.   On July 5, 2023, the Company announced the expansion of its hepatitis B partnership with Brii Bio. Through (i) a Collaboration and License Agreement (the “Collaboration Agreement”), dated July 5, 2023, by and between the Company and Brii Bio, and (ii) the Amended and Restated Collaboration and License Agreement (the “A&R Collaboration Agreement, and together with the Collaboration Agreement, the “Brii Collaboration Agreements”), dated July 5, 2023, by and between the Company and Brii Bio, Brii Bio expanded its exclusive license to VBI-2601 to global rights and acquired an exclusive license for PreHevbri in Asia Pacific (“APAC”), excluding Japan. As part of this collaboration, Brii Bio paid the Company an upfront payment of $15,000 consisting of a $3,000 equity investment in a concurrent registered direct offering (discussed below), $5,000 as an advance payment for the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures pursuant to a supply agreement (the “Supply Agreement”) dated July 5, 2023, by and between the Company and Brii Bio, and $7,000 as a non-refundable upfront payment pursuant to the Brii Collaboration Agreements. In addition, pursuant to the Letter Agreement (the “Letter Agreement”), dated July 5, 2023, by and among the Company, SciVac, and Brii Bio, the Company also granted to Brii Bio a security interest, subject to a Subordination Agreement between Brii Bio and K2 HealthVentures LLC (“K2HV”), in all of its respective right, title, and interest in and to all intellectual property, know-how, and licenses to the extent related to PreHevbri and VBI-2601, and all proceeds of the foregoing, in order to secure performance of all of the Company’s obligations under the Brii Collaboration Agreements, the Supply Agreement, and the Loan Agreement (each as defined herein).     The Company is also eligible to receive up to an additional $422,000 in potential regulatory and commercial milestone payments (combined under the Brii Collaboration Agreements), and royalties in the licensed territories, which is worldwide for VBI-2601 and APAC, excluding Japan, for PreHevbri. Brii Bio will be responsible for all development, regulatory, and commercial activities and costs for the two programs in their respective licensed territories. There is no assurance that Brii Bio will achieve any of the milestones as specified in the Brii Collaboration Agreements and that we will receive any or all of these potential payments pursuant to the Brii Collaboration Agreements.   In July 2023, the Company closed (i) an underwritten public offering of 12,445,454 common shares and accompanying common warrants to purchase up to 12,545,454 common shares (which included 1,536,363 common shares and common warrants to purchase up to 1,636,363 common shares issued pursuant to the underwriters’ partial exercise of their option to purchase additional common shares and common warrants) at a combined public offering price of $1.65 per common share and accompanying common warrant, and (ii) a concurrent registered direct offering, pursuant to the expanded hepatitis B partnership with Brii Bio, of 1,818,182 common shares and accompanying common warrants to purchase up to 1,818,182 common shares, at a combined purchase price of $1.65 per share and accompanying common warrant. The accompanying common warrants issued and sold in each of the underwritten public offering and the registered direct offering have an initial exercise price of $1.65 per share, which, pursuant to certain anti-dilution provisions of the warrants, was reduced to $0.6749 per share, as of September 30, 2023, and expire five years from the date of issuance. The aggregate gross proceeds from the underwritten public offering, including aggregate gross proceeds from the underwriters’ exercise of their option to purchase additional securities, were $20,500. The aggregate gross proceeds from the concurrent registered direct offering were $3,000.   As of September 30, 2023, the Company had outstanding warrants to purchase up to an aggregate of 14,363,636 common shares, issued in July 2023. Pursuant to certain anti-dilution provisions of the warrants, as the consideration paid per common share under the ATM Program was less than the exercise price of such warrants in effect immediately prior to such issuance (“New Issuance Price”), the exercise price of the warrants (the “Exercise Price”) was reduced to the New Issuance Price. As of September 30, 2023, the Exercise Price in effect was $0.6749 per share, which resulted in a deemed dividend of $862 as the fair value of the warrants was greater subsequent to the reduction in Exercise Price than it was immediately prior to such reduction in Exercise Price. The fair values were determined using the Black-Scholes option pricing model.   On November 1, 2023, the Company received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, it 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 letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until April 29, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).   In order to regain compliance with Nasdaq’s minimum bid price requirement, the common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period. In the event that the Company does not regain compliance by the end of the Compliance Period, it may be eligible for additional time to regain compliance. To qualify, the Company will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, the Company may be granted an additional 180 calendar days to regain compliance. The Company has not regained compliance as of the date of this Form 10-Q, and if it fails to regain compliance during the Compliance Period or any subsequent grace period granted by Nasdaq, its common shares will be subject to delisting by Nasdaq, which could seriously decrease or eliminate the value of an investment in the common shares and result in significantly increased uncertainty as to the Company’s ability to raise additional capital.   Financial instruments recognized in the condensed consolidated balance sheet consist of cash, accounts receivable, other current assets, accounts payable, and other current liabilities. The Company believes that the carrying value of its current financial instruments approximates their fair values due to the short-term nature of these instruments. The Company does not hold any derivative financial instruments.

v3.23.3

SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2023
Accounting Policies [Abstract]
SIGNIFICANT ACCOUNTING POLICIES	2. SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation and Consolidation   The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2022 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), as filed with the SEC on March 13, 2023.   The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.     In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.   Significant Accounting Policies   The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2022 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2023, other than the polices discussed below.   Restructuring charges   Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company’s restructuring plans are typically completed within a one-year period or less. Restructuring costs incurred under these plans may include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities.

v3.23.3

NEW ACCOUNTING PRONOUNCEMENTS	9 Months Ended
	Sep. 30, 2023
Accounting Changes and Error Corrections [Abstract]
NEW ACCOUNTING PRONOUNCEMENTS	3. NEW ACCOUNTING PRONOUNCEMENTS   Recently Adopted Accounting Pronouncements   In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Our adoption of this ASU, effective January 1, 2023, did not have a material impact on our condensed consolidated financial statements and the related footnote disclosures.

v3.23.3

INVENTORY, NET	9 Months Ended
	Sep. 30, 2023
Inventory Disclosure [Abstract]
INVENTORY, NET	4. INVENTORY, NET   Inventory consists of the following:  SCHEDULE OF INVENTORY     September 30, 2023     December 31, 2022   Finished goods   $ 1,940     $ 893   Work-in-process     2,136       1,869   Raw materials     3,464       3,837   Inventory, net   $ 7,540     $ 6,599

v3.23.3

OTHER CURRENT ASSETS	9 Months Ended
	Sep. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
OTHER CURRENT ASSETS	5. OTHER CURRENT ASSETS   Other current assets consisted of the following:  SCHEDULE OF OTHER CURRENT ASSETS     September 30, 2023     December 31, 2022   Government receivables   $ 3,470     $ 4,033   Other current assets     400       2,026   Total other current assets   $ 3,870     $ 6,059

v3.23.3

IMPAIRMENT CHARGES	9 Months Ended
	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
IMPAIRMENT CHARGES	6. IMPAIRMENT CHARGES   The drop in market conditions experienced in April 2023 and subsequently in September 2023 were considered triggering events for interim impairment tests for property and equipment, In-Process Research and Development (“IPR&D”) and goodwill. The impairment test compares the carrying amount of the assets to their respective fair values. If the carrying amount exceeds the fair value of the assets, such excess is recorded as an impairment charge.   Impairment charges consist of the following:  SCHEDULE OF IMPAIRMENT CHARGES     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Property and equipment (Note 7)   $ -     $ -     $ 1,000     $ -   IPR&D (Note 8)     3,600       -       22,600       -    Impairment charges   $ 3,600     $ -     $ 23,600     $ -

v3.23.3

PROPERTY AND EQUIPMENT	9 Months Ended
	Sep. 30, 2023
Property, Plant and Equipment [Abstract]
PROPERTY AND EQUIPMENT	7. PROPERTY AND EQUIPMENT   As discussed above, in April 2023, the Company performed an interim impairment test. The fair value of the property and equipment’s assets included in the impairment test was determined using a combination of the market approach and the cost approach and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value the property and equipment include: 1) current market prices; 2) cost to replace the assets; and 3) factors to account for obsolescence. The Company recorded an impairment of property and equipment of $1,000 as a result of its interim impairment test performed as of April 30, 2023. The Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed, which such test resulted in no further impairment as of September 30, 2023.

v3.23.3

INTANGIBLE ASSETS, NET, AND GOODWILL	9 Months Ended
	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
INTANGIBLE ASSETS, NET, AND GOODWILL	8. INTANGIBLE ASSETS, NET, AND GOODWILL   The Company’s intangible assets determined to have indefinite useful lives IPR&D and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. As discussed above, in April 2023, the Company performed an interim impairment test. The IPR&D assets, consisting of the CMV and GBM programs acquired in a business combination (the 2016 merger between VBI and SciVac), are capitalized as an intangible asset and are tested for impairment at least annually until commercialization, after which time the IPR&D will be amortized over its estimated useful life. The fair value of the IPR&D assets included in the impairment test was determined using the income approach method and is considered Level 3 in the fair value hierarchy. Some of the more significant estimates and assumptions inherent in the estimate of the fair value of IPR&D assets include: 1) the amount and timing of costs to develop the IPR&D into viable products; 2) the amount and timing of future cash inflows; 3) the discount rate; and 4) the probability of technical and regulatory success. The discount rate used was 15% and the cumulative probability of technical and regulatory success to achieve approval to market the products ranged from approximately 10% to 17%. During the second quarter of 2023, the Company recorded an impairment of IPR&D of $19,000, as a partial impairment to the congenital CMV asset, as a result of its interim impairment test performed as of April 30, 2023. The Company performed its annual test as of August 31, 2023 and determined there was no additional IPR&D impairment. The methodology and significant estimates and assumptions used in determining the fair value of the IPR&D assets as of August 31, 2023 were the same as the interim impairment test performed as of April 30, 2023. As discussed above, the Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed. During the third quarter of 2023, the Company recorded an impairment of IPR&D of $3,600, as a partial impairment to the congenital CMV asset, as a result of its interim impairment test performed as of September 30, 2023. The methodology and significant estimates and assumptions used in determining the fair value of the IPR&D assets as of September 30, 2023 were the same as the annual impairment test, other than the discount rate. This discount rate used was 25%.    SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION           September 30, 2023       Gross           Cumulative     Cumulative             Carrying     Accumulated     Impairment     Currency     Net Book       Amount     Amortization     Charge     Translation     Value   IPR&D assets   $ 61,500     $        -     $ (22,900 )   $ (2,997 )   $ 35,603               December 31, 2022       Gross           Cumulative     Cumulative             Carrying     Accumulated     Impairment     Currency     Net Book       Amount     Amortization     Charge     Translation     Value   IPR&D assets   $ 61,500     $          -     $ (300 )   $ (2,855 )   $ 58,345     The change in carrying value for IPR&D assets from December 31, 2022, relates to the impairment of $22,600 and currency translation adjustments which decreased by $142 for the nine months ended September 30, 2023.   Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. When evaluating goodwill for impairment, we may first perform an assessment qualitatively whether it is more likely than not that a reporting unit’s carrying amount exceeds its fair value, referred to as a “step zero” approach. Subsequently (if necessary, after step zero), if the carrying value of a reporting unit exceeded its fair value an impairment would be recorded. We performed our goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. There was no goodwill impairment determined as a result of the Company’s interim impairment test performed as of April 30, 2023 and its annual impairment test performed as of August 31, 2023. As discussed above, the Company considered the further decline in market conditions in September 2023 to be an additional triggering event for the second interim impairment test to be performed and determined there was no goodwill impairment as of September 30, 2023. The Company consists of a single reporting unit and uses its market capitalization to determine the fair value of the reporting unit. In order to determine the market capitalization, the Company used the trailing 20-day volume weighted average price of its shares as of the testing date.  SCHEDULE OF GOODWILL           September 30, 2023       Gross     Cumulative     Cumulative             Carrying     Impairment     Currency     Net Book       Amount     Charge     Translation     Value   Goodwill   $ 8,714     $ (6,292 )   $ (301 )   $ 2,121                                                 December 31, 2022       Gross     Cumulative     Cumulative             Carrying     Impairment     Currency     Net Book       Amount     Charge     Translation     Value   Goodwill   $ 8,714     $ (6,292 )   $ (295 )   $ 2,127     The change in carrying value for goodwill from December 31, 2022, relates to currency translation adjustments which decreased by $6 for the nine months ended September 30, 2023.   The Company has experienced a continued drop in market conditions subsequent to September 30, 2023 that may be an indicator of additional impairment to our property and equipment, intangible assets, and/or goodwill, which may result in the Company having to perform an additional interim impairment analysis during the three months ended December 31, 2023.

v3.23.3

OTHER CURRENT LIABILITIES	9 Months Ended
	Sep. 30, 2023
Other Liabilities Disclosure [Abstract]
OTHER CURRENT LIABILITIES	9. OTHER CURRENT LIABILITIES   Other current liabilities consisted of the following:  SCHEDULE OF OTHER CURRENT LIABILITIES     September 30, 2023     December 31, 2022   Accrued research and development expenses (including clinical trial accrued expenses)   $ 3,405     $ 6,561   Accrued professional fees     1,568       3,250   Payroll and employee-related costs     1,883       4,036   Deferred funding     3,925       6,966   Other current liabilities     1,142       1,775   Total other current liabilities   $ 11,923     $ 22,588       Included in payroll and employee-related costs are one time termination benefits as a result of our organizational changes to reduce our internal workforce by 30-35%, which took place mostly in the second quarter of 2023, as discussed in Note 1. The Company did not incur contract termination costs or other related costs.   The Company did not incur significant charges in one-time termination benefits during the three or nine months ended September 30, 2023.   The following table presents changes in one-time termination benefits for nine months ended September 30, 2023.  SCHEDULE OF CHANGES IN ONE-TIME TERMINATION BENEFITS Accrued balance at January 1, 2023   $ -             Charges     759   Cash payments     (698 )           Accrued balance at September 30, 2023   $ 61     The restructuring charges are included in cost of revenues, research and development and sales, general and administrative in the condensed consolidated statements of operations and comprehensive loss.

v3.23.3

LOSS PER SHARE OF COMMON SHARES	9 Months Ended
	Sep. 30, 2023
Earnings Per Share [Abstract]
LOSS PER SHARE OF COMMON SHARES	10. LOSS PER SHARE OF COMMON SHARES   Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, and stock options, which would result in the issuance of incremental shares of common shares unless such effect is anti-dilutive. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as their effect would be anti-dilutive. These potentially dilutive securities are more fully described in Note 12, Stockholders’ Equity and Additional Paid-in Capital.   The following potentially dilutive securities outstanding at September 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:  SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING     2023     2022       Nine months ended September 30,       2023     2022   Warrants     14,467,566       118,816   Stock options and restricted stock units     1,662,836       769,933   K2HV conversion feature     205,396       205,396   Total     16,335,798       1,094,145

v3.23.3

LONG-TERM DEBT	9 Months Ended
	Sep. 30, 2023
Debt Disclosure [Abstract]
LONG-TERM DEBT	11. LONG-TERM DEBT   As of September 30, 2023, and December 31, 2022, the Company’s long-term debt is as follows:  SCHEDULE OF LONG-TERM DEBT     September 30, 2023     December 31, 2022   Long-term debt, net of debt discount of $5,400 ($6,811 at December 31, 2022)   $ 50,299     $ 48,888   Less: current portion, net of debt discount of $5,400 ($0 at December 31, 2022)     50,299       -   Long-term debt, net of current portion   $ -     $ 48,888       On May 22, 2020, the Company, along with its subsidiary VBI Cda (collectively, the “Borrowers”), entered into the Loan and Guaranty Agreement (the “Loan Agreement”) with K2HV and any other lender from time-to-time party thereto (the “Lenders”). On May 22, 2020, the Lenders advanced the first tranche of term loans of $20,000. Pursuant to the Loan Agreement, the Lenders originally had the ability to convert, at the Lenders’ option, up to $4,000 of the secured term loan into common shares of the Company at a conversion price of $43.80 per share until the original maturity date of June 1, 2024. On February 3, 2021, pursuant to the Loan Agreement, the Lenders, converted $2,000 of the secured term loan into 45,662 common shares at a conversion price of $43.80 per share.   On May 17, 2021, the Company entered into the First Amendment to the Loan and Guaranty Agreement (“First Amendment”) with the Lenders and received additional loan advances of $12,000.   On September 14, 2022, the Company entered into the Second Amendment to the Loan Agreement (the “Second Amendment”) with the Lenders to: (i) increase the amount of the term loans available under the Loan Agreement to $100,000 from $50,000, which term loans are available in additional tranches subject to the achievement of milestones and other customary conditions, (ii) add certain minimum net revenue covenants, (iii) extend the final maturity date for the term loans to September 14, 2026, which may be extended to September 14, 2027, under certain circumstances, and (iv) to the extent that the maturity date is extended, the term loans will begin amortizing on a monthly basis on September 14, 2026.   On September 15, 2022, the Lenders advanced to the Borrowers the Restatement First Tranche Term Loan (as defined in the Second Amendment) in an aggregate amount of $50,000 which included the refinancing of the $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment. The next tranche of term loans of up to $10,000 will be available from April 1, 2024, through June 30, 2024, so long as certain milestones are achieved, no events of default under the Loan Agreement have occurred and are continuing, and the Liquidity Requirement is satisfied. The final tranche of term loans of up to $25,000 shall be available at any time from September 14, 2022, until September 14, 2026, subject to the Lender’s review of the Company’s clinical and financial plans and Lender’s investment committee approval.   Pursuant to the Second Amendment, the Lenders have the ability to convert $7,000 into common shares, by which $2,000 of the term loans shall be convertible into 45,662 common shares at a conversion price of $43.80 per share and $5,000 of the term loans shall be convertible into 159,734 common shares at a conversion price of $31.302 per share (“K2HV conversion feature”).   In connection with the Loan Agreement, on May 22, 2020, the Company issued the Lenders a warrant to purchase up to 20,833 common shares (the “Original K2HV Warrant”) at an exercise price of $33.60 per share. On May 17, 2021, in connection with the First Amendment, the Company amended and restated the Original K2HV Warrant to purchase an additional 10,417 common shares for a total of 31,250 common shares (the “First Amendment Warrant”) with the same exercise price of $33.60 per share. On September 14, 2022, in connection with the Second Amendment and the advance of the first tranche of term loans of $50,000 by the Lenders, the Company issued the Lenders a warrant to purchase an additional 72,680 common shares (the “Second Amendment Warrant”) with a warrant exercise price of $24.08 per share. If and/or when additional tranches are advanced pursuant to the Second Amendment, the Company will issue additional warrants to purchase up to 72,680 common shares pursuant to the Second Amendment Warrant.   The First Amendment Warrant and the Second Amendment Warrant may be exercised either for cash or on a cashless “net exercise” basis. The First Amendment Warrant expires on May 22, 2030 and the Second Amendment Warrant expires on September 14, 2032.   The Company is required to make a final payment equal to 6.95% of the aggregate term loan principal on the maturity date of the term loan, or upon earlier prepayment of the term loans in accordance with the Second Amendment (the “Second Amendment Final Payment”). The final payment related to the refinanced $30,000 in term loans that were outstanding under the Loan Agreement as amended by the First Amendment of $2,224 remains and is due the earlier of June 1, 2024 or the earlier prepayment of the term loans in accordance with the Second Amendment (the “Original Final Payment”).   Upon receipt of additional funds, issuable pursuant to the various tranches, under the Second Amendment, additional common shares will be issuable pursuant to the Second Amendment Warrant as determined by the principal amount of the applicable tranche actually funded multiplied by 3.5% and divided by the warrant exercise price of $24.08, and the Second Amendment Final Payment will increase by 6.95% of the funds advanced.     The total principal amount of the loan under the Loan Agreement as amended by the Second Amendment, outstanding at September 30, 2023, including the Original Final Payment of $2,224 and the Second Amendment Final Payment of $3,475 in connection with the Second Amendment, is $55,699. The principal amount of the loan made under the Loan Agreement as amended by the Second Amendment accrues interest at an annual rate equal to the greater of (a) 8.00%, or (b) prime rate plus 4.00%. The interest rate as of September 30, 2023 was 12.50%. The effective interest rate on the loan of $50,000, excluding the Original Final Payment and Second Amendment Final Payment, is 16.03%.   The secured term loan maturity date is September 14, 2026, until which the Company is required to pay only interest, or if the milestone for the next tranche of the term loans has been achieved, September 14, 2027. The Loan Agreement, as amended by the Second Amendment, includes both financial and non-financial covenants, including quarterly minimum Net Revenue (as defined in the Loan Agreement) targets. The Company was not in compliance with the minimum Net Revenue covenant for the measurement period ended September 30, 2023, and did not qualify for an exception for this covenant, which constitutes an Event of Default (as defined in the Loan Agreement). In anticipation of K2HV declaring an Event of Default as a result of such failure to comply with the Net Revenue covenant, the Company began discussions with K2HV with respect to possible forbearance and other remedies. On October 27, 2023, the Borrowers and K2HV entered into an extension agreement (the “Extension Agreement”), pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. Pursuant to the Extension Agreement, as amended, K2HV agreed to refrain from declaring an Event of Default under the Loan Agreement and/or the Loan Documents (as defined in the Loan Agreement) prior to November 13, 2023. On November 13, 2023, the Borrowers entered into a forbearance agreement with the Lenders (the “Forbearance Agreement”), pursuant to which the Lenders agreed to forbear from exercising the Secured Parties’ (as defined in the Loan Agreement) rights with respect to the failure to meet the minimum Net Revenue covenant for the measurement period ended September 30, 2023 (the “Specified Default”), from November 13, 2023, through and including November 28, 2023 (the “Forbearance Period”), subject to compliance by the Borrowers with certain terms and conditions as set forth in the Forbearance Agreement. Such conditions include delivery of cash flow budget and adherence reports, and adherence with such budget and cash flow forecast. The Forbearance Period will immediately terminate if an Event of Default other than the Specified Default, occurs, including any Event of Default caused by a breach of the terms of the Forbearance Agreement. There is no assurance that the Company will be able to meet the conditions set forth in the Forbearance Agreement, which will result in a termination of the Forbearance Period. In addition, the Forbearance Agreement is not a waiver by K2HV of the Company’s obligation to meet the covenants pursuant to the Loan Agreement. Accordingly, K2HV may declare an Event of Default after the end of the Forbearance Period, and there is no assurance that the Company would be able to enter into another forbearance agreement for any additional periods. Upon occurrence and during the continuance of an Event of Default, K2HV is entitled to declare all obligations under the Loan Agreement immediately due and payable and to stop advancing money or extending credit under the Loan Agreement, and the applicable rate of interest, described above, will be increased by 5.00% per annum.   The obligations under the Loan Agreement as amended by the Third Amendment (as defined below) are secured on a senior basis by a lien on substantially all of the assets of the Company and its subsidiaries. The subsidiaries of the Company, other than VBI Cda, SciVac HK, and VBI BV, are guarantors of the obligations of the Company and VBI Cda under the Loan Agreement. The Loan Agreement also contains customary events of default.   On July 5, 2023, the Borrowers and K2HV entered into (i) an amendment (the “Third Amendment”) to the Loan Agreement, and (ii) an amendment to the Pledge and Security Agreement, dated May 22, 2020, by and among the Company, VBI DE, VBI Cda, K2HV, and Ankura Trust Company, LLC, as collateral trustee for the lenders, pursuant to which the parties have agreed to permit the Brii Collaboration Agreements, the Supply Agreement, and the Letter Agreement, SciVac and Brii Bio. The Company granted to K2HV a security interest in, all of its respective right, title, and interest in and to substantially all of the Company’s intellectual property. In addition, among others, any breach, default or other triggering event by the Company occurring under the Brii Collaboration Agreements resulting in Brii Bio exercising a right to terminate the Brii Collaboration Agreements, will cross default the Third Amendment.   The total initial debt discount related to the Second Amendment is $7,359. As of September 30, 2023, and December 31, 2022, the unamortized debt discount was $5,400 and $6,811 respectively. The debt discount is being charged to interest expense, net in the condensed consolidated statement of operations and comprehensive loss using the effective interest method over the term of the debt.   At September 30, 2023 and December 31, 2022, the fair value of our outstanding debt, which is considered level 3 in the fair value hierarchy, is estimated to be $46,230 and $56,510, respectively.     Interest expense, net recorded in the three and nine months ended September 30, 2023 and 2022 was as follows:  SCHEDULE OF INTEREST EXPENSE     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Interest expense   $ 1,588     $ 856     $ 4,586     $ 2,132   Amortization of debt discount     470       416       1,411       1,237   Extinguishment loss     -       172       -       172   Interest income     (515)       (486 )     (1,317 )     (742 ) Total interest expense, net of interest income   $ 1,543     $ 958     $ 4,680     $ 2,799

v3.23.3

STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL	9 Months Ended
	Sep. 30, 2023
Equity [Abstract]
STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL	12. STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL   Stock option plans   The Company’s stock option plans are approved by and administered by the Board and its Compensation Committee. The Board designates, in connection with recommendations from the Compensation Committee, eligible participants to be included under the plan, and designates the number of options, exercise price and vesting period of the new options.   2006 VBI US Stock Option Plan   The 2006 VBI US Stock Option Plan (the “2006 Plan”), was approved by and was previously administered by the VBI US board of directors which designated eligible participants to be included under the 2006 Plan, and designated the number of options, exercise price and vesting period of the new options. The 2006 Plan was not approved by the stockholders of VBI US. The 2006 Plan was superseded by the 2014 Plan (as defined below) following the PLCC Merger and no further options will be issued under the 2006 Plan. As of September 30, 2023, there were 28,038 options outstanding under the 2006 Plan.   2014 Equity Incentive Plan   On May 1, 2014, the VBI DE board of directors adopted the VBI Vaccines Inc. 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan was approved by the VBI DE’s shareholders on July 14, 2014. The 2014 Plan was superseded by the 2016 Plan (as defined below) and no further options will be issued under the 2014 Plan. As of September 30, 2023, there were 17,195 options outstanding under the 2014 Plan.   2016 VBI Equity Incentive Plan   The 2016 VBI Equity Incentive Plan (the “2016 Plan”) is a rolling incentive plan that sets the number of common shares issuable under the 2016 Plan, together with any other security-based compensation arrangement of the Company, at a maximum of 10% of the aggregate common shares issued and outstanding on a non-diluted basis at the time of any grant under the 2016 Plan. The 2016 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and equity-linked awards to eligible participants in order to promote the success of the Company by providing a means to offer incentives and to attract, motivate, retain and reward persons eligible to participate in the 2016 Plan. Grants under the 2016 Plan include a grant or right consisting of one or more options, stock appreciation rights (“SARs”), restricted share units (“RSUs”), performance share units (“PSUs”), shares of restricted stock, or other such award as may be permitted under the 2016 Plan. As of September 30, 2023, there were 1,617,603 options outstanding and no RSUs unvested under the 2016 Plan.   The aggregate number of common shares remaining available for issuance for awards under the 2016 Plan totaled 622,295 at September 30, 2023.     Activity related to stock options is as follows:  SCHEDULE OF STOCK OPTIONS ACTIVITY     Number of     Weighted       Stock     Average       Options     Exercise Price   Balance outstanding at December 31, 2022     761,243     $ 71.26                     Granted     996,143       2.02   Forfeited     94,550       61.90                     Balance outstanding at September 30, 2023     1,662,836     $ 30.32                     Exercisable at September 30, 2023     633,031     $ 69.26     Information relating to RSUs is as follow:  SCHEDULE OF RESTRICTED STOCK UNITS           Weighted             Average       Number of     Fair Value       Stock Awards     at Grant Date   Unvested shares outstanding at December 31, 2022     82     $ 43.80                     Vested     (82 )     43.80   Unvested shares outstanding at September 30, 2023     -     $ -     In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:  SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK SCHOLES OPTION PRICING ASSUMPTIONS     Nine months ended September 30       2023     2022   Volatility     112.44 %     93.23 % Risk free interest rate     4.17 %     1.75 % Expected term in years     5.74       5.83   Expected dividend yield     0.00 %     0.00 % Weighted average fair value per option   $ 1.65     $ 33.90     The fair value of the options is recognized as an expense on a straight-line basis over the vesting period and forfeitures are accounted for when they occur. The total stock-based compensation expense recorded in the three and nine months ended September 30, 2023 and 2022 was as follows:  SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE     Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Research and development   $ 191     $ 514     $ 684     $ 1,534   Sales, general, and administrative     1,287       1,868       4,437       5,751   Cost of revenues     22       30       64       86   Total stock-based compensation expense   $ 1,500     $ 2,412     $ 5,185     $ 7,371

v3.23.3

REVENUES, NET AND DEFERRED REVENUE	9 Months Ended
	Sep. 30, 2023
Revenue from Contract with Customer [Abstract]
REVENUES, NET AND DEFERRED REVENUE	13. REVENUES, NET AND DEFERRED REVENUE   Revenues, net comprises the following:  SCHEDULE OF REVENUE COMPRISED     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Product revenues, net   $ 1,076     $ 258     $ 2,262     $ 680   License revenue     3,596       -       3,596       -   R&D service revenues     1,952       59       1,971       109   Revenues   $ 6,624     $ 317     $ 7,829     $ 789       The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2023:  SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS     Total     Current portion to September 30, 2024     Remaining portion thereafter   Product revenues, net   $ 5,314     $ 5,314     $ -   R&D service revenues     3,404       1,656       1,748       $ 8,718     $ 6,970     $ 1,748     The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2023:  SUMMARY OF CHANGES IN DEFERRED REVENUE Balance at January 1, 2022   $ 2,803         -         -         -             Balance at December 31, 2022     2,613             Revenue deferred     8,049   Recognition of deferred revenue     (1,971 ) Currency translation     27             Balance at September 30, 2023   $ 8,718             Short Term   $ 6,970   Long Term   $ 1,748     Brii Collaboration Agreements – VBI-2601   On December 4, 2018, the Company entered into a Collaboration and License Agreement (the “Brii Collaboration and License Agreement”) with Brii Bio, amended on April 8, 2021, whereby:     ● the Company and Brii Bio agreed to collaborate on the development of a HBV recombinant protein-based immunotherapeutic in the licensed territory, which consists of China, Hong Kong, Taiwan, and Macau (collectively, the “Licensed Territory”), and to conduct a Phase II 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”);         ● the Company granted Brii Bio an exclusive royalty-bearing license to perform studies, and regulatory and other activities, as may be required to obtain and maintain marketing approval of the Licensed Product, for the treatment of HBV in the Licensed Territory and to commercialize and the Licensed Product for the diagnosis and treatment of chronic HBV in the Licensed Territory; and         ● Brii Bio granted the Company an exclusive royalty-free license under Brii Bio’s technology and Brii Bio’s interest in any joint technology developed during the collaboration to develop and commercialize the Licensed Product for the diagnosis and treatment of chronic HBV in the countries of the world other than the Licensed Territory.     On December 20, 2021, the Company and Brii Bio further amended the Brii Collaboration and License Agreement (the “Brii Second Amendment Collaboration and License Agreement”) whereby:     ● the Company 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         ● Brii Bio granted the Company a non-exclusive royalty free license under the Brii Bio technology arising from the data generated in the Combo Clinical Trial solely for use in the development, manufacture, or commercialization of the Licensed Product in combination with an siRNA in the countries of the world other than the Licensed Territory.   Pursuant to the Brii Collaboration and License Agreement, as amended, the Company was responsible for the R&D Services and Brii Bio was responsible for costs relating to the clinical trials for the Licensed Territory.   The Company and Brii Bio will jointly own all right, title, and interest in the joint know-how development and the patents claiming joint inventions made pursuant to the Brii Second Amendment Collaboration and License Agreement.   The initial consideration of the Brii Collaboration and License Agreement consisted of an $11,000 non-refundable upfront payment. As part of the Brii Collaboration and License Agreement, the Company and Brii Bio entered into a stock purchase agreement. Under the terms of the stock purchase agreement, the Company issued to Brii Bio 76,502 of its common shares valued at $3,626 (based on the Company’s common share price on December 4, 2018). The remaining $7,374, deemed to be the initial transaction price, was allocated to two performance obligations: (i) the VBI-2601 license and (ii) R&D services. The R&D services were allocated $4,737 of the transaction price using an estimated selling price based on an expected cost plus a margin approach and the remaining transaction price of $2,637 was allocated to the VBI-2601 license using the residual method.   There was no additional consideration contemplated in the Brii Second Amendment Collaboration and License Agreement.   On July 5, 2023, the Company and Brii Bio entered into the A&R Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the A&R Collaboration Agreement, expand the Licensed Territory to the entire world (the “New Licensed Territory”) for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import VBI-2601 (“VBI-2601 Licensed Product”). Pursuant to the A&R Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the VBI-2601 Licensed Products in the New Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in the New Licensed Territory. Except for the rights and licenses expressly granted in the A&R Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property. Additionally, the A&R Collaboration Agreement constitutes the entire agreement between the VBI and Brii Bio relating to VBI-2601 and supersedes all previous agreements, including the Brii Collaboration and License Agreement and the Brii Second Amendment Collaboration and License Agreement. As a result of the A&R Collaboration Agreement, the unsatisfied performance obligation of $1,925 under the Brii Collaboration and License Agreement prior to the amendment and restatement was immediately recognized as R&D service revenues during the three and nine months ended September 30, 2023.   The initial consideration of the A&R Collaboration Agreement consisted of a $5,000 non-refundable upfront payment. In addition, the Company is also eligible to receive up to an additional $227,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the New Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the A&R Collaboration Agreement or have been recognized under the A&R Collaboration Agreement. The $5,000 of initial consideration of the A&R Collaboration Agreement was allocated to three performance obligations: (i) the VBI-2601 license for the New Licensed Territory; (ii) R&D services related to VBI-2601; and (iii) the technology transfer of VBI-2601. The initial consideration of $5,000 was allocated as follows: R&D services were allocated $43, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $3,360 was allocated to the VBI-2601 license for the New Licensed Territory.     The A&R Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) expiration, invalidation or lapse of the last Company patent claiming such VBI-2601 Licensed Product, (ii) 10 years from the date of first commercial sale of such VBI-2601 Licensed Product in the applicable region, or (iii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such VBI-2601 Licensed Product in such region. Upon expiration (but not an earlier termination) of the A&R Collaboration Agreement in each region of the New Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license under the Company’s technology related to the VBI-2601 Licensed Products in such region to make and sell VBI-2601 Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.   Brii Collaboration Agreements – PreHevbri   On July 5, 2023, the Company and Brii Bio also entered into the Collaboration Agreement, to, among other things, and subject to the terms and conditions set forth in the Collaboration Agreement, acquired an exclusive license for PreHevbri in APAC, excluding Japan (“PreHevbri Licensed Territory”), for Brii Bio’s exclusive rights and licenses to make, have made, use, sell, offer for sale, and import PreHevbri (“PreHevbri Licensed Product”). Pursuant to the Collaboration Agreement, the Company granted Brii Bio an exclusive royalty-bearing license, with the right to grant sublicenses through multiple tiers, to (i) perform studies, regulatory and other activities, as may be required to obtain and maintain marketing approval of the PreHevbri Licensed Products in the PreHevbri Licensed Territory; and (ii) research, develop, make, have made, distribute, use, sell, offer for sale, have sold, import, export or otherwise commercialize the PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in the PreHevbri Licensed Territory. Except for the rights and licenses expressly granted in the Collaboration Agreement, the Company and Brii Bio retained all rights under their respective intellectual property.   The initial consideration of the Collaboration Agreement consisted of a $2,000 non-refundable upfront payment. In addition, the Company is also eligible to receive up to an additional $195,000 in potential regulatory and net sales milestone payments, along with up to double-digit royalties on commercial sales in the PreHevbri Licensed Territory. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. Therefore, no variable consideration was included in the initial transaction price and no such amounts were recognized under the Collaboration Agreement or have been recognized under the Collaboration Agreement. The $2,000 of the initial consideration of the Collaboration Agreement was allocated to three performance obligations: (i) the PreHebvri license for the PreHevbri Licensed Territory; (ii) R&D services related to PreHevbri; and (iii) the technology transfer of PreHevbri. The initial consideration of $2,000 was allocated as follows: the R&D services were allocated $88, the technology transfer was allocated $1,597, both performance obligations using an estimated selling price based on an expected cost-plus margin approach, and the residual consideration of $315 was allocated to the PreHevbri license for the PreHevbri Licensed Territory.   The Collaboration Agreement will be in effect on a region-by-region basis until the last-to-expire of the latest of the following terms in each region of the New Licensed Territory: (i) 10 years from the date of first commercial sale of such PreHevbri Licensed Product in the applicable region, or (ii) termination or expiration of the Company’s obligation to pay third party royalties with respect to sales of such PreHevbri Licensed Product in such region. Upon expiration (but not an earlier termination) of the Collaboration Agreement in each region of the PreHevbri Licensed Territory, the Company will grant Brii Bio a perpetual, non-exclusive, fully paid-up, royalty free license under the Company’s technology related to the PreHevbri Licensed Products in such region to make and sell PreHevbri Licensed Products for the field of the diagnosis and treatment of hepatitis B in such region.   The R&D services and technology transfer for the Brii Collaboration Agreements will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.   Upon termination of the Brii Collaboration Agreements prior to the end of the term, there is no obligation for refund and any amounts in deferred revenue related to unsatisfied performance obligations will be immediately recognized.     Supply Agreement   On July 5, 2023, in connection with the Brii Collaboration Agreements, the Company and Brii Bio entered into the Supply Agreement related to the clinical and commercial manufacture and supply of VBI-2601 and PreHevbri and any related manufacturing expenditures, as negotiated. Pursuant to the Supply Agreement, as the Company achieved a qualified underwritten public offering of $5,000 of its common shares within 90 days of the effective date of the Supply Agreement, the Company received an advance payment of $5,000 from Brii Bio. The advance payment of $5,000 will be allocated to the following performance obligations, depending on which performance obligation is requested by Brii Bio, until the advance payment of $5,000 has been fully utilized: (i) units of VBI-2601 and/or PreHevbri; and (ii) manufacturing expenditures. The advance payment of $5,000 is included in deferred revenue as of September 30, 2023.   The performance obligation of a unit of VBI-2601 and/or PreHevbri will be satisfied at a point in time using the prices set out in the Supply Agreement and revenue will be recognized upon transfer of control of the performance obligation.   The manufacturing expenditures will be satisfied over time as services are rendered using the “cost-to-cost” input method as this method represents the most accurate depiction of the transfer of services based on the types of costs expected to be incurred.   As of September 30, 2023, performance obligations related to the Brii Collaboration Agreements and the Supply Agreements that remain unsatisfied are $8,049.

v3.23.3

COLLABORATION ARRANGEMENTS	9 Months Ended
	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
COLLABORATION ARRANGEMENTS	14. COLLABORATION ARRANGEMENTS   The Company has entered into, and expects to enter into from time to time in the future, license agreements, funding agreements, collaboration agreements, and similar agreements related to the advancement of its product candidates and research and development efforts. Significant agreements (collectively, the “Collaboration Agreements”) are described in detail in the Company’s 2022 10-K. While specific amounts will fluctuate from quarter to quarter based on clinical trials progress, advancement and completion of research studies and manufacturing projects, and other factors, the Company believes its overall activities regarding Collaboration Agreements are materially consistent with those described in the 2022 10-K, other than described below.   Set forth below are the approximate amounts expensed for Collaboration Agreements during the three and nine months ended September 30, 2023 and 2022, respectively. These expensed amounts are included under Research and Development expenses in the accompanying condensed consolidated statements of operations.   SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE     2023     2022     2023     2022       Three months ended     Nine months ended       September 30     September 30       2023     2022     2023     2022   National Research Council of Canada (“NRC”)   $ -     $ 118     $ 35     $ 702   Coalition for Epidemic Preparedness Innovations (“CEPI”)     829       692       3,023       3,098   Agenus Inc.     72       -       436       -   Research and Development expenses   $ 901     $ 810     $ 3,494     $ 3,800     NRC   On February 28, 2023, the Company signed a seventh amendment to the collaboration agreement with the NRC to extend the expiration date of the collaboration agreement to December 31, 2023.   On April 17, 2023, the Company signed an eighth amendment to the collaboration agreement with the NRC to further broaden the scope to include the development of stable cell lines for our multivalent vaccine candidate against coronaviruses.     CEPI   The Company has $3,925 recorded as deferred funding, recorded in other current liabilities on the condensed consolidated balance sheet.

v3.23.3

GOVERNMENT GRANTS	9 Months Ended
	Sep. 30, 2023
Government Grants
GOVERNMENT GRANTS	15. GOVERNMENT GRANTS   Strategic Innovation Fund (“SIF”)   On September 16, 2020, the Company 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 $55,976 from the SIF to support the development of our coronavirus vaccine program, VBI-2900, though Phase II clinical studies (the “Project”). The Company 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, the Company 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, the Company 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, the Company will become a primary obligor under the Contribution Agreement.   Costs associated with the Contribution Agreement are expensed as incurred in Research and Development expenses and overhead charges are included in Sales, General and Administrative. For the three and nine months ended September 30, 2023, the Company recognized $2,095 and $4,970 respectively, as a reduction in expenses. As of September 30, 2023, the Company had $0 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.   For the three and nine months ended September 30, 2022, the Company recognized $1,831 and $3,783, respectively, as a reduction in expenses. As of September 30, 2022, the Company had $716 recorded as deferred government grants, recorded in other current liabilities on the condensed consolidated balance sheet.

v3.23.3

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	16. COMMITMENTS AND CONTINGENCIES   Legal Proceedings   From time to time, the Company may be involved in certain claims and litigation arising out of the ordinary course and conduct of business. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.     On September 13, 2018, two civil claims were brought in the District Court of the central district in Israel naming our subsidiary SciVac as a defendant. In one claim, two minors, through their parents, allege, among other things: defects in certain batches of Sci-B-Vac discovered in July 2015; that Sci-B-Vac was approved for use in children and infants in Israel without sufficient evidence establishing its safety; that SciVac failed to provide accurate information about Sci-B-Vac to consumers; and that each child suffered side effects from the vaccine. The claim was filed together with a motion seeking approval of a class action on behalf of 428,000 children vaccinated with Sci-B-Vac in Israel from April 2011 and seeking damages in a total amount of NIS 1,879,500 ($491,501). The second claim is a civil action brought by two minors and their parents against SciVac and the Ministry of Health of the State of Israel (“IMoH”) alleging, among other things, that SciVac marketed an experimental, defective, hazardous or harmful vaccine; that Sci-B-Vac was marketed in Israel without sufficient evidence establishing its safety; and that Sci-B-Vac was produced and marketed in Israel without approval of a western regulatory body. The claim seeks damages for past and future losses and expenses as well as punitive damages.   The District Court has accepted SciVac’s motion to suspend reaching a decision on the approval of the class action pending the determination of liability under the civil action. Preliminary hearings for the trial of the civil action began on January 15, 2020, with subsequent preliminary hearings held on May 13, 2020, December 3, 2020, September 30, 2021, June 9, 2022, January 12, 2023 and July 13, 2023. The next preliminary hearing is scheduled to be held on November 16, 2023.   On December 5, 2022, another tort 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. 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). Preliminary hearings have been postponed and a new date has not yet been scheduled.   SciVac intends to defend these claims vigorously.

v3.23.3

LEASES	9 Months Ended
	Sep. 30, 2023
Leases
LEASES	17. LEASES   The Company has entered into various non-cancelable lease agreements for its office, lab, and manufacturing facilities, which are classified as operating leases. The office facility lease agreement in the U.S. expires on October 31, 2024 with no option to extend. Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027. A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025.   There are no residual value guarantees, no variable lease payments, and no restrictions or covenants imposed by leases. The discount rate used in measuring the lease liabilities and right of use assets was determined by reviewing our incremental borrowing rate at the initial measurement date.  SCHEDULE OF LEASE COST AND OTHER INFORMATION     Three months ended     Nine months ended       September 30     September 30       2023     2022     2023     2022   Operating lease cost   $ 399     $ 489     $ 1,373     $ 1,383     Weighted average discount rate     13 % Weighted average remaining lease term     2.51 years     Operating lease costs are included G&A expenses in the statement of operations and comprehensive loss.     The following table summarizes future undiscounted cash payments reconciled to the lease liabilities: SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES             Remaining 2023   $ 310   2024     1,142   2025     654   2026     564   2027     154   Total   $ 2,824   Effect of discounting     (404 ) Total lease liability   $ 2,420   Less: current portion     (994 ) Lease liability, net of current portion   $ 1,426

v3.23.3

SEGMENT INFORMATION	9 Months Ended
	Sep. 30, 2023
Segment Reporting [Abstract]
SEGMENT INFORMATION	18. SEGMENT INFORMATION   The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.   Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:  SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS     2023     2022     2023     2022       Three Months Ended     Nine Months Ended       September 30     September 30       2023     2022     2023     2022                             United States   $ 690     $ 238     $ 1,520     $ 444   Israel     42       60       98       281   China / Hong Kong     5,562       19       5,580       58   Europe     330       -       631       6   Revenues   $ 6,624     $ 317     $ 7,829     $ 789     There was no revenue attributed to our country of domicile, Canada, for the three and nine months ended September 30, 2023 and 2022.

v3.23.3

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	19. SUBSEQUENT EVENTS   ATM Program   Subsequent to September 30, 2023 the Company sold and issued 348,475 common shares under the ATM Program for total gross proceeds of $219 at a weighted average price of $0.6270 per share.   As of November 13, 2023, the Exercise Price of the warrants that contain certain anti-dilution provisions (see Note 1 Liquidity and Going Concern above), in effect is $0.6057.   Extension Agreements and Forbearance Agreement with K2HV   On October 27, 2023 the Company and K2HV entered into the Extension Agreement, pursuant to which the due date for the Company to deliver the compliance certificate for the period ending September 30, 2023, pursuant to the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023. On November 13, 2023, the Company and K2HV entered into the Forbearance Agreement. See Note 11 for more details.   Nasdaq Minimum Bid Price Requirement   On November 1, 2023, the Company received a letter from the Nasdaq indicating that, based upon the closing bid price of the Company’s common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, it did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq. See Note 1 Liquidity and Going Concern for more details.

v3.23.3

SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2023
Accounting Policies [Abstract]
Basis of Presentation and Consolidation	Basis of Presentation and Consolidation   The Company’s fiscal year ends on December 31 of each calendar year. The accompanying unaudited condensed consolidated financial statements have been prepared in U.S. dollars (“USD”) and pursuant to the rules and regulations of the SEC, for interim reporting. Accordingly, certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP, have been condensed or omitted pursuant to such rules and regulations. The December 31, 2022 condensed consolidated balance sheet in this document was derived from the audited consolidated financial statements. The condensed consolidated financial statements and notes included in this quarterly report on this Form 10-Q does not include all of the disclosures required by U.S. GAAP and should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 10-K”), as filed with the SEC on March 13, 2023.   The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: VBI DE, VBI US, VBI Cda, SciVac, SciVac HK, and VBI BV. Intercompany balances and transactions between the Company and its subsidiaries are eliminated in the condensed consolidated financial statements. Certain items previously reported in specific financial statement captions have been reclassified to conform to the current presentation.     In the opinion of management, these condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the periods presented. The results for the periods presented are not necessarily indicative of results to be expected for the full year or for any future periods.   Significant Accounting Policies   The significant accounting policies used in the preparation of these condensed consolidated financial statements are disclosed in the 2022 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2023, other than the polices discussed below.   Restructuring charges   Restructuring costs include charges associated with exit or disposal activities that meet the definition of restructuring under FASB ASC Topic 420, Exit or Disposal Cost Obligations (“ASC 420”). The Company’s restructuring plans are typically completed within a one-year period or less. Restructuring costs incurred under these plans may include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities.

v3.23.3

INVENTORY, NET (Tables)	9 Months Ended
	Sep. 30, 2023
Inventory Disclosure [Abstract]
SCHEDULE OF INVENTORY	Inventory consists of the following:  SCHEDULE OF INVENTORY     September 30, 2023     December 31, 2022   Finished goods   $ 1,940     $ 893   Work-in-process     2,136       1,869   Raw materials     3,464       3,837   Inventory, net   $ 7,540     $ 6,599

v3.23.3

OTHER CURRENT ASSETS (Tables)	9 Months Ended
	Sep. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
SCHEDULE OF OTHER CURRENT ASSETS	Other current assets consisted of the following:  SCHEDULE OF OTHER CURRENT ASSETS     September 30, 2023     December 31, 2022   Government receivables   $ 3,470     $ 4,033   Other current assets     400       2,026   Total other current assets   $ 3,870     $ 6,059

v3.23.3

IMPAIRMENT CHARGES (Tables)	9 Months Ended
	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
SCHEDULE OF IMPAIRMENT CHARGES	Impairment charges consist of the following:  SCHEDULE OF IMPAIRMENT CHARGES     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Property and equipment (Note 7)   $ -     $ -     $ 1,000     $ -   IPR&D (Note 8)     3,600       -       22,600       -    Impairment charges   $ 3,600     $ -     $ 23,600     $ -

v3.23.3

INTANGIBLE ASSETS, NET, AND GOODWILL (Tables)	9 Months Ended
	Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION	SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION           September 30, 2023       Gross           Cumulative     Cumulative             Carrying     Accumulated     Impairment     Currency     Net Book       Amount     Amortization     Charge     Translation     Value   IPR&D assets   $ 61,500     $        -     $ (22,900 )   $ (2,997 )   $ 35,603               December 31, 2022       Gross           Cumulative     Cumulative             Carrying     Accumulated     Impairment     Currency     Net Book       Amount     Amortization     Charge     Translation     Value   IPR&D assets   $ 61,500     $          -     $ (300 )   $ (2,855 )   $ 58,345
SCHEDULE OF GOODWILL	SCHEDULE OF GOODWILL           September 30, 2023       Gross     Cumulative     Cumulative             Carrying     Impairment     Currency     Net Book       Amount     Charge     Translation     Value   Goodwill   $ 8,714     $ (6,292 )   $ (301 )   $ 2,121                                                 December 31, 2022       Gross     Cumulative     Cumulative             Carrying     Impairment     Currency     Net Book       Amount     Charge     Translation     Value   Goodwill   $ 8,714     $ (6,292 )   $ (295 )   $ 2,127

v3.23.3

OTHER CURRENT LIABILITIES (Tables)	9 Months Ended
	Sep. 30, 2023
Other Liabilities Disclosure [Abstract]
SCHEDULE OF OTHER CURRENT LIABILITIES	Other current liabilities consisted of the following:  SCHEDULE OF OTHER CURRENT LIABILITIES     September 30, 2023     December 31, 2022   Accrued research and development expenses (including clinical trial accrued expenses)   $ 3,405     $ 6,561   Accrued professional fees     1,568       3,250   Payroll and employee-related costs     1,883       4,036   Deferred funding     3,925       6,966   Other current liabilities     1,142       1,775   Total other current liabilities   $ 11,923     $ 22,588
SCHEDULE OF CHANGES IN ONE-TIME TERMINATION BENEFITS	The following table presents changes in one-time termination benefits for nine months ended September 30, 2023.  SCHEDULE OF CHANGES IN ONE-TIME TERMINATION BENEFITS Accrued balance at January 1, 2023   $ -             Charges     759   Cash payments     (698 )           Accrued balance at September 30, 2023   $ 61

v3.23.3

LOSS PER SHARE OF COMMON SHARES (Tables)	9 Months Ended
	Sep. 30, 2023
Earnings Per Share [Abstract]
SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING	The following potentially dilutive securities outstanding at September 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive:  SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING     2023     2022       Nine months ended September 30,       2023     2022   Warrants     14,467,566       118,816   Stock options and restricted stock units     1,662,836       769,933   K2HV conversion feature     205,396       205,396   Total     16,335,798       1,094,145

v3.23.3

LONG-TERM DEBT (Tables)	9 Months Ended
	Sep. 30, 2023
Debt Disclosure [Abstract]
SCHEDULE OF LONG-TERM DEBT	As of September 30, 2023, and December 31, 2022, the Company’s long-term debt is as follows:  SCHEDULE OF LONG-TERM DEBT     September 30, 2023     December 31, 2022   Long-term debt, net of debt discount of $5,400 ($6,811 at December 31, 2022)   $ 50,299     $ 48,888   Less: current portion, net of debt discount of $5,400 ($0 at December 31, 2022)     50,299       -   Long-term debt, net of current portion   $ -     $ 48,888
SCHEDULE OF INTEREST EXPENSE	Interest expense, net recorded in the three and nine months ended September 30, 2023 and 2022 was as follows:  SCHEDULE OF INTEREST EXPENSE     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Interest expense   $ 1,588     $ 856     $ 4,586     $ 2,132   Amortization of debt discount     470       416       1,411       1,237   Extinguishment loss     -       172       -       172   Interest income     (515)       (486 )     (1,317 )     (742 ) Total interest expense, net of interest income   $ 1,543     $ 958     $ 4,680     $ 2,799

v3.23.3

STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL (Tables)	9 Months Ended
	Sep. 30, 2023
Equity [Abstract]
SCHEDULE OF STOCK OPTIONS ACTIVITY	Activity related to stock options is as follows:  SCHEDULE OF STOCK OPTIONS ACTIVITY     Number of     Weighted       Stock     Average       Options     Exercise Price   Balance outstanding at December 31, 2022     761,243     $ 71.26                     Granted     996,143       2.02   Forfeited     94,550       61.90                     Balance outstanding at September 30, 2023     1,662,836     $ 30.32                     Exercisable at September 30, 2023     633,031     $ 69.26
SCHEDULE OF RESTRICTED STOCK UNITS	Information relating to RSUs is as follow:  SCHEDULE OF RESTRICTED STOCK UNITS           Weighted             Average       Number of     Fair Value       Stock Awards     at Grant Date   Unvested shares outstanding at December 31, 2022     82     $ 43.80                     Vested     (82 )     43.80   Unvested shares outstanding at September 30, 2023     -     $ -
SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK SCHOLES OPTION PRICING ASSUMPTIONS	In determining the amount of stock-based compensation the Company used the Black-Scholes option pricing model to establish the fair value of options granted by applying the following weighted average assumptions:  SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK SCHOLES OPTION PRICING ASSUMPTIONS     Nine months ended September 30       2023     2022   Volatility     112.44 %     93.23 % Risk free interest rate     4.17 %     1.75 % Expected term in years     5.74       5.83   Expected dividend yield     0.00 %     0.00 % Weighted average fair value per option   $ 1.65     $ 33.90
SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE	SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE     Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Research and development   $ 191     $ 514     $ 684     $ 1,534   Sales, general, and administrative     1,287       1,868       4,437       5,751   Cost of revenues     22       30       64       86   Total stock-based compensation expense   $ 1,500     $ 2,412     $ 5,185     $ 7,371

v3.23.3

REVENUES, NET AND DEFERRED REVENUE (Tables)	9 Months Ended
	Sep. 30, 2023
Revenue from Contract with Customer [Abstract]
SCHEDULE OF REVENUE COMPRISED	Revenues, net comprises the following:  SCHEDULE OF REVENUE COMPRISED     2023     2022     2023     2022       Three months ended September 30     Nine months ended September 30       2023     2022     2023     2022   Product revenues, net   $ 1,076     $ 258     $ 2,262     $ 680   License revenue     3,596       -       3,596       -   R&D service revenues     1,952       59       1,971       109   Revenues   $ 6,624     $ 317     $ 7,829     $ 789
SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS	The following table presents revenues expected to be recognized in the future related to performance obligations, based on current estimates, that are unsatisfied at September 30, 2023:  SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS     Total     Current portion to September 30, 2024     Remaining portion thereafter   Product revenues, net   $ 5,314     $ 5,314     $ -   R&D service revenues     3,404       1,656       1,748       $ 8,718     $ 6,970     $ 1,748
SUMMARY OF CHANGES IN DEFERRED REVENUE	The following table presents changes in the deferred revenue balance for the nine months ended September 30, 2023:  SUMMARY OF CHANGES IN DEFERRED REVENUE Balance at January 1, 2022   $ 2,803         -         -         -             Balance at December 31, 2022     2,613             Revenue deferred     8,049   Recognition of deferred revenue     (1,971 ) Currency translation     27             Balance at September 30, 2023   $ 8,718             Short Term   $ 6,970   Long Term   $ 1,748

v3.23.3

COLLABORATION ARRANGEMENTS (Tables)	9 Months Ended
	Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE	SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE     2023     2022     2023     2022       Three months ended     Nine months ended       September 30     September 30       2023     2022     2023     2022   National Research Council of Canada (“NRC”)   $ -     $ 118     $ 35     $ 702   Coalition for Epidemic Preparedness Innovations (“CEPI”)     829       692       3,023       3,098   Agenus Inc.     72       -       436       -   Research and Development expenses   $ 901     $ 810     $ 3,494     $ 3,800

v3.23.3

LEASES (Tables)	9 Months Ended
	Sep. 30, 2023
Leases
SCHEDULE OF LEASE COST AND OTHER INFORMATION	SCHEDULE OF LEASE COST AND OTHER INFORMATION     Three months ended     Nine months ended       September 30     September 30       2023     2022     2023     2022   Operating lease cost   $ 399     $ 489     $ 1,373     $ 1,383     Weighted average discount rate     13 % Weighted average remaining lease term     2.51 years
SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES	The following table summarizes future undiscounted cash payments reconciled to the lease liabilities: SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES             Remaining 2023   $ 310   2024     1,142   2025     654   2026     564   2027     154   Total   $ 2,824   Effect of discounting     (404 ) Total lease liability   $ 2,420   Less: current portion     (994 ) Lease liability, net of current portion   $ 1,426

v3.23.3

SEGMENT INFORMATION (Tables)	9 Months Ended
	Sep. 30, 2023
Segment Reporting [Abstract]
SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS	Revenues, net from external customers are attributed to geographic areas based on location of the contracting customers:  SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS     2023     2022     2023     2022       Three Months Ended     Nine Months Ended       September 30     September 30       2023     2022     2023     2022                             United States   $ 690     $ 238     $ 1,520     $ 444   Israel     42       60       98       281   China / Hong Kong     5,562       19       5,580       58   Europe     330       -       631       6   Revenues   $ 6,624     $ 317     $ 7,829     $ 789

v3.23.3

NATURE OF BUSINESS AND CONTINUATION OF BUSINESS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands					1 Months Ended	3 Months Ended			6 Months Ended	9 Months Ended
	Jul. 05, 2023	Apr. 12, 2023	Apr. 04, 2023	Aug. 26, 2022	Jul. 31, 2023	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Entity incorporation, date of incorporation										Apr. 09, 1965
Reverse stock split		1-for-30 reverse stock split
Retained Earnings (Accumulated Deficit)						$ 582,432				$ 582,432		$ 489,609
Cash						35,454				35,454		$ 62,629
Net Cash Provided by (Used in) Operating Activities										48,826	$ 54,649
Proceeds from issuance of equity						$ 22,339
Shares issued, price					$ 1.65
Stock issuance costs										1,482
Net proceeds										$ 23,908
Upfront payment	$ 15,000
Payment for clinical and commercial manufacture	5,000
Potential regulatory and commercial milestone payments	422,000
Warrant price					$ 1.65	$ 0.6749				$ 0.6749
Expiration term					5 years
Deemed dividend						$ 862				$ 862
Common Stock [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common shares, issued					1,536,363	14,730,681
Proceeds from issuance of equity						$ 22,339
Warrant [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Purchase of warrants					1,636,363
Warrants to purchase common stock						14,363,636				14,363,636
Brii Bio [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Non-refundable upfront payment	7,000
Direct Offering [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common shares, issued					1,818,182
Equity investment	$ 3,000
Purchase of warrants					1,818,182
Gross proceeds					$ 3,000
IPO [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common shares, issued					12,445,454
Purchase of warrants					12,545,454
Gross proceeds					$ 20,500
ATM Program [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Common shares, issued						467,045
Proceeds from issuance of equity						$ 373
Shares issued, price						$ 0.80				$ 0.80
Stock issuance costs						$ 54
Net proceeds						319
Share value remaining, available for sale						$ 124,627				$ 124,627
Minimum [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Operating expenses and workforce reduction percentage			30.00%				30.00%		30.00%
Maximum [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Operating expenses and workforce reduction percentage			35.00%				35.00%		35.00%
Share value remaining, available for sale				$ 300,000
Maximum [Member] | ATM Program [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Share value remaining, available for sale				$ 125,000

v3.23.3

SCHEDULE OF INVENTORY (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Finished goods	$ 1,940	$ 893
Work-in-process	2,136	1,869
Raw materials	3,464	3,837
Inventory, net	$ 7,540	$ 6,599

v3.23.3

SCHEDULE OF OTHER CURRENT ASSETS (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Government receivables	$ 3,470	$ 4,033
Other current assets	400	2,026
Total other current assets	$ 3,870	$ 6,059

v3.23.3

SCHEDULE OF IMPAIRMENT CHARGES (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Indefinite-Lived Intangible Assets [Line Items]
Impairment charges	$ 3,600			$ 23,600
In Process Research and Development [Member]
Indefinite-Lived Intangible Assets [Line Items]
Impairment charges	3,600	$ 19,000		22,600
Property, Plant and Equipment [Member]
Indefinite-Lived Intangible Assets [Line Items]
Impairment charges				$ 1,000

v3.23.3

PROPERTY AND EQUIPMENT (Details Narrative) $ in Thousands	Apr. 30, 2023 USD ($)
Property, Plant and Equipment [Member]
Impairment Effects on Earnings Per Share [Line Items]
Impairment charges	$ 1,000

v3.23.3

SCHEDULE OF INDEFINITE LIVED INTANGIBLE ASSETS INCLUDING CUMULATIVE IMPAIRMENT AND CURRENCY TRANSLATION (Details) - Inprocess Research and Development Assets [Member] - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Indefinite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 61,500	$ 61,500
Accumulated Amortization
Cumulative Impairment Charge	(22,900)	(300)
Cumulative Currency Translation	(2,997)	(2,855)
Net Book value	$ 35,603	$ 58,345

v3.23.3

SCHEDULE OF GOODWILL (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Gross Carrying Amount	$ 8,714	$ 8,714
Goodwill, Cumulative Impairment Charge	(6,292)	(6,292)
Goodwill, Cumulative Currency Translation	(301)	(295)
Goodwill, Net Book value	$ 2,121	$ 2,127

v3.23.3

INTANGIBLE ASSETS, NET, AND GOODWILL (Details Narrative) - USD ($)	3 Months Ended			9 Months Ended
	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Apr. 30, 2023
Finite-Lived Intangible Assets [Line Items]
Estimated fair value of assets discount rate						15.00%
Impairment charges	$ 3,600,000			$ 23,600,000
Intangible asset foreign currency translation adjustment				142,000
Goodwill, impairment				0
Goodwill foreign currency translation adjustment				$ 6,000
In Process Research and Development [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated fair value of assets discount rate	25.00%			25.00%
Impairment charges	$ 3,600,000	$ 19,000,000		$ 22,600,000
Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Percentage of cumulative probability				10.00%
Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Percentage of cumulative probability				17.00%

v3.23.3

SCHEDULE OF OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Other Liabilities Disclosure [Abstract]
Accrued research and development expenses (including clinical trial accrued expenses)	$ 3,405	$ 6,561
Accrued professional fees	1,568	3,250
Payroll and employee-related costs	1,883	4,036
Deferred funding	3,925	6,966
Other current liabilities	1,142	1,775
Total other current liabilities	$ 11,923	$ 22,588

v3.23.3

SCHEDULE OF CHANGES IN ONE-TIME TERMINATION BENEFITS (Details) - One-time Termination Benefits [Member] $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($)
Restructuring Cost and Reserve [Line Items]
Restructuring Reserve, Beginning Balance
Charges	759
Cash payments	(698)
Balance at June 30, 2023	$ 61

v3.23.3

OTHER CURRENT LIABILITIES (Details Narrative)		3 Months Ended	6 Months Ended
	Apr. 04, 2023	Jun. 30, 2023	Jun. 30, 2023
Minimum [Member]
Operating expenses and workforce reduction percentage	30.00%	30.00%	30.00%
Maximum [Member]
Operating expenses and workforce reduction percentage	35.00%	35.00%	35.00%

v3.23.3

SCHEDULE OF ANTI-DILUTIVE WEIGHTED AVERAGE SHARES OUTSTANDING (Details) - shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	16,335,798	1,094,145
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	14,467,566	118,816
Stock Options and Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	1,662,836	769,933
K2HV Conversion Feature [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	205,396	205,396

v3.23.3

SCHEDULE OF LONG-TERM DEBT (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Debt Disclosure [Abstract]
Long-term debt, net of debt discount of $5,400 ($6,811 at December 31, 2022)	$ 50,299	$ 48,888
Less: current portion, net of debt discount of $5,400 ($0 at December 31, 2022)	50,299
Long-term debt, net of current portion		$ 48,888

v3.23.3

SCHEDULE OF LONG-TERM DEBT (Details) (Parenthetical) - Long-Term Debt [Member] - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Extinguishment of Debt [Line Items]
Debt instrument, unamortized discount	$ 5,400	$ 6,811
Debt instrument, unamortized discount, current	$ 5,400	$ 0

v3.23.3

SCHEDULE OF INTEREST EXPENSE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Debt Disclosure [Abstract]
Interest expense	$ 1,588	$ 856	$ 4,586	$ 2,132
Amortization of debt discount	470	416	1,411	1,237
Extinguishment loss		172		172
Interest income	(515)	(486)	(1,317)	(742)
Total interest expense, net of interest income	$ 1,543	$ 958	$ 4,680	$ 2,799

v3.23.3

LONG-TERM DEBT (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands				9 Months Ended
	Sep. 14, 2022	Feb. 03, 2021	May 22, 2020	Sep. 30, 2023	Jul. 31, 2023	Dec. 31, 2022	Sep. 15, 2022	May 17, 2021
Debt Instrument [Line Items]
Warrant price				$ 0.6749	$ 1.65
Final payment				$ 55,699
Fair Value, Inputs, Level 3 [Member]
Debt Instrument [Line Items]
Debt instrument, fair value disclosure				46,230		$ 56,510
Second Amendment [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Increase amount of term loans available	$ 100,000
Loan and Guaranty Agreement [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Debt conversion, converted instrument, amount			$ 4,000
Conversion price			$ 43.80
Debt face amount								$ 30,000
Loan and Guaranty Agreement [Member] | K2 HealthVentures LLC [Member] | K2 Warrant [Member]
Debt Instrument [Line Items]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right			20,833
Warrant price			$ 33.60
Loan and Guaranty Agreement [Member] | K2 HealthVentures LLC [Member] | Restated K2 Warrant [Member]
Debt Instrument [Line Items]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right								10,417
Warrant price								$ 33.60
Class of Warrant or Right, Number of Securities Called by Warrants or Rights								31,250
Loan and Guaranty Agreement [Member] | K2 HealthVentures LLC [Member] | Second Amendment Warrant [Member]
Debt Instrument [Line Items]
Debt face amount	$ 50,000
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right	72,680
Warrant price	$ 24.08
Loan and Guaranty Agreement [Member] | First Tranche [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Secured debt			$ 20,000
Loan and Guaranty Agreement [Member] | First Amendment [Member]
Debt Instrument [Line Items]
Additional secured debt								$ 12,000
Debt face amount								30,000
Loan and Guaranty Agreement [Member] | First Amendment [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Final payment, value								$ 2,224
Loan and Guaranty Agreement [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Debt face amount				$ 50,000
Warrant price	$ 24.08
Secured term loan final payment percentage	6.95%
Final payment amount	$ 3,475
Debt instrument, interest rate, stated percentage				12.50%
Debt instrument, interest rate, effective percentage				16.03%
Debt instrument, maturity date				Sep. 14, 2026
Debt increased percentage				5.00%
Debt instrument discount							$ 7,359
Debt instrument, unamortized discount				$ 5,400		$ 6,811
Loan and Guaranty Agreement [Member] | Second Amendment [Member] | Prime Rate Plus [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage				4.00%
Loan and Guaranty Agreement [Member] | Second Amendment [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt instrument, interest rate, stated percentage				8.00%
Loan Agreement [Member]
Debt Instrument [Line Items]
Term loan available	50,000
Loan Agreement [Member] | Third Tranche Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt face amount							10,000
Loan Agreement [Member] | Fourth Tranche Term Loan [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt face amount							25,000
Loan Agreement [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Debt conversion, converted instrument, amount		$ 2,000
Conversion price		$ 43.80
Conversion price		45,662
Loan Agreement [Member] | Second Amendment [Member] | First Tranche Term Loan [Member]
Debt Instrument [Line Items]
Debt face amount							$ 50,000
Loan Agreement [Member] | Second Amendment [Member] | K2 HealthVentures LLC [Member]
Debt Instrument [Line Items]
Convertible amount	$ 7,000
Loan Agreement [Member] | Second Amendment [Member] | K2 HealthVentures LLC [Member] | Conversion Price of $43.80 Per Share [Member]
Debt Instrument [Line Items]
Conversion price	$ 43.80
Convertible amount	$ 2,000
Shares available for conversion	45,662
Loan Agreement [Member] | Second Amendment [Member] | K2 HealthVentures LLC [Member] | Conversion Price of $31.302 Per Share [Member]
Debt Instrument [Line Items]
Conversion price	$ 31.302
Convertible amount	$ 5,000
Shares available for conversion	159,734
Extension Agreement [Member] | Second Amendment [Member]
Debt Instrument [Line Items]
Debt instrument term description				the Loan Agreement, was extended from October 30, 2023, to November 6, 2023, which date was extended again from November 6, 2023, to November 13, 2023, pursuant to a subsequent letter agreement dated November 3, 2023

v3.23.3

SCHEDULE OF STOCK OPTIONS ACTIVITY (Details) - Equity Option [Member]	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Offsetting Assets [Line Items]
Number of Stock Options Outstanding, Beginning Balance | shares	761,243
Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 71.26
Number of Stock Options, Granted | shares	996,143
Weighted Average Exercise Price, Granted | $ / shares	$ 2.02
Number of Stock Options, Forfeited | shares	94,550
Weighted Average Exercise Price, Forfeited | $ / shares	$ 61.90
Number of Stock Options Outstanding, Ending Balance | shares	1,662,836
Weighted Average Exercise Price, Ending Balance | $ / shares	$ 30.32
Number of Stock Options, Exercisable | shares	633,031
Weighted Average Exercise Price, Exercisable | $ / shares	$ 69.26

v3.23.3

SCHEDULE OF RESTRICTED STOCK UNITS (Details) - Restricted Stock Units (RSUs) [Member]	9 Months Ended
	Sep. 30, 2023 $ / shares shares
Class of Stock [Line Items]
Number of Stock Awards, Unvested shares outstanding beginning balance | shares	82
Weighted Average Fair Value at Grant Date, Unvested shares outstanding beginning balance | $ / shares	$ 43.80
Number of Stock Awards, Vested | shares	(82)
Weighted Average Fair Value at Grant Date, Vested | $ / shares	$ 43.80
Number of Stock Awards, Unvested shares outstanding beginning balance | shares
Weighted Average Fair Value at Grant Date, Unvested shares outstanding ending balance | $ / shares

v3.23.3

SCHEDULE OF FAIR VALUE OF OPTIONS GRANTED BY USING BLACK SCHOLES OPTION PRICING ASSUMPTIONS (Details) - $ / shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Equity [Abstract]
Volatility	112.44%	93.23%
Risk free interest rate	4.17%	1.75%
Expected term in years	5 years 8 months 26 days	5 years 9 months 29 days
Expected dividend yield	0.00%	0.00%
Weighted average fair value per option	$ 1.65	$ 33.90

v3.23.3

SCHEDULE OF STOCK-BASED COMPENSATION EXPENSE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Total stock-based compensation expense	$ 1,500	$ 2,412	$ 5,185	$ 7,371
Research and Development Expense [Member]
Total stock-based compensation expense	191	514	684	1,534
General and Administrative Expense [Member]
Total stock-based compensation expense	1,287	1,868	4,437	5,751
Cost of Sales [Member]
Total stock-based compensation expense	$ 22	$ 30	$ 64	$ 86

v3.23.3

STOCKHOLDERS’ EQUITY AND ADDITIONAL PAID-IN CAPITAL (Details Narrative)	9 Months Ended
	Sep. 30, 2023 shares
2006 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options outstanding	28,038
2014 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options outstanding	17,195
2016 Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based compensation arrangement by share-based, percentage	10.00%
Number of common shares remaining available for issuance for awards	622,295

v3.23.3

SCHEDULE OF REVENUE COMPRISED (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Revenues	$ 6,624	$ 317	$ 7,829	$ 789
Product [Member]
Disaggregation of Revenue [Line Items]
Revenues	1,076	258	2,262	680
License [Member]
Disaggregation of Revenue [Line Items]
Revenues	3,596		3,596
Service [Member]
Disaggregation of Revenue [Line Items]
Revenues	$ 1,952	$ 59	$ 1,971	$ 109

v3.23.3

SUMMARY OF REVENUE EXPECTED TO BE RECOGNIZED IN FUTURE RELATED TO PERFORMANCE OBLIGATIONS (Details) $ in Thousands	Sep. 30, 2023 USD ($)
Disaggregation of Revenue [Line Items]
Revenues	$ 8,718
Current Portion to September 30, 2024 [Member]
Disaggregation of Revenue [Line Items]
Revenues	6,970
Remaining Portion There After [Member]
Disaggregation of Revenue [Line Items]
Revenues	1,748
Product [Member]
Disaggregation of Revenue [Line Items]
Revenues	5,314
Product [Member] | Current Portion to September 30, 2024 [Member]
Disaggregation of Revenue [Line Items]
Revenues	5,314
Product [Member] | Remaining Portion There After [Member]
Disaggregation of Revenue [Line Items]
Revenues
Service [Member]
Disaggregation of Revenue [Line Items]
Revenues	3,404
Service [Member] | Current Portion to September 30, 2024 [Member]
Disaggregation of Revenue [Line Items]
Revenues	1,656
Service [Member] | Remaining Portion There After [Member]
Disaggregation of Revenue [Line Items]
Revenues	$ 1,748

v3.23.3

SUMMARY OF CHANGES IN DEFERRED REVENUE (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Contract with customer liability,beginning	$ 2,613	$ 2,803
Revenue deferred	8,049
Recognition of deferred revenue	(1,971)
Currency translation	27
Contract with customer liability, ending	8,718	2,613
Contract with customer, liability, current	6,970	409
Contract with customer, liability, non-current	$ 1,748	$ 2,204

v3.23.3

REVENUES, NET AND DEFERRED REVENUE (Details Narrative) - USD ($) $ in Thousands			1 Months Ended	3 Months Ended		9 Months Ended
	Jul. 05, 2023	Dec. 04, 2018	Jul. 31, 2023	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Disaggregation of Revenue [Line Items]
Stock issued during period, value				$ 22,339
Revenue, remaining performance obligation, amount				8,718		$ 8,718
Revenues				6,624	$ 317	7,829	$ 789
IPO [Member]
Disaggregation of Revenue [Line Items]
Stock issued during period, shares			12,445,454
Service [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount				3,404		3,404
Revenues				1,952	59	1,971	109
License [Member]
Disaggregation of Revenue [Line Items]
Revenues				3,596		3,596
Brii Bio [Member]
Disaggregation of Revenue [Line Items]
Non-refundable upfront payment	$ 7,000
Collaboration and License Agreement [Member] | Service [Member]
Disaggregation of Revenue [Line Items]
Revenues				1,925		1,925
Collaboration and License Agreement [Member] | Brii Bio [Member]
Disaggregation of Revenue [Line Items]
Non-refundable upfront payment		$ 11,000
Stock issued during period, shares		76,502
Stock issued during period, value		$ 3,626
Collaboration and License Agreement [Member] | Brii Bio [Member] | Pre Hevbri Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Non-refundable upfront payment	2,000
Net sales milestone payments	195,000
Collaboration and License Agreement [Member] | Brii Bio [Member] | VBI-2601 [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount		2,637
Collaboration and License Agreement [Member] | Brii Bio [Member] | VBI-2601 [Member] | New Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Non-refundable upfront payment	5,000
Net sales milestone payments	227,000
Collaboration and License Agreement [Member] | Brii Bio [Member] | Service [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount		4,737
Collaboration and License Agreement [Member] | Brii Bio [Member] | Service [Member] | Pre Hevbri Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	88
Collaboration and License Agreement [Member] | Brii Bio [Member] | Service [Member] | VBI-2601 [Member] | New Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	43
Collaboration and License Agreement [Member] | Brii Bio [Member] | Technology Transfer [Member] | Pre Hevbri Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	1,597
Collaboration and License Agreement [Member] | Brii Bio [Member] | Technology Transfer [Member] | VBI-2601 [Member] | New Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	1,597
Collaboration and License Agreement [Member] | Brii Bio [Member] | License [Member] | Pre Hevbri Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	315
Collaboration and License Agreement [Member] | Brii Bio [Member] | License [Member] | VBI-2601 [Member] | New Licensed Territory [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount	3,360
License Agreement [Member] | Brii Bio [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount		$ 7,374
Supply Agreement [Member] | Brii Bio [Member]
Disaggregation of Revenue [Line Items]
Advance payment	5,000
Deferred revenue				5,000		5,000
Supply Agreement [Member] | Brii Bio [Member] | IPO [Member]
Disaggregation of Revenue [Line Items]
Stock issued during period, value	$ 5,000
Brii Collaboration Agreements and Supply Agreement [Member]
Disaggregation of Revenue [Line Items]
Revenue, remaining performance obligation, amount				$ 8,049		$ 8,049

v3.23.3

SCHEDULE OF RESEARCH AND DEVELOPMENT EXPENSE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and Development expenses	$ 1,532	$ 4,983	$ 7,975	$ 12,988
Collaboration Agreement [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and Development expenses	901	810	3,494	3,800
Collaboration Agreement [Member] | National Research Council [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and Development expenses		118	35	702
Collaboration Agreement [Member] | Coalition For Epidemic Preparedness Innovations [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and Development expenses	829	692	3,023	3,098
Collaboration Agreement [Member] | Agenus Inc [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Research and Development expenses	$ 72		$ 436

v3.23.3

COLLABORATION ARRANGEMENTS (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Deferred funding	$ 3,925	$ 6,966

v3.23.3

GOVERNMENT GRANTS (Details Narrative) - Strategic Innovation Fund [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Reduction expenses	$ 2,095	$ 1,831	$ 4,970	$ 3,783
Deferred government grants	$ 0	$ 716	$ 0	$ 716

v3.23.3

COMMITMENTS AND CONTINGENCIES (Details Narrative) - Sci B Vac [Member] ₪ in Thousands, $ in Thousands	Sep. 13, 2018 USD ($) Integer	Sep. 13, 2018 ILS (₪) Integer
Product Liability Contingency [Line Items]
Children vaccinated	428,000	428,000
Loss contingency, damages seeking, value	$ 491,501	₪ 1,879,500

v3.23.3

SCHEDULE OF LEASE COST AND OTHER INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Leases
Operating lease cost	$ 399	$ 489	$ 1,373	$ 1,383
Weighted average discount rate	13.00%		13.00%
Weighted average remaining lease term	2 years 6 months 3 days		2 years 6 months 3 days

v3.23.3

SUMMARY OF FUTURE UNDISCOUNTED CASH PAYMENTS RECONCILED TO LEASE LIABILITIES (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Leases
Remaining 2023	$ 310
2024	1,142
2025	654
2026	564
2027	154
Total	2,824
Effect of discounting	(404)
Total lease liability	2,420
Less: current portion	(994)	$ (972)
Lease liability, net of current portion	$ 1,426	$ 2,365

v3.23.3

LEASES (Details Narrative)	9 Months Ended
	Sep. 30, 2023
ISRAEL | Manufacturing Facility Lease Agreement [Member]
Lessee, operating lease, option to extend	Our manufacturing facility lease agreement in Israel has been extended for 5 years with a term now ending January 31, 2027.
CANADA | Lease Agreement [Member]
Lessee, operating lease, option to extend	A lease for additional office space in Israel has a term ending November 30, 2025 with an option to extend for two additional years and June 30, 2027 with an option to extend the term for five additional years. In September 2022, the Company extended the term of our lease for our research facility in Canada, which comprises office and laboratory space, for three additional years, which now has a term ending on December 31, 2025

v3.23.3

SCHEDULE OF REVENUES FROM EXTERNAL CUSTOMERS (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 6,624	$ 317	$ 7,829	$ 789
UNITED STATES
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	690	238	1,520	444
ISRAEL
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	42	60	98	281
China Hong Kong [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	5,562	19	5,580	58
Europe [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 330		$ 631	$ 6

v3.23.3

SEGMENT INFORMATION (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue	$ 6,624	$ 317	$ 7,829	$ 789
CANADA
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenue			$ 0	$ 0

v3.23.3

SUBSEQUENT EVENTS (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended	9 Months Ended
	Nov. 13, 2023	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Jul. 31, 2023
Subsequent Event [Line Items]
Proceeds from issuance of equity			$ 23,908
Shares issued price per share					$ 1.65
Warrant price		$ 0.6749	$ 0.6749		$ 1.65
Subsequent Event [Member]
Subsequent Event [Line Items]
Warrant price	$ 0.6057
ATM Program [Member]
Subsequent Event [Line Items]
Proceeds from issuance of equity		$ 319
Shares issued price per share		$ 0.80	$ 0.80
ATM Program [Member] | Subsequent Event [Member]
Subsequent Event [Line Items]
Number of shares issued in transaction	348,475
Proceeds from issuance of equity	$ 219
Shares issued price per share	$ 0.6270

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