UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM
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(Mark One)
OR
For the fiscal year ended
December 31
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2024
OR
OR
Date of event requiring this shell company report
For the transition period from
__________ to __________
Commission file number
001-35223
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Exact name of Registrant as specified in its charter
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Translation of Registrant’s name into English
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(Jurisdiction of incorporation or organization)
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(Address of principal executive offices)
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Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person
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Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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American Depositary Shares, each representing 600 ordinary shares, par value NIS 0.10 per share
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Nasdaq Capital Market
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Ordinary shares, par value NIS 0.10 per share
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Nasdaq Capital Market*
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*Not for trading; only in connection with the registration of American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of March 16, 2025:
2,232,601,990
ordinary shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
No
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If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐
No
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Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
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.
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 and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Emerging growth company
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
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If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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Other ☐
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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. N/A
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
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TABLE OF CONTENTS
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INTRODUCTION
We are a biopharmaceutical company pursuing life-changing therapies in oncology and
rare diseases. Our first approved product, APHEXDA® (motixafortide), a novel peptide for the treatment of stem-cell mobilization
and solid tumors, with an indication in the United States for stem cell mobilization for autologous transplantation in multiple myeloma,
is being developed and commercialized by Ayrmid Pharma Ltd., or Ayrmid (globally, excluding Asia) and Guangzhou Gloria Biosciences Co.,
Ltd., or Gloria (in Asia). We are also advancing the development of motixafortide for patients with pancreatic cancer and other solid
tumors.
Our ordinary shares have been trading on the Tel Aviv Stock Exchange,
or TASE, under the symbol “BLRX” since February 2007. In July 2011, we listed our ADSs on the Nasdaq Capital Market, or Nasdaq,
and they are traded under the symbol “BLRX.”
Unless otherwise indicated, all references to “BioLineRx,”
the “Company,” “us,” “we” and “our” refer to BioLineRx Ltd., an Israeli company, and its
consolidated subsidiaries. References to “ordinary shares”, “ADSs”, “warrants” and “share capital”
refer to the ordinary shares, ADSs, warrants and share capital, respectively, of BioLineRx.
References to “U.S. dollars”, “dollars”, “USD”,
and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. References
to “ordinary shares” are to our ordinary shares, no par value. We report financial information under International Financial
Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. The functional and presentation currency
of the Company in this annual report on Form 20-F for the year ended December 31, 2024, or the Annual Report on Form 20-F, is the U.S.
dollar.
Unless otherwise indicated, U.S. dollar translations of NIS amounts
presented in this Annual Report on Form 20-F are translated using the rate of NIS 3.647 to $1.00, the exchange rate reported by the Bank
of Israel on December 31, 2024.
On January 30, 2025, we effected a change in the ratio of our ADSs
to ordinary shares from one ADS representing 15 ordinary shares to a new ratio of one ADS representing 600 ordinary shares. For ADS holders,
the ratio change had the same effect as a one-for-forty reverse ADS split. All ADS and related option and warrant information presented
in this Annual Report on Form 20-F have been retroactively adjusted to reflect the reduced number of ADSs and the increase in the ADS
price which resulted from this action. Unless otherwise indicated, in this Annual Report on Form 20-F fractional ADSs have been rounded
to the nearest whole number.
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Forward-Looking Statements
Some of the statements under the sections entitled “Item
3. Key Information - Risk Factors,” “Item 4. Information on the Company” and “Item 5. Operating and Financial
Review and Prospects” and elsewhere in this Annual Report on Form 20-F constitute forward-looking statements. These include statements
regarding management's expectations, beliefs and intentions regarding, among other things, the potential benefits of motixafortide, the
potential success of our out-licensing agreements, expectations and commercial potential of motixafortide, as well as its potential investigational
uses, expectations with regard to clinical trials of motixafortide, the plans and objectives of management for future operations, and
statements as to results of operations or of financial condition, expected capital needs and expenses. These statements involve known
and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify
forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predicts,”
“projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking
statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions, and are subject
to risks and uncertainties. In addition, the section of this Annual Report on Form 20-F entitled “Item 4. Information on the Company”
contains information obtained from independent industry and other sources that we have not independently verified. You should not put
undue reliance on any forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking
statements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or
revise any forward-looking statements. Readers are encouraged to consult the Company’s filings made on Form 6-K, which are periodically
filed with or furnished to the SEC.
Factors that could cause our actual results to differ materially
from those expressed or implied in such forward-looking statements include, but are not limited to:
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the clinical development, commercialization and market acceptance of our therapeutic
candidates, including the degree and pace of market uptake of APHEXDA for the mobilization of hematopoietic stem cells for autologous
transplantation in multiple myeloma patients;
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the initiation, timing, progress and results of our preclinical studies, clinical
trials and other therapeutic candidate development efforts;
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our ability to advance our therapeutic candidates into clinical trials or to successfully
complete our preclinical studies or clinical trials;
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whether the clinical trial results for APHEXDA will be predictive of real-world results;
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our receipt of regulatory approvals for our therapeutic candidates, and the timing
of other regulatory filings and approvals;
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whether access to APHEXDA is achieved in a commercially viable manner and whether
APHEXDA receives adequate reimbursement from third-party payors;
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our ability to establish, manage, and maintain corporate collaborations, as well as
the ability of our collaborators to execute on their development and commercialization plans;
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our ability to integrate new therapeutic candidates and new personnel, as well as
new collaborations;
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the interpretation of the properties and characteristics of our therapeutic candidates
and of the results obtained with our therapeutic candidates in preclinical studies or clinical trials;
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the implementation of our business model and strategic plans for our business and
therapeutic candidates;
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the scope of protection that we are able to establish and maintain for intellectual
property rights covering our therapeutic candidates and our ability to operate our business without infringing the intellectual property
rights of others;
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estimates of our expenses, future revenues, capital requirements and our need for
and ability to access sufficient additional financing;
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risks related to changes in healthcare laws, rules and regulations in the United States
or elsewhere;
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competitive companies, technologies and our industry;
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our ability to maintain the listing of our ADSs on Nasdaq;
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statements as to the impact of the political and security situation in Israel on our
business, including the impact of Israel’s war with Hamas and other militant groups, which may exacerbate the magnitude of the factors
discussed above; and
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those factors referred to in “Item 3.D. Risk Factors,” “Item 4.
Information on the Company,” and “Item 5. Operating and Financial Review and Prospects”, as well as in this Annual Report
on Form 20-F generally.
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ii
PART I.
ITEM 1
. IDENTITY OF
DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS
AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A. [Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider the risks we describe below, in addition
to the other information set forth elsewhere in this Annual Report on Form 20-F, including our consolidated financial statements and the
related notes beginning on page F-1, before deciding to invest in our ordinary shares and ADSs. These material risks could adversely impact
our results of operations, possibly causing the trading price of our ordinary shares and ADSs to decline, and you could lose all or part
of your investment.
Summary Risk Factors
Investing in our ordinary shares involves a high degree of risk,
as fully described below. The principal factors and uncertainties that make investing in our ordinary shares risky include, among others:
Risks Related to Our Financial Condition and Capital Requirements
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We have incurred significant losses since inception and expect to incur additional losses in the future
and may never be profitable.
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We cannot assure investors that our existing cash and investment balances will be sufficient to meet our
future capital requirements.
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If we default under our secured loan agreement with BlackRock EMEA Venture and Growth Lending (previously
Kreos Capital VII Aggregator SCSP), or BlackRock, all or a portion of our assets could be subject to forfeiture.
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Management has concluded that there is substantial doubt about our ability to continue as a going concern,
which could prevent us from obtaining new financing on reasonable terms or at all.
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Risks Related to Our Business and Regulatory Matters
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We have earned limited commercialization revenues to date. We may never achieve profitability.
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APHEXDA, or any other therapeutic candidate that may receive marketing approval in
the future, may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical
community necessary for commercial success and the market opportunity for APHEXDA or any other therapeutic candidate may be smaller than
our estimates.
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If we or our collaborators are unable to obtain and/or maintain U.S. and/or foreign
regulatory approval for our therapeutic candidates, in a timely manner or at all, we will be unable to commercialize our therapeutic candidates.
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We and our collaborators may not obtain additional marketing approvals for motixafortide
in other indications or initial approval for any other therapeutic candidates we may develop in the future.
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Clinical trials involve a lengthy and expensive process with an uncertain outcome,
and results of earlier studies and trials may not be predictive of future trial results.
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Even if we obtain regulatory approvals, our therapeutic candidates will be subject
to ongoing regulatory review and if we fail to comply with continuing U.S. and applicable foreign regulations, we could lose those approvals
and our business would be seriously harmed.
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We generally rely on third parties to conduct our preclinical studies and clinical
trials and to provide other services, and those third parties may not perform satisfactorily, including by failing to meet established
deadlines for the completion of such services.
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We recently entered into and may in the future rely on out-licensing arrangements
for late-stage development, marketing or commercialization of our therapeutic candidates.
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If we cannot meet requirements under our in-license agreements, we could lose the
rights to our therapeutic candidates, which could have a material adverse effect on our business.
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We have partnered with and may seek to partner with third-party collaborators with
respect to the development and commercialization of motixafortide, and we may not succeed in establishing and maintaining collaborative
relationships, which may significantly limit our ability to develop and commercialize our therapeutic candidates successfully, if at all.
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If competitors develop and market therapeutics that are more effective, safer or less
expensive than our current or future therapeutic candidates, our prospects will be negatively impacted.
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APHEXDA, or any other therapeutic candidate that we or our licensees are able to commercialize,
may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives, any
of which could harm our business.
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We rely upon third-party manufacturers to produce therapeutic supplies for the clinical
trials, and commercialization, of APHEXDA. If we manufacture any therapeutic candidates in the future, we will be required to incur significant
costs and devote significant efforts to establish and maintain manufacturing capabilities.
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Risks Related to Our Industry
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Healthcare reforms and related reductions in pharmaceutical pricing, reimbursement and coverage by government
authorities and third-party payors may adversely affect our business.
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If third-party payors do not adequately reimburse customers for any of our therapeutic candidates that
are approved for marketing, they might not be purchased or used, and our revenues and profits will not develop or increase.
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Our business has a substantial risk of clinical trial and product liability claims. If we are unable to
obtain and maintain appropriate levels of insurance, a claim could adversely affect our business.
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Significant disruptions of our information technology systems or breaches of our data security could adversely
affect our business.
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We deal with hazardous materials and must comply with environmental, health and safety laws and regulations,
which can be expensive and restrict how we do business.
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We are currently party to, and may in the future, become subject to litigation or claims arising in or
outside the ordinary course of business that could negatively affect our business operations and financial condition.
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Risks Related to Intellectual Property
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Our access to most of the intellectual property associated with our therapeutic candidates
results from in-license agreements with biotechnology companies and a university, the termination of which would prevent us from commercializing
the associated therapeutic candidates.
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Risks Related to our Ordinary Shares and ADSs
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Our business, operating results and growth rates may be adversely affected by current or future unfavorable
economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk.
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The market prices of our ordinary shares and ADSs are subject to fluctuation, which could result in substantial
losses by our investors.
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Future sales of our ordinary shares or ADSs could reduce the market price of our ordinary shares and ADSs.
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Raising additional capital by issuing securities may cause dilution to existing shareholders.
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If we fail to comply with the continued listing requirements of the Nasdaq, our ADSs may be delisted and
the price of our ADSs and our ability to access the capital markets could be negatively impacted.
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Risks Related to our Operations in Israel
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We conduct a substantial part of our operations in Israel and therefore our results may be adversely affected
by political, economic and military instability in Israel and its region.
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Provisions of Israeli law may delay, prevent or otherwise impede a merger with, or an acquisition of, our
company, which could prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
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It may be difficult to enforce a U.S. judgment against us and our officers and directors in Israel or the
United States, or to serve process on our officers and directors.
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Your rights and responsibilities as a shareholder will be governed by Israeli law, which may differ in
some respects from the rights and responsibilities of shareholders of U.S. companies.
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Risks Related to Our Financial Condition and Capital Requirements
We have incurred significant losses since inception
and expect to incur additional losses in the future and may never be profitable.
We are a biopharmaceutical company pursuing life-changing therapies
in oncology and rare diseases. Our first approved product is APHEXDA (motixafortide), a novel peptide for the treatment of stem-cell mobilization
and solid tumors which, on September 8, 2023, was approved by the FDA for use in combination with filgrastim (G-CSF) to mobilize hematopoietic
stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma. In October
2023, we out-licensed the rights to motixafortide for all indications in substantially all of Asia, and in November 2024, we out-licensed
the global rights (other than in Asia) to motixafortide for all indications, other than solid tumors. See “Item 4.B. Information
on the Company—Business Overview—Recent Developments”. As a result of the November 2024 transaction, we shut down our
independent commercialization activities in the United States and refocused our operations on development activities in Israel in the
fields of oncology and rare diseases, at a significantly reduced annual cash burn rate.
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Since our incorporation, we have been mainly focused on research and development. We
have incurred losses since inception, principally as a result of research and development and general administrative expenses and more
recently sales and marketing in support of our operations. We recorded net losses of $25.0 million in 2022, $60.6 million in 2023 and
$9.2 million in 2024. As of December 31, 2024, we had an accumulated deficit of $400 million. We expect to continue to incur significant
expenses and sustain net losses for the foreseeable future as we continue our planned development activities for motixafortide in
other indications. Our ability to become and remain profitable depends on our and our licensees’ abilities to generate significant
product revenue. Our ability to generate significant revenue will require our licensees to successfully commercialize APHEXDA. While we
began to generate product revenue from sales of APHEXDA, there can be no assurance that we or our licensees will generate significant
revenue or as to the timing of any such revenue, and we may not achieve profitability for several years, if at all. Successful commercialization
is subject to many risks. There are numerous examples of unsuccessful product launches and failures to meet expectations of market potential,
including by pharmaceutical companies with more experience and resources than us.
Successful commercialization will depend upon our licensees’
ability to achieve sufficient market acceptance, reimbursement from third-party payers and adequate market share for APHEXDA. The likelihood
of our long-term success must be considered in light of the expenses, difficulties and potential delays to be encountered in the development
and commercialization of new pharmaceutical products, competitive factors in the marketplace and the complex regulatory environment in
which we operate. Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing
and amount of revenues, and if or when we might achieve profitability. We and any licensees may never succeed in these activities and,
even if we do, or any licensee does, we may never generate revenues that are large enough for us to achieve profitability. Even if we
do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become
and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain
our research and development efforts, diversify our pipeline or continue our operations. A decline in the value of our company could cause
our shareholders to lose all or part of their investment.
We cannot assure investors
that our existing cash and investment balances will be sufficient to meet our future capital requirements.
As of December 31, 2024, we held $19.6 million of cash, cash equivalents
and short-term bank deposits. In January 2025, we completed a registered direct offering of ADSs and warrants for net proceeds of $8.9
million. Based on our current projected cash requirements, we believe that our existing cash and investment balances, including the proceeds
from the January 2025 registered direct offering, along with other sources of liquidity, including royalties received from Ayrmid for
product sales of APHEXDA and milestone payments from our license agreements with Ayrmid and Gloria, will be sufficient to meet our capital
requirements through the second half of 2026. We have funded our operations primarily through public and private offerings of our securities,
payments received under our strategic licensing and collaboration arrangements and interest earned on investments. The adequacy of our
available funds to meet our operating and capital requirements will depend on many factors, including: milestone payments from our
license agreements with Ayrmid and Gloria, the number, breadth, progress and results of our research, product development and clinical
programs; the costs and timing of obtaining regulatory approvals for any of our therapeutic candidates; the terms and conditions of in-licensing
and out-licensing therapeutic candidates; and costs incurred in enforcing and defending our patent claims and other intellectual property
rights
While we expect to continue to explore alternative financing sources,
including the possibility of future securities offerings and government funding, we cannot be certain that in the future these liquidity
sources will be available when needed on commercially reasonable terms or at all, or that our actual cash requirements will not be greater
than anticipated. We expect to also continue to seek to finance our operations through other sources, including out-licensing arrangements
for the development and commercialization of our therapeutic candidates or other partnerships or joint ventures, as well as grants from
government agencies and foundations. If we are unable to obtain future financing through the methods we describe above or through other
means, we may be unable to complete our business objectives and may be unable to continue operations, which would have a material adverse
effect on our business and financial condition.
4
If we default under our
secured loan agreement with BlackRock, all or a portion of our assets could be subject to forfeiture.
In September 2022, we entered into a secured loan agreement, or
the Loan Agreement, with BlackRock, under which BlackRock agreed to provide the Company with access to term loans in an aggregate principal
amount of up to $40 million in three tranches as follows: (a) a loan in the aggregate principal amount of up to $10 million, (b) a loan
in the aggregate principal amount of up to $20 million, available for drawdown upon achievement of certain milestones and until April
1, 2024, and (c) a loan in the aggregate principal amount of up to $10 million, available for drawdown upon achievement of certain milestones
and until October 1, 2024. We drew down the initial tranche of $10 million following execution of the agreement in September 2022 and
we drew down the second tranche of $20 million in April 2024, following fulfilment of the requisite milestones. We did not draw down the
third tranche.
In November 2024, in connection with the Ayrmid License Agreement
(as defined below), we entered into an amendment, or the Amendment, to the Loan Agreement with BlackRock, pursuant to which, (i)
we agreed to make aggregate payments of $16.5 million, as partial repayment of the loan to BlackRock and in lieu of future revenue-based
payments, which were fully cancelled, (ii) effective December 1, 2024, we agreed to pay the remaining amounts outstanding under the loan
(in principal and interest) over a three year period ending December 1, 2027, and (iii) our minimum cash balance requirement under the
Loan Agreement was reduced to $4 million. In addition, pursuant to the Amendment, 10% of any future milestone payments received by us
from the out-licensing agreements through December 1, 2027 will be used to repay outstanding loan principal, and the repayments in (ii)
above will be adjusted accordingly. All other terms of the Loan Agreement remain the same.
Our ability to make the scheduled payments under the Loan Agreement
or to refinance our debt obligations with BlackRock depends on numerous factors including, but not limited to, the amount of our cash
reserves, our capital requirements and our ability to raise additional capital. We may be unable to maintain a level of cash reserves
sufficient to permit us to pay the principal and accrued interest on the loan. If our cash reserves, cash flows and capital resources
are insufficient to fund our debt obligations to BlackRock, we may be required to seek additional capital, restructure or refinance our
indebtedness, or delay or abandon our research and development projects or other capital expenditures, which could have a material adverse
effect on our business, financial condition, prospects or results of operations. There is no assurance that we would be able to take any
of such actions, or that such actions would permit us meet our scheduled debt obligations under the BlackRock loan agreement. If we default
on the Loan Agreement and are unable to cure the default pursuant to the terms of the Loan Agreement or are unable to repay or refinance
the loan when due, BlackRock could take possession of any or all assets in which it holds a security interest, and dispose those assets
to the extent necessary to pay off the debts, which would have a material adverse effect on our business, financial condition, prospects
or results of operations.
Management has concluded
that there is substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing
on reasonable terms or at all.
We have incurred significant losses and negative cash flows from
operations and have an accumulated deficit that raises substantial doubt about our ability to continue as a going concern. Our audited
consolidated financial statements for the year ended December 31, 2024 were prepared under the assumption that we would continue our operations
as a going concern. Our independent registered public accounting firm has included a “going concern” explanatory paragraph
in its report on our financial statements for the year ended December 31, 2024. If we are unable to improve our liquidity position, by,
among other things, raising capital through public or private offerings or reducing our expenses, we may exhaust our cash resources and
will be unable to continue our operations. If we cannot continue as a viable entity, our shareholders would likely lose most or all of
their investment in us.
Risks Related to Our Business and Regulatory Matters
We have earned limited commercialization
revenues to date. We may never achieve profitability.
We are a biopharmaceutical company pursuing life-changing therapies in oncology and
rare diseases. To date, we have generated only limited revenues from commercialization. We have FDA regulatory approval in the United
States for APHEXDA (motixafortide). In October 2023, we out-licensed to Gloria the rights to motixafortide for all indications in substantially
all of Asia, and in November 2024, we out-licensed to Ayrmid the global rights (other than in Asia) to motixafortide for all indications,
other than solid tumors. As a result of the November 2024 transaction, we shut down our independent commercialization activities in the
United States and refocused our operations on development activities in Israel in the fields of oncology and rare diseases, at a significantly
reduced annual cash burn rate.
Our ability to generate revenues from commercialization and achieve
profitability will be dependent on the ability of the licensees under the Gloria License Agreement (as defined below) and the Ayrmid License
Agreement to successfully commercialize the licensed products and the ability of any future partners or licenses to successfully commercialize
any other product candidates that we may develop, in-license or acquire in the future.
5
Our revenues from motixafortide or any product candidate for which
regulatory approval is obtained will be dependent, in part, upon the size of the markets in the territories for which we gain regulatory
approval, the accepted price for the product, the ability to get reimbursement at any price, and the terms and conditions of our commercialization
agreement with our partner for that territory. While we retain the right to potentially meaningful milestones or royalty payments under
the Gloria License Agreement and the Ayrmid License Agreement, it could take many years before such milestones are achieved, resulting
in such royalty payments being made, if at all.
The timing and amount of any milestone and royalty payments we
may receive from our licensees, as well as the commercial success of our products will depend on, among other things, the efforts, allocation
of resources, negotiation of pricing and reimbursement and successful commercialization of our products by our licensees. As a result,
even if we generate product revenues, we may not become profitable and may need to obtain additional funding to continue operations.
APHEXDA, or any other therapeutic
candidate that may receive approval to sell the product in the future, may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors and others in the medical community necessary for commercial success and the market opportunity for APHEXDA
or any other therapeutic candidate may be smaller than our estimates.
APHEXDA or any other therapeutic candidate that may be approved
in the future by the appropriate regulatory authorities for marketing and sale, may fail to gain sufficient market acceptance by physicians,
patients, third-party payors and others in the medical community. Physicians are often reluctant to switch their patients from existing
therapies even when new and potentially more effective or convenient treatments enter the market. APHEXDA competes with the standard of
care using stem cell mobilization and its generic versions.
Efforts to educate the medical community and third-party payors
on the benefits of APHEXDA over its competition have required significant resources and may not ultimately be successful. If APHEXDA,
or any other therapeutic candidate that may be approved in the future for marketing and sale in the future, does not achieve an adequate
level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance
of APHEXDA, or any other therapeutic candidate that may be approved in the future, will depend on a number of factors, including:
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the advantages of the treatment compared
to competitive therapies;
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the number of competitors approved for similar
uses;
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the relative promotional effort and marketing
success of us as compared with our competitors;
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how the product is positioned in physician
treatment guidelines and pathways;
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the prevalence and severity of any side
effects;
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the efficacy and safety of the product;
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our ability to offer the product for sale
at competitive reimbursement;
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the product’s tolerability, convenience
and ease of administration compared to alternative treatments;
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the willingness of the target patient population
to try, and of physicians to prescribe, the product;
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limitations or warnings, including use restrictions,
contained in the product’s approved labeling;
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the strength of sales, marketing and distribution
support;
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the timing of market introduction of our
approved products as well as competitive products;
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adverse publicity about the product or favorable
publicity about competitive products;
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potential product liability claims;
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changes in the standard of care for the
targeted indications of the product; and
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availability and amount of coverage and
reimbursement from government payors, managed care plans and other third-party payors.
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In addition, the potential market opportunities for APHEXDA and
any other therapeutic are difficult to estimate precisely. Our estimates of the potential market opportunities are predicated on many
assumptions, including industry knowledge and publications, third-party research reports and other surveys. While we believe that our
internal assumptions are reasonable, these assumptions involve the exercise of significant judgment on the part of our management, are
inherently uncertain and the reasonableness of these assumptions has not been assessed by an independent source. If any of the assumptions
prove to be inaccurate, the actual markets for our therapeutic candidate could be smaller than our estimates of the potential market opportunities.
Even if a therapeutic candidate
receives marketing approval, we or others may later discover that the product is less effective than previously believed or causes undesirable
side effects that were not previously identified, which could compromise our ability or that of any collaborators to market the product,
and could cause regulatory authorities to take certain regulatory actions.
It is possible that our clinical trials may indicate an apparent
positive effect of a therapeutic candidate that is greater than the actual positive effect, if any, or alternatively fail to identify
undesirable side effects. For example, despite the recent FDA marketing approval of APHEXDA in the United States, we, or others, including
our licensees, may discover that APHEXDA is less effective or tolerable than previously believed. If we, or others, discover that a product
is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following
adverse events could occur:
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regulatory authorities may withdraw their
approval of the product or seize the product;
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we, or any of our collaborators, may be
required to recall the product, change the way the product is administered or conduct additional clinical trials;
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additional restrictions may be imposed on
the marketing of, or the manufacturing processes for, the particular product;
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we, or any of our collaborators, may be
subject to fines, injunctions or the imposition of civil or criminal penalties;
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regulatory authorities may require the addition
of labeling or warning statements, such as a “black box” warning or a contraindication;
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we, or any of our collaborators, may be
required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to physicians,
health care professionals and patients;
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we could be sued and held liable for harm
caused to patients;
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physicians and patients may stop using our
product; and
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our reputation may suffer.
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Any of these events could harm our business and operations and
could negatively impact the market price of our ordinary shares and/or ADSs.
7
If we or our licensees are unable to obtain and/or maintain U.S. and/or foreign regulatory
approval for our therapeutic candidates in a timely manner or at all, we will be unable to commercialize our therapeutic candidates.
While we recently shut down our independent commercialization activities
in the United States and refocused our operations on development activities in Israel in the fields of oncology and rare diseases, we
continue to advance the development of motixafortide in solid tumors for all territories other than Asia. Motixafortide and any other
therapeutic candidate we develop will require additional, time-consuming and costly development efforts, by us or by our collaborators,
prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory
authorities. All therapeutic candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including
the possibility that the therapeutic candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities.
In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, successfully
commercialized or widely accepted in the marketplace, or will be more effective than other commercially available alternatives.
In the United States, we are required to submit a New Drug Application,
or NDA, to obtain FDA approval before marketing any of our current or future therapeutic candidates. An NDA must include extensive preclinical
and clinical data and supporting information to establish the therapeutic candidate’s safety, purity and potency, or efficacy, for
each desired indication. The NDA must also include information regarding the product’s pharmacology, toxicology, chemistry, manufacture
and manufacturing controls. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained.
Upon submission of an NDA, the FDA must make an initial determination that the application is sufficiently complete to accept the submission
for filing. We cannot be certain that any submissions will be accepted for filing and review by the FDA, or ultimately be approved. The
FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will approve or reconsider
any application we make. If the FDA requires additional studies or data, we will incur increased costs and delays in the marketing approval
process, which may require us to expend more resources than we have available. In addition, the FDA may not consider any additional information
to be complete or sufficient to support approval.
Any delay in obtaining, or the failure to obtain, required regulatory
approvals will materially and adversely affect our ability to generate future revenues from a particular therapeutic candidate. Any regulatory
approval to market a product may be subject to limitations on the indicated uses for which we may market the product or may impose restrictive
conditions of use, including cautionary information, thereby limiting the size of the market for the product. We and our collaborators,
as applicable, also are, and will be, subject to numerous foreign regulatory requirements that govern the conduct of clinical trials,
manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all
the risks associated with the FDA approval process that we describe above, as well as risks attributable to the satisfaction of foreign
requirements. Approval by the FDA does not ensure approval by regulatory authorities outside the United States. Foreign jurisdictions
may have different approval processes than those required by the FDA and may impose additional testing requirements for our therapeutic
candidates.
We and our licensees may
not obtain additional marketing approvals for motixafortide or initial approval for any other therapeutic candidates we may develop in
the future.
We and our licensees may not obtain additional marketing approvals
for motixafortide or any other therapeutic candidate that we may develop in the future. It is possible that the FDA or comparable foreign
regulatory agencies may refuse to accept for substantive review any future application that we or a licensee may submit to market and
sell our therapeutic candidates, or that any such agency may conclude after review of our or our licensee’s data that such application
is insufficient to obtain marketing approval of our therapeutic candidate.
If the FDA or other comparable foreign regulatory agency does not
accept or approve any future application to market and sell any therapeutic candidate, such regulators may require that we conduct additional
clinical trials, preclinical studies or manufacturing validation studies and submit that data before they will reconsider our application.
Depending on the extent of these or any other required trials or studies, approval of any application that we submit may be delayed by
several years, or may require us or our licensee to expend more resources than we or they have available. It is also possible that additional
trials or studies, if performed and completed, may not be considered sufficient by the FDA or other foreign regulatory agency to approve
our applications for marketing and commercialization.
Any delay in obtaining, or an inability to obtain, marketing approvals
would prevent us or our licensees from commercializing motixafortide in other jurisdictions and indications or any other therapeutic candidate
that we may develop in the future and generating revenues. If any of these outcomes occur, we would not be eligible for certain milestone
and royalty revenue under our license agreements, our licensees could terminate our license agreements and we may be forced to abandon
our development efforts, any of which could significantly harm our business.
8
Clinical trials involve
a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial
results.
Clinical trials are expensive and complex, can take many years
and have uncertain outcomes. We cannot necessarily predict whether we or any licensee will encounter problems with any of the completed,
ongoing or planned clinical trials that will cause us, any licensee or regulatory authorities to delay or suspend clinical trials, or
to delay the analysis of data from completed or ongoing clinical trials. In addition, because some of our clinical trials are investigator-initiated
studies (i.e., we are not the study sponsor), we may have less control over these studies. We estimate that certain of our clinical trials
will continue for several years, but they may take significantly longer to complete. Failure can occur at any stage of the testing, and
we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent commercialization
of our current or future therapeutic candidates, including, but not limited to:
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delays in securing clinical investigators
or trial sites for the clinical trials;
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delays in obtaining institutional review
board and other regulatory approvals to commence a clinical trial;
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slower-than-anticipated patient recruitment
and enrollment;
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negative or inconclusive results from clinical
trials;
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unforeseen safety issues;
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uncertain dosing issues;
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an inability to monitor patients adequately
during or after treatment; and
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problems with investigator or patient compliance
with the trial protocols.
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A number of companies in the pharmaceutical and biotechnology industries,
including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after
seeing promising results in earlier clinical trials. Despite the results reported in earlier clinical trials for our therapeutic candidates,
we do not know whether any Phase 3 or other clinical trials we or our licensees may conduct will demonstrate adequate efficacy and safety
to result in regulatory approval to market any therapeutic candidate. For example, we previously investigated the treatment of motixafortide
for acute myeloid leukemia, AML, and following an interim analysis of a Phase 2b trial in which the investigational arm of motixafortide
combined with cytarabine did not demonstrate a statistically significant effect in the study’s primary endpoint, we terminated the
study. Nevertheless, we continue to believe in the relevance of CXCR4 as a viable target in other AML treatment lines, such as rr/AML
and induction treatment. If later-stage clinical trials of any therapeutic candidate do not produce favorable results, our ability
to obtain regulatory approval for the therapeutic candidate may be adversely impacted, which will have a material adverse effect on our
business, financial condition and results of operations.
Even if we obtain regulatory
approvals, motixafortide and any other therapeutic candidate that we may develop in the future will be subject to ongoing regulatory review
and if we fail to comply with continuing U.S. and applicable foreign regulations, we could lose those approvals and our business would
be seriously harmed.
Even if therapeutics we or any licensee develops receive regulatory
approval, we or any licensee, as applicable, will be subject to ongoing reporting obligations, and any approved products and the manufacturing
operations for such products will be subject to continuing regulatory review, including FDA inspections. The outcome of this ongoing review
may result in the withdrawal of a product from the market, the interruption of the manufacturing operations and/or the imposition of labeling
and/or marketing limitations. Since many more patients are exposed to a drug product following its marketing approval, serious but infrequent
adverse reactions that were not observed in clinical trials may be observed during the commercial marketing of the product. In addition,
the manufacturer and the manufacturing facilities we or our licensees, as applicable, will use to produce any therapeutic candidate will
be subject to periodic review and inspection by the FDA and other similar foreign regulators. Later discovery of previously unknown problems
with any product, manufacturer or manufacturing process, or failure to comply with regulatory requirements, may result in actions such
as:
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restrictions on such product, manufacturer
or manufacturing process;
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warning letters from the FDA or other regulatory
authorities;
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withdrawal of the product from the market;
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suspension or withdrawal of regulatory approvals;
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refusal to approve pending applications
or supplements to approved applications that we or our licensees submit;
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voluntary or mandatory recall;
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fines;
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refusal to permit the import or export of
our products;
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product seizure or detentions;
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injunctions or the imposition of civil or
criminal penalties; or
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adverse publicity.
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If we, or any licensee, supplier, third-party contractor, partner
or clinical investigator is slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new
regulatory requirements or policies, we or any licensee may lose marketing approval for any of our products, if any of our therapeutic
products are approved, resulting in decreased or lost revenue from milestones, product sales or royalties.
We generally rely on third
parties to conduct our preclinical studies and clinical trials and to provide other services, and those third parties may not perform
satisfactorily, including by failing to meet established deadlines for the completion of such services.
We do not have the ability to conduct certain preclinical studies
and clinical trials independently for motixafortide, and we rely on third parties, such as contract laboratories, contract research organizations,
medical institutions, clinical investigators and other collaborators to conduct these studies and clinical trials. Our reliance on these
third parties limits our control over these activities. The collaborators may not assign as great a priority to our clinical development
programs or pursue them as diligently as we would if we were undertaking such programs directly. Accordingly, these collaborators may
not complete activities on schedule, or may not conduct the studies or our clinical trials in accordance with regulatory requirements
or with our trial design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, or
if their performance is substandard, we may be required to replace them or add more sites to the studies. Although we believe that there
are a number of other third-parties that we could engage to continue these activities, replacement of these third parties will result
in delays and/or additional costs. As a result, our efforts to obtain regulatory approvals for, and to commercialize, motixafortide and
any other therapeutic candidate that we may develop in the future may be delayed. The collaborators may also have relationships with other
commercial entities, some of whom may compete with us. If the collaborators assist our competitors, our competitive position may be harmed.
In addition, our ability to bring future products to market depends
on the quality and integrity of data that we present to regulatory authorities in order to obtain marketing authorizations. Although we
attempt to audit and control the quality of third-party data, we cannot guarantee the authenticity or accuracy of such data, nor can we
be certain that such data has not been fraudulently generated. The failure of these third parties to carry out their obligations would
materially adversely affect our ability to develop and market new products and implement our strategies.
We recently entered into
out-licensing arrangements with Gloria and Ayrmid and may in the future rely on additional out-licensing arrangements for late-stage development,
marketing or commercialization.
We recently entered into out-licensing arrangements with Gloria
and Ayrmid and may in the future rely on additional
out-licensing arrangements
for late-stage development, marketing or commercialization. Dependence on out-licensing arrangements subjects us to a number of risks,
including the risk that:
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we have limited control over the amount
and timing of resources that a licensee devotes to our therapeutic candidate;
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a licensee may experience financial difficulties;
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a licensee may fail to secure adequate commercial
supplies of our therapeutic candidate upon marketing approval, if at all;
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our future revenues depend heavily on the
efforts of a licensee;
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business combinations or significant changes
in a licensee’s business strategy may adversely affect the licensee’s willingness or ability to complete its obligations under
any arrangement with us;
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a licensee could move forward with a competing
therapeutic candidate developed either independently or in collaboration with others, including our competitors; and
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out-licensing arrangements are often terminated
or allowed to expire, which would delay the development and may increase the development costs of our therapeutic candidates.
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Under the Gloria License Agreement, Gloria is late in the payment
of $2.4 million to us for the achievement of a specific milestone under the Gloria License Agreement and for certain product supply that
was due during 2024. In addition, the planned studies of motixafortide in China under the Gloria License Agreement are currently not advancing
according to schedule and it is unclear when such studies will be initiated, if at all. There can be no assurance that Gloria will meet
its payment obligations or any other obligations under the Gloria License Agreement.
If we or any licensee breaches or terminates its agreement with
us, or if any licensee otherwise fails to conduct its development and commercialization activities in a timely manner or there is a dispute
about their obligations, we may need to seek other licensees, or we may have to develop our own internal sales and marketing capability.
Our dependence on a licensee’s experience and the rights
of a licensee will limit our flexibility in considering alternative out-licensing arrangements for any therapeutic candidate. Any failure
to successfully develop these arrangements or failure by a licensee to successfully develop or commercialize any therapeutic candidate
in a competitive and timely manner will have a material adverse effect on the commercialization of any therapeutic candidate.
We depend on our ability
to identify and in-license technologies and therapeutic candidates.
We employ a number of methods to identify therapeutic candidates
that we believe are likely to achieve commercial success. In certain instances, disease-specific third-party advisors evaluate therapeutic
candidates as we deem necessary. However, there can be no assurance that our internal research efforts or our screening system will accurately
or consistently select among various therapeutic candidates those that have the highest likelihood to achieve, and that ultimately achieve,
commercial success. As a result, we may spend substantial resources developing therapeutic candidates that will not achieve commercial
success, and we may not advance those therapeutic candidates with the greatest potential for commercial success. For example, we
recently determined to terminate development of AGI-134 and provided notice of our intent to terminate the Agalimmune Development Agreement
(as defined below) effective March 15, 2024 and intend to either transfer ownership of our subsidiary Agalimmune Ltd., or Agalimmune,
to a third party, or to liquidate it during 2025.
An important element of our strategy is maintaining relationships
with universities, medical institutions and biotechnology companies in order to in-license potential therapeutic candidates. We may not
be able to maintain relationships with these entities, and they may elect not to enter into in-licensing agreements with us or to terminate
existing agreements. The existence of global companies with significantly greater resources than we have may increase the competition
with respect to the in-licensing of promising therapeutic candidates. We may not be able to acquire licenses on commercially reasonable
terms or at all. Failure to license or otherwise acquire necessary technologies could materially and adversely affect our business, financial
condition and results of operations.
11
If we cannot meet requirements
under our in-license agreements, we could lose the rights to any of our therapeutic candidates, which could have a material adverse effect
on our business.
We depend on in-licensing agreements with third parties to maintain
the intellectual property rights to our therapeutic candidates. We have in-licensed rights from Biokine Therapeutics Ltd., or Biokine,
with respect to our motixafortide therapeutic candidate; and from Innovative Pharmaceutical Concepts, Inc., or IPC, with respect to our
BL-5010 therapeutic candidate. See “Item 4.B. Information on the Company — Business Overview — In-Licensing Agreements.”
Our in-license agreements require us to make payments and satisfy performance obligations in order to maintain our rights under these
agreements. These in-license agreements last either throughout the life of the patents that are the subject of the agreements, or with
respect to other licensed technology, for a number of years after the first commercial sale of the relevant product. In addition, we are
responsible for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us.
On June 16, 2024, Biokine filed a complaint with the District Court of Jerusalem against us. The complaint alleges breach of contract
and a purported failure to make certain payments to Biokine under our in-licensing agreement with Biokine for motixafortide. The lawsuit
seeks compensatory damages in the amount of approximately $6.5 million and a declaratory judgment in favor of Biokine. On November
20, 2024, we and Biokine entered into an agreement to refer the dispute to arbitration. See “Item 8. Financial Information —
Biokine Claim.” If we do not meet our obligations under our in-license agreements in a timely manner, we could lose the rights
to our proprietary technology, which could have a material adverse effect on our business, financial condition and results of operations.
We have partnered with and
may seek to partner with third-party collaborators with respect to the development and commercialization of motixafortide and for any
other therapeutic candidate and we may not succeed in establishing and maintaining collaborative relationships, which may significantly
limit our ability to develop and commercialize our therapeutic candidates successfully, if at all.
We collaborate with third parties with respect to the development
of motixafortide for certain indications and may in the future seek a partner for other indications or other therapeutic candidates. In
October 2023, we out-licensed the rights to motixafortide for all indications in substantially all of Asia to Gloria, and in November
2024, we out-licensed the global rights (other than in Asia) to motixafortide for all indications, other than solid tumors, to Ayrmid.
See “Item 4.B. Information on the Company—Business Overview—Recent Developments”. We may compete with many other
companies if we seek additional partners for motixafortide and for any other therapeutic candidate and we may not be able to compete successfully
against those companies. If we are not able to enter into additional collaboration arrangements for motixafortide and for any other therapeutic
candidate, we would be required to undertake and fund further development, clinical trials, manufacturing and commercialization activities
solely at our own expense and risk, as is the case with motixafortide in stem cell mobilization for autologous bone marrow transplantation
in multiple myeloma patients in the U.S. If we are unable to finance and/or successfully execute those expensive activities, or we delay
such activities due to capital availability, our business could be materially and adversely affected, and potential future product launch
could be materially delayed, be less successful, or we may be forced to discontinue clinical development of these therapeutic candidates.
Furthermore, if we are unable to enter into a commercial agreement for the development and commercialization of motixafortide and for
any other therapeutic candidate, then this could have a material adverse effect on our business, financial condition or results of operations.
The process of establishing and maintaining collaborative relationships
is difficult, time-consuming and involves significant uncertainty, including:
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a collaboration partner may shift its priorities
and resources away from our therapeutic candidates due to a change in business strategies, or a merger, acquisition, sale or downsizing;
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a collaboration partner may seek to renegotiate
or terminate their relationships with us due to unsatisfactory clinical results, manufacturing issues, a change in business strategy,
a change of control or other reasons;
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a collaboration partner may cease development
in therapeutic areas which are the subject of our strategic collaboration;
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a collaboration partner may not devote sufficient
capital or resources towards our therapeutic candidates;
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a collaboration partner may change the success
criteria for a therapeutic candidate, thereby delaying or ceasing development of such candidate;
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a significant delay in initiation of certain
development activities by a collaboration partner will also delay payment of milestones tied to such activities, thereby impacting our
ability to fund our own activities;
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a collaboration partner could develop a
product that competes, either directly or indirectly, with our therapeutic candidate;
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a collaboration partner with commercialization
obligations may not commit sufficient financial or human resources to the marketing, distribution or sale of a product;
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a collaboration partner with manufacturing
responsibilities may encounter regulatory, resource or quality issues and be unable to meet demand requirements;
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a partner may exercise a contractual right
to terminate a strategic alliance;
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a dispute may arise between us and a partner
concerning the research, development or commercialization of a therapeutic candidate resulting in a delay in milestones, royalty payments
or termination of an alliance and possibly resulting in costly litigation or arbitration which may divert management attention and resources;
and
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a partner may use our products or technology
in such a way as to invite litigation from a third party.
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Under the Gloria License Agreement, Gloria is late in the payment of $2.4 million to
us for the achievement of a specific milestone under the Gloria License Agreement and for certain product supply, which was due during
2024. In addition, the planned studies of motixafortide in China under the Gloria License Agreement are currently not advancing according
to schedule and it is unclear when such studies will be initiated, if at all. There can be no assurance that Gloria will meet its payment
obligations or any other obligations under the Gloria License Agreement.
Any collaborative partners may in the future shift their priorities
and resources away from our therapeutic candidates or seek to renegotiate or terminate their relationships with us. If any collaborator
fails to fulfill its responsibilities in a timely manner, or at all, our research, clinical development, manufacturing or commercialization
efforts related to that collaboration could be delayed or terminated, or it may be necessary for us to assume responsibility for expenses
or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish and maintain collaborative
relationships on acceptable terms or to successfully transition terminated collaborative agreements, we may have to delay or discontinue
further development of one or more of our therapeutic candidates, undertake development and commercialization activities at our own expense
or find alternative sources of capital.
If competitors develop and
market products that are more effective, safer or less expensive than our current or future therapeutic candidates, our prospects will
be negatively impacted.
The life sciences industry is highly competitive, and we and our
licensees face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching and
marketing products designed to address the indications for which we are currently developing motixafortide or for which we may develop
therapeutic candidates in the future. Specifically, we are aware of other companies that currently market and/or are in the process of
developing products that address stem cell mobilization, solid malignancies and skin lesions. In particular, during 2023, the last to
expire patent for Mozobil and uses thereof, the standard of care for stem cell mobilization expired and as a consequence there are several
generic versions on the market. Successful commercialization of APHEXDA will in part require that our licensees are able to overcome competition
from Mozobil and its generic versions.
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Any therapeutic candidates that we successfully develop and commercialize
will compete with existing therapies and new therapies that may become available in the future. The key competitive factors affecting
the success of each therapeutic candidate, if approved, is likely to be their safety, efficacy, convenience, price, the level of proprietary
and generic competition, and the availability of coverage and reimbursement from government and other third‑party payors. APHEXDA
sales will suffer, or the commercial opportunity may be reduced or eliminated if competitors develop and commercialize products that are
safer or more effective, have fewer or less severe side effects, or are more convenient or less expensive than any products that we may
develop. Competitors may also obtain FDA or other regulatory approval for their therapeutic candidates more rapidly than we or our licensees
may be able to do so for any existing or new therapeutic candidates of ours, which could result in their establishing a strong market
position before we are able to enter the market.
Mergers and acquisitions in the biotechnology and pharmaceutical
industries may result in even more resources being concentrated in favor of our competitors. Additionally, many competitors have greater
experience in product discovery and development, obtaining FDA and other regulatory approvals and commercialization capabilities, which
may provide them with a competitive advantage. If we or our licensees are not able to compete effectively, our business will not grow
and our financial condition and operations will suffer.
An important element of our strategy for identifying future products
is maintaining relationships with universities, medical institutions and biotechnology companies in order to in-license potential therapeutic
candidates, and we compete with respect to this in-licensing with a number of global pharmaceutical companies. The presence of these global
companies with significantly greater resources than we have may increase the competition with respect to the in-licensing of promising
therapeutic candidates. Our failure to license or otherwise acquire necessary technologies could materially and adversely affect our business,
financial condition and results of operations.
APHEXDA, or any other therapeutic
candidate that we or our licensees are able to commercialize, may become subject to unfavorable pricing regulations, third-party payor
reimbursement practices or healthcare reform initiatives, any of which could harm our business.
The commercial success of APHEXDA and any other therapeutic candidate
will depend substantially, both domestically and abroad, on the extent to which product costs will be paid by third-party payors, including
government health care programs and private health insurers. There is significant uncertainty related to third-party payor coverage and
reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to
country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review
period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains
subject to continuing governmental control even after initial approval is granted. As a result, we or our licensees might obtain marketing
approval for a product in a particular country but then be subject to price regulations that delay commercial launch of the product, possibly
for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the product in that country.
Adverse pricing limitations may hinder our ability to recoup our or their investment in one or more therapeutic candidates, even if our
therapeutic candidates obtain marketing approval.
Patients who are provided with medical treatment for their conditions
generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and
the ability of any licensees to successfully commercialize any of our therapeutic candidates will depend in part on the extent to which
coverage and adequate reimbursement for these products and related treatments will be available from third-party payors. Third-party payors
decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment,
both in the United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular medications, which could affect our ability to sell APHEXDA profitably. These
payors may not view APHEXDA as cost-effective, and coverage and reimbursement may not be available to customers or may not be sufficient
to allow our products to be marketed on a competitive basis. Cost-control initiatives could cause us or our licensees to decrease the
price we might establish, which could result in lower than anticipated product revenues. If the prices for our products, if any, decrease
or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability
will suffer.
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There may also be delays in obtaining coverage and reimbursement
for newly approved drugs, such as APHEXDA, and coverage may be more limited for APHEXDA than for other drug products with similar indications
approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any therapeutic
will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution.
Reimbursement rates may vary, for example, according to the use of the product and the clinical setting in which it is used. Reimbursement
rates may also be based on reimbursement levels already set for lower cost treatments or may be incorporated into existing payments for
other services.
In addition, increasingly, third-party payors are requiring higher
levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. We cannot be sure
that coverage will be available for any therapeutic candidate that we, or third parties, commercialize and, if available, that the reimbursement
rates will be adequate. Further, the net reimbursement for products may be subject to additional reductions if there are changes to laws
that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. An inability
to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any therapeutic candidate for
which we obtain regulatory approval could significantly harm our operating results and our overall financial condition.
We rely upon third-party
manufacturers to produce therapeutic supplies of motixafortide. If we manufacture any therapeutic candidates in the future, we will be
required to incur significant costs and devote significant efforts to establish and maintain manufacturing capabilities.
We do not currently have laboratories that are compliant with cGMP
and therefore cannot independently manufacture drug products for our current clinical trials or commercialization. We rely on third-party
manufacturers to produce the therapeutic supplies that enable us to perform clinical trials and supply commercial scale product. We have
limited personnel with experience in drug product manufacturing and we lack the resources and capabilities to manufacture any of our therapeutic
candidates on a commercial scale. The manufacture of pharmaceutical products requires significant expertise and capital investment, including
the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties
in production, particularly in scaling up initial production. These problems include difficulties with production costs and yields and
quality control, including stability of the therapeutic candidate.
We do not currently have any long-term agreements with third-party
manufacturers that guarantee the supply of therapeutic supplies and we rely on single source suppliers. When we require additional supplies
to complete our clinical trials or for commercialization, we may be unable to enter into agreements for clinical or commercial supply,
as applicable, with third-party manufacturers, or may be unable to do so on acceptable terms.
Reliance on third-party manufacturers entails risks to which we
would not be subject if we manufactured therapeutic candidates ourselves, including:
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reliance on the third party for regulatory
compliance and quality assurance;
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limitations on supply availability resulting
from capacity and scheduling constraints of the third parties;
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impact on our reputation in the marketplace
if manufacturers of our products, once commercialized, fail to meet customer demands;
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the possible breach of the manufacturing
agreement by the third party because of factors beyond our control; and
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the possible termination or nonrenewal of
the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us.
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The failure of any of our contract manufacturers to maintain high
manufacturing standards could result in injury or death of clinical trial participants or patients being treated with our products. Such
failure could also result in product liability claims, product recalls, product seizures or withdrawals, delays or failures in testing
or delivery, cost overruns or other problems, which would have a material adverse effect on our business, financial condition and results
of operations.
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Our contract manufacturers
are, and will be, subject to FDA and other comparable agency regulations.
Our contract manufacturers are, and will be, required to adhere
to FDA regulations setting forth current good manufacturing practices, or cGMP, for drugs. These regulations cover all aspects of the
manufacturing, testing, quality control and recordkeeping relating to our therapeutic candidates. Our manufacturers may not be able to
comply with applicable regulations. Our manufacturers are and will be subject to unannounced inspections by the FDA, state regulators
and similar regulators outside the United States. The failure of our third-party manufacturers to comply with applicable regulations could
result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant
marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls
of our candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect
regulatory approval and supplies of our therapeutic candidates, and materially and adversely affect our business, financial condition
and results of operations.
Our business could suffer
if we are unable to attract and retain key employees.
Our success depends upon the continued service and performance
of our senior management and other key personnel. The loss of the services of these personnel could delay or prevent the successful completion
of our planned clinical trials or the commercialization of our therapeutic candidates or otherwise affect our ability to manage our company
effectively and to carry out our business plan. We do not maintain key-man life insurance. Although we have entered into employment agreements
with all of the members of our senior management team, members of our senior management team may resign at any time subject to prior notice
as applicable. High demand exists for senior management and other key personnel in the pharmaceutical industry. There can be no assurance
that we will be able to continue to retain and attract such personnel.
Our growth and success also depend on our ability to attract and
retain highly qualified scientific, technical, sales, managerial and finance personnel. We experience intense competition for qualified
personnel, and the existence of non-competition agreements between prospective employees and their former employers may prevent us from
hiring those individuals or subject us to suit from their former employers. While we attempt to provide competitive compensation packages
to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making
it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified technical employees
on acceptable terms, we may not be able to develop competitive products. Further, any failure to effectively integrate new personnel could
prevent us from successfully growing our company.
Scrutiny of sustainability
and environmental, social, and governance, or ESG, initiatives could increase our costs or otherwise adversely impact our business.
Public companies have recently faced scrutiny related to ESG practices
and disclosures from certain investors, capital providers, shareholder advocacy groups, other market participants and other stakeholder
groups. Such scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business,
financial condition or results of operations. If our ESG practices and reporting do not meet investor or other stakeholder expectations,
we may be subject to investor or regulator engagement regarding such matters. Our failure to comply with any applicable ESG rules or regulations
could lead to penalties and adversely impact our reputation, access to capital and employee retention. Such ESG matters may
also impact our third-party contract manufacturers and other third parties on which we rely, which may augment or cause additional impacts
on our business, financial condition, or results of operations.
Risks Related to Our Industry
Healthcare reforms and related
reductions in pharmaceutical pricing, reimbursement and coverage by governmental authorities and third-party payors may adversely affect
our business.
The continuing increase in expenditures for healthcare has been
the subject of considerable government attention, particularly as public resources have been stretched by financial and economic crises
in the United States, Western Europe and elsewhere. Both private health insurance funds and government health authorities continue to
seek ways to reduce or contain healthcare costs, including by reducing or eliminating coverage for certain products and lowering reimbursement
levels. In many countries and regions, including the United States, Western Europe, Israel, Russia, certain countries in Central and Eastern
Europe and several countries in Latin America, pharmaceutical prices are subject to new government policies designed to reduce healthcare
costs. These changes frequently adversely affect pricing and profitability and may cause delays in market entry. We cannot predict which
additional measures may be adopted or the impact of current and additional measures on the marketing, pricing and demand for our approved
products, if any of our therapeutic products are approved.
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Significant developments that may adversely affect pricing in the
United States include (i) the enactment of federal healthcare reform laws and regulations, including the Medicare Prescription Drug Improvement
and Modernization Act of 2003 and the ACA, and (ii) trends in the practices of managed care groups and institutional and governmental
purchasers, including the impact of consolidation of our customers. In 2022, the IRA, established the Medicare Drug Price Negotiation
Program which permits the government to negotiate “maximum fair” drug prices for certain high expenditure, single source drugs
and biologics. It is estimated that over the next seven years, 60 drugs covered under Medicare B and D will have negotiated a “maximum
fair price.”
Changes to the healthcare system enacted as part of healthcare
reform in the United States, as well as the increased purchasing power of entities that negotiate on behalf of Medicare, Medicaid, and
private sector beneficiaries, may result in increased pricing pressure by influencing, for instance, the reimbursement policies of third-party
payors. Healthcare reform legislation has increased the number of patients who would have insurance coverage for our approved products,
if any of our therapeutic products are approved, but provisions such as the assessment of a branded pharmaceutical manufacturer fee and
an increase in the amount of the rebates that manufacturers pay for coverage of their drugs by Medicaid programs may have an adverse effect
on us. It is uncertain how current and future reforms in these areas will influence the future of our business operations and financial
condition, as federal, state and foreign governmental authorities are likely to continue efforts to control the price of drugs and reduce
overall healthcare costs. These efforts could have an adverse impact on our ability to market products and generate revenues in the United
States and foreign countries.
If third-party payors do
not adequately reimburse customers for any of our therapeutic candidates that are approved for marketing, they might not be purchased
or used, and our revenues and profits will not develop or increase.
Our revenues and profits will depend heavily upon the availability
of adequate reimbursement for the use of our approved candidates, if any, from governmental or other third-party payors, both in the United
States and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s
determination that the use of an approved product is:
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a covered benefit under its health plan;
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safe, effective and medically necessary;
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appropriate for the specific patient;
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cost-effective; and
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neither experimental nor investigational.
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Obtaining reimbursement approval for a product from each government
or other third-party payor is a time-consuming and costly process that could require us or our licensees to provide supporting scientific,
clinical and cost-effectiveness data for the use of our products to each payor. Even when a payor determines that a product is eligible
for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or comparable
foreign regulatory authorities. Reimbursement rates may vary according to the use of the product and the clinical setting in which it
is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments
for other products or services, and may reflect budgetary constraints and/or imperfections in Medicare, Medicaid or other data used to
calculate these rates.
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Regardless of the impact of the ACA on us, the U.S. government,
other governments and commercial payors have shown significant interest in pursuing healthcare reform and reducing healthcare costs. Any
government-adopted reform measures could cause significant pressure on the pricing of healthcare products and services, including those
biopharmaceuticals currently being developed by us or our licensees, in the United States and internationally, as well as the amount of
reimbursement available from governmental agencies or other third-party payors. The continuing efforts of the U.S. and foreign governments,
insurance companies, managed care organizations and other payors to contain or reduce healthcare costs may compromise our ability to set
prices at commercially attractive levels for our products that we may develop, which in turn could adversely impact how much or under
what circumstances healthcare providers will prescribe or administer our products, if approved. Changes in healthcare policy, such as
the creation of broad limits for diagnostic products, could substantially diminish the sale of or inhibit the utilization of diagnostic
tests, increase costs, divert management’s attention and adversely affect our ability to generate revenues and achieve consistent
profitability. This could materially and adversely impact our business by reducing our ability to generate revenue, raise capital, obtain
additional collaborators and market our products, if approved.
Further, the Centers for Medicare and Medicaid Services, or CMS,
frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. The
IRA will modify 60 drugs and biologics through negotiation of a fair maximum pricing for CMS. Third-party payors often follow Medicare
coverage policy and payment limitations in setting their own reimbursement rates, and both CMS and other third-party payors may have sufficient
market power to demand significant price reductions.
Our business has a substantial
risk of clinical trial and product liability claims. If we are unable to obtain and maintain appropriate levels of insurance, a claim
could adversely affect our business.
Our business exposes us to significant potential clinical trial
and product liability risks that are inherent in the development, manufacturing and sales and marketing of human therapeutic products.
Claims could be made against us based on the use of our therapeutic candidates in clinical trials and in marketed products. In addition,
we have a cyber insurance policy with a coverage amount of $5.0 million per each claim and in the aggregate However, our insurance may
not provide adequate coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly
expensive. As a result, we may be unable to maintain current amounts of insurance coverage or to obtain additional or sufficient insurance
at a reasonable cost to protect against losses that could have a material adverse effect on us. If a claim is brought against us, we might
be required to pay legal and other expenses to defend the claim, as well as damage awards beyond the coverage of our insurance policies
resulting from a claim brought successfully against us. Furthermore, whether or not we are ultimately successful in defending any claims,
we might be required to direct significant financial and managerial resources to such defense, and adverse publicity is likely to result.
Significant disruptions
of our information technology systems or breaches of our data security could adversely affect our business.
A significant invasion, interruption, destruction or breakdown
of our information technology systems and/or infrastructure by persons with authorized or unauthorized access could negatively impact
our business and operations. We could experience business interruption, information theft and/or reputational damage from cyber-attacks
or cyber-intrusions over the Internet, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electrical
failures, and attachments to emails. Any of the foregoing may compromise our systems and lead to data leakage either internally or at
our third-party providers. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including
by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of
attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations,
it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed
or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to
recover or reproduce the data. Our systems have been, and are expected to continue to be, the target of malware and other cyber-attacks.
Although we have invested in measures to reduce these risks, we cannot assure you that these measures will be successful in preventing
compromise and/or disruption of our information technology systems and related data.
We deal with hazardous materials
and must comply with environmental, health and safety laws and regulations, which can be expensive and restrict how we do business.
Our activities and those of our third-party manufacturers on our
behalf involve the controlled storage, use and disposal of hazardous materials, including microbial agents, corrosive, explosive and flammable
chemicals, as well as cytotoxic, biologic, radio-labeled and other hazardous compounds. We and our manufacturers are subject to U.S. federal,
state, local, Israeli and other foreign laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous
materials. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed
by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials. In addition, if
we develop a manufacturing capacity, we may incur substantial costs to comply with environmental regulations and would be subject to the
risk of accidental contamination or injury from the use of hazardous materials in our manufacturing process.
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In the event of an accident, government authorities may curtail
our use of these materials and interrupt our business operations. In addition, we could be liable for any civil damages that result, which
may exceed our financial resources and may seriously harm our business. Although our Israeli insurance program covers certain unforeseen
sudden pollutions, we do not maintain a separate insurance policy for any of the foregoing types of risks. In addition, although the general
liability section of our life sciences policy covers certain unforeseen, sudden environmental issues, pollution in the United States and
Canada is excluded from the policy. In the event of environmental discharge or contamination or an accident, we may be held liable for
any resulting damages, and any liability could exceed our resources. In addition, we may be subject to liability and may be required to
comply with new or existing environmental laws regulating pharmaceuticals or other medical products in the environment.
We are currently party to,
and may in the future, become subject to litigation or claims arising in or outside the ordinary course of business that could negatively
affect our business operations and financial condition.
We are currently party to, and may in the future, become subject
to litigation or claims arising in or outside the ordinary course of business (other than intellectual property infringement actions)
that could negatively affect our business operations and financial condition, including securities class actions which are typically expensive
to defend. Such claims and litigation proceedings may be brought by third parties, including our competitors, advisors, service providers,
partners or collaborators, employees, and governmental or regulatory bodies. For information on legal proceedings, please see “Item
8. Financial Information – A. Financial Statements and Other Financial Information – Legal Proceedings.” Any claims
and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention
and resources, and lead to attempts on the part of other parties to pursue similar claims. We may not be able to determine the amount
of any potential losses and other costs we may incur due to the inherent uncertainties of litigation and settlement negotiations. In the
event we are required or decide to pay amounts in connection with any claims or lawsuits, such amounts could be significant and could
have a material adverse impact on our liquidity, business, financial condition and results of operations. In addition, depending on the
nature and timing of any such dispute, a resolution of a legal matter could materially affect our future operating results, our cash flows
or both. Additionally, we may be unable to maintain our existing directors’ and officers’ liability insurance in the future
at satisfactory rates or adequate coverage amounts and may incur significant increases in insurance costs.
Risks Related to Intellectual Property
Our access to most of the
intellectual property associated with our therapeutic candidates results from in-license agreements with biotechnology companies, the
termination of which would prevent us from commercializing the associated therapeutic candidates.
We do not conduct our own initial research with respect to the
identification of our therapeutic candidates. Instead, we rely upon research and development work conducted by third parties as the primary
source of our therapeutic candidates. As such, we have obtained our rights to our therapeutic candidates through in-license agreements
entered into with biotechnology companies that invent and own or jointly own with us the intellectual property underlying our candidates.
There is no assurance that such in-licenses or rights will not be terminated or expire due to a material breach of the agreements, such
as a failure on our part to achieve certain progress milestones set forth in the terms of the in-licenses or due to the loss of the rights
to the underlying intellectual property by any of our licensors. There is no assurance that we will be able to renew or renegotiate an
in-licensing agreement on acceptable terms if and when the agreement terminates. We cannot guarantee that any in-license is enforceable
or will not be terminated or converted into a non-exclusive license in the future. The termination of any in-license or our inability
to enforce our rights under any in-license would materially and adversely affect our ability to commercialize certain of our therapeutic
candidates.
We currently have in-licensing agreements relating to our therapeutic
candidates that are in development or are being commercialized. In 2012, we in-licensed the rights to motixafortide under a license agreement
from Biokine. Under the license agreement for motixafortide, we are obligated to make commercially reasonable, good faith efforts to sublicense
or commercialize motixafortide for fair consideration. In 2007, we in-licensed the rights to BL-5010 under a license agreement with IPC.
Under the BL-5010 license agreement, we are obligated to use commercially reasonable efforts to develop the licensed technology in accordance
with a specified development plan, including meeting certain specified diligence goals.
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Each of the foregoing in-licensing agreements, or the obligation
to pay royalties thereunder, will generally remain in effect until the expiration, under the applicable agreement, of all the licensing,
royalty and sublicense revenue obligations to the applicable licensors, determined on a product-by-product and country-by-country basis.
We may terminate the motixafortide in-licensing agreement upon 90 days’ prior written notice to Biokine. We may terminate the BL-5010
in-licensing agreement upon 30 days’ prior written notice to IPC.
Any party to any of the foregoing in-licensing agreements may terminate
the respective agreement for material breach by the other party if the breaching party is unable to cure the breach within an agreed-upon
period, generally 30 days to 90 days, after receiving written notice of the breach from the non-breaching party.
Patent protection for our
products is important and uncertain.
Our success depends, in part, on our ability, and the ability of
our licensees and licensors to obtain patent protection for any therapeutic candidate, maintain the confidentiality of our trade secrets
and know-how, operate without infringing on the proprietary rights of others and prevent others from infringing our proprietary rights.
We try to protect our proprietary position by, among other things,
filing U.S., European, Israeli and other patent applications related to our proprietary products, technologies, inventions and improvements
that may be important to the continuing development of our therapeutic candidates. As of March 16, 2025, we owned or exclusively licensed
for use within our field of business 20 patent families that collectively contain 70 granted patents, 6 allowed patent applications and
73 pending patent applications relating to motixafortide and BL-5010.
Because the patent position of biopharmaceutical companies involves
complex legal and factual questions, we cannot predict the validity and enforceability of patents with certainty. Our issued patents and
the issued patents of our licensees or licensors may not provide us with any competitive advantages or may be held invalid or unenforceable
as a result of legal challenges by third parties. Thus, any patents that we own or license from others may not provide any protection
against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not
result in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages
against competitors with similar technology. The degree of future protection to be afforded by our proprietary rights is uncertain because
legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.
Patent rights are territorial; thus, the patent protection we do
have will only extend to those countries in which we have issued patents. Even so, the laws of certain countries do not protect our intellectual
property rights to the same extent as do the laws of the United States. For example, the patent laws of China and India are relatively
new and are not as developed as are older, more established patent laws of other countries. Competitors may successfully challenge our
patents, produce similar drugs or products that do not infringe our patents, or produce drugs in countries where we have not applied for
patent protection or that do not respect our patents. Furthermore, it is not possible to know the scope of claims that will be allowed
in published applications and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable in a
court of law.
Our technology may infringe the rights of third parties. The nature
of claims contained in unpublished patent filings around the world is unknown to us and it is not possible to know which countries patent
holders may choose for the extension of their filings under the Patent Cooperation Treaty, or other mechanisms. Any infringement by us
of the proprietary rights of third parties may have a material adverse effect on our business, financial condition and results of operations.
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If we are unable to protect
the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
We rely on a combination of patents, trade secrets, know-how, technology,
trademarks and regulatory exclusivity to maintain our competitive position. We generally try to protect trade secrets, know-how and technology
by entering into confidentiality or non-disclosure agreements with parties that have access to it, such as our licensees, employees, contractors
and consultants. We also enter into agreements that purport to require the disclosure and assignment to us of the rights to the ideas,
developments, discoveries and inventions of our employees, advisors, research collaborators, contractors and consultants while we employ
or engage them. However, these agreements can be difficult and costly to enforce or may not provide adequate remedies. Any of these parties
may breach the confidentiality agreements and willfully or unintentionally disclose our confidential information, or our competitors might
learn of the information in some other way. The disclosure to, or independent development by, a competitor of any trade secret, know-how
or other technology not protected by a patent could materially adversely affect any competitive advantage we may have over any such competitor.
To the extent that any of our employees, advisors, research collaborators,
contractors or consultants independently develop, or use independently developed, intellectual property in connection with any of our
projects, disputes may arise as to the proprietary rights to this type of information. If a dispute arises with respect to any proprietary
right, enforcement of our rights can be costly and unpredictable, and a court may determine that the right belongs to a third party.
Legal proceedings or third-party
claims of intellectual property infringement may require us to spend substantial time and money and could prevent us from developing or
commercializing products.
The development, manufacture, use, offer for sale, sale or importation
of therapeutic candidates may infringe on the claims of third-party patents. A party might file an infringement action against us. The
cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors
may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially greater financial resources.
Uncertainties resulting from the initiation and continuation or defense of a patent litigation or other proceedings could have a material
adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management
time. Consequently, we are unable to guarantee that we will be able to manufacture, use, offer for sale, sell or import our therapeutic
candidates in the event of an infringement action. At present, we are not aware of pending or threatened patent infringement actions against
us.
In the event of patent infringement claims, or to avoid potential
claims, we may choose or be required to seek a license from a third party and would most likely be required to pay license fees or royalties
or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may
be non-exclusive, which could potentially limit our competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic
candidate or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement claims,
we are unable to enter into licenses on acceptable terms. This inability to enter into licenses could harm our business significantly.
At present, we have not received any written demands from third parties that we take a license under their patents nor have we received
any notice form a third party accusing us of patent infringement.
Our license agreements with our licensees contain, and any contract
that we enter into with licensees in the future will likely contain, indemnity provisions that obligate us to indemnify the licensee against
any losses arising from infringement of third-party intellectual property rights. In addition, our in-license agreements contain provisions
that obligate us to indemnify the licensors against any damages arising from the development, manufacture and use of products developed
on the basis of the in-licensed intellectual property.
We may be subject to other
patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.
In addition to infringement claims against us, we may in the future
become a party to other patent litigation or proceedings, including interference or re-examination proceedings filed with the U.S. Patent
and Trademark Office or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to
our products and technology, as well as other disputes regarding intellectual property rights with licensees, licensors or others with
whom we have contractual or other business relationships. Post-issuance oppositions are not uncommon and we, our licensee or our licensor
will be required to defend these opposition procedures as a matter of course. Opposition procedures may be costly, and there is a risk
that we may not prevail.
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We may be subject to damages
resulting from claims that we or our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former
employers.
Many of our employees and contractors were previously employed
at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims
against us are currently pending, we may be subject to claims that we or any employee or contractor has inadvertently or otherwise used
or disclosed trade secrets or other proprietary information of his or her former employers. Litigation may be necessary to defend against
these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain
therapeutic candidates, which could severely harm our business, financial condition and results of operations. Even if we are successful
in defending against these claims, litigation could result in substantial costs and be a distraction to management.
Risks Related to Our Ordinary Shares and ADSs
There can be no assurance
that we will not be classified as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes in
the current taxable year or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S.
taxpayers that are holders of our ordinary shares if we are or were to become a PFIC.
We will be treated as a PFIC for U.S. federal income tax purposes
in any taxable year in which either (i) at least 75% of our gross income is “passive income” or (ii) on average at least 50%
of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally
includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and
from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the
temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a
proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by
value) is taken into account. We believe that we may have been a PFIC for the year ended December 31, 2024. Although we have not determined
whether we will be a PFIC for our taxable year ending December 31, 2025, or in any subsequent year, our operating results for any such
years may cause us to be a PFIC. Because PFIC status is determined annually and is based on our income, assets and activities for the
entire taxable year, it is not possible to determine with certainty whether we will be characterized as a PFIC for the 2025 taxable year
until after the close of the year, and there can be no assurance that we will not be classified as a PFIC in any future year. If we are
a PFIC for our taxable year ending December 31, 2024, or any subsequent year, and a U.S. Investor (as defined below) does not make an
election to treat us as a “qualified electing fund,” or QEF, or make a “mark-to-market” election, then “excess
distributions” to a U.S. Investor, and any gain realized on the sale or other disposition of our ordinary shares or ADSs will be
subject to special rules. Under these rules: (i) the excess distribution or gain would be allocated ratably over the U.S. Investor’s
holding period for the ordinary shares (or ADSs, as the case may be); (ii) the amount allocated to the current taxable year and any period
prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (iii) the amount allocated
to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for
that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each
such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with
respect to which we have determined that we were not a PFIC, it may be too late for a U.S. Investor to make a timely QEF or mark-to-market
election. U.S. Investors who hold our ordinary shares or ADSs during a period when we are a PFIC will be subject to the foregoing rules,
even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. Investors who made a timely QEF or mark-to-market election.
A U.S. Investor can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions
thereto. A QEF election generally may not be revoked without the consent of the IRS. Upon request, we intend to annually furnish U.S.
Investors with information needed in order to complete IRS Form 8621 (which form would be required to be filed with the IRS on an annual
basis by the U.S. Investor) and to make and maintain a valid QEF election for any year in which we are a PFIC. There is no assurance,
however, that we will have timely knowledge of our status as a PFIC, or that the information that we provide will be adequate to allow
U.S. Investors to make a QEF election. See also “Item 10. Additional Information—E. Taxation—Certain Material U.S. Federal
Income Tax Considerations.”
If a United States person
is treated as owning at least 10% of our shares, such holder may be subject to adverse U.S. federal income tax consequences.
If a United States person is treated as owning (directly, indirectly
or constructively) at least 10% of the value or voting power of our shares, such person may be treated as a “United States shareholder”
with respect to each “controlled foreign corporation”, or CFC, in our group (if any). Because our group includes a U.S.
subsidiary, our non-U.S. subsidiary will be treated as a CFC (regardless of whether or not we are treated as a CFC. A United States shareholder
of a controlled foreign corporation may be required to annually report and include in its U.S. taxable income its pro rata share of “Subpart
F income,” “global intangible low-taxed income” and investments in U.S. property by controlled foreign corporations,
whether or not we make any distributions, and may be subject to tax reporting obligations. An individual that is a United States shareholder
with respect to a controlled foreign corporation generally would not be allowed certain tax deductions or foreign tax credits that would
be allowed to a United States shareholder that is a U.S. corporation. A failure to comply with these reporting obligations may subject
you to significant monetary penalties and may prevent the statute of limitations with respect to your U.S. federal income tax return for
the year for which reporting was due from starting. We cannot provide any assurances that we will assist any shareholder in determining
whether such shareholder is treated as a United States shareholder with respect to any “controlled foreign corporation” in
our group (if any) or furnish to any United States shareholders information that may be necessary to comply with the aforementioned reporting
and tax paying obligations. A United States investor should consult its tax advisors regarding the potential application of these
rules to its investment in our ordinary shares or ADSs.
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Our business, operating
results and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments
with respect to financial institutions and associated liquidity risk.
Our business depends on the economic health of the global economies.
If the conditions in the global economies remain uncertain or continue to be volatile, or if they deteriorate, including as a result of
the impact of military conflict, terrorism or other geopolitical events, our business, operating results and financial condition may be
materially adversely affected. Economic weakness, inflation and increases in interest rates, limited availability of credit, liquidity
shortages and constrained capital spending have at times in the past resulted, and may in the future result, in challenging and delayed
sales cycles, slower adoption of new technologies and increased price competition, and could negatively affect our ability to forecast
future periods, which could result in an inability to satisfy demand for our products and a loss of market share.
In addition, increases in inflation raise our costs for commodities,
labor, materials and services and other costs required to grow and operate our business, and failure to secure these on reasonable terms
may adversely impact our financial condition. Additionally, increases in inflation, along with the uncertainties geopolitical developments
and global supply chain disruptions, have caused, and may in the future cause, global economic uncertainty and uncertainty about the interest
rate environment, which may make it more difficult, costly or dilutive for us to secure additional financing. A failure to adequately
respond to these risks could have a material adverse impact on our financial condition, results of operations or cash flows.
There can be no assurance that future credit and financial market
instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected
by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions.
If the current equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause
short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly, more onerous with respect
to financial and operating covenants and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable
terms could have a material adverse effect on our growth strategy, financial performance and market price of our ordinary shares and ADSs
and could require us to alter our operating plans. In addition, there is a risk that one or more of our service providers, financial institutions,
manufacturers, suppliers and other partners may be adversely affected by the foregoing risks, which could directly affect our ability
to attain our operating goals on schedule and on budget.
The market prices of our
ordinary shares and ADSs are subject to fluctuation, which could result in substantial losses by our investors.
The stock market in general and the market prices of our ordinary
shares on the TASE, and ADSs on Nasdaq, in particular, are subject to fluctuation, and changes in these prices may be unrelated to our
operating performance. We expect that the market prices of our ordinary shares and ADSs will continue to be subject to wide fluctuations.
The market price of our ordinary shares and ADSs are and will be subject to a number of factors, including:
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announcements of technological innovations
or new products by us or others;
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announcements by us of significant acquisitions,
strategic partnerships, in-licensing, out-licensing, joint ventures or capital commitments;
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expiration or terminations of licenses,
research contracts or other collaboration agreements;
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public concern as to the safety of drugs
we, our licensees or others develop;
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general market conditions;
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the volatility of market prices for shares
of biotechnology companies generally;
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success of research and development projects;
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departure of key personnel;
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developments concerning intellectual property
rights or regulatory approvals;
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variations in our and our competitors’
results of operations;
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changes in earnings estimates or recommendations
by securities analysts, if our ordinary shares or ADSs are covered by analysts;
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statements about the Company made in the
financial media or by bloggers on the Internet;
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statements made about drug pricing and other
industry-related issues by government officials;
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changes in government regulations or patent
decisions;
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developments by our licensees; and
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general market conditions and other factors,
including factors unrelated to our operating performance.
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These factors and any corresponding price fluctuations may materially
and adversely affect the market price of our ordinary shares and ADSs, and result in substantial losses by our investors. See also Risk
Factors—Risks Related to our Ordinary Shares and ADSs — “
Our business, operating results
and growth rates may be adversely affected by current or future unfavorable economic and market conditions and adverse developments with
respect to financial institutions and associated liquidity risk.
”
Additionally, market prices for securities of biotechnology and pharmaceutical companies
historically have been very volatile. The market for these securities has from time to time experienced significant price and volume fluctuations
for reasons unrelated to the operating performance of any one company. Following periods of market volatility, shareholders have often
instituted securities class action litigation, and in the past, we have been party to securities class action litigations. See “Item
8.A—Financial Information—Legal Proceedings” for additional information. Such securities litigation or any additional
securities litigation could have a substantial cost and divert resources and attention of management from our business, even if we are
successful.
Our ordinary shares are traded on the TASE and our ADSs are listed
on Nasdaq. Trading in our securities on these markets takes place in different currencies (dollars on Nasdaq and NIS on the TASE), and
at different times (resulting from different time zones, different trading days and different public holidays in the United States and
Israel). The trading prices of our securities on these two markets may differ due to these factors, the factors listed above, or other
factors. Any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities
on the other market.
Future sales of our ordinary
shares or ADSs could reduce the market price of our ordinary shares and ADSs.
Substantial sales of our ordinary shares or ADSs, either on the
TASE or on Nasdaq, may cause the market price of our ordinary shares or ADSs to decline. Sales by us or our securityholders of substantial
amounts of our ordinary shares or ADSs, or the perception that these sales may occur in the future, could cause a reduction in the market
price of our ordinary shares or ADSs.
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As of March 16, 2025, as a result of previous financings, we had
(A) warrants outstanding (i) for the purchase of 1,596 ADSs at an exercise price of $564.00 per ADS, (ii) for the purchase of 17,969 ADSs
at an exercise price of $120.00 per ADS, (iii) for the purchase for the purchase of 277,273 ADSs at an exercise price of $46.00 per ADS,
(iv) for the purchase of 17,045 ADSs at an exercise price of $55.00 per ADS, (v) for the purchase of 187,500 ADSs at an exercise price
of $32.00 per ADS, (vi) for the purchase of 205,893 ADSs at an exercise price of $23.60 per ADS and (vii) for the purchase of 1,250,000
ADSs at an exercise price of $8.00 per ADS and (viii) for the purchase of 62,500 ADSs at an exercise price of $10.00 per ADS and (B) pre-funded
warrants outstanding for the purchase of 82,357 ADSs at an exercise price of $0.004 per ADS.
On September 3, 2021, we entered into an offering agreement, or
the HCW Offering Agreement, with H.C. Wainwright Co., LLC, or HCW, pursuant to which we may offer and sell, at our option, up to
$25.0 million of our ADSs through an “at-the-market” equity program under which HCW agreed to act as sales agent. As of March
16, 2025, we have sold 194,656 of our ADSs for total gross proceeds of approximately $6.0 million under the New HCW Offering Agreement.
As of March 16, 2025, in the framework of our Share Incentive Plan, there are outstanding
options, restricted share units and performance share units (granted to directors, employees and consultants) for the purchase of 131,167,200
ordinary shares (equivalent to 218,612 ADSs) with a weighted average exercise price of $0.10 per ordinary share (equivalent to $58.85
per ADS).
The issuance of any additional ordinary shares, any additional
ADSs, or any securities that are exercisable for or convertible into our ordinary shares or ADSs, may have an adverse effect on the market
price of our ordinary shares and ADSs and will have a dilutive effect on our shareholders.
Raising additional capital
by issuing securities may cause dilution to existing shareholders.
We expect that we will need to raise substantial future capital
to continue to complete clinical development and commercialize our products and therapeutic candidates and to conduct the research and
development and clinical and regulatory activities necessary to bring our therapeutic candidates to market. Our future capital requirements
will depend on many factors, including:
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the failure to obtain regulatory approval,
in a timely manner or at all, or achieve commercial success of our therapeutic candidates;
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our success in effecting out-licensing arrangements
with third parties;
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our success in establishing other out-licensing
or co-development arrangements;
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the success of our licensees in selling
products that utilize our technologies;
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the results of our preclinical studies and
clinical trials for our earlier stage therapeutic candidates, and any decisions to initiate clinical trials if supported by the preclinical
results;
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the costs, timing and outcome of regulatory
review of our therapeutic candidates that progress to clinical trials;
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the costs of establishing or acquiring specialty
sales, marketing and distribution capabilities, if any of our therapeutic candidates are approved, and we decide to commercialize them
ourselves;
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the costs of preparing, filing and prosecuting
patent applications, maintaining and enforcing our issued patents and defending intellectual property-related claims;
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the extent to which we acquire or invest
in businesses, products or technologies and other strategic relationships; and
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the costs of financing unanticipated working
capital requirements and responding to competitive pressures.
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If we raise additional funds through licensing arrangements with
third parties, we may have to relinquish valuable rights to our therapeutic candidates or grant licenses on terms that are not favorable
to us. If we raise additional funds by issuing equity or convertible debt securities, we will reduce the percentage ownership of our then-existing
shareholders, and these securities may have rights, preferences or privileges senior to those of our existing shareholders. See also “—
Future sales of our ordinary shares or ADSs could reduce the market price of our ordinary shares and ADSs.”
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As a foreign private issuer,
we follow certain home country corporate governance practices instead of applicable Nasdaq requirements, which may result in less protection
than is accorded to investors under rules applicable to domestic issuers.
As a foreign private issuer, we are permitted to follow certain
home country corporate governance practices instead of those otherwise required under the Listing Rules of the Nasdaq Stock Market, or
the Nasdaq Rules, for U.S. domestic issuers. For instance, we follow home country practice in Israel with regard to, among other things,
director nomination procedure, approval of compensation of officers, and quorum at shareholders’ meetings. In addition, we will
follow our home country law, instead of the Nasdaq Rules, which require that we obtain shareholder approval for certain dilutive events,
such as for the establishment or amendment of certain equity-based compensation plans, an issuance that will result in a change of control
of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain
acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements
that would otherwise apply to a U.S. company listed on Nasdaq may provide less protection than is accorded to investors under the Nasdaq
Rules applicable to U.S. domestic issuers. See “Item 16G — Corporate Governance — Nasdaq Listing Rules and Home Country
Practices.”
In addition, as a foreign private issuer, we are exempt from the
rules and regulations under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, related to the furnishing and content
of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery
provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly
and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered
under the Exchange Act.
If we fail to comply with the continued listing
requirements of the Nasdaq Capital Market, our ADSs may be delisted and the price of our ADSs and our ability to access the capital markets
could be negatively impacted.
Our ADSs are listed on the Nasdaq Capital Market. As such, we are
required to meet the continued listing requirements of the Nasdaq Capital Market and other Nasdaq rules, including those regarding director
independence and independent committee requirements, minimum shareholders’ equity, minimum share price and certain other corporate
governance requirements. In particular, we are required to maintain a minimum bid price for our listed ADSs of $1.00 per share.
On May 13, 2024, we were notified by the Nasdaq Stock Market, LLC,
or Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued
listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00
per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency
continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until November 11,
2024, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Since we did not regain compliance by November 11, 2024, we requested
and received from Nasdaq an additional 180 calendar days, or until May 12, 2025, to comply with the minimum bid price. On January 30,
2025, we effected a change in the ratio of our ADSs to ordinary shares from one ADS representing 15 ordinary shares to a new ratio of
one ADS representing 600 ordinary shares. As a result, on February 13, 2025, we received a notice from Nasdaq indicating that we regained
compliance with the minimum bid price requirement under Nasdaq Rules 5550(a)(2).
No assurance can be given that we will be able to maintain a minimum
bid price of $1.00 per ADS. If we do not meet the minimum bid price requirement or other continued listing requirements, our ADSs could
be delisted. A delisting of our ADSs from Nasdaq could materially reduce the liquidity of our ADSs and result in a corresponding material
reduction in the price of our ADSs. In addition, delisting could harm our ability to raise capital through alternative financing sources
on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, employees and fewer business development
opportunities and strategic alternatives. There can be no assurance that our ADSs, if delisted from the Nasdaq Capital Market in the future,
would be listed on a national securities exchange, a national quotation service, the Over-The-Counter Markets or the pink sheets. Delisting
from the Nasdaq Capital Market, or even the issuance of a notice of potential delisting, would also result in negative publicity, make
it more difficult for us to raise additional capital, adversely affect the market liquidity of our ADSs, reduce security analysts’
coverage of us and diminish investor, supplier and employee confidence. Additionally, the threat of delisting or the delisting of our
ADSs from the Nasdaq Capital Market could reduce the number of investors willing to hold or acquire our ADSs, thereby further restricting
our ability to obtain equity financing, and it could reduce our ability to retain, attract and motivate our directors, officers and employees.
In addition, as a consequence of any such delisting, our share price could be negatively affected and our shareholders would likely find
it more difficult to sell, or to obtain accurate quotations as to the prices of, our ADSs.
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Risks Related to Our Operations in Israel
We conduct our operations
in Israel and therefore, may be adversely affected by political, geopolitical, economic and military instability in Israel and its region.
Our headquarters and principal executive offices, development,
and some of our suppliers and third-party contractors are located in central Israel. In addition, all of our employees and officers and
the majority of our directors are residents of Israel. Accordingly, political, geopolitical, economic and military conditions in Israel
and the surrounding region may directly affect our business could harm our results of operations and could make it more difficult for
us to raise capital.
Since the establishment of the State of Israel in 1948, a number
of armed conflicts have taken place between Israel and its neighboring countries and terrorist organizations active in the region, including
Hamas (an Islamist militia and political group in the Gaza Strip) and Hezbollah (an Islamist militia and political group in Lebanon) ),
which have involved missile strikes, hostile infiltrations, terrorism against civilian targets in various parts of Israel, and recently
abduction of soldiers and citizens.
On October 7, 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 the Israeli population and industrial centers within the State of Israel. These attacks resulted in extensive deaths
and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet
declared war against Hamas. As a result, the Israeli military began to call-up reservists for active duty. None of our employees were
called up for active duty; however, military service call-ups that lead to the absence of personnel for extended periods may materially
and adversely affect our business, prospects, financial condition and results of operations. As of March 16, 2025, we had 24 full-time
and 4 part-time employees, all of whom are located in Israel.
Subsequent to the commencement of the Israel-Hamas war, there have
been hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various
extremist groups in region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. In April 2024, Iran launched
drone and missile attacks on military and civilian targets within Israel. In October 2024, Israel began limited ground operations against
Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. In January 2025, a temporary ceasefire
agreement was reached between Hamas in Gaza and Israel, although in March 2025 hostilities resumed. We cannot predict if and to what extent
any ceasefire agreements will remain in effect or will be upheld and military activity and hostilities continue to exist at varying levels
of intensity, and the situation remains volatile, with the potential for escalation into a broader regional conflict involving additional
terrorist organizations and possibly other countries. Also, the fall of the Assad regime in Syria may create geopolitical instability
in the region.
Since the war broke out on October 7, 2023, our operations have not been adversely affected
in a material manner, and we have not experienced disruptions to operations. Our manufacturing operations and supply of APHEXDA take place
outside of Israel and therefore, remain unaffected by the war against Hamas. However, prolonged and/or heightened conflict could adversely
impact our business, financial condition and results of operations in the future.
Our commercial insurance does not cover losses that may occur as
a result of events associated with the security situation in the Middle East. Although the Israeli government currently covers the reinstatement
value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you 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, financial condition and results of operations.
The continuation of the war led to a deterioration of certain indicators
of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies (such as by Moody’s,
SP Global, and Fitch).
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The global perception of Israel and Israeli companies, influenced
by actions by international judicial bodies, may lead to increased sanctions and other negative measures against Israel and Israeli companies.
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. There is also a growing movement among countries, activists, and organizations to boycott Israeli goods and services
or restrict business with Israel and Israeli companies. These restrictive laws and policies, along with any future rulings from international
tribunals against Israel, may have an adverse impact on our operating results, financial condition or our business.
Finally, political conditions within Israel may affect our operations.
Israel held five general elections between 2019 and 2022, and prior to October 2023, the Israeli government pursued extensive changes
to Israel’s judicial system and has recently renewed its efforts to effect such changes. In response to the foregoing developments,
certain individuals, organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if
adopted, may negatively impact the business environment in Israel. Such proposed changes may also lead to political instability or civil
unrest. Actual or perceived political instability in Israel or any negative changes in the political environment, may individually or
in the aggregate adversely affect the Israeli economy and, in turn, our business, financial condition, results of operations and ability
to raise capital.
Due to a significant portion
of our expenses and revenues being denominated in non-dollar currencies, our results of operations may be harmed by currency fluctuations.
Our reporting and functional currency is the U.S. dollar. However,
we pay a significant portion of our expenses in NIS and in Euro, and we expect this to continue. If the dollar depreciates against the
NIS or the Euro in the future, then the U.S. dollar cost of our operations in Israel would increase and our results of operations could
be materially and adversely affected. Although we expect our revenues from future licensing arrangements to be denominated primarily in
dollars, we are exposed to currency fluctuation risks relating to the recording of our revenues in currencies other than the U.S. dollar.
For example, if the Euro appreciates against the dollar, our reported revenues in U.S. dollars may be lower than anticipated. From time
to time, we engage in currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates
of the currencies mentioned above in relation to the dollar. These measures, however, may not adequately protect us from material adverse
effects.
Before we in-licensed motixafortide,
Biokine had received Israeli government grants for motixafortide research and development. Under our agreement with Biokine, we are required
to abide with terms of these grants, which require us, in addition to payment of royalties, to satisfy specified conditions in order to
transfer the manufacture of products and transfer technologies outside of Israel and to make additional payments in addition to repayment
of the grants.
Before we in-licensed motixafortide, Biokine had received $2.7
million in funding for the project from the Israel Innovation Authority, or the IIA (formerly the Office of the Chief Scientist of Israel’s
Ministry of Economy and Industry, or the OCS). As a condition for the IIA’s consent to our in-licensing of motixafortide,
we were required to agree to abide by any obligations resulting from such funding under the Israeli Encouragement of Industrial Research,
Development and Technological Innovation Law, 1984, and related regulations, as amended (the Research Law). Under the Research Law
and the terms of IIA grants, royalties on the revenues derived from sales of products (and associated services) developed with IIA funding
are payable to the Israeli government, generally at the rate of 3% (and at an increased rate under certain circumstances, as described
below). The obligation to make these royalty payments terminates upon repayment of the amount of grants, linked to the U.S. dollar, plus
interest (in accordance with IIA regulations), which amount may be increased under certain circumstances, as described below.
Under the Research Law, the transfer or license to third parties outside of Israel of
know-how or technologies developed under IIA-funded programs, or the transfer to third parties outside of Israel of manufacturing or rights
to manufacture based on IIA-funded know-how, requires the consent of the IIA in certain circumstances, and may result in increased payments
to the IIA. Specifically, for the transfer of manufacturing outside of Israel, royalty payments can be up to three times the amount of
the IIA grants received, linked, plus interest, and the royalty repayment rate may increase. For the transfer of IIA-funded know-how outside
of Israel, the payment may be up to six times the amount of the IIA grants, linked, plus interest. In connection with the IIA’s
approval of the out-licensing transactions with Gloria and Ayrmid, the IIA determined that we are required to pay the IIA 3.9% on any
sub-license consideration, up to six times the IIA grant, linked, plus interest. Additionally, in December 2024, we received IIA approval
to transfer the manufacturing of motixafortide outside of Israel, which requires us to pay the IIA 4% of proceeds on any direct product
sales, up to three times the IIA grant, linked plus interest. As of December 31, 2024, $1.1 million in aggregate royalties had been paid
to the IIA on account of the motixafortide program and there was a contingent liability to the IIA (including interest) of $2.7 million
(without taking into account the potential repayment requirement of up to six times the amount as detailed above). In any event, under
our agreement with Biokine, we have a full right of offset for amounts payable to the IIA for the motixafortide program from any payments
that we may owe to Biokine in the future.
28
Should we wish to further out-license motixafortide in the future,
there is no assurance that we will be able to obtain the IIA’s consent on terms acceptable to us, or at all. Even following the
full repayment of IIA grants, we must nevertheless continue to comply with the requirements of the Research Law. If we fail to comply
with any of the conditions and restrictions imposed by the Research Law and regulations and guidelines thereunder, or by the specific
terms of the IIA grants, we may be required to refund any IIA grants that Biokine previously received together with interest and penalties,
and, in certain circumstances, may be subject to criminal charges. In any event, under our agreement with Biokine, we have a full right
of offset for amounts payable to the IIA for the motixafortide program from any payments that we may owe to Biokine in the future.
Provisions of Israeli law
and our Articles of Association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could prevent
a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers
for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant
shareholders and regulates other matters that may be relevant to these types of transactions. For example, a merger may not be consummated
unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of
Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, a majority
of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a company’s issued
and outstanding shares can only be completed if the acquirer receives the approval of at least 95% of the issued share capital (provided
that a majority of the offerees that do not have a personal interest in such tender offer shall have approved the tender offer, except
that if the total votes to reject the tender offer represent less than 2% of the company’s issued and outstanding share capital,
in the aggregate, approval by a majority of the offerees that do not have a personal interest in such tender offer is not required to
complete the tender offer). Furthermore, the shareholders, including those who indicated their acceptance of such a tender offer,
may, at any time within six months following the completion of the tender offer, claim that the consideration for the acquisition of the
shares did not reflect their fair market value and petition an Israeli court to alter the consideration for the acquisition accordingly
(unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek appraisal rights, and the acquirer
or the company published all required information with respect to the tender offer prior to the date indicated for response to the tender
offer).
Furthermore, Israeli tax considerations may make potential transactions
unappealing to us or to our shareholders, such as for those whose country of residence does not have a tax treaty with Israel exempting
such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S.
tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on
the fulfilment of numerous conditions, including, in some cases, a holding period of two years from the date of the transaction during
which sales and dispositions of shares of the participating companies are subject to certain restriction. Moreover, with respect to certain
share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable, even if no actual disposition
of the shares has occurred.
Further, our Articles of Association, as currently in effect, provide
that our directors (other than external directors, if any) are elected on a staggered basis, such that a potential acquirer cannot readily
replace our entire board of directors at a single annual general shareholder meeting; rather, at least two annual meetings of shareholders
will generally be required to effect a change in a majority of our board of directors. Any amendment to the provision in our Articles
of Association dividing our directors into three classes and certain related provisions requires a vote of the holders of at least 65%
of the shares represented at the meeting and voting on the matter.
These and other similar provisions could delay, prevent or impede
an acquisition of us or our merger with another company, even if such an acquisition or merger would be beneficial to us or to our shareholders.
29
It may be difficult
to enforce a U.S. judgment against us and our officers and directors in Israel or the United States,
to
assert U.S. securities laws claims in Israel or to serve process on our officers and directors.
We are incorporated in Israel. All of our executive officers and
the majority of our directors reside outside of the United States, and a significant portion of our assets and most of the assets of such
executive officers and directors are located outside of the United States. Therefore, a judgment obtained against us or any of our executive
officers and directors in the United States, including a judgment based on the civil liability provisions of the U.S. federal securities
laws, may not be collectible in the United States. It also may be difficult for you to effect service of process on these persons in the
United States or to assert U.S. securities law claims in original actions instituted in Israel or obtain a judgment based on the civil
liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim against us or our non-U.S. officers and
directors based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring
such a claim. In addition, even if an Israeli court agrees to hear such a claim, it may determine that Israeli law and not U.S. law is
applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert
witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There
is little binding case law in Israel that addresses the matters described above. Additionally, Israeli courts might not enforce judgments
obtained in the United States against us or our non-U.S. directors and executive officers, which may make it difficult to collect on judgments
rendered against us or our non-U.S. officers and directors.
Your rights and responsibilities
as a shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders
of U.S. companies.
We are incorporated under Israeli law. The rights and responsibilities
of the holders of our ordinary shares are governed by our Articles of Association and Israeli law. These rights and responsibilities differ
in some respects from the rights and responsibilities of shareholders in typical U.S.-based corporations. In particular, pursuant to the
Companies Law, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner toward the company and other
shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of
shareholders on amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers
and acquisitions and interested party transactions requiring shareholder approval under the Companies Law, as well as a general duty to
refrain from discriminating against other shareholders. In addition, a controlling shareholder and a shareholder who knows that it possesses
the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in
the company or has other powers toward the company, has a duty of fairness toward the company. Israeli law does not define the substance
of this duty of fairness and there is limited case law available to assist us in understanding the nature of these duties or the implications
of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares
that are not typically imposed on shareholders of U.S. corporations.
ITEM 4. INFORMATION
ON THE COMPANY
A. History and Development of the Company
Our legal and commercial name is BioLineRx Ltd. We are a company
limited by shares organized under the laws of the State of Israel. Our principal executive offices are located at 2 HaMa’ayan Street,
Modi’in 7177871, Israel, and our telephone number is +972 (8) 642-9100. Our wholly owned subsidiary, BioLineRx USA, Inc., was incorporated
in Delaware on January 4, 2008, and is located at 77 Fourth Ave, Waltham, Massachusetts 02451.
We were founded in 2003 by leading institutions in the Israeli
life sciences industry. We completed our initial public offering in Israel in February 2007 and our ordinary shares are traded on the
TASE under the symbol “BLRX.” In July 2011, we listed our ADSs on Nasdaq and they are traded under the symbol “BLRX.”
In March 2017, we acquired Agalimmune a private U.K.-based company and
intend to either transfer ownership of Agalimmune to a third party or liquidate it during 2025.
Our capital expenditures for the year ended December 31, 2024 were
immaterial and were $0.3 million for each of the years ended December 31, 2022 and 2023. Our current capital expenditures involve acquisitions
of laboratory equipment, computers and communications equipment.
30
The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers like BioLineRx that file electronically with the SEC. The address
of that site is
www.sec.gov
. We maintain a corporate
website at
www.biolinerx.com
.
Information contained
on or accessible through our website is not a part of this Annual Report on Form 20-F, and the inclusion of our website address herein
is an inactive textual reference only.
We use our website (
http://www.biolinerx.com
)
as a channel of distribution of Company information. The information we post through this channel may be deemed material. Accordingly,
investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
The contents of our website are not, however, a part of this Annual Report on Form 20-F.
B. Business Overview
We are a biopharmaceutical company pursuing life-changing therapies
in oncology and rare diseases. Our first approved product, APHEXDA® (motixafortide), a novel peptide for the treatment of stem-cell
mobilization and solid tumors, with an indication in the United States for stem cell mobilization for autologous transplantation
in multiple myeloma, is being developed and commercialized by Ayrmid (globally, excluding Asia) and Gloria (in Asia). We are also advancing
the development of motixafortide for patients with pancreatic cancer and other solid tumors.
Following the out-licensing of APHEXDA (motixafortide) to Ayrmid
and Gloria, we have refocused our operations on development activities in Israel in the fields of oncology and rare diseases, at a significantly
reduced annual cash burn rate.
We have retained the rights to develop motixafortide across all solid tumor indications,
in all territories other than Asia, including in PDAC, for which an investigator-initiated Phase 2b trial, sponsored by Columbia University,
and supported equally by us and Regeneron, is ongoing at a relatively minimal cost to us. We expect this program to continue to advance
without any significant expense to us.
A key component of our strategy moving forward is to in-license
additional assets in oncology and/or rare diseases that exhibit distinct advantages over currently available therapies or address unmet
medical needs that we can advance through clinical development. We have generated our pipeline by systematically identifying, rigorously
validating and in-licensing therapeutic candidates that we believe exhibit a high probability of therapeutic and commercial success. We
have substantial experience in scouting and assessing assets in transactions with back-ended, success-based consideration, which can be
acquired or licensed for a modest upfront payment, and with relatively modest and affordable clinical development programs. We are actively
working on this initiative and are being presented with many promising opportunities that meet these criteria.
Our longer-term vision is to develop innovative assets with significant
potential value whose development costs have been offset by the royalties and milestones from our existing motixafortide partnerships.
We aim to continue pursuing new partnerships on these programs to create additional value for our shareholders.
With headquarters and development operations in Israel, we are
driving innovative therapeutics with end-to-end expertise in development, ensuring life-changing discoveries move beyond the bench to
the bedside.
We use “APHEXDA” when referring to our FDA approved
drug and “motixafortide” when referring to our development of APHEXDA for additional indications.
Recent Developments
Out Licensing of Motixafortide in All Territories
Except Asia
On November 20, 2024, we entered into a license agreement, or
the Ayrmid License Agreement, with Ayrmid Pharma Ltd., or Ayrmid, pursuant to which we granted to Ayrmid an exclusive, transferable, royalty-bearing,
sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide, in order to commercialize
motixafortide across all indications, except solid tumor indications, in all territories other than Asia, or collectively, the Ayrmid
Territory.
31
Pursuant to the terms of the Ayrmid License Agreement, Ayrmid
paid a non-refundable $10 million upfront payment and we are entitled to up to $87 million of certain commercial and sales milestones
based on defined sales targets of motixafortide in the Ayrmid Territory. Additionally, we are eligible to receive tiered double-digit
royalties (ranging from 18-23%) on aggregate net sales of motixafortide on a country-by-country basis until the longer of (i) fifteen
years from the date of the first sale of motixafortide by Ayrmid in such country, (ii) the last to expire of any licensed patents with
respect to motixafortide in such country, (iii) the expiration of regulatory exclusivity in such country and (iv) the expiration of motixafortide’s
orphan drug status, if any, in such country, it being noted that such royalties may be subject to reduction in certain specific circumstances.
In connection with the Ayrmid License Agreement, we and Ayrmid
also entered into a manufacturing and supply agreement, or the Supply Agreement, according to which we will supply motixafortide to Ayrmid
during the term of the Ayrmid License Agreement, on a cost-plus basis, for both commercial and development supply. Furthermore, the Supply
Agreement provides Ayrmid with “step-in rights” with respect to the manufacture and supply of motixafortide upon the occurrence
of certain trigger events. In addition, we and Ayrmid entered into a transition services agreement pursuant to which we agreed to provide
Ayrmid with certain services related to the development and commercialization of motixafortide within the Ayrmid Territory during a defined
transition period, on a cost basis.
The Ayrmid License Agreement will continue on a country-by-country
basis in the Ayrmid Territory until the expiration of the royalty term or earlier termination thereof. The Ayrmid License Agreement may
also be terminated by either party in the case of a material breach or bankruptcy. Further, if our license agreement with Biokine Therapeutics
Ltd., or the Upstream License, is terminated in whole or in part, the Ayrmid License Agreement will immediately terminate. In such event,
Ayrmid will have the right to enter into a direct license agreement with the licensor of such Upstream License on substantially similar
terms.
Following the Ayrmid License Agreement, we shut down our commercial
operations in the United States and undertook certain cost-cutting and workforce reduction measures. As a result, we have significantly
reduced our expenditures and as of the date of this Annual Report on Form 20-F have 24 full-time employees and 4 part-time employees.
January 2025 Registered Direct Offering
On January 7, 2025, we sold to certain investors, in a registered
direct offering, 858,304 ADSs and pre-funded warrants to purchase 391,697 ADSs. Each ADS and pre-funded warrant were sold together with
ordinary warrants to purchase up to an aggregate of 1,250,000 ADSs. The purchase price was $8.00 per ADS and accompanying ordinary warrant
and $7.996 per pre-funded warrant and accompanying ordinary warrant. The pre-funded warrants are exercisable at an exercise price of $0.004
per ADS, subject to adjustment as set forth therein, and will not expire until exercised in full. The ordinary warrants have an exercise
price of $8.00 per ADS, subject to adjustment as set forth therein, and have a 5-year term from the issuance date. We also issued placement
agent warrants to purchase 62,500 ADSs at an exercise price of $10.00 per ADS. Aggregate gross proceeds from the offering (without taking
into account any proceeds from any future exercises of pre-funded warrants or ordinary warrants) were $10.0 million.
Amendment to Loan Agreement
In November 2024, in connection with the Ayrmid License Agreement, we entered into the
Loan Amendment to the Loan Agreement that we previously entered into in September 2022 with BlackRock, pursuant to which, (i) we agreed
to make aggregate payments of $16.5 million, as partial repayment of the loan to BlackRock and in lieu of future revenue-based payments,
which will be fully cancelled, (ii) effective December 1, 2024, we agreed to pay the remaining amounts outstanding under the loan (in
principal and interest) over a three year period ending December 1, 2027, and (iii) our minimum cash balance requirement under the Loan
Agreement has been reduced to $4 million. All other terms of the Loan Agreement remain the same. In addition, pursuant to the Amendment,
10% of any future milestone payments received by us from the out-licensing agreements through December 1, 2027 will be used to repay the
outstanding loan principal, and the repayments in (ii) above will be adjusted accordingly. All other terms of the Loan Agreement remain
the same.
32
November 2024 Registered Direct Offering
On November 21, 2024, we sold to certain funds associated with
Highbridge Capital Management LLC, or Highbridge, in a registered direct offering, 103,038 ADSs and pre-funded warrants to purchase 308,749
ADSs. Each ADS and pre-funded warrant were sold together with ordinary warrants to purchase up to an aggregate of 205,894 ADSs. The purchase
price was $21.856 per ADS and accompanying ordinary warrant and $21.852 per pre-funded warrant and accompanying ordinary warrant. The
pre-funded warrants are immediately exercisable at an exercise price of $0.004 per ADS, subject to adjustment as set forth therein, and
will not expire until exercised in full. The ordinary warrants have an exercise price of $23.60 per ADS, subject to adjustment as set
forth therein, are immediately exercisable, and have a 4-year term from the issuance date. Aggregate gross proceeds from the offering
(without taking into account any proceeds from any future exercises of pre-funded warrants or ordinary warrants) were $9.0 million.
April 2024 Registered Direct Offering
On April 1, 2024, we sold to certain investors, in a registered
direct offering, 187,500 of our ADSs and warrants to purchase up to an aggregate of 187,500 ADSs at a combined purchase price of $32.00
per ADS and accompanying warrant. The warrants have a 5-year term from the issuance date. The exercise price of each warrant is $32.00
per ADS, subject to adjustment as set forth therein. Aggregate gross proceeds from the offering (without taking into account any proceeds
from any future exercises of warrants) were $6.0 million.
Out Licensing of Motixafortide in Asia
On August 27, 2023, we entered into a License Agreement, or the Gloria License Agreement,
with Hong Seng Technology Limited, or HST, and Gloria, and/or with HST, the Gloria Licensee, pursuant to which we granted HST an exclusive,
royalty-bearing, sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide in
order to develop and commercialize motixafortide in Asia (other than Israel and certain other countries), or the Gloria Territory, and
to engage and authorize Gloria to perform services under the Gloria License Agreement in the Territory.
Pursuant to the terms of the Gloria License Agreement, the Gloria
Licensee made a $15 million upfront payment in October 2023, upon the closing of the transaction. We are entitled to up to $49 million
based on the achievement of certain development and regulatory milestones in China and Japan, and up to $197 million in sales milestones
based on defined sales targets of motixafortide in the Gloria Territory. Additionally, we are eligible to receive tiered, double-digit
royalties (ranging from 10-20%), on aggregate net sales of motixafortide in the Gloria Territory payable on a country-by-country basis
until the longer of (i) fifteen years from the date of the first sale of motixafortide by Licensee, (ii) the last to expire valid claim
of any licensed patents with respect to motixafortide in such country and (iii) the expiration of motixafortide’s orphan drug status
in such country. The royalties payable by Gloria Licensee to us are to be reduced by 50% following the end of the initial royalty term
and are also to be reduced upon the occurrence of certain events, including, on a country-by-country basis, the entry of a generic product
in such country.
The Gloria License Agreement includes various development obligations
for the Gloria Licensee pursuant to an agreed-upon development plan, including the execution of a registrational study in stem-cell mobilization
and the execution of a randomized Phase 2b study in first-line pancreatic adenocarcinoma.
Under the Gloria License Agreement, Gloria is late in the payment of $2.4 million to
us for the achievement of a specific milestone under the Gloria License Agreement and for certain product supply, which was due during
2024. In addition, the planned studies of motixafortide in China under the Gloria License Agreement are currently not advancing according
to schedule and it is unclear when such studies will be initiated, if at all. There can be no assurance that Gloria will meet its payment
obligations or any other obligations under the Gloria License Agreement.
Expanding our Product Portfolio
Following entry into the Gloria License Agreement and the Ayrmid
License Agreement as well as the shutdown of our U.S. commercial operations, we have refocused our operations on development activities
in Israel in the fields of oncology and rare diseases, at a significantly reduced annual cash burn rate.
We are continuing to advance the development of motixafortide for
patients with pancreatic cancer and other solid tumors.
33
In addition, as part of our growth strategy, we are actively pursuing
in-licensing opportunities to expand and diversify our product pipeline. We are specifically targeting innovative therapeutic candidates
that complement our existing portfolio and align with our core expertise in oncology and rare disease. Our business development team is
evaluating potential assets across various stages of development, from preclinical to late-stage clinical programs. We maintain a disciplined
approach to asset acquisition, focusing on opportunities that offer significant market potential, address unmet medical needs, and can
leverage our established development and commercialization capabilities. Through these strategic in-licensing efforts, we aim to enhance
shareholder value while advancing our mission of bringing novel therapies to patients in need. See also “Item 4.B. Information on
the Company — In-Licensing Agreements.”
Our Product Pipeline
The table below summarizes key information about our products and
our clinical programs:
Motixafortide
Motixafortide is a novel, short peptide that functions as a high-affinity
antagonist of CXCR4, used in the treatment of stem cell mobilization and solid tumors. CXCR4 is expressed by normal hematopoietic cells
and overexpressed in various human cancers where its expression correlates with disease severity. CXCR4 is a chemokine receptor that mediates
the homing and retention of hematopoietic stem cells, or HSCs, in the bone marrow, and also mediates tumor progression, angiogenesis (growth
of new blood vessels in the tumor), metastasis (spread of tumor to other organs) and survival. Before “motixafortide” was
approved by the World Health Organization, or WHO, in 2019 as an International Nonproprietary Name, this therapeutic candidate was known
as “BL-8040”. In October 2021, we received WHO approval of the United States Adopted Name, or USAN, “motixafortide”.
The FDA-approved trade or brand name of motixafortide is APHEXDA.
Inhibition of CXCR4 by motixafortide leads to the mobilization
of HSCs from the bone marrow to the peripheral blood, enabling their collection for subsequent autologous or allogeneic transplantation
in cancer patients. Clinical data has demonstrated the ability of motixafortide to mobilize higher numbers of long-term engrafting HSCs
(CD34+CD38-CD45RA-CD90+CD49f+) as compared to G-CSF.
Motixafortide also mobilizes cancer cells from the bone marrow,
detaching them from their survival signals and sensitizing them to chemotherapy. In addition, motixafortide has demonstrated a direct
anti-cancer effect by inducing apoptosis (cell death) and inhibiting proliferation in various cancer cell models (multiple myeloma, non-Hodgkin’s
lymphoma, leukemia, non-small-cell lung carcinoma, neuroblastoma and melanoma).
34
In the field of immuno-oncology, motixafortide mediates infiltration
of T-cells while reducing immune regulatory cells in the tumor microenvironment, or TME. In clinical studies, the combination of motixafortide
with immune checkpoint inhibitors, such as anti PD-1, has shown T-cell activation and a reduction in tumor cell numbers.
In September 2023, the FDA approved motixafortide in combination
with G-CSF to mobilize hematopoietic stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients
with multiple myeloma. Following this approval, we commenced commercialization of motixafortide in the U.S. independently in order to
accelerate its availability to patients and to maximize the value of this innovative therapeutic candidate.
The FDA approval of APHEXDA was based on results from the 2-part,
Phase 3 GENESIS trial, a randomized, double-blind, placebo-controlled study evaluating the safety and efficacy of APHEXDA plus G-CSF compared
to placebo plus G-CSF, for the mobilization of hematopoietic stem cells for autologous transplantation in multiple myeloma patients. Top-line
results announced in May 2021 showed highly statistically significant evidence across all primary and secondary endpoints favoring motixafortide
in combination with G-CSF (p0.0001). In addition, the combination was found to be safe and well tolerated.
During 2023, we completed the build-out of the infrastructure for
commercial operations in the U.S. designed to support the commercialization of APHEXDA and launched the product in the U.S. In November
2024, we entered into the Ayrmid License Agreement with Ayrmid, pursuant to which we granted to Ayrmid an exclusive, transferable, royalty-bearing,
sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide, in order to commercialize
motixafortide across all indications, except solid tumor indications, in all territories other than Asia. For additional information concerning
the Ayrmid License Agreement, see “Item 4.B. Information on the Company — Business Overview — Recent Developments —
Out Licensing of Motixafortide in All Territories Except Asia
.
”
The following is a summary of the motixafortide clinical trials.
Stem cell mobilization
Multiple Myeloma
High-dose chemotherapy followed by stem cell transplantation is
an established treatment modality for a variety of hematologic malignancies, including multiple myeloma (MM), as well as various forms
of lymphoma and leukemia. Stem cells are mobilized from the bone marrow of the patient (i.e., autologous transplant) or donor (i.e., allogeneic
transplant) using granulocyte-colony stimulating factor (G-CSF), harvested from the peripheral blood by apheresis, and infused to the
patient after intensive myeloablation (chemo/radiotherapy).
In 2021, approximately 40,000 autologous transplants were conducted
in the U.S. and EU. It is estimated that approximately two-thirds, i.e., 60-70% of patients undergoing autologous transplantation in the
U.S. receive plerixafor on top of G-CSF. Based on our internal assessment, we estimate the value of the U.S. stem cell mobilization
market at approximately $300 million in 2023.
Multiple myeloma is the second most-common hematologic malignancy.
Multiple myeloma is an incurable blood cancer that affects certain white blood cells called plasma cells, which are found in the bone
marrow. When damaged, these plasma cells rapidly spread and replace normal cells in the bone marrow. According to the American Cancer
Society, in 2024, it is estimated that more than 36,000 people will be diagnosed with multiple myeloma, and nearly 13,000 people will
die from the disease in the U.S. While some people diagnosed with multiple myeloma initially have no symptoms, most patients are diagnosed
due to symptoms that can include bone fracture or pain, low red blood cell counts, tiredness, high calcium levels, kidney problems, or
infections.
35
ASCT is part of the standard treatment paradigm for a number of
blood cancers, including multiple myeloma. In the U.S., as many as 8,000 ASCTs are performed each year in patients with multiple myeloma.
The success of ASCT depends on adequate mobilization of stem cells during the treatment process. The American Society for Transplantation
and Cellular Therapy (ASTCT) guidelines recommend a collection target of 3-5 x 10
6
CD34+ cells/kg and a higher target of double the recommended target if multiple transplants are planned. The International Myeloma Working
Group (IMWG) guidelines recommend a collection of 4-6 x 10
6
CD34+ cells/kg with a higher target of 8-10 x 10
6
CD34+
cells/kg to allow for two transplants if needed. Historically, depending on induction regimens and mobilization strategies, up to 47%
of patients have had challenges collecting target numbers of hematopoietic stem cells for ASCT after one apheresis session. Increased
age, as well as exposure to lenalidomide-containing induction regimens, including 3-4 drug combination regimens, have been associated
with impaired stem cell mobilization.
To begin the stem cell mobilization process, a patient will receive
a daily dose of G-CSF for four days. Daily doses of G-CSF will continue until the target collection goal is met with the addition of up
to four daily doses of plerixafor as needed. For patients unable to mobilize sufficient numbers of cells for harvesting during this primary
mobilization phase, rescue therapy may be carried out followed by an additional number of apheresis sessions as necessary.
In March 2015, we reported successful top-line results from a Phase
1 safety and efficacy trial for the use of motixafortide as a novel stem cell mobilization treatment for allogeneic bone marrow transplantation
at Hadassah Medical Center in Jerusalem.
In March 2016, we initiated a Phase 2 trial for motixafortide in
allogeneic stem cell transplantation, conducted in collaboration with the Washington University School of Medicine, Division of Oncology
and Hematology. In May 2018, we announced positive top-line results of this study showing, among other things, that a single injection
of motixafortide mobilized sufficient amounts of CD34+ cells required for transplantation at a level of efficacy similar to that achieved
by using 4-6 injections of granulocyte colony-stimulating factor, or G-CSF, the current standard of care.
In December 2017, we commenced a randomized, placebo-controlled
Phase 3 registrational trial for motixafortide, known as the GENESIS trial, for the mobilization of HSCs for autologous transplantation
in patients with multiple myeloma. The trial began with a lead-in period for dose confirmation, which was to include 10-30 patients and
then progress to the placebo-controlled main part, which was designed to include 177 patients in more than 25 centers. Following review
of the positive results from treatment of the first 11 patients, the Data Monitoring Committee, or DMC, recommended that the lead-in part
of the study be stopped and that we should move immediately to the second part. Additional positive results from the lead-in period were
reported at the annual meeting of the European Society for Blood and Marrow Transplantation held in March 2019, where it was announced
that HSCs mobilized by motixafortide in combination with G-CSF were successfully engrafted in all 11 patients.
In August 2020, we announced a decision to perform an interim analysis
on approximately 65% of the original study sample size, primarily based on a significantly lower-than-anticipated patient-dropout rate
in the study. In October 2020, we announced positive results from the interim analysis. Based on the statistically significant evidence
favoring treatment with motixafortide, the study’s independent DMC issued a recommendation to us that patient enrollment may be
ceased immediately, without the need to recruit all 177 patients originally planned for the study. In accordance with the DMC’s
recommendation, study enrollment was completed at 122 patients. In May 2021, we announced positive top-line results from the Phase 3 trial.
Based on an analysis of data on all 122 enrolled patients (the intent to treat population) we found highly statistically significant evidence
across all primary and secondary endpoints favoring motixafortide in addition to G-CSF, as compared to placebo plus G-CSF (p0.0001).
The addition of motixafortide to G-CSF also allowed 88.3% of patients to undergo transplantation after only one apheresis session, compared
to 10.8% in the G-CSF arm – an 8.2-fold increase. The combination was also found to be generally well tolerated with a favorable
safety profile. In GENESIS, safety was evaluated in 92 patients with multiple myeloma who received motixafortide 1.25 mg/kg subcutaneously
plus G-CSF, and 42 patients who received placebo plus G-CSF. Serious adverse reactions occurred in 5.4% of patients receiving motixafortide
plus G-CSF. These reactions included vomiting, injection site reaction, hypersensitivity reaction, injection site cellulitis, hypokalemia
and hypoxia. The most common adverse reactions occurring in GENESIS (incidence 20%) were injection site reactions (pain, erythema
and pruritus), pruritus, flushing, and back pain. We continue to follow-up on the GENESIS study patients for relapse-free and overall
survival, according to the statistical analysis plan agreed upon with the FDA.
36
In October 2021, we announced positive results from a pharmacoeconomic
study evaluating the cost-effectiveness of using motixafortide as a primary stem cell mobilization agent on top of G-CSF, versus G-CSF
alone, in multiple myeloma patients undergoing autologous stem-cell transplantation (ASCT). The study was performed by the Global Health
Economics and Outcomes Research (HEOR) team of IQVIA, and was a pre-planned study conducted in parallel with the GENESIS Phase 3 trial.
The study concluded that the addition of motixafortide to G-CSF (the current standard of care) was associated with a statistically significant
decrease in health resource utilization (HRU) during the ASCT process, compared to G-CSF alone. Based on the significantly higher number
of mobilized cells and the lower number of apheresis sessions, lifetime estimates showed quality-adjusted-life-year (QALY) benefits and
net cost savings of approximately $19,000 (not including the cost of motixafortide), versus G-CSF alone.
In March 2022, we announced results from a follow-on pharmacoeconomic
study performed by the HEOR team of IQVIA. This study indirectly evaluated the cost-effectiveness of using motixafortide as a primary
stem cell mobilization agent in combination with G-CSF, against plerixafor in combination with G-CSF, in multiple myeloma patients undergoing
ASCT. The additional study results showed that motixafortide in combination with G-CSF, versus plerixafor in combination with G-CSF, demonstrated
a statistically significant decrease in HRU during the ASCT process. Based on the significantly higher number of mobilized cells and the
lower number of apheresis sessions, lifetime estimates showed QALY benefits and net cost savings of approximately $30,000 (not including
the cost of motixafortide), versus plerixafor plus G-CSF. The study findings strengthened the assessment that the use of motixafortide
in combination with G-CSF, as the potential new standard of care in mobilization for ASCT, would be a cost-effective option in the United
States, based on accepted willingness-to-pay (WTP) values for healthcare payers.
In September 2022, we submitted an NDA to the FDA for motixafortide
in stem cell mobilization for autologous bone marrow transplantation for multiple myeloma patients and as noted above in September 2023,
the FDA approved motixafortide in combination with G-CSF to mobilize hematopoietic stem cells to the peripheral blood for collection and
subsequent autologous transplantation in patients with multiple myeloma.
In November 2023, we initiated pivotal bridging study preparation
activities with Gloria, our Asia partner, to support potential approval and commercialization of motixafortide in stem-cell mobilization
in China. In February 2024, an IND was filed with the Center for Drug Evaluation of the National Medical Products Administration, which
was approved in May 2024. The study in China was originally planned to commence in the first half of 2025, with data approximately 18
months later. Gloria is not currently advancing this study according to schedule and it is unclear when such study will be initiated,
if at all. There can be no assurance that Gloria will meet its obligations under the Gloria License Agreement. See “Item 4.B. Information
on the Company — Business Overview—Our Product Pipeline—Out licensing of Motixafortide in Asia”.
Sickle Cell Disease
Sickle cell disease, or SCD, is one of the most common genetic
diseases globally, affecting millions of people throughout the world and disproportionately impacting persons of color. It is estimated
that 5% of the world’s population carries trait genes for hemoglobin disorders (including SCD) and in the U.S. it is estimated that
100,000 Americans are affected by SCD. SCD arises from mutations in the hemoglobin gene, ultimately leading to the production of abnormally
shaped (sickle) red blood cells that tend to stick within blood vessels causing their occlusion. The clinical manifestations of SCD include
anemia and blood vessel occlusion which can lead to both acute and chronic pain, as well as tissue ischemia across multiple organ systems
(e.g., stroke, heart attack, respiratory failure), ultimately compromising end organ function. The cumulative impact of these complications
significantly impacts morbidity and mortality for patients with SCD.
Effective HSC-based gene therapies depend upon the collection of
significant quantities of stem cells to engineer the treatments that enable the potential genetic treatment of SCD. Currently available
mobilization regimens can carry serious risk and side effects for patients with SCD or may not reliably yield optimal numbers of HSCs
for gene therapy. Peripheral blood mobilization of stem cells using the mobilization agent plerixafor is the current strategy to
collect HSCs for SCD gene therapies.
37
In March 2023, we entered into a clinical collaboration with Washington
University School of Medicine in St. Louis to advance a Phase 1 clinical trial in which motixafortide will be evaluated as a monotherapy
and in combination with natalizumab (VLA-4 inhibitor), as novel regimens to mobilize CD34+ hematopoietic stem cells (HSC) for gene therapies
in Sickle Cell Disease. The proof-of-concept investigator-initiated study plans to enroll five adults with a diagnosis of SCD who are
receiving automated red blood cell exchanges via apheresis. The trial’s primary objective is to assess the safety and tolerability
of motixafortide alone and in combination with natalizumab in SCD patients, defined by dose-limiting toxicities. Secondary objectives
include determining the number of CD34+ hematopoietic stem and progenitor cells (HSPCs) mobilized via leukapheresis; and determining the
pharmacokinetics of CD34+ HSPCs mobilization to peripheral blood in response to motixafortide alone and motixafortide plus natalizumab
in SCD patients. As anticipated, the study began enrolling in 2023, with first patient dosed in December 2023, and is ongoing. Initial
data from this study was presented at an oral presentation at the 66th American Society of Hematology (ASH) Annual Meeting. Five
patients completed mobilization and apheresis with motixafortide alone, and four of five with motixafortide in combination with natalizumab. Motixafortide
alone, and in combination with natalizumab, were found to be safe and well-tolerated in the trial. Common adverse events were transient
and included Grade 1-2 injection site (pruritis, tingling/pain) and systemic reactions (pruritis, hives). No grade 4 adverse events or
vaso-occlusive events occurred. Motixafortide alone, and in combination with natalizumab, resulted in robust CD34+ HSC mobilization
to peripheral blood. Motixafortide alone mobilized a median of 198 CD34+ cells/μl (range 77-690) to PB with median 3.49x10
6
CD34+ cells/kg as part of a single blood volume collection, projecting the collection of 13.9x10
6
HSCs in a normal, single-day four-blood-volume apheresis collection session. Motixafortide in combination with natalizumab mobilized a
median of 231 CD34+ cells/μl (range 117-408), with median 4.64x10
6
CD34+ cells/kg collected as part of a single blood volume collection, projecting the collection of 18.6x10
6
CD34+ HSCs in a single day four blood volume apheresis collection session. Following the out-licensing of motixafortide to Ayrmid, the
study is being continued under the Ayrmid License Agreement.
In May 2024, we announced that we entered into a multi-center Phase
1 clinical trial sponsored by St. Jude Children’s Research Hospital, Inc. to evaluate motixafortide for the mobilization of CD34+
hematopoietic stem cells (HSCs) used in the development of gene therapies for patients with SCD. Investigators in the trial from
St. Jude Children’s Research Hospital, Inc. and two other clinical sites have extensive SCD gene therapy clinical development experience
and are recognized leaders in the field. Following the out-licensing of motixafortide to Ayrmid, the study is being continued under the
Ayrmid License Agreement. The first patient in the study was dosed in February 2025.
Pancreatic Cancer
Novel, emerging therapeutic approaches for targeting solid tumors
in oncology are being developed and tested. Combinational therapies of immune checkpoint inhibitors with immuno-oncology supporting agents,
with or without chemotherapy, are among the most promising experimental treatments for solid malignancies.
Pancreatic cancer has a low rate of early diagnosis, a high mortality
rate and a poor five-year survival prognosis. Symptoms are usually non-specific and as a result, pancreatic cancer is often not diagnosed
until it reaches an advanced stage. Once the disease has metastasized, or spread to other organs, it becomes especially hard to treat.
In the United States in 2024, an estimated 67,000 adults will be diagnosed with the disease, which accounts for approximately 3% of all
cancers in the U.S. and about 8% of all cancer deaths. Worldwide, an estimated 495,000 people were diagnosed with the disease in
2020. In the U.S., if the cancer is detected at an early stage when surgical removal of the tumor is possible, the 5-year relative
survival rate is 44%. About 12% of people are initially diagnosed at this stage. If the cancer has spread to surrounding tissues or organs,
the 5-year relative survival rate is 15%. For the 52% of patients who are initially diagnosed with metastatic cancer, the 5-year
relative survival rate is 3%. In particular, hepatic (liver) metastases are a critical risk factor driving poor prognoses for patients
with metastatic pancreatic adenocarcinoma, or PDAC.
Furthermore, second-line patients that were diagnosed already with
metastatic disease have very few therapeutic options. The only approved regimen for second-line patients is Onivyde® in combination
with 5FU and LV. For these Stage IV at diagnosis patients reaching second-line therapy, median overall survival is only 4.7 months (Macarulla
et al, Pancreas 2020).
In January 2016, we entered into a clinical collaboration with
MSD (a tradename of Merck Co., Inc., Kenilworth, New Jersey) in the field of cancer immunotherapy. Based on this collaboration,
in September 2016 we initiated a Phase 2a study, known as the COMBAT/KEYNOTE-202 study, focusing on evaluating the mechanism of action
and safety of motixafortide in combination with KEYTRUDA
®
(pembrolizumab),
MSD’s anti-PD-1 therapy, in 37 patients with metastatic PDAC. The study was an open-label, multicenter, single-arm trial designed
to evaluate the mechanism of action, safety and tolerability, and clinical response of the combination of these therapies. The mechanistic
evaluation consisted of multiple pharmacodynamic parameters, including the ability to improve infiltration of T-cells into the tumor and
their reactivity. Top-line results showed that the dual combination demonstrated encouraging disease control and overall survival in patients
with metastatic pancreatic cancer. In addition, assessment of patient biopsies supported motixafortide’s ability to induce infiltration
of tumor-reactive T-cells into the tumor, while reducing the number of immune regulatory cells.
38
In July 2018, we announced the expansion of the COMBAT/KEYNOTE-202
study under the collaboration to include a triple combination arm investigating the safety, tolerability and efficacy of motixafortide,
KEYTRUDA
®
and chemotherapy. We initiated this
arm of the trial in December 2018. In December 2019, we announced that preliminary data from the study indicated that the triple combination
therapy showed a high level of disease control, including seven partial responders and 10 patients with stable disease out of 22 evaluable
patients. In February 2020, we completed the recruiting of a total of 43 patients for the study and in December 2020, we announced the
final results of the study. The results of the study showed substantial improvement as compared to comparable historical results of other
pancreatic cancer studies across all study endpoints. Of the 38 evaluable patients, median overall survival was 6.5 months, median progression
free survival was 4.0 months, confirmed overall response rate was 13.2%, overall response rate was 21.2% and disease control rate was
63.2%. The combination was generally well tolerated, with a safety profile consistent with the individual safety profile of each component
alone; adverse event and severe adverse event profiles were as expected with chemotherapy-based treatment regimens.
In October 2020, we announced that motixafortide will be tested
in combination with the anti-PD-1 cemiplimab (LIBTAYO
®
)
and standard-of-care chemotherapy (gemcitabine and nab-paclitaxel) in first-line PDAC. This investigator-initiated Phase 2, single-arm
study (CheMo4METPANC), led by Columbia University and supported equally by BioLineRx and Regeneron, initially enrolled 11 PDAC patients
in a pilot phase. In September 2023, we reported data from the pilot phase of the study. As of July 2023, of those 11 patients, seven
patients (64%) experienced a partial response (PR), of which six (55%) are now confirmed PRs, with one patient experiencing resolution
of the hepatic (liver) metastatic lesion. Three patients (27%) experienced stable disease, resulting in a disease control rate of
91%. These findings compare favorably to historic partial response and disease control rates of 23% and 48%, respectively, reported
with the chemotherapy combination of gemcitabine and nab-paclitaxel. Additionally, analysis of paired pre- and on-treatment biopsy samples
demonstrated an increase in CD8+ T-cell density in tumors from all 11 patients treated (P = 0.007).
Based on the preliminary data from this pilot phase, the planned
single-arm study was amended to a significantly larger, randomized multi-center study, with a new planned total of 108 patients. The amended
Phase 2b study is evaluating the combination of motixafortide, PD-1 inhibitor cemiplimab, and standard of care chemotherapies gemcitabine
and nab-paclitaxel, versus gemcitabine and nab-paclitaxel alone. The trial's primary endpoint is progression free survival, and a pre-specified
interim futility analysis will be conducted when 40% of progression free survival events are observed, which is expected in 2026. Secondary
objectives include safety, response rate, disease control rate, duration of clinical benefit and overall survival. In February 2024, the
first patient was dosed, with full enrollment projected for 2027.
We have also been advancing plans in collaboration with Gloria,
our Asia partner, for a Phase 2b randomized study assessing motixafortide in combination with the PD-1 inhibitor zimberelimab and standard-of-care
chemotherapy as first-line treatment in patients with metastatic pancreatic cancer. IND submission and protocol finalization was planned
for the first half of 2025, with study initiation expected during 2025. However, Gloria is not currently advancing this study according
to schedule and it is unclear when such study will be initiated, if at all. There can be no assurance that Gloria will meet its obligations
under the Gloria License Agreement. See “Item 4.B. Information on the Company — Business Overview—Our Product Pipeline—Out
licensing of Motixafortide in Asia”.
Other Studies
In addition to the above, from time to time a number of Company-sponsored
and investigator-initiated studies may be conducted in a variety of indications, to support the interest of the scientific and medical
communities in exploring additional uses for motixafortide. These studies serve to potentially further elucidate the mechanism of action
for motixafortide, generate data about motixafortide’s potential use in other indications, and inform the life-cycle management
process of motixafortide. The results of studies such as these are presented from time to time at relevant professional conferences.
39
Orphan Drug Designations
Motixafortide has been granted three Orphan Drug Designations by
the FDA: for use to mobilize HSCs from the bone marrow to peripheral blood for collection in autologous or allogeneic transplantation
(granted in July 2012); for the treatment of AML (granted in September 2013); and for the treatment of pancreatic cancer (granted in February
2019). Orphan Drug Designation is granted to therapeutics intended to treat rare diseases or conditions that affect not more than 200,000
people in the United States (or diseases or conditions that affect more than 200,000 people but where there is no reasonable expectation
that the product development cost will be recovered from product sales in the United States). If an Orphan Drug-Designated product subsequently
receives FDA approval for the disease or condition for which it was designated, the product is entitled to a seven-year marketing exclusivity
period, which means that the FDA may not approve any other applications to market the same drug for the same indication, except in very
limited circumstances (such as a showing of clinical superiority to the product with orphan exclusivity by means of greater effectiveness,
greater safety or providing a major contribution to patient care or in instances of drug supply issues), for seven years. In addition,
Orphan Drug Designation enables sponsors to apply for certain federal grants and tax credits for clinical trials and provides an exemption
from the Prescription Drug User Fee so long, as the sponsor’s annual revenue is below $50,000,000.
In January 2020, the EMA granted an Orphan Drug Designation to
motixafortide for the treatment of pancreatic cancer. In addition, in December 2023, the EMA granted Orphan Drug Designation to motixafortide
for treatment of patients undergoing hematopoietic stem cell transplantation. The EMA grants orphan medicinal product designation to investigational
drugs intended to treat, prevent or diagnose a life-threatening or chronically debilitating disease affecting fewer than five in 10,000
people in the EU and for which no satisfactory treatment is available or, if such treatment exists, the medicine must be of significant
benefit to those affected by the condition. Orphan medicinal product designation provides regulatory and financial incentives for companies
to develop and market therapies, including ten years of market exclusivity, protocol assistance, fee reductions and EU-funded research.
BL-5010
Our commercialized, legacy therapeutic product, BL-5010, is a customized,
proprietary pen-like applicator containing a novel, acidic, aqueous solution for the non-surgical removal of skin lesions. It offers an
alternative to painful, invasive and expensive removal treatments including cryotherapy, laser treatment and surgery. Since the treatment
is non-invasive, it poses minimal infection risk and eliminates the need for anesthesia, antiseptic precautions and bandaging. The pre-filled
device controls and standardizes the volume of solution applied to a lesion, ensuring accurate administration directly on the lesion and
preventing both accidental exposure of the healthy surrounding tissue and unintentional dripping. It has an ergonomic design, making it
easy to handle, and has been designed with a childproof cap. BL-5010 is applied topically on a skin lesion in a treatment lasting a few
minutes with the pen-like applicator and causes the lesion to gradually dry out and fall off within one to four weeks.
In December 2014, we entered into an exclusive out-licensing arrangement
with Perrigo Company plc, or Perrigo, for the rights to BL-5010 for over-the-counter, or OTC, indications in Europe, Australia and additional
selected countries. In March 2016, Perrigo received CE Mark approval for BL-5010 as a novel OTC treatment for the non-surgical removal
of warts. The commercial launch of products for treatment of this first OTC indication (warts/verrucas) commenced in Europe in the second
quarter of 2016. Since then, Perrigo has invested in improving the product and during 2019 launched an improved version of the product
in several European countries. In March 2020, we agreed that Perrigo could relinquish its license rights for certain countries that had
been included in its territory according to the original license agreement, and was also no longer obligated to develop, obtain regulatory
approval for, and commercialize products for a second OTC indication. In turn, in March 2020, we agreed with our licensor of the rights
to BL-5010, Innovative Pharmaceutical Concepts (IPC) Inc., or IPC, to return to IPC those license rights no longer out-licensed to Perrigo
as a result of the agreement described in the preceding sentence, in consideration of the payment to us of royalties or fees on sublicense
receipts.
In-Licensing Agreements
We have in-licensed and intend to continue to in-license development,
production and marketing rights from selected research and academic institutions in order to capitalize on the capabilities and technology
developed by these entities. We also seek to obtain technologies that complement and expand our existing technology base by entering into
license agreements with pharmaceutical and biotechnology companies. When entering into in-license agreements, we generally seek to obtain
unrestricted sublicense rights consistent with our primarily partner-driven strategy. We are generally obligated under these agreements
to diligently pursue product development, make development milestone payments, pay royalties on any product sales and make payments upon
the grant of sublicense rights. We generally insist on the right to terminate any in-license for convenience upon prior written notice
to the licensor.
The scope of payments we are required to make under our in-licensing
agreements is comprised of various components that are paid commensurate with the progressive development and commercialization of our
drug products.
40
Our in-licensing agreements generally provide for the following
types of payments:
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Revenue sharing payments. These are payments to be made to licensors with respect
to revenue we receive from sub-licensing to third parties for further development and commercialization of our drug products. These payments
are generally fixed at a percentage of the total revenues we earn from these sublicenses.
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Milestone payments. These payments are generally linked to the successful achievement
of milestones in the development and approval of drugs, such Phases 1, 2 and 3 of clinical trials and approvals of NDAs, and achievement
of sales milestones.
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Royalty payments. To the extent we elect to complete the development, licensing and
marketing of a therapeutic candidate, we are generally required to pay our licensors royalties on the sales of the end drug product. These
royalty payments are generally based on the net revenue from these sales. In certain instances, the rate of the royalty payments decreases
upon the expiration of the drug’s underlying patent and its transition into a generic drug.
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Additional payments. In addition to the above payments, certain of our in-license
agreements provide for a one-time or periodic payment that is not linked to milestones. Periodic payments may be paid until the commercialization
of the product, either by direct sales or sublicenses to third parties. Other agreements provide for the continuation of these payments
even following the commercialization of the licensed drug product.
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The following are descriptions of our in-licensing agreements associated
with our therapeutic candidates. In addition to the in-licensing agreements discussed herein, we have entered into other in-licensing
arrangements in connection with our therapeutic candidates in clinical, advanced preclinical and feasibility stages.
Motixafortide
In September 2012, we in-licensed the rights to motixafortide under
a license agreement with Biokine. Pursuant to the agreement, Biokine granted us an exclusive, worldwide, sublicensable license to develop,
manufacture, market and sell certain technology relating to a short peptide that functions as a high-affinity antagonist for CXCR4 and
the uses thereof.
There were no upfront payments due under the agreement. We are
obligated to pay a monthly development fee of $27,500 for certain development services that Biokine has committed to provide to us under
the agreement. The payment of this monthly fee is required to continue until March 2029.
We are responsible for paying all development costs incurred by
the parties in carrying out the development plan.
The agreement also grants us the right to grant sublicenses for
the licensed technology. In the case of a sublicense, we were initially required to pay Biokine a payment of 40% of the amounts we receive
as consideration in connection with a sublicense, including royalties, license fees, milestone payments, license maintenance fees and
equity, or the Sublicense Receipts. In October 2018, the agreement was amended to reduce the payments associated with sublicensing to
20% of Sublicense Receipts, in return for the payment by us of $10 million in cash plus $5 million in our restricted ADSs. Biokine is
also eligible to receive up to a total of $2.5 million in future milestone payments. In the case of self-commercialization, we are obligated
to make royalty payments of 10% of net sales, subject to certain limitations.
41
Before we in-licensed motixafortide, Biokine had received funding
for the project from the IIA, and as a condition to IIA giving its consent to our in-licensing of motixafortide, we were required to agree
to abide by any obligations resulting from such funding. However, we have the right to offset the full amount of any royalty payments
payable to the IIA from any payments otherwise due to Biokine as sublicensing royalties as described above.
We are obligated under the agreement with Biokine to make commercially
reasonable, good faith efforts to sublicense or commercialize motixafortide for fair consideration.
We have the first right to prepare, file, prosecute and maintain
any patent applications and patents, in respect of the licensed technology and any part thereof, at our expense, provided that we are
required to consult with Biokine regarding patent prosecution and patent maintenance. In addition, we have the right to take action in
the prosecution, prevention, or termination of any patent infringement of the licensed technology. We are responsible for all the expenses
of any patent infringement suit that we bring, including any expenses incurred by Biokine in connection with such suits, with such expenses
reimbursable from any sums recovered in such suit or in the settlement thereof for. After such reimbursement, if any funds remain, both
we and Biokine are each entitled to a certain percentage of any remaining sums.
The agreement will remain in effect until the expiration of all
of our royalty and sublicense revenue obligations to Biokine, determined on a product-by-product and country-by-country basis. We may
terminate the agreement for any reason on 90 days’ prior written notice to Biokine. Either party may terminate the agreement for
a material breach by the other party if the breaching party is unable to cure the breach within 30 days after receiving written notice
of the breach from the non-breaching party. With respect to any termination for a material breach, if the breach is not susceptible to
cure within the stated period and the breaching party uses diligent, good faith efforts to cure such breach, the stated period will be
extended by an additional 30 days. In addition, either party may terminate the agreement upon the occurrence of certain bankruptcy events.
On June 16, 2024, Biokine filed a complaint with the District
Court of Jerusalem against us. The complaint alleges breach of contract and a purported failure to make certain payments to Biokine under
our in-licensing agreement with Biokine for motixafortide. The lawsuit seeks compensatory damages in the amount of approximately $6.5
million and a declaratory judgment in favor of Biokine. On November 20, 2024, we and Biokine entered into an agreement to refer the
dispute to arbitration. See “Item 8. Financial Information — Biokine Claim.”
Termination of the agreement will result in a loss of all of our
rights to the drug and the licensed technology, which will revert to Biokine. In addition, any sublicense of ours will terminate provided
that, upon such termination and at the request of the sublicensee, Biokine will be required to enter into a separate license agreement
with the sublicensee on substantially the same terms as those contained in the applicable sublicense agreement.
BL-5010
In November 2007, we in-licensed the rights to develop and commercialize
BL-5010 under a license agreement with IPC. Under the agreement, IPC granted us an exclusive, worldwide, sublicensable license to develop,
manufacture, market and sell certain technology relating to an acid-based formulation for the non-surgical removal of skin lesions and
the uses thereof. We are obligated to use commercially reasonable efforts to develop the licensed technology in accordance with a specified
development plan, including meeting certain specified diligence goals. We are required to make low, single-digit royalty payments on the
net sales of the licensed technology if we manufacture and sell it on our own, subject to certain limitations. Our royalty payment obligations
are payable on a product-by-product and country-by-country basis, until the last to expire of any patent included within the licensed
technology in such country. We also have the right to grant sublicenses for the licensed technology and are required to pay IPC a payment,
within our standard range of sublicense receipt consideration, based on the revenues we receive as consideration in connection with any
sublicensing, development, manufacture, marketing, distribution or sale of the licensed technology.
The license agreement remains in effect until the expiration of
all of our license, royalty and sublicense revenue obligations to IPC, determined on a product-by-product and country-by-country basis,
unless we terminate the license agreement earlier. We may terminate the license agreement for any reason on 30 days’ prior written
notice. Either party may terminate the agreement for material breach if the breach is not cured within 30 days after written notice from
the non-breaching party. If the breach is not susceptible to cure within the stated period and the breaching party uses diligent, good
faith efforts to cure such breach, the stated period will be extended by an additional 30 days. In addition, either party may terminate
the agreement upon the occurrence of certain bankruptcy events.
42
Termination of the agreement will result in a loss of all of our
rights to the licensed technology, which would revert to IPC. In addition, any sublicense of the licensed technology will terminate provided
that, upon termination, at the request of the sublicensee, IPC is required to enter into a license agreement with the sublicensee on substantially
the same terms as those contained in the sublicense agreement.
AGI-134
In March 2017, we acquired substantially all of the outstanding shares of Agalimmune
and entered into a development agreement with Agalimmune and its selling shareholders, or the Agalimmune Development Agreement. The compound
is a synthetic alpha-gal immunotherapy in development for solid tumors. AGI-134 harnesses the body’s pre-existing, highly abundant,
anti-alpha-gal, or anti-Gal, antibodies to induce a systemic, specific anti-tumor response to the patient’s own tumor neo-antigens.
This response is designed to not only kill the tumor cells at the site of injection, but also to bring about a durable, follow-on, anti-metastatic
immune response. In December 2023, we determined to terminate development of AGI-134 and provided notice of our intent to terminate the
Agalimmune Development Agreement effective March 15, 2024.
The Agalimmune Development Agreement provides the selling shareholders
with a reversionary option, in the event of certain triggering events, including termination by us, that permits the selling shareholders
to re-acquire our equity interests in Agalimmune for nominal consideration. The reversionary option was not exercised and we intend to
either transfer ownership of Agalimmune to a third party, or to liquidate it during 2025.
Intellectual Property
Our success depends in part on our ability to obtain and maintain
proprietary protection for our therapeutic candidates, technology and know-how, to operate without infringing the proprietary rights of
others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among
other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are
important to the development of our business. We also rely on trade secrets, know-how and continuing technological innovation, as well
as on regulatory exclusivity, such as Orphan Drug designation or new chemical entity, or NCE, protection to develop and maintain our proprietary
position.
Patents
As of March 16, 2025, we owned or exclusively licensed for use
within our field of business 20 patent families that collectively contain 70 granted patents, 6 allowed patent applications and 73 pending
patent applications relating to the two candidates listed below. We are also pursuing patent protection for other drug candidates in our
pipeline. Patents related to our therapeutic candidates may provide future competitive advantages by providing exclusivity related to
the composition of matter, formulation, and method of administration of the applicable compounds and could materially improve the value
of our therapeutic candidates. The patent positions for our three therapeutic candidates are described below and include both issued patents
and pending patent applications we exclusively license. We vigorously defend our intellectual property to preserve our rights and gain
the benefit of our investment.
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The motixafortide drug product composition of matter and methods of manufacturing thereof are covered by
a granted U.S. patent and patent applications pending in the USA (two applications received notice of allowance). Israel, Europe, Japan,
Canada, Australia, China, India, Mexico, Brazil, Hong-Kong and Korea. The patents, if granted, will expire in December 2041, not including
any applicable patent term extension, which may add an additional term of up to five years for the U.S. patents. We also have an exclusive
license to a patent family that covers motixafortide combined with a PD1 antagonist for the treatment of cancer. Patents of this family
have been granted in the U.S., Israel, Australia, China, India, Mexico and Hong Kong; and member patent applications are pending in Australia,
Hong Kong, Europe, China, Canada, India, Israel and Brazil. The granted U.S. patent and patents to issue in the future based on pending
patent applications in this family will expire in 2036, not including any applicable patent term extension. In addition, we have an exclusive
license to nineteen other patent families pending or granted worldwide directed to methods of synthesis of motixafortide and methods of
use of motixafortide either alone or in combination with other drugs for the treatment of certain types of cancer and other indications.
Furthermore, we have Orphan Drug status for AML, pancreatic cancer and stem cell mobilization, as well as data exclusivity protection
afforded to motixafortide as an NCE.
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With respect to BL-5010, we have an exclusive license to a patent family directed
to a novel applicator uniquely configured for applying the BL-5010 composition to targeted skin tissue safely and effectively. Patents
in this family have been granted in the U.S., Europe, Israel, Japan, China, Australia and New Zealand. The patents will expire in 2033-2034.
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The patent positions of companies like ours are generally uncertain
and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will
depend on our success in obtaining effective claims and enforcing those claims once granted. We do not know whether any of our patent
applications or those patent applications that we license will result in the issuance of any patents. Our issued patents and those that
may issue in the future, or those licensed to us, may be challenged, narrowed, circumvented or found to be invalid or unenforceable, which
could limit our ability to stop competitors from marketing related products or the length of term of patent protection that we may have
for our products. Neither we nor our licensors can be certain that we were the first to invent the inventions claimed in our owned or
licensed patents or patent applications. In addition, our competitors may independently develop similar technologies or duplicate any
technology developed by us, and the rights granted under any issued patents may not provide us with any meaningful competitive advantages
against these competitors. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential
product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only
a short period following commercialization, thereby reducing any advantage of the patent.
Trade Secrets
We may rely, in some circumstances, on trade secrets to protect
our technology. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part,
by confidentiality agreements and assignment of invention agreements with our employees, consultants, scientific advisors and contractors.
We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises
and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations
and systems, such agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition,
our trade secrets may otherwise become known or be independently discovered by competitors.
Trademarks
We also rely on protection available under trademark laws. As of
March 16, 2025, we have registered textual trademarks for “APHEXDA” in Israel, Australia, Brazil, Canada, China, EU, UK, Japan,
Republic of Korea and the USA, as well as registered logo marks for “APHEXDA” in Israel, Australia, Brazil, China, EU, UK,
Japan, Republic of Korea and the USA. We also have the same pending logo trademark in Canada. We further have registered textual trademarks
for “BioLineRx” in the USA and registered logo marks for “BioLineRx” in Israel and the USA. We also claim common
law protections for other marks we use in our business. Competitors and other companies could adopt similar marks or try to prevent us
from using our marks, consequently impeding our ability to build brand identity and possibly leading to customer confusion.
44
Manufacturing
We rely on contract manufacturers to produce motixafortide for
clinical trials and commercial sales. We have contracted with third-party manufacturers for the manufacture of the API for motixafortide,
the supply of finished product for both commercial use and our clinical programs, and for labeling and packaging. In addition, under the
Gloria License Agreement, the Gloria Licensee may in the future serve as an additional source for the manufacture of the API for motixafortide.
To the extent possible and commercially practicable, we plan to develop back-up strategies for raw materials, manufacturing and testing
services for our commercial products. Given the long lead times and cost of establishing additional commercial manufacturing sites, we
expect that we will rely on single contract manufacturers to produce motixafortide for the foreseeable future. Our manufacturing partners
have a limited number of facilities in which our therapeutic candidates can be produced.
In connection with the Ayrmid License Agreement, we and Ayrmid
also entered into the Supply Agreement, according to which we will supply motixafortide to Ayrmid during the term of the Ayrmid License
Agreement, on a cost-plus basis, for both commercial and development supply. Furthermore, the Supply Agreement provides Ayrmid with “step-in
rights” with respect to the manufacture and supply of motixafortide upon the occurrence of certain trigger events.
Our laboratories are located in our headquarters in Modi’in,
Israel, and are in part compliant with FDA regulations setting forth current good laboratory practices, or GLP. While our bioanalytical
laboratory complies with these regulations, the chemistry and formulation laboratories, as well as the analytical laboratories, are limited
in manufacturing scale and resources and therefore are intended to support our projects for research and development activities only.
These laboratories are not compliant with current good manufacturing practices, or cGMP. Hence, we cannot independently manufacture drug
substances or drug products for our current clinical trials or for commercial distribution.
Our current and any future third-party manufacturers, their facilities
and all lots of drug substance and drug products used in our clinical trials and commercial sales are required to be in compliance with
cGMP. The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of
components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution,
laboratory controls, records and reports, and returned or salvaged products. The manufacturing facilities for our products must meet cGMP
requirements and FDA satisfaction before any product is approved and we can manufacture commercial products. Our current and any future
third-party manufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures
and operations used in the testing and manufacture of our products to assess our compliance with applicable regulations.
Failure to comply with statutory and regulatory requirements subjects
a manufacturer to possible legal or regulatory action, including refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters,
modification of promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports,
total or partial suspension of production or distribution, debarment, injunctions, fines, consent decrees, additional reporting requirements
and oversight if we become subject to a corporate integrity agreement or similar agreements to resolve allegations of non-compliance with
these laws, refusals of government contracts and new orders under existing contracts, exclusion from participation in federal and state
healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and individual imprisonments.
Contract Research Organizations
We outsource certain preclinical and clinical development activities
to CROs, which meet FDA or European Medicines Agency regulatory standards. We create and implement the drug development plans and, during
the preclinical and clinical phases of development, manage the CROs according to the specific requirements of the therapeutic candidate
under development.
Competition
The life science industry is intensely competitive. We face potential
competition from both large and small pharmaceutical and biotechnology companies, academic institutions, governmental and public and private
research institutions. Many of these organizations have substantially greater financial, technical, manufacturing and marketing resources
than we do. In certain cases, our competitors may also be able to use alternative technologies that do not infringe upon our patents to
formulate the active materials in our therapeutic candidates. They may, therefore, bring to market products that are able to compete with
our candidates, or other products that we may develop in the future.
45
Any therapeutic candidates that we successfully develop and commercialize
will compete with existing therapies and new therapies that may become available in the future. The key competitive factors affecting
the success of each therapeutic candidate, if approved, is likely to be their safety, efficacy, convenience, price, the level of proprietary
and generic competition, and the availability of coverage and reimbursement from government and other third‑party payors. Our competitors
may also obtain FDA or other regulatory approval for their therapeutic candidates more rapidly than we may be able to do so for any existing
or new product candidates of ours, which could result in their establishing a strong market position before we are able to enter the market.
Motixafortide
Stem cell mobilization
Motixafortide competes directly with Mozobil® (plerixafor), which is marketed by
Sanofi Genzyme as a stem cell mobilizer for autologous stem cell transplantation. During the third quarter of 2023, Mozobil’s last
to expire patent expired. As a result, several companies have launched generic formulations of plerixafor at a substantially reduced price
to Mozobil including Dr. Reddy’s Laboratories Ltd, Teva Pharmaceuticals USA Inc, Zydus Pharmaceuticals USA Inc, MSN Laboratories
Private Ltd, Eugia Pharma Specialities Ltd, Amneal EU Ltd, Gland Pharma Ltd. and Meitheal Pharmaceuticals Inc.
The competitive development pipeline in stem cell mobilization
is currently very scarce, but we are aware of GPCR Therapeutic’s burixafor +propranolol combination under clinical investigation
for stem cell mobilization in multiple myeloma, which may compete with motixafortide in the future.
CXCR4 landscape
A new CXCR4 inhibitor entered the market, X4 Pharmaceuticals' mavorixafor was approved
by the FDA and EMA in 2024 and is commercialized as XOLREMDI for WHIM syndrome. Further, we are aware of other CXCR4 inhibitors in various
stages of development including further development of mavorixafor for chronic neutropenia, burixafor developed by GPCR Therapeutics for
stem cell mobilization in multiple myeloma, AD-214 developed by AdAlta for idiopathic pulmonary fibrosis (IPF), and Balixafortide previously
developed by Spexis AG for the treatment of PDAC and TNBC. In addition, PentixaPharm is developing a radiotherapeutic targeting CXCR4-expressing
cells for various cancer indications.
Pancreatic cancer
Immuno-oncology is an area of great interest in the pharmaceutical
market, specifically, immuno-oncology combination therapies. Currently there are thousands of immuno-oncology combination treatments being
tested in clinical trials that aim to transform scientific innovation into practice-changing cancer drugs.
In the field of pancreatic cancer, motixafortide competes indirectly
with the few currently approved treatments for PDAC. Motixafortide is believed to modulate the effector/suppressor cell ratio toward a
proinflammatory profile, which may act synergistically with checkpoint inhibitor agents to enhance the anti-tumor activity of infiltrated
T cells. In the first line setting, Gemcitabine in combination with Abraxane® or FOLFIRINOX regimen are the current standard of care.
In February 2024, Ipsen’s Onivyde® obtained approval in first line PDAC in the NALIRIFOX regimen based on phase III NAPOLI
-3.
Oncologists have limited options of existing therapies for second-line
metastatic patients. The only FDA-approved second-line treatment is Onivyde® in combination with 5FU and LV for gemcitabine-treated
patients.
In addition to chemotherapy, Merck’s KEYTRUDA® was approved
for MSI-H cancers (approximately 1% of all cases) and Lynparza® is approved for maintenance of BRCA mutated metastatic pancreatic
cancer (approximately 7% of all cases), while in April 2024, ENHERTU® received accelerated approval for HER2+ solid tumors (approximately
2-6% of PDAC) following prior systemic treatment.
We are aware of late clinical stage development in metastatic PDAC by other companies,
including daraxonrasib by Revolution Medicines for RAS-mutant PDAC, quemliclustat from Arcus Biosciences, nadunolimab from Cantargia.
In the last several years we have seen a number of late-stage clinical
failures of compounds for advanced PDAC, most notably Fibrogen’s pamrevlumab, in the last year. Most of these failed trials have
been based on a single promising endpoint. Despite a busy early-stage clinical pipeline, there are only a few phase III and approved assets,
demonstrating a high attrition rate in PDAC.
46
BL-5010
BL-5010 competes with a variety of approved destructive and non-destructive
treatments for skin lesions. Both Endwarts
®
(Meda
Health) and Eskata
®
(Aclaris therapeutics) are medical
device-based treatments marketed for removal of warts.
Government Regulation
We operate in a highly controlled regulatory environment. Stringent
regulations establish requirements relating to analytical, toxicological and clinical standards and protocols in respect of the testing
of pharmaceuticals and medical devices. Regulations also cover research, development, manufacturing and reporting procedures, both pre-
and post-approval. In many markets, especially in Europe, marketing and pricing strategies are subject to national legislation or administrative
practices that include requirements to demonstrate not only the quality, safety and efficacy of a new product, but also its cost-effectiveness
relating to other treatment options. Failure to comply with regulations can result in stringent sanctions, including product recalls,
withdrawal of approvals, seizure of products and criminal prosecution.
Before obtaining regulatory approvals for the commercial sale of
our therapeutic candidates, we or our licensees must demonstrate through preclinical studies and clinical trials that our therapeutic
candidates are safe and effective. Historically, the results from nonclinical studies and early clinical trials often have not accurately
predicted results of later clinical trials. In addition, a number of pharmaceutical products have shown promising results in early clinical
trials but subsequently failed to establish sufficient safety and efficacy results to obtain necessary regulatory approvals. We have incurred
and will continue to incur substantial expense for, and devote a significant amount of time to, preclinical studies and clinical trials.
Many factors can delay the commencement and rate of completion of clinical trials, including the inability to recruit patients at the
expected rate, the inability to follow patients adequately after treatment, the failure to manufacture sufficient quantities of materials
used for clinical trials, and the emergence of unforeseen safety issues and governmental and regulatory delays. If a therapeutic candidate
fails to demonstrate safety and efficacy in clinical trials, this failure may delay development of other therapeutic candidates and hinder
our ability to conduct related preclinical studies and clinical trials. Additionally, as a result of these failures, we may also be unable
to find additional licensees or obtain additional financing.
Governmental authorities in all major markets require that a new
pharmaceutical product or medical device be approved or exempted from approval before it is marketed, and have established high standards
for technical appraisal, which can result in an expensive and lengthy approval process. The time to obtain approval varies by country.
In the past, it generally took from six months to four years from the application date, depending upon the quality of the results produced,
the degree of control exercised by the regulatory authority, the efficiency of the review procedure and the nature of the product. Some
products are never approved. In recent years, there has been a trend towards shorter regulatory review times in the United States as well
as certain European countries, despite increased regulation and higher quality, safety and efficacy standards.
Historically, different requirements by different countries’
regulatory authorities have influenced the submission of applications. However, a trend toward harmonization of drug and medical device
approval standards, starting in individual countries in Europe and then in the EU as a whole, in Japan, the United Kingdom and in the
United States under the aegis of what is now known as the International Council on Harmonisation, or ICH (created as the International
Conference on Harmonisation in 1990), is gradually narrowing these differences. In many cases, compliance with ICH standards can help
avoid duplication of non-clinical and clinical trials and enable companies to use the same basis for submissions to each of the respective
regulatory authorities. The adoption of the Common Technical Document format by the ICH has greatly facilitated use of a single regulatory
submission for seeking approval in the ICH regions and many other countries worldwide.
Summaries of the United States, EU, United Kingdom and Israeli
regulatory processes follow below.
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United States
In the United States, drugs are subject to rigorous regulation
by the FDA. The U.S. Federal Food, Drug and Cosmetic Act, or FDCA, and other federal and state statutes and regulations govern, among
other things, the research, development, testing, manufacture, storage, record-keeping, packaging, labeling, adverse event reporting,
advertising, promotion, marketing, distribution and import and export of pharmaceutical products. Failure to comply with the applicable
U.S. requirements may subject us to stringent administrative or judicial sanctions, such as agency refusal to approve pending applications,
warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions or criminal
prosecution.
Unless a drug is exempt from the NDA process or the Biologics License
Application, or BLA, process or subject to another regulatory procedure, the steps required before a drug may be marketed in the United
States include:
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preclinical laboratory tests, animal studies and formulation development;
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submission to the FDA of an Investigational New Drug, or IND, application to conduct human clinical testing;
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adequate and well controlled clinical trials to determine the safety and efficacy of the drug for each indication as well as to establish
the exposure levels;
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submission to the FDA of an application for marketing approval;
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satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is manufactured; and
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FDA review and approval of the drug and drug labeling for marketing.
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Preclinical studies include laboratory evaluation of product chemistry,
toxicity, formulation and stability, as well as animal studies. For preclinical studies conducted in the United States, and certain studies
carried out outside the United States, we submit the results of the nonclinical studies, together with manufacturing information and analytical
results, to the FDA as part of an IND, which must become effective before we may commence human clinical trials.
Clinical Trials (INDs)
Clinical trials involve the administration of the investigational
drug to people under the supervision of qualified investigators in accordance with the principles of good clinical practice, or GCP. We
conduct clinical trials under protocols detailing the trial objectives, the parameters to be used in monitoring safety, and the effectiveness
criteria to be evaluated. We must submit each U.S. study protocol to the FDA as part of an IND. An IND will automatically become effective
30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the
trials as outlined in the IND. In such a case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before
clinical trials can proceed. Submission of an IND does not always result in the FDA allowing clinical trials to commence and the FDA may
halt a clinical trial if unexpected safety issues surface or the study is not being conducted in compliance with applicable requirements.
The FDA may refuse to accept an IND for review if applicable regulatory
requirements are not met. Moreover, the FDA may delay or prevent the start of clinical trials if the manufacturing of the study drug fails
to meet cGMP requirements or the clinical trials are not adequately designed. Such government regulation may delay or prevent the study
and marketing of potential products for a considerable time period and may impose costly procedures upon a manufacturer’s activities.
In addition, the FDA may, at any time, impose a clinical hold on ongoing clinical trials. If the FDA imposes a clinical hold, clinical
trials cannot continue without FDA authorization and then only under terms authorized by the FDA.
Success in early-stage clinical trials does not assure success
in later-stage clinical trials. Results obtained from clinical activities are not always conclusive and may be susceptible to varying
interpretations that could delay, limit or prevent regulatory approval. Even if a therapeutic candidate receives regulatory approval,
later discovery of previously unknown problems with a product may result in restrictions on the product or even withdrawal of marketing
approval for the product.
Foreign clinical trials may or may not be conducted under an IND.
However, their safety assessments should be submitted annually.
48
We conduct clinical trials typically in three sequential phases
(1-3), but the phases may overlap or be combined. An institutional review board, or IRB, must review and approve each trial before it
can begin. Phase 1 includes the initial administration of a tested drug to a small number of humans. These trials are closely monitored
and may be conducted in patients but are usually conducted in healthy volunteer subjects. These trials are designed to determine the metabolic
and pharmacologic actions of the drug in humans and the side effects associated with increasing doses as well as, if possible, to gain
early evidence of effectiveness. Phase 2 usually involves trials in a limited patient population to evaluate dosage tolerance and appropriate
dosage, identify possible adverse effects and safety risks and preliminarily evaluate the efficacy of the drug for specific indications.
Phase 3 trials are large trials used to further evaluate clinical efficacy and test further for safety by using the drug in its final
form in an expanded patient population. There can be no assurance that we or our licensees will successfully complete Phase 1, Phase 2
or Phase 3 testing with respect to any therapeutic candidate within any specified period of time, if at all. Furthermore, clinical trials
may be suspended at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable
health risk. We and our licensees perform some of our nonclinical and clinical testing outside of the United States. The acceptability
of the results of our preclinical and clinical testing by the FDA will be dependent upon adherence to applicable U.S. and foreign standards
and requirements, including GLP, GCP and the Declaration of Helsinki for protection of human subjects.
Marketing Applications (NDAs and BLAs)
After successful completion of the required clinical testing, an
NDA, or in the case of certain biological products, a BLA, is prepared and submitted to the FDA. FDA approval of the NDA or BLA is required
before product marketing may begin in the United States. The NDA/BLA must include the preclinical and clinical testing results and a compilation
of detailed information relating to the product’s pharmacology, toxicology, chemistry, manufacture and manufacturing controls. The
cost of preparing and submitting an NDA may be substantial. Under U.S. federal law, the submission of NDAs is generally subject to substantial
application user fees, and the manufacturer and/or sponsor under an NDA approved by the FDA is also subject to annual product and establishment
user fees. These fees are typically increased annually.
The FDA has 60 days from its receipt of an NDA/BLA to determine
whether the application will be accepted for filing based on the FDA threshold determination that the application is sufficiently complete
to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the submitted application.
Under U.S. federal law, the FDA has agreed to certain performance goals in the review of NDAs/BLAs. Most such applications for non-priority
drug products are to be reviewed within 10 months following acceptance of the application for filing. The review process may be significantly
extended by FDA requests for additional information or clarification or if the applicant submits a major amendment during the review.
The FDA may also refer applications to an advisory committee, typically a panel that includes clinicians and other experts, for review,
evaluation and a recommendation as to whether the application should be approved. This often, but not exclusively, occurs for novel drug
products or drug products that present difficult questions of safety or efficacy. The FDA is not bound by the recommendation of an advisory
committee.
Before approving an application, the FDA typically will inspect
the facility or facilities where the product is manufactured. The FDA will not approve the application unless the FDA determines that
the product is manufactured in substantial compliance with cGMP. If the FDA determines that the NDA or BLA is supported by adequate data
and information, the FDA may issue an approval letter. During review, the FDA may request additional information via an information request,
or IR letter, or state deficiencies via a deficiency letter, or DR letter. Upon compliance with the conditions stated, the FDA will typically
issue an approval letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific
indications. As a condition of approval, the FDA may require additional trials or post-approval testing and surveillance to monitor the
drug’s safety or efficacy, the adoption of risk evaluation and mitigation strategies, and may impose other conditions, including
labeling and marketing restrictions on the use of the drug, which can materially affect its potential market and profitability. Once granted,
product approvals may be withdrawn if compliance with regulatory standards for manufacturing and quality control are not maintained or
if additional safety problems are identified following initial marketing.
If the FDA’s evaluation of the NDA or BLA submission or manufacturing
processes and facilities is not favorable, the FDA may refuse to approve the NDA or BLA and may issue a complete response letter. The
complete response letter, or CRL, indicates that the review cycle for an application is complete and that the application is not ready
for approval. The complete response letter will describe specific deficiencies and, when possible, will outline recommended actions the
applicant might take in order to place the application in condition for approval. Following receipt of a CRL, the company may submit additional
information and start a new review cycle, withdraw the application or request a hearing. Failure to take any of the above actions may
result in the FDA considering the application withdrawn following one year from issuance of the CRL. In such cases, the FDA will notify
the company and the company will have 30 days to respond and request an extension of time in which to resubmit the application. The FDA
may grant reasonable requests for extension. If the company does not respond within 30 days of the FDA’s notification, the application
will be considered withdrawn. Even with submission of additional information for a new review cycle, the FDA ultimately may decide that
the application does not satisfy the regulatory criteria for approval.
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The Pediatric Research Equity Act, or PREA, requires NDAs and BLAs
(or supplements) for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration to contain
results assessing the safety and efficacy for the claimed indication in all relevant pediatric subpopulations. Data to support dosing
and administration also must be provided for each pediatric subpopulation for which the drug is safe and effective. The FDA may grant
deferrals for the submission of results or full or partial waivers from the PREA requirements (for example, if the product is ready for
approval in adults before pediatric studies are complete, if additional safety data is needed, among others). In addition, under the Best
Pharmaceuticals for Children Act, or BPCA, the FDA may issue a written request to the company to conduct clinical trials in the pediatric
population that are related to the moiety and expand on the claimed indication. The studies are voluntary but may award the company with
6 months of marketing exclusivity if conducted according to good scientific principles and address the written request. Finally, a sponsor
can request that a product that must be studied under PREA to be studied also under the BPCA to allow the sponsor to be eligible for six-months
of pediatric exclusivity. The pediatric studies requested under BPCA are usually more extensive and would generally also fulfill the PREA
requirement; however, even if the sponsor does not complete the studies outlined in the BPCA written request, it is still required to
complete any studies required under PREA.
Post-Marketing Requirements
Once an NDA or BLA is approved, the drug sponsor will be subject
to certain post-approval requirements, including requirements for adverse event reporting, submission of periodic reports, manufacturing,
labeling, packaging, advertising, promotion, distribution, record-keeping and other requirements. For example, the approval may be subject
to limitations on the uses for which the product may be marketed or conditions of approval, or contain requirements for costly post-marketing
testing and surveillance to monitor the safety or efficacy of the product or require the adoption of risk evaluation and mitigation strategies.
In addition, the FDA requires the reporting of any adverse effects observed after the approval or marketing of a therapeutic candidate
and such events could result in limitations on the use of such approved product or its withdrawal from the marketplace. Also, some types
of changes to the approved product, such as manufacturing changes and labeling claims, are subject to further FDA review and approval.
Additionally, the FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, the
FDA requires substantiation of any claims of superiority of one product over another including, in many cases, requirements that such
claims be proven by adequate and well controlled head-to-head clinical trials. To the extent that market acceptance of our therapeutic
candidates may depend on their superiority over existing products, any restriction on our ability to advertise or otherwise promote claims
of superiority, or any requirements to conduct additional expensive clinical trials to provide proof of such claims, could negatively
affect the sales of our therapeutic candidates and our costs.
Orphan Drug Designation
The Orphan Drug Act, or ODA, provides for granting special status
to a drug or biological product to treat a rare disease or condition (i.e., a disease or condition that affects fewer than 200,000 individuals
in the United States), or a disease or condition that affects more than 200,000 individuals in the United States but where there is no
reasonable expectation that the product development cost will be recovered from product sales in the United States, upon request of a
sponsor. This status is referred to as orphan designation (or sometimes “orphan status”). For a therapeutic candidate to qualify
for orphan designation, both the candidate and the disease or condition must meet certain criteria specified in the ODA’s implementing
regulations (set forth at 21 CFR Part 316). Orphan designation qualifies the sponsor of the candidate for various development incentives
of the ODA, including tax credits for qualified clinical testing, waiver of NDA/BLA user fees and eligibility for seven-year marketing
exclusivity, referred to as orphan exclusivity upon marketing approval. The granting of an orphan designation request does not alter the
standard regulatory requirements and process for obtaining marketing approval. Safety and effectiveness of a candidate must still be established
through adequate and well-controlled studies.
Expedited Programs for Serious Conditions
The FDA has put in place four programs intended to facilitate and
expedite development and review of a new drug intended to address an unmet medical need in the treatment of a serious or life-threatening
condition: fast track designation, breakthrough therapy designation, accelerated approval and priority review designation. Each program
offers the sponsor a defined set of opportunities such as expedited development and review, intensive FDA guidance during development,
marketing approval based on an effect on a surrogate endpoint or an intermediate clinical endpoint that is reasonably likely to predict
the drug’s clinical benefit, and a shorter time for review of marketing application. Fast Track and Breakthrough Therapy designations
may be requested during development, while Accelerated Approval and Priority Review relate to the marketing approval stage.
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European
Union/European Economic Area
Clinical Trials
Within the European Union (EU) and the European Economic Area (EEA),
which is composed of the 27 member states of the EU plus Norway, Iceland and Liechtenstein, the authorization of clinical trials
occurs at member state level. The European Medicines Agency, or EMA, plays a key role in ensuring that GCP standards are applied across
the European Economic Area, or EEA, in cooperation with the member states. It also manages a database of clinical trials carried out in
the EU.
Clinical trials in the EU are regulated under Regulation (EU) 536/2014
(CTR), as amended on April 5, 2022. As opposed to the previous Directive 2001/20/EC (CTD), which as an EU directive was not directly applicable
in the member states, the CTR has immediate effect for the whole EU and did not have to be transposed into national law. While national
laws implementing the CTD varied to a great extent, the CTR provides for a significant further harmonization of the law governing clinical
trials in the EU. After significant delay, the CTR became applicable on January 31, 2022. The CTR now harmonizes the assessment and supervision
processes for clinical trials throughout the EU via the Clinical Trials Information System (CTIS), which includes a centralized EU portal
and database for clinical trials. From 31 January 2023 onwards, clinical trial sponsors need to apply to start a clinical trial via CTIS.
From 31 January 2025, any trials previously approved under the CTD that continue to run after such date will need to comply with CTR and
their sponsors must have recorded the required information on such trials in CTIS. The CTR provides inter alia:
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Consistent rules for conducting clinical trials throughout the EU;
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Making information on the authorization, conduct and results of each clinical trial carried out in the EU publicly available;
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Harmonized electronic submission and assessment process for clinical trials conducted in multiple member states;
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Improved collaboration, information sharing and decision-making between and within member states;
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Increased transparency of information on clinical trials; and
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Higher standards of safety for all participants in EU clinical trials.
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The authorization of a clinical trial (Phase 1-3) in an EU member
state requires the submission of a clinical trial application (CTA) via the EU Portal, CTIS. The application will be reviewed by the competent
authorities of the member states where the trial is supposed to take place. The application and approval process is conducted by the member
states under the cooperation system set forth in the CTR. Particularities under member states’ national law still apply to some
extent. In general, the CTA should include, among other documents, the study protocol, results of the nonclinical studies and manufacturing
information and analytical results. Also, the sponsor has to suggest one of the concerned member states as reporting member state. The
CTR aims at speeding up the validation and review of clinical trial applications and therefore provides strict deadlines.
Marketing Authorization Procedures
A medicinal product may only be placed on the market in the EEA
if it has obtained a marketing authorization according to the applicable EU and/or member state law. A marketing authorization may either
be granted in a national procedure, or in a coordinated procedure of several member states pursuant to Directive 2001/83/EC, as amended
on January 1, 2025, or under the centralized EU procedure in accordance with Regulation (EC) No. 726/2004, as amended on January 28, 2022.
Depending on the nature of the medicinal product, several different legal frameworks of the EU and the member states may be relevant for
the market clearance.
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Centralized Procedure (CP)
The Centralized Procedure according to Regulation 726/2004/EC (as
amended on January 28, 2022) allows a marketing authorization holder to market the medicine and make it available to patients and healthcare
professionals throughout the entire EEA on the basis of a single marketing authorization, granted by the European Commission, acting in
its capacity as the European Licensing Authority on the advice of the EMA. The EMA is the administrative body responsible for coordinating
the existing scientific resources available in the member states for evaluation, supervision and pharmacovigilance of medicinal products.
Certain medicinal products (e.g., products derived from biotechnology,
advanced-therapy medicinal products, orphan medicinal products and medicinal products for human use, which contain an active substance
authorized in the European Union after May 20, 2004 and which are intended for the treatment of AIDS, cancer, neurodegenerative disorders,
diabetes, auto-immune diseases and other immune dysfunctions or viral diseases) must be authorized centrally. The centralized authorization
procedure is optional for other medicinal products if they contain a new active substance which on May 20, 2002 was not authorized in
the European Union, or if the applicant shows that the medicinal product concerned constitutes a significant therapeutic, scientific or
technical innovation or that the granting of authorization is in the interest of patients in the European Union. For each application
submitted to the EMA for scientific assessment, the EMA is required to ensure that the opinion of the Committee for Medicinal Products
for Human Use, or CHMP, is given within 210 days after receipt of a valid application or within 150 days by means of an accelerated procedure
(excluding clock stops); the review period can be extended. If the opinion is positive, the EMA is required to send the opinion to the
European Commission, which is responsible for preparing the decision granting a marketing authorization. If the initial opinion of the
CHMP is negative, the applicant is afforded an opportunity to seek a re-examination of the opinion. The CHMP is required to re-examine
its opinion within 60 days following receipt of the request by the applicant. A refusal of a centralized marketing authorization constitutes
a prohibition on placing the given medicinal product on the market in the EU.
The EMA’s Committee for Advanced Therapies (CAT) is responsible
for assessing the quality, safety and efficacy of advanced therapy medicinal products (ATMP). ATMP include gene therapy medicinal products,
somatic cell therapy medicinal products and tissue engineered medicinal products. The main responsibility of the CAT is to prepare a draft
opinion on an application for marketing authorization for an ATMP candidate that is submitted to the EMA. The EMA’s Committee for
Medicinal Products for Human Use (CHMP) then provides a final opinion regarding the application for marketing authorization. The European
Commission grants or refuses marketing authorization after the CHMP has delivered its opinion. ATMP are further regulated under Regulation
(EC) No 1394/2007 on advanced therapy medicinal products, as amended on July 26, 2024 and Directive 2001/83/EC on medicinal products
for human use, as amended on January 1, 2025.
National Authorization Procedure
A National Authorization Procedure is used when applying for a
marketing authorization in one individual EEA state. The national procedure can only be used if the medicinal product does not already
have a marketing authorization in another EEA state.
Mutual Recognition Procedure (MRP)
The mutual recognition procedure (Art. 28 Directive 2004/27/EC)
should be used if a medicinal product already has a marketing authorization in one EEA member state, and the authorization holder would
like to extend the authorization to other member states. An application for mutual recognition may be addressed to one or more EEA countries.
The country in which the national marketing authorization has been granted acts as the “Reference Member State,” and the other
countries concerned (Concerned Member States) can, upon successful completion of the procedure, recognize the marketing authorization.
To this end, the marketing authorization holder shall request the Reference Member State either to prepare an assessment report on the
product or, if necessary, to update any existing assessment report. The assessment time is 180 days plus 30 days.
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Decentralized Procedure (DCP)
The decentralized procedure (introduced by Directive 2004/27/EU)
is used in cases where the medicinal product has not received a marketing authorization in the EU at the time of application. It allows
the common assessment of an application submitted simultaneously to several member states. One of the member states will take the lead
in evaluating the application as Reference Member State to facilitate agreement with the Concerned Member States and the grant of a national
marketing authorization in all of these member states. To this end, the Reference Member State conducts a detailed review and prepares
a draft assessment report, a draft assessment report, a draft summary of product characteristics and a draft of the labelling and package
leaflet and shall send these documents to the Concerned Member States to provide comments. The assessment time is 210 days plus 30 days.
Manufacturing Requirements
Any medicinal product placed on the market in the EEA must be manufactured
in accordance with the principles of good manufacturing practice as set out in Directive EC2017/1572 supplementing Directive 2001/83/EC
of the European Parliament and of the Council as regards the principles and guidelines of good manufacturing practice for medicinal products
for human use for human use and Volume 4 of the “Rules Governing Medicinal Products in the European Community”. Directive
2017/1572/EU has replaced Directive 2003/94/EC. Directive 2003/94/EC will still be applicable to clinical trials conducted in accordance
with the former regime under transitional provisions. Furthermore, distribution of medicinal products in the EU is subject to Directive
2001/83/EC and current guidance on good distribution practice, or GDP. Moreover, EU law requires the clinical results in support of clinical
safety and efficacy to be based upon clinical trials conducted in the EU in compliance with the requirements of the CTR and Directive
2005/28/EC, which implement good clinical practice in the conduct of clinical trials on medicinal products for human use. Clinical trials
conducted outside the EU and used to support applications for marketing within the EU must have been conducted in a way consistent with
the principles set out in the CTR or if conducted prior to 31 January 2022, its predecessor Directive 2001/20/EC. The conduct of a clinical
trial in the EU requires, pursuant to the CTR, authorization by the relevant national competent authority where a trial takes place, and
an ethics committee to have issued a favorable opinion in relation to the arrangements for the trial. It also requires that the sponsor
of the trial, or a person authorized to act on his behalf in relation to the trial, be established in the EU.
Law Relating to Pediatric Research
Regulation (EC) 1901/2006 (as amended by Regulation (EC) 1902/2006
and Regulation (EU) 2019/5), or the Pediatric Regulation, was adopted on December 12, 2006. This Regulation governs the development of
medicinal products for human use in order to meet the specific therapeutic needs of the pediatric population (children aged 0 to 17 years).
It requires any application for marketing authorization made after July 26, 2008 in respect of a medicinal product not authorized in the
EU on January 26, 2007, the time the Regulation entered into force, to include studies in children conducted in accordance with a pediatric
investigation plan agreed to by the relevant European authorities. This does not apply if the product is subject to an agreed waiver or
deferral or if the product is excluded from the scope of Regulation 1901/2006, which is the case for
inter
alia
generics, homeopathic and traditional (herbal) medicinal products. Waivers can be granted in certain circumstances where pediatric
studies are not required or desirable. Deferrals can be granted in certain circumstances where the initiation or completion of pediatric
studies should be deferred until appropriate studies in adults have been performed. Moreover, this regulation imposes the same obligation
from January 26, 2009 on an applicant seeking approval of a new indication, pharmaceutical form or route of administration for a product
already authorized and still protected by a supplementary protection certificate granted under Regulation (EC) no. 469/2009 or its precursor
Regulation (EEC) 1768/92 by a patent that qualifies for the granting of such a supplementary protection certificate. The pediatric Regulation
1901/2006 also provides, subject to certain conditions, a reward for performing such pediatric studies, regardless of whether the pediatric
results provided resulted in the grant of a pediatric indication. This reward comes in the form of an extension of six months to the supplementary
protection certificate granted in respect of the product, unless the product is subject to Orphan Drug designation, in which case the
10-year market exclusivity period for such orphan products is extended to 12 years. If any of the non-centralized procedures for marketing
authorization have been used, the six-month extension of the supplementary protection certificate is only granted if the medicinal product
is authorized in all member states. Where the product is no longer covered by a patent or supplementary protection certificate, the applicant
may make a separate application for a Pediatric Use Marketing Authorization, or PUMA, which, on approval, will provide eight years’
protection for data and 10 years’ marketing protection for the pediatric results.
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Post-authorization Obligations
An authorization to market a medicinal product in the EU carries
with it an obligation to comply with many post-authorization regulations relating to the marketing and other activities of authorization
holders. These may include requirements relating to provision of a risk management plan and provision of annual periodic safety update
reports, carrying out of post-authorization efficacy studies and/or post-authorization safety studies, maintenance of a pharmacovigilance
system master file, adverse event reporting, signal detection and management and other pharmacovigilance activities conducted under an
established quality system, advertising, packaging and labelling, patient package leaflets, and distribution. The regulations frequently
operate within a criminal law framework, and failure to comply with the requirements may not only affect the authorization, but also can
lead to financial and other sanctions levied on the company in question and responsible officers. EU pharmacovigilance legislation has
been significantly modified by the Pharmacovigilance Directive, Directive 2010/84/EU (as amended on January 20, 2011) which amended the
legal framework of pharmacovigilance for medicines marketed within the EU provided in Regulation (EC) No 726/2004 with respect to EU authorized
medicinal products and in Directive 2001/83/EC with respect to nationally authorized medicinal products (including those authorized through
the mutual recognition and decentralized systems). Furthermore, EU good pharmacovigilance practice (GVP) rules apply. With the amended
pharmacovigilance requirements, the financial and organizational burden on market authorization holders increased significantly, such
as the obligation to maintain a pharmacovigilance system master file that applies to all holders of marketing authorizations granted in
accordance with Directive 2001/83/EC (as amended on January 1, 2025) or Regulation (EC) No 726/2004 (as amended on January 28, 2022).
Marketing authorization holders must furthermore collect data on adverse events associated with use of the authorized product outside
the scope of the authorization. Pharmacovigilance for biological products and medicines with a new active substance is strengthened by
subjecting their authorization to additional monitoring activities.
Another relevant aspect in the EU regulatory framework is the “sunset
clause”: a provision leading to the cessation of the validity of any marketing authorization if it is not followed by marketing
within three years or, if marketing is interrupted for a period of three consecutive years.
Data Privacy in the EU
The EU has a strict regime on data privacy under the General Regulation
on Data Protection, Regulation 2016/679 (GDPR), as amended on May 4, 2016, that has become applicable on May 25, 2018. The GDPR as an
EU regulation does not have to be implemented into member states’ national law but applies directly in all member states. It applies
to companies with an establishment in the European Economic Area (EEA) that includes the 27 member states of the EU and Norway, Iceland
and Liechtenstein. Furthermore, the GDPR applies to companies not located in the EEA but processing personal data of individuals located
in the EEA (e.g., through online business). The GDPR implements stringent operational requirements for controllers of personal data, including,
for example, obligations to justify the collection, use and other processing of personal data (e.g., based on the individual’s consent),
to notify the individuals concerned about data processing activities, to protect all processed personal data through appropriate technical
and organizational measures, and to implement a data protection compliance management. Furthermore, the GDPR defines high data security
and compliance standards for the transfer of personal data to third countries, including the U.S. The operational requirements under the
GDPR are even stricter in case of sensitive personal data, such as health or genetic data, that typically have to be stored in a pseudonymized
(i.e., key-coded) manner. The GDPR provides that EU member states may in certain areas deviate from GDPR standards which results in varying
laws and regulations at member states level. The applicable data protection laws in the EEA may limit our ability to share and otherwise
process personal data. If our business falls below the GDPR standards, we may be subject to severe administrative fines up to 20,000,000
or up to 4 % of the total worldwide annual turnover of our preceding financial year, if greater, and other administrative penalties
including criminal liability, which may be onerous and adversely affect our business, financial condition, results of operations and prospects.
Failure to comply with the GDPR and related laws may also give risk to increased risk of private actions, including a new form of class
action that is available under the GDPR.
Israel
Israel Ministry of the Environment — Toxin Permit
In accordance with the Israeli Dangerous Substances Law - 1993,
the Israeli Ministry of the Environment is required to grant a permit in order to use toxic materials. Because we utilize toxic materials
in the course of operation of our laboratories, we were required to apply for a permit to use these materials. Our current toxin permit
will remain in effect until August 2031.
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Clinical Testing in Israel
In order to conduct clinical testing on humans in Israel, special
authorization must first be obtained from the ethics committee and the head of the medical center in which the clinical studies are planned
to be conducted, as required under the Guidelines for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health
Regulations (Clinical Trials in Human Subjects), as amended from time to time, and other applicable legislation. These regulations require
authorization by the institutional ethics committee and the head of the medical center. Israeli Ministry of Health, except for certain
circumstances, is required to approve each trial as well. The institutional ethics committee must, among other things, evaluate the anticipated
benefits that are likely to be derived from the project to determine if it justifies the risks and inconvenience to be inflicted on the
human subjects, and the committee must ensure that adequate protection exists for the rights and safety of the participants as well as
the accuracy of the information gathered in the course of the clinical testing. Since we intend to perform a portion of the clinical studies
on certain of our therapeutic candidates in Israel, we will be required to obtain authorization from the ethics committee and head of
medical center of each institution in which we intend to conduct our clinical trials, and in most cases, from the Israeli Ministry of
Health.
Other Countries
In addition to regulations in the United States, the EU and
Israel, we and our collaborators are subject to numerous and a variety of regulatory requirements of other countries and jurisdictions
regarding quality, safety and efficacy governing, among other things, clinical trials, marketing authorization, manufacturing, commercial
sales and distribution of drugs in other countries. Whether or not our products receive approval from the FDA, approval of such products
must be obtained by the comparable regulatory authorities of countries other than the United States before we or our collaborators can
commence clinical trials, manufacturing or marketing of the product in those countries. The approval process varies from country to country
and may involve additional product testing and additional administrative review periods. As a result, the time may be longer or shorter
than that required for FDA approval. The requirements governing the conduct of clinical trials and product licensing vary greatly from
country to country. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or
delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Related Matters
From time to time, legislation is drafted, introduced and passed
in governmental bodies that could significantly change the statutory provisions governing the approval, manufacturing and marketing of
products regulated by the FDA or EMA and other applicable regulatory bodies to which we are subject. In addition, regulations and guidance
are often revised or reinterpreted by the national agency in ways that may significantly affect our business and our therapeutic candidates.
It is impossible to predict whether such legislative changes will be enacted, whether FDA or EMA regulations, guidance or interpretations
will change, or what the impact of such changes, if any, may be. We may need to adapt our business and therapeutic candidates and products
to changes that occur in the future.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement
status of products approved by the FDA and other government authorities. Sales of products will depend, in part, on the extent to which
third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers
and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining
whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that
the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining
the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party
payors may limit coverage to specific products on an approved list, or formulary, which might not include all of the approved products
for a particular indication.
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In order to secure coverage and reimbursement for any product that
might be approved for sale, a company may need to conduct expensive pharmacoeconomic, health outcome studies in order to demonstrate the
medical necessity, quality of life benefits, and cost-effectiveness of the product, in addition to the costs required to obtain FDA or
other comparable regulatory approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective in
light of cost-benefit analysis. Additionally, a payor’s decision to provide coverage for a drug product does not imply that an adequate
reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that
other payors will also provide coverage for the drug product. Third-party reimbursement may not be sufficient to maintain price levels
high enough to realize an appropriate return on investment in product development.
The containment of healthcare costs also has become a priority
of federal, state and foreign governments and the prices of drugs have been a focus in this effort. Governments have shown significant
interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution
of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions
with existing controls and measures, could further limit our net revenue and results. Coverage policies and third-party reimbursement
rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company
or its collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
Outside the United States, ensuring adequate coverage and payment
for our therapeutic candidates will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many
countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for
a product and may require us to conduct studies that compare the cost effectiveness of our product candidates or products to other available
therapies. The conduct of such studies could be expensive and result in delays in our commercialization efforts.
Pricing and reimbursement schemes vary widely from country to country.
Some countries provide that drug products may be marketed only after a reimbursement price has been agreed. Some countries may require
the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies
in order to obtain reimbursement. For example, the European Union provides options for its member states to restrict the range of drug
products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human
use. European Union member states may approve a specific price for a drug product, or it may instead adopt a system of direct or indirect
controls on the profitability of the company placing the drug product on the market. Other member states allow companies to fix their
own prices for drug products but monitor and control company profits and issue guidance to prescribers. The downward pressure on health
care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected
to the entry of new products. In addition, reference pricing and cross-border imports from low-priced markets exert competitive pressure
that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products may not allow
favorable reimbursement and pricing arrangements.
Other Healthcare Laws and Regulation
Healthcare providers and third-party payors play a primary role
in the recommendation and prescription of drug products that are granted regulatory approval. Arrangements with providers, consultants,
third-party payors and customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may
constrain our business and/or financial arrangements. Such restrictions under applicable federal and state healthcare laws and regulations
include the following:
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the federal Anti-Kickback Statute, which prohibits, among other
things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration (including any kickback,
bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase,
lease or order of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as
Medicare and Medicaid;
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the federal civil and criminal false claims laws, including
the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly
presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement
to avoid, decrease or conceal an obligation to pay money to the federal government;
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the federal Health Insurance Portability and Accountability
Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willingly executing,
or attempting to execute, a scheme or making false statements in connection with the delivery of or payment for health care benefits,
items, or services;
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HIPAA, as amended by the Health Information Technology for
Economic and Clinical Health Act and its implementing regulations, which also imposes obligations, including mandatory contractual terms,
with respect to safeguarding the privacy, security and transmission of individually identifiable health information on covered entities
and their business associates that associates that perform certain functions or activities that involve the use or disclosure of protected
health information on their behalf;
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the Foreign Corrupt Practices Act, or FCPA, which prohibits
companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose
of obtaining or retaining business or otherwise seeking favorable treatment;
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the federal transparency requirements known as the federal
Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation
Act, or collectively the ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment
is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually
to the Centers for Medicare Medicaid Services, or CMS, within HHS, information related to payments and other transfers of value
to certain healthcare providers and teaching hospitals and information regarding ownership and investment interests held by physicians
and their immediate family members; and
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analogous state and foreign laws and regulations, such as state
anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party
payors, including private insurers.
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Some state laws require pharmaceutical companies to comply with
the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government
in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many
of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
U.S. Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is
cost containment. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount
of reimbursement for particular medical products. For example, in March 2010, the ACA was enacted, which, among other things, increased
the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program; introduced a new methodology by which
rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted
or injected; extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care
plans; imposed mandatory discounts for certain Medicare Part D beneficiaries as a condition for manufacturers’ outpatient drugs
coverage under Medicare Part D; subjected drug manufacturers to new annual fees based on pharmaceutical companies’ share of sales
to federal healthcare programs; created a new Patient Centered Outcomes Research Institute to oversee, identify priorities in and conduct
comparative clinical effectiveness research, along with funding for such research; and established the Center for Medicare Medicaid
Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending.
We expect that future changes or additions to the ACA, the Medicare
and Medicaid programs, and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing
or other legislation in individual states, could have a material adverse effect on the healthcare industry in the United States. For example,
on March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid
drug rebate cap, currently set at 100% of a drug’s average manufacturer price, beginning January 1, 2024.
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Additionally, on December 20, 2019, the Further Consolidated Appropriations
Act for 2020 was signed into law (P.L. 116-94) and includes a piece of bipartisan legislation called the Creating and Restoring Equal
Access to Equivalent Samples Act of 2019, or the CREATES Act. The CREATES Act aims to address the concern articulated by both the FDA
and others in the industry that some brand manufacturers have improperly restricted the distribution of their products, including by invoking
the existence of a REMS for certain products, to deny generic product developers access to samples of brand products. Because generic
product developers need samples of an RLD to conduct certain comparative testing required by the FDA, some have attributed the inability
to timely obtain samples as a cause of delay in the entry of generic products. To remedy this concern, the CREATES Act establishes a private
cause of action that permits a generic product developer to sue the brand manufacturer to compel it to furnish the necessary samples on
“commercially reasonable, market-based terms.” Whether and how generic product developments will use this new pathway, as
well as the likely outcome of any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects
on any of our future commercial products are unknown.
In August 2022, President Biden signed into the law the Inflation
Reduction Act of 2022, or the IRA. The IRA has multiple provisions that may impact the prices of drug products that are both sold into
the Medicare program and throughout the United States. Starting in 2023, a manufacturer of a drug or biological product covered by Medicare
Parts B or D must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation.
This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly
dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting in payment year 2026, CMS
will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition. CMS will
also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for
negotiation, it is expected that the revenue generated from such drug will decrease. CMS has begun to implement these new authorities
and entered into the first set of agreements with pharmaceutical manufacturers to conduct price negotiations in October 2023. However,
the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical
companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program
is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.
To date, President Trump has signed an Executive Order to require
drug prices to be transparent. In addition, the President reversed certain policies by the Biden Administration. President Trump eliminated:
Medicare $2 drug list model, cell and gene therapy access model to improve high-cost drugs for Medicaid enrollees, and accelerate clinical
evidence model for new drug. It is not clear what additional changes may be implemented, but President Trump does want disclosure of transparency
in prices.
Individual states in the United States have also increasingly passed legislation and
implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts,
restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage
importation from other countries and bulk purchasing. For example, in recent years, several states have formed prescription drug affordability
boards (PDABs). Much like the IRA’s drug price negotiation program, these PDABs have attempted to implement upper payment limits
(UPLs) on drugs sold in their respective states in both public and commercial health plans. In August 2023, Colorado’s PDAB announced
a list of five prescription drugs that would undergo an affordability review. The effects of these efforts remain uncertain pending the
outcomes of several federal lawsuits challenging state authority to regulate prescription drug payment limits. In December 2020, the U.S.
Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers,
or PBMs, and other members of the healthcare and pharmaceutical supply chain, an important decision that may lead to further and
more aggressive efforts by states in this area. The Federal Trade Commission (FTC) in mid-2022 also launched sweeping investigations into
the practices of the PBM industry that could lead to additional federal and state legislative or regulatory proposals targeting such entities’
operations, pharmacy networks, or financial arrangements. Significant efforts to change the PBM industry as it currently exists in the
U.S. may affect the entire pharmaceutical supply chain and the business of other stakeholders, including pharmaceutical product developers
like us.
We expect that additional foreign, federal and state healthcare
reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare
products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or
additional pricing pressures.
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Israeli Government Programs
Israel Innovation Authority
Before we in-licensed motixafortide, Biokine had received $2.7 million in funding for
the project from the IIA (formerly the OCS). As a condition for the IIA’s consent to our in-licensing of motixafortide, we
were required to agree to abide by any obligations resulting from such funding under the Israeli Encouragement of Industrial Research,
Development and Technological Innovation Law, 1984, and related regulations, as amended (the Research Law). Under the Research Law
and the terms of IIA grants, royalties on the revenues derived from sales of products (and associated services) developed with IIA funding
are payable to the Israeli government, generally at the rate of 3% (and at an increased rate under certain circumstances, as described
below). The obligation to make these royalty payments terminates upon repayment of the amount of grants, linked to the U.S. dollar, plus
interest (in accordance with IIA regulations), which amount may be increased under certain circumstances, as described below.
Under the Research Law, the transfer or license to third parties
outside of Israel of know-how or technologies developed under IIA-funded programs, or the transfer to third parties outside of Israel
of manufacturing or rights to manufacture based on IIA-funded know-how, requires the consent of the IIA in certain circumstances, and
may result in increased payments to the IIA. Specifically, for the transfer of manufacturing outside of Israel, royalty payments can be
up to three times the amount of the IIA grants received, linked, plus interest, and the royalty repayment rate may increase. For the transfer
of IIA-funded know-how outside of Israel, the payment may be up to six times the amount of the IIA grants, linked, plus interest. In connection
with the IIA’s approval of the out-licensing transactions with Gloria and Ayrmid, the IIA determined that we are required to pay
the IIA 3.9% on any sub-license consideration, up to six times the IIA grant, linked, plus interest. Additionally, in December 2024, we
received IIA approval to transfer the manufacturing of motixafortide outside of Israel, which requires us to pay the IIA 4% of proceeds
on any direct product sales, up to three times the IIA grant, linked plus interest. As of December 31, 2024, $1.1 million in aggregate
royalties had been paid to the IIA on account of the motixafortide program and there was a contingent liability to the IIA (including
interest) of $2.7 million (without taking into account the potential repayment requirement of up to six times the amount as detailed above).
In any event, under our agreement with Biokine, we have a full right of offset for amounts payable to the IIA for the motixafortide program
from any payments that we may owe to Biokine in the future.
Should we wish to further out-license motixafortide in the future,
there is no assurance that we will be able to obtain the IIA’s consent on terms acceptable to us, or at all. Even following the
full repayment of IIA grants, we must nevertheless continue to comply with the requirements of the Research Law. If we fail to comply
with any of the conditions and restrictions imposed by the Research Law and regulations and guidelines thereunder, or by the specific
terms of the IIA grants, we may be required to refund any IIA grants that Biokine previously received together with interest and penalties,
and, in certain circumstances, may be subject to criminal charges. In any event, under our agreement with Biokine, we have a full right
of offset for amounts payable to the IIA for the motixafortide program from any payments that we may owe to Biokine in the future.
Environmental Matters
We are subject to various environmental, health and safety laws
and regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and disposal
of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. We believe that our business, operations
and facilities are being operated in compliance, in all material respects, with applicable environmental and health and safety laws and
regulations. Based on information currently available to us, we do not expect environmental costs and contingencies to have a material
adverse effect on us. The operation of our facilities, however, entails risks in these areas. Significant expenditures could be required
in the future if we are required to comply with new or more stringent environmental or health and safety laws, regulations or requirements.
See “Business — Government Regulation and Funding — Israel Ministry of Environment — Toxin Permit.”
C. Organizational Structure
Our corporate structure consists of BioLineRx Ltd., one wholly
owned subsidiary, BioLineRx USA, Inc., and a substantially wholly owned, inactive U.K. subsidiary, Agalimmune Ltd.
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D. Property, Plant and Equipment
We are headquartered in Modi’in, Israel. We entered into
a lease agreement in August 2014, for an aggregate of 1,663 square meters (approximately 17,900 square feet) of space. Monthly rent is
NIS 128,300 (approximately $35,000), including maintenance fees and parking. The initial term of the lease expired in June 2020, and we
exercised our options to extend the lease through June 30, 2028. We have the option to extend the lease for one additional period of two
years, at a 5% increase to the preceding lease payment amount.
This facility houses both our administrative and research operations
and our central laboratory. The central laboratory consists of approximately 380 square meters (approximately 4,200 square feet) and includes
a bioanalytical laboratory, a formulation laboratory and a tissue culture laboratory. Our bioanalytical laboratory has received GLP certification.
In addition, in October 2022 we entered into a lease agreement
for our office in Waltham, Massachusetts for an aggregate of 4,880 square feet of space. Due to the shutdown of our commercialization
operations in the U.S. following the Ayrmid License Agreement, we are not currently utilizing this space. Monthly rent is $23,600. The
lease expires in December 2025.
ITEM 4A. UNRESOLVED STAFF
COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL
REVIEW AND PROSPECTS
You should read the following discussion of our financial condition
and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this Annual Report
on Form 20-F. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences
include those discussed below and elsewhere in this Annual Report on Form 20-F, particularly those in “Item 3. Key Information —
Risk Factors.” Our discussion and analysis for the year ended December 31, 2023 can be found in Item 5. “Operating and Financial
Review and Prospects” of our Annual Report on Form 20-F for the fiscal year ended December 31, 2023, filed with the SEC on March
26, 2024, as amended on March 26, 2024 (File No. 001-35223).
We are a biopharmaceutical company pursuing life-changing therapies
in oncology and rare diseases. Our first approved product is APHEXDA (motixafortide), a novel peptide for the treatment of stem-cell mobilization
and solid tumors which, on September 8, 2023, was approved by the FDA for use in combination with filgrastim (G-CSF) to mobilize hematopoietic
stem cells to the peripheral blood for collection and subsequent autologous transplantation in patients with multiple myeloma. In October
2023, we out-licensed the rights to motixafortide for all indications in substantially all of Asia to Gloria, and in November 2024, we
out-licensed the global rights (other than in Asia) to motixafortide for all indications, other than solid tumors, to Ayrmid. As a result
of the November 2024 transaction, we shut down our independent commercialization activities in the United States and refocused our operations
on development activities in Israel in the fields of oncology (including solid tumors) and rare diseases, at a significantly reduced annual
cash burn rate.
We have retained the rights to develop motixafortide across all
solid tumor indications, in all territories other than Asia, including in PDAC, for which an investigator-initiated Phase 2b trial, sponsored
by Columbia University, and supported equally by us and Regeneron, is ongoing at a relatively minimal cost to BioLineRx. We expect this
program to continue to advance without any significant expense to us.
A key component of our strategy moving forward is to in-license
additional assets in oncology and/or rare diseases that exhibit distinct advantages over currently available therapies or address unmet
medical needs that we can advance through clinical development. We have generated our pipeline by systematically identifying, rigorously
validating and in-licensing therapeutic candidates that we believe exhibit a high probability of therapeutic and commercial success. We
have substantial experience in scouting and assessing assets in transactions with back-ended, success-based consideration, which can be
acquired or licensed for a modest upfront payment, and with relatively modest and affordable clinical development programs. We are actively
working on this initiative and are being presented with many promising opportunities that meet these criteria.
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Our longer-term vision is to develop innovative assets with significant
potential value whose development costs have been offset by the royalties and milestones from our existing motixafortide partnerships.
We aim to continue pursuing new partnerships on these programs to create additional value for our shareholders.
A. Operating Results
History of Losses
Since our inception in 2003, we have generated significant losses
in connection with our research and development, and more recently, our commercialization activities (prior to the Ayrmid License Agreement
in November 2024). As of December 31, 2024, we had an accumulated deficit of $400 million. We expect to continue to generate losses in
connection with our research and development activities relating to our pipeline of therapeutic candidates until we reach commercial profitability,
if ever. Such research and development activities are budgeted to expand over time and will require further resources if we are to be
successful. As a result, we expect to continue to incur operating losses and we expect to need to obtain additional funds to further pursue
our research and development programs.
We have funded our operations primarily through the sale of equity
securities (both in public and private offerings), payments received under our strategic licensing and collaboration arrangements, funding
previously received from the IIA, and interest earned on investments. We expect to continue to fund our operations over the next several
years through our existing cash resources, potential future milestone and royalty payments that we may receive from our existing out-licensing
agreements, primarily royalties from the commercialization of APHEXDA by Ayrmid, potential future upfront, milestone or royalty payments
that we may receive from Gloria and any other out-licensing transaction, interest earned on our investments, and additional capital to
be raised through public or private equity offerings or debt financings. As of December 31, 2024, we had $19.6 million of cash, cash equivalents
and short-term bank deposits.
Revenues
Our revenues to date have been generated primarily from upfront
and milestone payments under out-licensing agreements and between the fourth quarter of 2023 and November 2024, revenues from product
sales of APHEXDA.
We expect our revenues, if any, for the next several years to be
derived primarily from future royalties on product sales, primarily royalties paid by Ayrmid from the commercialization of APHEXDA in
stem cell mobilization in the U.S. and potential milestone payments from the license agreements with Ayrmid and Gloria.
Cost of Revenues
Our cost of revenues to date have consisted of sub-license payments
to the licensors in respect of upfront and milestone payments associated with out-licensing agreements and costs associated with the manufacture
of APHEXDA and royalty payments to the licensor with respect to direct product sales of APHEXDA. Prior to receiving FDA approval for APHEXDA
in September 2023, we expensed all manufacturing and material costs as research and development expenses.
We expect our cost of revenues, if any, for the next several years
to be derived primarily from sub-license payments to the licensors in respect of out-licensing agreements and other potential collaboration
arrangements, including future royalties on product sales from such out-licensing agreements.
Research and Development
Our research and development expenses consist primarily of salaries
and related personnel expenses, fees paid to external service providers, up-front and milestone payments under our license agreements,
patent-related legal fees, costs of preclinical studies and clinical trials, drug and laboratory supplies and costs for facilities and
equipment. We primarily use external service providers to manufacture our therapeutic candidates for clinical trials and for the majority
of our preclinical and clinical development work. We charge all research and development expenses to operations as they are incurred.
We expect our research and development expenses to remain one of our primary expenses in the near future as we continue to develop motixafortide
and additional assets we may in license.
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The following table identifies our current major research and development
projects:
|
Project
|
Status
|
Expected Near Term Milestones
|
||
|
motixafortide
|
1.
|
FDA approval received on September 8, 2023 for stem-cell mobilization
in multiple myeloma patients.
|
1.
|
Out-licensed to Ayrmid in November 2024; five-year long-term
follow-up of GENESIS patients ongoing
|
|
2.
|
Reported data from single-arm pilot phase of the investigator-initiated
Phase 2 combination trial in first-line PDAC. Of 11 patients with metastatic pancreatic cancer enrolled, 7 patients (64%) experienced
partial response (PR), of which 6 (55%) were confirmed PRs with one patient experiencing resolution of the hepatic (liver) metastatic
lesion. 3 patients (27%) experienced stable disease, resulting in a disease control rate of 91%. Based on these encouraging results, study
was substantially revised to a multi-institution, randomized Phase 2b trial of 108 patients
|
2.
|
First patient dosed in February 2024. Interim data expected
in 2026 and full enrollment projected for 2027*
|
|
|
3.
|
Phase 1 study for gene therapies in SCD (with Washington University
School of Medicine in St. Louis)**
|
3.
|
First patient dosed in December 2023 and initial data from
the study released in November 2024. Final data planned in 2025*
|
|
|
4.
|
Phase 1 study for gene therapies in SCD (with St. Jude Children’s
Research Hospital, Inc.)**
|
4.
|
First patient dosed in February 2025, with data planned in
2025/2026*
|
|
|
5.
|
IND approved in China for initiation of pivotal bridging study
in SCM under license agreement with Gloria
|
5.
|
Initiation of the study is currently delayed***
|
|
|
6.
|
Phase 2b randomized study in first-line PDAC in China under
license agreement with Gloria
|
6.
|
IND submission and protocol finalization is currently delayed***
|
|
|
|
* |
These studies are investigator-initiated studies; therefore, the timelines are ultimately controlled by the independent investigators
and are subject to change.
|
|
**
|
Study to be continued under
the Ayrmid License Agreement
|
|
|
*** |
Under the Gloria License Agreement, Gloria is late in the payment of $2.4 million to
us for the achievement of a specific milestone under the Gloria License Agreement and for certain product supply, which was due during
2024. In addition, the planned studies of motixafortide in China under the Gloria License Agreement are currently not advancing according
to schedule and it is unclear when such studies will be initiated, if at all. There can be no assurance that Gloria will meet its payment
obligations or any other obligations under the Gloria License Agreement.
|
We expect that a large percentage of our research and development
expenses in the future will be incurred in support of our current and future preclinical and clinical development projects. Due to the
inherently unpredictable nature of preclinical and clinical development processes, we are unable to estimate with any certainty the costs
we will incur in the continued development of motixafortide in our pipeline for commercialization. Clinical development timelines, the
probability of success and development costs can differ materially from expectations. We expect to continue to test motixafortide and
any other therapeutic candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials
for each such candidate. If we are not able to enter into an out-licensing arrangement with respect to any therapeutic candidate prior
to the commencement of later stage clinical trials, we may fund the trials for the therapeutic candidate ourselves.
Our future research and development expenses will depend on the
clinical success of motixafortide in solid tumor indications and on other potential therapeutic candidates, as well as ongoing assessments
of each therapeutic candidate’s commercial potential. In addition, we cannot forecast with any degree of certainty which therapeutic
candidates may be subject to future out-licensing arrangements, when such out-licensing arrangements will be secured, if at all, and to
what degree such arrangements would affect our development plans and capital requirements.
62
As we obtain results from clinical trials, we may elect to discontinue
or delay clinical trials for certain therapeutic candidates or projects in order to focus our resources on more promising therapeutic
candidates or projects. Completion of clinical trials by us or our licensees may take several years or more, but the length of time generally
varies according to the type, complexity, novelty and intended use of a therapeutic candidate.
The cost of clinical trials may vary significantly over the life
of a project as a result of differences arising during clinical development, including, among others:
|
|
•
|
the number of sites included in the clinical trials;
|
|
|
•
|
the length of time required to enroll suitable patients;
|
|
|
|
|
|
|
•
|
the number of patients that participate, and are eligible to participate, in the clinical
trials;
|
|
|
•
|
the duration of patient follow-up;
|
|
|
|
|
|
|
•
|
whether the patients require hospitalization or can be treated on an outpatient basis;
|
|
|
•
|
the development stage of the therapeutic candidate; and
|
|
|
•
|
the efficacy and safety profile of the therapeutic candidate.
|
The lengthy process of completing clinical trials and seeking regulatory
approval for our therapeutic candidates requires expenditure of substantial resources. Any failure or delay in completing clinical trials,
or in obtaining regulatory approvals, could cause a delay in generating product revenue and cause our research and development expenses
to increase and, in turn, have a material adverse effect on our operations. Due to the factors set forth above, we are not able to estimate
with any certainty when we would recognize any net cash inflows from our projects.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation
for employees in commercialization, marketing and business development functions. Other significant costs include marketing and
communication materials, market access activities, professional fees for outside market research and consulting, and legal services related
to compliance and to potential business development transactions.
We expect our sales and marketing expenses to be reduced significantly
following the license agreement with Ayrmid and the termination of our commercialization activities in the U.S., and to be primarily related
to business development
General and Administrative Expenses
General and administrative expenses consist primarily of compensation
for employees in executive and operational functions, including accounting, finance, legal, investor relations, information technology
and human resources. Other significant general and administration costs include facilities costs, professional fees for outside accounting
and legal services, travel costs, insurance premiums and depreciation.
63
Non-Operating Expense and Income
Non-operating expense and income includes fair-value adjustments
of liabilities on account of the warrants issued in equity financings we carried out in February 2019, September 2022 April 2024, November
2024 and January 2025. These fair-value adjustments are highly influenced by our share price at each period end (revaluation date). Non-operating
expense and income also includes issuance expenses under the “at-the-market” offering agreement, or ATM Agreement, between
us and HCW entered into in September 2021, and the pro-rata share of issuance expenses from the placements related to the warrants. Sales-based
royalties from the license agreement with Perrigo have also been included as part of non-operating income, as the out-licensed product
is not an integral part of our strategy, and the amounts are not material.
Financial Expense and Income
Financial expense and income consist of interest earned on our
cash, cash equivalents and short-term bank deposits; interest expense related to our loans from BlackRock, bank fees and other transactional
costs. In addition, it may also include gains/losses on foreign exchange hedging transactions, which we carry out from time to time to
protect against a portion of our NIS-denominated expenses (primarily compensation) in relation to the dollar.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with IFRS, as issued
by the IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about the application of
our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Our critical accounting judgements
and sources of estimation uncertainty are described in Note 4 to our consolidated financial statements, which are included elsewhere in
this Annual Report on Form 20-F.
Revenue Recognition
We account for contract revenues in accordance with International
Financial Reporting Standards No. 15, or IFRS 15. IFRS 15, “Revenue from Contracts with Customers”.
IFRS 15 introduces a five-step model for recognizing revenue from
contracts with customers, as follows:
|
|
•
|
identify the contract with a customer;
|
|
|
•
|
identify the performance obligations in the contract;
|
|
|
•
|
determine the transaction price;
|
|
|
•
|
allocate the transaction price to the performance obligations in the contract; and
|
|
|
•
|
recognize revenue when (or as) the entity satisfies a performance obligation.
|
Accrued Expenses
We are required to estimate accrued expenses as part of our process
of preparing financial statements. This process involves estimating the level of service performed on our behalf and the associated cost
incurred in instances where we have not been invoiced or otherwise notified of actual costs. Examples of areas in which subjective judgments
may be required include costs associated with services provided by contract organizations for commercialization, clinical trials, and
preclinical development. We account for expenses associated with these external services by determining the total cost of a given study
based on the terms of the related contract. We accrue for costs incurred as the services are being provided by monitoring the status of
the trials and the invoices received from our external service providers. In the case of clinical trials, the estimated cost normally
relates to the projected costs of treating the patients in our trials, which we recognize over the estimated term of the trial according
to the number of patients enrolled in the trial on an ongoing basis, beginning with patient enrollment. As actual costs become known to
us, we adjust our accruals.
64
Investments in Financial Assets
The primary objective of our investment activities is to preserve
principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments
are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our
investments. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities of our investments
to date, their carrying value has always approximated their fair value.
A financial asset is classified in this category if our management
has designated it as a financial asset upon initial recognition, because it is managed, and its performance is evaluated, on a fair-value
basis in accordance with a documented risk management or investment strategy. Our investment policy with regard to excess cash, as adopted
by our board of directors, is composed of the following objectives: (i) preserving investment principal; (ii) providing liquidity; and
(iii) providing optimum yields pursuant to the policy guidelines and market conditions. The policy provides detailed guidelines as to
the securities and other financial instruments in which we are allowed to invest. In addition, in order to maintain liquidity, investments
are structured to provide flexibility to liquidate at least 50% of all investments within 15 business days. Information about these assets,
including details of the portfolio and income earned, is provided internally on a quarterly basis to our key management personnel and
on a semi-annual basis to the Investment Monitoring Committee of our board of directors. Any divergence from this investment policy requires
approval from our board of directors.
Share-based Compensation
We account for share-based compensation arrangements in accordance
with the provisions of IFRS 2. IFRS 2 requires companies to recognize share compensation expense for awards of equity instruments based
on the grant-date fair value of those awards (with limited exceptions). The cost is recognized as compensation expense over the life of
the instruments, based upon the grant-date fair value of the equity or liability instruments issued. The fair value of our share-based
compensation grants is computed as of the grant date based on the Black-Scholes model, using the standard parameters established in that
model including estimates relating to volatility of our shares/ADSs, risk-free interest rates, estimated life of the equity instruments
issued and the market price of our shares/ADSs. As our ordinary shares/ADSs are publicly traded on the TASE or Nasdaq, we do not need
to estimate their fair market value. Rather, we use the actual closing market price of our ordinary shares/ADSs on the date of grant,
as reported by the TASE or Nasdaq.
Warrants
In connection with a loan transaction entered into with BlackRock
in October 2018, we issued a warrant to purchase 1,596 ADSs at an exercise price of $564.00 per ADS. The warrant is exercisable for a
period of ten years from the date of issuance. Since the exercise price was not deemed to be fixed, the warrant is not qualified for classification
as an equity instrument and has therefore been classified as a non-current financial liability.
In connection with an underwritten public offering we completed
in January 2021, we issued warrants to purchase 17,989 ADSs at an exercise price of $120.00 per ADS. The warrants are exercisable for
a period of five years from the date of issuance. The warrants have been classified as shareholder’s equity.
In connection with a registered direct offering we completed in
September 2022, we issued warrants to purchase 340,909 ADSs at an exercise price of $46.00 per ADS, of which warrants to purchase 63,637
have been exercised. The warrants are exercisable for a period of five years from the date of issuance. Since the exercise price of those
warrants were not deemed to be fixed, the warrants are not qualified for classification as an equity instrument and have therefore been
classified as a non-current financial liability. We also issued warrants to purchase 17,045 ADSs at an exercise price of $55.00 per ADS.
The warrants are exercisable for a period of five years from the date of issuance and have been classified as shareholder’s equity.
In connection with a registered direct offering we completed in April 2024, we issued
warrants to purchase 187,500 ADSs at an exercise price of $32.00 per ADS, of which none of these warrants have been exercised to date.
The warrants are exercisable for a period of five years from the date of issuance. Since the exercise price of those warrants were not
deemed to be fixed, the warrants are not qualified for classification as an equity instrument and have therefore been classified as a
non-current financial liability.
In connection with a registered direct offering we completed in November 2024, we issued
warrants to purchase 205,893 ADSs at an exercise price of $23.60 per ADS, of which none of these warrants have been exercised to date,
and pre-funded warrants to purchase 308,749 ADSs at an exercise price of $0.004 per ADS, of which warrants to purchase 124,982 have been
exercised. The warrants are exercisable for a period of four years from the date of issuance and the pre-funded warrants will not expire
until exercised in full. Since the exercise price of the warrants were not deemed to be fixed, the warrants are not qualified for classification
as an equity instrument and have therefore been classified as a non-current financial liability. The pre-funded warrants have been classified
as equity instruments.
65
In connection with a registered direct offering we completed in January 2025, we issued
warrants to purchase 1,250,000 ADSs at an exercise price of $8.00 per ADS, of which none of these warrants have been exercised to date,
and pre-funded warrants to purchase 391,697 ADSs at an exercise price of $7.996 per ADS, of which all of the warrants had been exercised.
The warrants are exercisable for a period of five years from the date of issuance and the pre-funded warrants will not expire until exercised
in full. We also issued placement agent warrants to purchase 62,500 ADSs at an exercise price of $10.00 per ADS. The warrants are exercisable
for a period of five years from the date of issuance. Since the exercise price of the warrants were not deemed to be fixed, the warrants
are not qualified for classification as an equity instrument and have therefore been classified as a non-current financial liability.
The pre-funded warrants have been classified as equity instruments.
Results of Operations – Overview
Comparison of the Year Ended December 31, 2024 to the Year Ended
December 31, 2023
Revenues
Revenues for the year ended December 31, 2024 were $28.9 million, an increase of $24.1
million, or 502.1% compared to $4.8 million for the year ended December 31, 2023. The revenues in 2024 primarily reflect a portion of
the up-front payment received by us under the Gloria License Agreement and a milestone payment achieved under the Gloria License Agreement,
which collectively amounted to $15.0 million, as well as the up-front payment received by us under the Ayrmid License Agreement and $6.0
million of net revenues from product sales of APHEXDA in the United States. The revenues in 2023 (all of which were recorded in the fourth
quarter of 2023) primarily reflect a portion of the up-front payment received by us for the Gloria License Agreement, of $4.6 million,
as well as $0.2 million of revenues from product sales of APHEXDA in the U.S.
Cost of revenues
Cost of revenues for the year ended December 31, 2024 were $9.3 million, an increase
of $5.6, or 151.4% compared to $3.7 million for the year ended December 31, 2023. The cost of revenues in 2024 primarily reflects amortization
of intangible assets, Biokine’s share of the up-front payment received by us for the Ayrmid License Agreement, sub-license fees
accrued on a milestone payment recorded under the Gloria License Agreement, as well as royalties on net product sales of APHEXDA in the
U.S. and cost of goods sold on product sales. The cost of revenues in 2023 primarily reflects Biokine’s share of the up-front payment
received by us for the Gloria License Agreement and of the net sales.
Research and development expenses
Research and development expenses for the year ended December 31, 2024 were $9.2 million,
a decrease of $3.3 million, or 26.4% compared to $12.5 million for the year ended December 31, 2023. The decrease resulted primarily from
lower expenses related to motixafortide NDA supporting activities, the termination of the development of AGI-134 and a decrease in payroll
and share-based compensation.
Sales and marketing expenses
Sales and marketing expenses for the year ended December 31, 2024
were $23.6 million, a decrease of $1.7 million, or 6.7% compared to $25.3 million for the year ended December 31, 2023. The decrease resulted
primarily from the shutdown of U.S. commercial operations in the fourth quarter of 2024 following the Ayrmid License Agreement.
General and administrative expenses
General and administrative expenses for the year ended December
31, 2024 were $6.3 million, similar to the year ended December 31, 2023.
66
Impairment of intangible assets
Impairment of intangible assets expenses for the year ended December
31, 2024 were $1.0 compared to impairment of intangible assets expenses of $6.7 million for the year ended December 31, 2023. This non-cash
expenses in 2024 reflects the impairment of the remaining rights related to motixafortide in solid tumor indications. This non-cash expenses
in 2023 reflects the impairment of the intellectual property related to AGI-134 resulting from our decision to terminate its development.
Non-operating income (expense), net
We recognized net non-operating income of $18.4 million for the
year ended December 31, 2024 compared to net non-operating expenses of $10.8 million for the year ended December 31, 2023. Non-operating
income for the year ended December 31, 2024 primarily relates to non-cash fair-value adjustments of warrant liabilities on our balance
sheet, as a result of changes in our share price, offset by warrant offering expenses. Non-operating expenses for the year ended December
31, 2023 primarily relates to non-cash, fair-value adjustments of warrant liabilities on our balance sheet.
Financial income (expense), net
We recognized net financial expenses of $7.3 million for the year
ended December 31, 2024 compared to net financial expenses of $0.1 million for the year ended December 31, 2023. Net financial expenses
for both periods primarily relate to interest paid on loans, which increased in 2024 due to a one-time $4.0 million charge to interest
expense in connection with the November 2024 amendment to our loan agreement with BlackRock (as described in Note 11 to our consolidated
financial statements), partially offset by investment income earned on our bank deposits.
B. Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through public and private
offerings of our equity securities, payments received under our strategic licensing and collaboration arrangements, interest earned on
investments and funding previously received from the IIA. As of December 31, 2024, we held $19.6 million of cash, cash equivalents and
short-term bank deposits. In addition, immediately after year end, we received $8.9 million of net proceeds in a registered direct
offering, as described below. We have invested substantially all our available cash funds in short-term bank deposits.
On January 7, 2025, we sold to certain investors, in a registered
direct offering, 858,304 ADSs and pre-funded warrants to purchase 391,697 ADSs. Each ADS and pre-funded warrant was sold together with
ordinary warrants to purchase up to an aggregate of 1,250,000 ADSs. The purchase price was $8.00 per ADS and accompanying ordinary warrant
and $7.996 per pre-funded warrant and accompanying ordinary warrant. Aggregate gross proceeds from the offering (without taking into account
any proceeds from any future exercises of pre-funded warrants or ordinary warrants) were $10.0 million.
In September 2021, we entered into the ATM Agreement with HCW pursuant
to which we may offer and sell, at our option, up to $25.0 million of our ADSs through an at-the-market equity program under which HCW
agreed to act as sales agent. As of the issuance date of this Annual Report on Form 20-F, we have sold 141,910 of our ADSs for total gross
proceeds of approximately $19.0 million under the ATM program.
Loan Agreements with BlackRock
In September 2022, we entered into a secured Loan Agreement with
BlackRock, under which BlackRock agreed to provide us with access to term loans in an aggregate principal amount of up to $40 million
in three tranches, or the Loans. We drew down the initial tranche of $10 million following execution of the agreement in September 2022
and we drew down the second tranche of $20 million in April 2024, following fulfilment of the requisite milestones. The third tranche
was available for draw down until October 1, 2024, upon achievement of certain milestones was not drawn down.
67
In November 2024, in connection with the Ayrmid License Agreement,
we entered into the Loan Amendment to the Loan Agreement with BlackRock, pursuant to which, (i) we agreed to make aggregate payments of
$16.5 million, as partial repayment of the Loans and in lieu of future revenue-based payments, which were fully cancelled, (ii) effective
December 1, 2024, we agreed to pay the remaining amounts outstanding under the Loans (in principal and interest) over a three year period
ending December 1, 2027, and (iii) our minimum cash balance requirement under the Loan Agreement was reduced from $10 million to $4 million.
In addition, pursuant to the Loan Amendment, 10% of any future milestone payments received by us from the out-licensing agreements through
December 1, 2027 will be used to repay principal of the Loans, and the repayments in (ii) above will be adjusted accordingly. All other
terms of the Loan Agreement remain the same.
Interest on each tranche of the Loans accrues at a fixed rate of
9.5% per annum from the drawdown date until repayment in full of the tranche.
We may prepay all, but not less than all, of the outstanding balance
of any of the Loans. In connection with any prepayment, we will also pay an end of loan payment equal to 5% of the amount of each tranche
drawn down upon the final repayment of each such tranche, or the End of Loan Payment, and any other unpaid fees or costs, if any.
The Loans are subject to mandatory accelerated repayment provisions
that require repayment of the outstanding principal amount of the Loans, and all accrued and unpaid interest thereon, upon the occurrence
of an event of default, subject to certain limitations and cure rights. In addition, in the event of acceleration upon an event of default
(a) we will be required to pay the aggregate of the monthly interest payments scheduled to be paid by the Company for the period from
the date of acceleration to the expiry of the applicable Loan, in each case discounted from the applicable monthly repayment date to the
date of prepayment at the rate of 2% per annum and (b) the End of Loan Payment.
Outstanding borrowings under the Loan Agreement are secured by
(a) a first priority fixed charge over certain assets and intellectual property of the Company as well as all shares held by the Company
in BioLineRx USA, Inc, or the Fixed Charge, (b) a first priority floating charge over all our assets as of the date of the Loan Agreement
or thereafter acquired, other than the assets charged under the Fixed Charge or as otherwise specifically excluded pursuant to the terms
of the floating charge, and (c) subject to the provisions of the Fixed Charge, a security interest in our intellectual property.
The Loan Agreement contains customary representations and warranties,
indemnification provisions in favor of the Lender, events of default and affirmative and negative covenants, including, among others,
covenants that limit or restrict the Company’s ability to, among other things, incur additional indebtedness, merge or consolidate,
make acquisitions, pay dividends or other distributions or repurchase equity, and dispose of assets, in each case subject to certain exceptions.
The Company has also granted BlackRock certain information rights.
Cash Flows
Net cash used in operating activities was $43.9 million for the
year ended December 31, 2024, compared with net cash used in operating activities of $22.6 million for the year ended December 31, 2023.
The $21.3 million increase in net cash used in operating activities in 2024 was primarily the result of a decrease in contract liabilities
resulting from deferred revenues as of December 31, 2023 that were recognized during 2024, a decrease in accounts payable and accruals,
and a decrease in research and development expenses as described above.
Net cash provided by investing activities was $29.4 million for
the year ended December 31, 2024, compared to net cash provided by investing activities of $1.4 million for the year ended December 31,
2023. The changes in cash flows from investing activities relate primarily to investments in, and maturities of short-term bank deposits.
Net cash provided by financing activities was $20.7 million for
the year ended December 31, 2024, compared to net cash provided by financing activities of $15.1 million for the year ended December 31,
2023. The cash provided by financing activities in 2024 primarily reflects the net proceeds of the loan from BlackRock and the net proceeds
of registered direct offerings of our ADSs in April 2024 and in November 2024, offset by repayments of the loan from BlackRock and the
repayments of lease liabilities. The cash provided by financing activities in 2023 primarily reflects the private placement of ADSs to
HST and Gloria, warrant exercises, and net proceeds from the ATM facility, offset in part by repayments of the loan from BlackRock and
the repayments of lease liabilities.
68
Funding Requirements
We have incurred accumulated losses in the amount of $400 million
through December 31, 2024, and we expect to continue incurring losses and negative cash flows from operations until the cash flows from
our strategic partnerships reach a level to offset our ongoing development costs. In this regard, management monitors rolling forecasts
of our liquidity reserves on the basis of anticipated cash flows and seeks to maintain liquidity balances at levels that are sufficient
to meet its needs. Our cash flow projections are subject to various risks and uncertainties concerning their fulfilment, and these factors
and the risk inherent in our operations, which management has concluded indicate that a material uncertainty exists, may cast significant
doubt on our ability to continue as a going concern. Similarly, our independent registered public accounting firm included a “going
concern” explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2024.
Developing drugs and conducting clinical trials is expensive and
we will need to raise substantial additional funds to achieve our strategic objectives. Based on our current projected cash requirements,
we believe that our existing cash and investment balances and other sources of liquidity, including royalties received from Ayrmid from
product sales of APHEXDA and milestone payments from our license agreements with Ayrmid and Gloria, will be sufficient to meet our capital
requirements through the second half of 2026. We expect to also continue to seek to finance our operations through other sources, including
out-licensing arrangements for the development and commercialization of our therapeutic candidates or other partnerships or joint ventures,
public and private offerings of our equity securities, as well as grants from government agencies and foundations. Our future capital
requirements will depend on many factors, including:
|
|
•
|
the progress and costs of our preclinical studies, clinical trials and other research
and development activities;
|
|
|
•
|
the scope, prioritization and number of our clinical trials and other research and
development programs;
|
|
|
•
|
the amount of revenues we receive, if any, under our collaboration or licensing arrangements;
|
|
|
|
|
|
|
•
|
the costs of the development and expansion of our operational infrastructure;
|
|
|
•
|
the costs and timing of obtaining regulatory approval of our therapeutic candidates;
|
|
|
•
|
our success in effecting out-licensing arrangements with third parties;
|
|
|
•
|
the ability of our collaborators and licensees to achieve development milestones,
marketing approval and other events or developments under our collaboration and out-licensing agreements;
|
|
|
•
|
the costs of filing, prosecuting, enforcing and defending patent claims and other
intellectual property rights;
|
|
|
•
|
the costs and timing of securing manufacturing arrangements for clinical or commercial
production;
|
|
|
•
|
the costs of establishing sales and marketing capabilities or contracting with third
parties to provide these capabilities for us;
|
|
|
•
|
the costs of acquiring or undertaking development and commercialization efforts for
any future therapeutic candidates;
|
|
|
•
|
the magnitude of our general and administrative expenses;
|
|
|
•
|
interest and principal payments on the loan from BlackRock;
|
|
|
•
|
any cost that we may incur under current and future licensing arrangements relating
to our therapeutic candidates; and
|
|
|
•
|
market conditions.
|
If funds are not available, we may be required to delay, reduce the scope of, or eliminate
one or more of our research or development programs or our commercialization efforts.
69
Contractual Obligations
We are party to contractual obligations involving commitments to
make payments to third parties. Our contractual obligations primarily consist of lease payments and purchase order obligations. Premises
leasing obligations represent our commitment for future lease payments under the lease agreement for our facilities in Modi’in,
Israel and Waltham, Massachusetts (which is not being utilized following shutdown of our U.S. commercialization activities in the fourth
quarter of 2024). The total future payments for our premises leasing obligations on December 31, 2024 were approximately $1.9 million
which is due through June 2030. Purchase order obligations amounted to $2.0 million as of December 31, 2024. For additional details regarding
our contractual obligations, see Note 10 to our audited financial statements included in this Annual Report on Form 20-f.
In addition, under our in-licensing agreements, we are obligated
to make certain payments to our licensors upon the achievement of agreed-upon milestones and receipt of royalties. We are unable at this
time to estimate the actual amount or timing of the costs we will incur in the future under these agreements. Some of the in-licensing
agreements are accompanied by consulting, support and cooperation agreements, pursuant to which we are required to pay the licensors a
fixed monthly amount, over a period stipulated in the applicable agreement, for their assistance in the continued research and development
under the applicable license. All of our in-licensing agreements are terminable at-will by us upon prior written notice of 30 to 90 days.
We are unable at this time to estimate the actual amount or timing of the costs we will incur in the future under these agreements. See
“Item 4. Information on the Company — Business Overview — In-Licensing Agreements.”
C. Research and Development, Patents and Licenses
For our research and development policies, see “Item 4.B.
— Information on the Company — Business Overview — Our Strategy.” For information regarding patents, see “Item
4.B. — Information on the Company —Business Overview — Intellectual Property.” For information regarding licenses,
see “Item 4.B. — Information on the Company — Business Overview — Collaboration and Out-Licensing Arrangements”
and “Item 4.B. — Information on the Company — Business Overview — In-Licensing Agreements.”
D. Trend Information
We are a biopharmaceutical company pursuing life-changing therapies
in oncology and rare diseases. To date, we have generated only limited direct product revenues from independent commercialization activities,
following the regulatory approval for APHEXDA (motixafortide) in September 2023. In October 2023, we out-licensed the rights to motixafortide
for all indications in substantially all of Asia, and in November 2024, we out-licensed the global rights (other than in Asia) to motixafortide
for all indications, other than solid tumors. As a result of the November 2024 transaction, we shut down our independent commercialization
activities in the United States and refocused our operations on development activities in Israel in the fields of oncology (including
solid tumors) and rare diseases, at a significantly reduced annual cash burn rate. Our ability to generate revenues from commercialization
and achieve profitability will be subject to Gloria License Agreement and the Ayrmid License Agreement and depend on our commercialization
partners’ ability to successfully commercialize products, including any of our current product and product candidates, and other
product candidates that we may develop, in-license or acquire in the future. As such, it is not possible for us to predict with any
degree of accuracy any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect
on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause reported
financial information to not necessarily be indicative of future operating results or financial conditions. However, to the extent possible,
certain trends, uncertainties, demands, commitments and events are in this “Operating and Financial Review and Prospects.”
E. Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity
with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make judgements, estimates and assumptions about
the application of our accounting policies which affect the reported amounts of assets, liabilities, revenue and expenses. Our critical
accounting judgements and sources of estimation uncertainty are described in Note 4 to our consolidated financial statements, which are
included elsewhere in this Annual Report on Form 20-F.
70
ITEM 6. DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES
A. Executive Officers and Directors
The following table sets forth information for our executive officers
and directors as of March 16, 2025. Unless otherwise stated, the address for our directors and officers is c/o BioLineRx Ltd., 2 HaMa’ayan
Street, Modi’in 7177871, Israel.
|
Name
|
|
Age
|
|
Position(s)
|
|
|
|
|
|
|
|
Philip A. Serlin, CPA, MBA
|
|
64
|
|
Chief Executive Officer
|
|
Mali Zeevi, CPA
|
|
49
|
|
Chief Financial Officer
|
|
Ella Sorani, Ph.D.
|
|
57
|
|
Chief Development Officer
|
|
Aharon Schwartz, Ph.D. (1)
|
|
82
|
|
Chairman of the Board of Directors, Class III Director
|
|
Rami Dar, MBA (1)(2)(3)(4)
|
|
68
|
|
Class I Director
|
|
B.J. Bormann, Ph.D. (1)(3)
|
|
66
|
|
Class II Director
|
|
Raphael Hofstein, Ph.D. (1)(2)(3)
|
|
75
|
|
Class II Director
|
|
Avraham Molcho, M.D. (1)(2)(3)
|
|
67
|
|
Class I Director
|
|
Sandra Panem, Ph.D. (1)(4)
|
|
78
|
|
Class III Director
|
|
Shaoyu Yan, Ph.D.
|
|
60
|
|
Class III Director
|
|
Gal Cohen (1)
|
|
52
|
|
Class I Director
|
|
(1)
|
Independent director under applicable Nasdaq Capital Market, as affirmatively determined by our board of
directors.
|
|
|
|
|
|
|
(2)
|
A member of our audit committee.
|
|
|
|
|
|
|
(3)
|
A member of our compensation committee.
|
|
|
|
|
|
|
(4)
|
A member of our investment monitoring committee
|
Philip A. Serlin, CPA, MBA,
has served as our Chief Executive Officer since October 2016. From May 2009 to October 2016, Mr. Serlin served as our Chief Financial
and Operating Officer. From January 2008 to August 2008, Mr. Serlin served as the Chief Financial Officer and Chief Operating Officer
of Kayote Networks Inc. From January 2006 to December 2007, Mr. Serlin served as the Chief Financial Officer of Tescom Software Systems
Testing Ltd., an IT services company publicly traded in both Tel Aviv and London. Mr. Serlin’s background also includes senior positions
at Chiaro Networks Ltd. and at Deloitte, where he was head of the SEC and U.S. Accounting Department at the National Office in Tel Aviv,
as well as seven years at the SEC at its Washington, D.C., headquarters. Mr. Serlin is a certified public accountant and holds a B.Sc.
degree in accounting from Yeshiva University and a Master’s degree in economics and public policy from The George Washington University.
Mali Zeevi, CPA,
has served
as our Chief Financial Officer since October 2016. Prior to becoming Chief Financial Officer, Ms. Zeevi served as our Senior Director
of Finance and Reporting beginning in 2011 and as our Director of Finance and Reporting beginning in 2009.
Before
joining BioLineRx, Ms. Zeevi was employed by Tescom Software Systems Testing Ltd., her last position there being Vice President Finance.
Ms. Zeevi also served as a certified public accountant at Kesselman Kesselman, a member firm of PricewaterhouseCoopers International
Limited. Ms. Zeevi is a certified public accountant and holds a B.A. degree in business and accountancy from the College of Management
Academic Studies in Israel.
Ella Sorani, Ph.D.,
has
served as our Chief Development Officer since January 2021. From February 2017 to December 2020, Dr. Sorani served as our Vice President
Research and Development. Before joining BioLineRx, from 2000 through 2016, Dr. Sorani served in a number of management positions in the
global RD division at Teva Pharmaceutical Industries Ltd. In her most recent position as Senior Director and Global Project
Leader, Dr. Sorani led the development of one of Teva’s leading innovative late-stage compounds. Dr. Sorani holds a B.Sc. degree
in chemistry and an M.Sc. degree and Ph.D. in pharmacology, all from Tel Aviv University.
71
Aharon Schwartz, Ph.D.,
has served as the Chairman of our board of directors since 2004. Dr. Schwartz served in a number of positions at Teva from 1975 through
2011, the most recent being Vice President, Head of Teva Innovative Ventures from 2008. Dr. Schwartz is currently a member of the board
of directors of Protalix Ltd. (NYSE American:PLX). Dr. Schwartz also works as an independent consultant. Dr. Schwartz received his Ph.D.
in organic chemistry from the Weizmann Institute of Science, an M.Sc. degree in organic chemistry from the Technion – Institute
of Technology and a B.Sc. degree in chemistry and physics from the Hebrew University of Jerusalem. In addition, Dr. Schwartz holds a Ph.D.
from the Hebrew University of Jerusalem in the history and philosophy of science.
Rami Dar, MBA
, has served
on our board of directors (as an external director, within the meaning of the Companies Law, until March 25, 2024) since July 2022 and
as a member of our Audit Committee and Compensation Committee since such time and has served as a member of our Investment Monitoring
Committee since July 2022. Mr. Dar has served as a board member of BetterSeeds Ltd. since November 2023 and served as a board member of
Nordia Springs since March 2020. From 2018 to 2023, Mr. Dar served as chairman of Novolog Ltd. (TLV: NVLG). From 2002 to 2019, Mr. Dar
served as Chief Executive Officer of Hazera Seeds Ltd. (formerly Hazera Genetics), a leading global seed company, and prior to that, from
1998 to 2002, served in various management positions at Teva Pharmaceuticals Ltd., including as Business Development Executive from 2001
to 2002, Chief Executive Officer of Teva Medical Ltd., from 1998 to 2001, and Chief Executive Officer of Teva Pharmaceuticals Ltd. Israel
from 1995 to 1998. Mr. Dar holds a B.A. degree in economics and philosophy and an M.A. degree in economics, both from the Hebrew
University of Jerusalem, Israel, and an Executive M.B.A. from Columbia University, New York, USA.
BJ Bormann, Ph.D.,
has
served on our board of directors since August 2013 and on our Compensation Committee since 2022. Dr. Bormann previously served as the
Vice President of Translational Science and Network Alliances at The Jackson Laboratory, a non-profit organization focused on the genetic
basis of disease. Dr. Bormann was previously the Chief Executive Officer of Supportive Therapeutics, LLC, a Boston-based company that
is developing two molecules for use in the supportive care of oncology patients. In the past several years Dr. Bormann has held executive
positions in several biotechnology companies including NanoMedical Systems (Austin, Texas), Harbour Antibodies (Rotterdam, The Netherlands)
and Pivot Pharmaceuticals (PVTF: OTC listed). Prior to these engagements, Dr. Bormann was Senior Vice President responsible for world-wide
alliances, licensing and business development at Boehringer Ingelheim Pharmaceuticals, Inc. from 2007 to 2013. From 1996 to 2007, Dr.
Bormann served in a number of positions at Pfizer, Inc., the last one being Vice President of Pfizer Global Research and Development and
world-wide Head of Strategic Alliances. Dr. Bormann serves on the board of directors of various companies, including Xeris BioPharma,
Inc (Nasdaq:XERS) and NanoMedical Systems (private). Dr. Bormann received her Ph.D. in biomedical science from the University of Connecticut
Health Center and her B.Sc. degree from Fairfield University in biology. Dr. Bormann completed postdoctoral training at Yale Medical School
in the department of pathology.
Raphael Hofstein, Ph.D.,
has served on our board of directors since 2003, our Audit Committee since 2007 and our Compensation Committee since 2012. Dr. Hofstein
has served as the President and Chief Executive Officer of MaRS Innovation (a commercialization company for 15 of Toronto’s universities,
institutions and research institutes plus the MaRS Discovery District) from June 2009 to March 2020. From 2000 through June 2009, Dr.
Hofstein was the President and Chief Executive Officer of Hadasit Medical Research Services and Development Ltd., or Hadasit, the technology
transfer company of Hadassah University Hospitals. Dr. Hofstein has served as chairman of the board of directors of Hadasit since 2006.
Prior to joining Hadasit, Dr. Hofstein was the President of Mindsense Biosystems Ltd. and the Business Unit Director of Ecogen Inc. and
has held a variety of other positions, including manager of RD and chief of immunochemistry at the International Genetic Science
Partnership. Dr. Hofstein serves on the board of directors of numerous companies. Dr. Hofstein received his Ph.D. and M.Sc. degree from
the Weizmann Institute of Science, and his B.Sc. degree in chemistry and physics from the Hebrew University of Jerusalem. Dr. Hofstein
completed postdoctoral training at Harvard Medical School in both the departments of biological chemistry and neurobiology.
Avraham Molcho, M.D.,
has
served on our board of directors since 2010 (as an external director, within the meaning of the Companies Law, until March 25, 2024) and
on our Audit Committee since 2010. In addition, Dr. Molcho has served on our Compensation Committee since 2012. Dr. Molcho is the co-founder
of Biolojic Design Ltd., a technology platform that encourages human antibody discovery. In 2012, Dr. Molcho became the co-founder
of Ayana Pharma Ltd. (formerly DoxoCure), a privately-held company engaged in the manufacturing of liposome-based therapeutics. Dr. Molcho
served as Ayana’s Chief Executive Officer and director until 2019. From 2006 through 2008, Dr. Molcho served as the Chief Executive
Officer and Chairman of Neovasc Medical, a privately-held Israeli medical device company. From 2006 until 2019, Dr. Molcho was a venture
partner at Forbion Capital Partners, a Dutch life sciences venture capital firm. From 2001 through 2006, Dr. Molcho was a managing director
and the head of life sciences of Giza Venture Capital and, in that capacity, was involved in the founding of our company. Dr. Molcho was
also the Deputy Director General of Abarbanel Mental Health Center, the largest acute psychiatric hospital in Israel, from 1999 to 2001.
Dr. Molcho holds an M.D. from Tel Aviv University School of Medicine and an MBA degree from Tel-Aviv University Recanati Business School.
72
Sandra Panem, Ph.D.,
has
served on our board of directors since February 2014 and on our Investment Monitoring Committee since 2010. Dr. Panem served as a managing
partner at Cross Atlantic Partners, from 2000 2023. Dr. Panem is also co-founder and President of NeuroNetworks Fund, a not-for-profit
venture capital fund focusing on epilepsy, schizophrenia and autism. From 1994 to 1999, Dr. Panem was President of Vector Fund Management,
the then asset management affiliate of Vector Securities International. Prior thereto, Dr. Panem served as Vice President and Portfolio
Manager for the Oppenheimer Global BioTech Fund, a mutual fund that invested in public and private biotechnology companies. Previously,
Dr. Panem was Vice President at Salomon Brothers Venture Capital, a fund focused on early and later-stage life sciences and technology
investments. Dr. Panem was also a Science and Public Policy Fellow in economic studies at the Brookings Institution, and an Assistant
Professor of Pathology at the University of Chicago. Previously, Dr. Panem served on numerous boards of public and private companies,
including Acorda Therapeutics, Inc. (Nasdaq:ACOR). Martek Biosciences (Nasdaq:MATK), IBAH Pharmaceuticals (Nasdaq:IBAH), Confluent Surgical,
Molecular Informatics and Labcyte, Inc. Dr. Panem received a B.S. degree in biochemistry and a Ph.D. in microbiology from the University
of Chicago.
Shaoyu Yan, Ph.D.,
has
served on our board of directors since November 2023. Dr. Yan has over 30 years’ experience in drug research and development, manufacturing,
and management, including more than 15 years working with pharmaceutical companies, contract research organizations and marketing authorization
holders under regulation of National Medical Products Administration of China (NMPA). Since March 2020, Dr. Yan has served as an executive
vice president and head of RD and manufacturing at Gloria Biosciences Co. Ltd. From February 2014 to December 2019, Dr. Yan served
as the senior director and senior research fellow of the oncology and immunology business unit at WuXi AppTec (Shanghai) Co., Ltd. (SHA:
603259). Prior to these roles, Dr. Yan held positions, including at various academic institutions, including: senior research scientist
at the department of thoracic and cardio surgery and pharmaceutical development center of the University of Texas’s MD Anderson
Cancer Center from June 2006 to December 2013; visiting scholar and research scientist of the faculty of pharmaceutical sciences at Kyushu
University from August 2001 to August 2002; deputy director in the institute of medical raw materials at Tianjin Pharmaceutical Group
Corp. and director and co-founder at the Shenyang Huiming Institute of Chinese Traditional Medicine from May 1995 to August 1998. Dr.
Yan received a Ph.D in pharmaceutical science and M.Sc. degree in pharmaceutics from Shenyang Pharmaceutical University, and a B.Sc. degree
from Jilin University in polymer chemistry. Dr. Yan completed his postdoctoral training in the field of pharmacology and biochemistry
from Michael E. DeBakey Department of Surgery at Baylor College of Medicine from February 2003 to June 2006. Dr. Yan was appointed
to serve as a Class III director by our board of directors pursuant to the securities purchase agreement that we entered into with HST
and Gloria in August 2023. See “Item 7B. Major Shareholders and Related Party Transactions - Related Party Transactions - Gloria
License Agreement and Securities Purchase Agreement.”
Gal Cohen, MBA,
has
served on our board of directors since December 2023. Mr. Cohen serves on the boards of directors of Ayana Pharma Ltd. and Silver Castle
Holdings Ltd (TASE: SLCL) and from April 2020 to February 2024, served as Chairman of the board of directors and Chief Executive Officer
of Quark Pharmaceuticals, Inc. From November 2006 to May 2019, Mr. Cohen served as President and Chief Executive Officer of MediWound
Ltd., leading the development of their innovative biological drug for burn treatment up to marketing authorization and commercialization
in numerous international markets, as well as their initial public offering on Nasdaq. Prior to that, from 2004 to 2006, Mr. Cohen served
as Director of Strategic Business Planning and New Ventures at Teva Pharmaceuticals Ltd. From 2000 to 2004, Mr. Cohen served at Teva’s
Global Products Division as Project Manager for the launch of Copaxone
®
in
Europe and numerous other countries, and from 1998 to 2000, he led projects at Teva’s Corporate Industrial Engineering Department.
Mr. Cohen holds a B.Sc. degree in Industrial Engineering and Management (
cum laude
) from the Technion-Israel
Institute of Technology and an M.B.A. degree (
cum laude
) from Tel Aviv University.
B. Compensation
Directors and Officer Agreements
We have entered into written employment agreements with each of
our executive officers, the terms of which are consistent with the provisions of our Compensation Policy for Executives and Directors,
or Compensation Policy, which was approved by our shareholders in July 2022. All of these agreements contain customary provisions regarding
noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions
may be limited under applicable law.
73
In addition, we have entered into agreements with each executive
officer and director exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result
of a breach of duty of care, and undertaking to indemnify each of them to the fullest extent permitted by law, to the extent that these
liabilities are not covered by directors’ and officers’ liability insurance. The terms of these agreements and of our directors’
and officers’ liability insurance are consistent with the provisions of the Compensation Policy. See “Item 6.C —
Directors, Senior Management and Employees — Board Practices — Exculpation, insurance and indemnification of office holders.”
Compensation of Directors and Senior Management
The following table presents in the aggregate all compensation
we paid to all of our directors and senior management as a group for the year ended December 31, 2024. The table does not include any
amounts we paid to reimburse any such persons for costs incurred in providing us with services during this period.
|
|
Salaries, fees,
commissions
and bonuses
|
Pension,
retirement,
options and
other similar benefits
|
||||||
|
|
(in thousands of U.S. dollars)
|
|||||||
|
All directors and senior management as a group, consisting of 13 persons
|
1,912
|
899
|
||||||
The following table presents information regarding the compensation costs of our four
executive officers in the year ended December 31, 2024. All amounts reported reflect the cost to the Company as recognized in our financial
statements for the year ended December 31, 2024.
|
Name and Position
|
Salary
|
Social Benefits
(1)
|
Bonuses
(2)
|
Value of
Share-Based
Compensation
(3)
|
All Other
Compensation
(4)
|
Total
|
||||||||||||||||||
|
|
(in thousands of U.S. dollars)
|
|||||||||||||||||||||||
|
Philip A. Serlin
Chief Executive Officer
|
296
|
109
|
74
|
265
|
20
|
764
|
||||||||||||||||||
|
Mali Zeevi
Chief Financial Officer
|
195
|
59
|
49
|
32
|
22
|
357
|
||||||||||||||||||
|
Ella Sorani
Chief Development Officer
|
221
|
54
|
-
|
32
|
20
|
328
|
||||||||||||||||||
|
Holly W. May
Former President of BioLineRx USA, Inc.*
|
440
|
61
|
226
|
-
|
220
|
947
|
||||||||||||||||||
* Ms. May ceased to serve as President of BioLineRx USA, Inc.
on December 31, 2024.
|
(1)
|
“Social Benefits” include payments to the National Insurance Institute,
advanced education funds, managers’ insurance and pension funds, vacation pay and recuperation pay as mandated by Israeli law.
|
|
(2)
|
With the exception of Ms. May, does not include annual bonuses for 2024, which remain
subject to the approval of the Company’s compensation committee and board of directors.
|
|
|
(3)
|
Consists of amounts recognized as share-based compensation expense on the Company’s
statement of comprehensive loss for the year ended December 31, 2024.
|
|
(4)
|
“All Other Compensation” includes automobile-related expenses pursuant to the Company’s
automobile leasing program, telephone, basic health insurance and holiday presents, as well as termination benefits to Ms. May.
|
As approved by our shareholders at the annual general meeting held
in 2022, our directors are entitled to cash compensation of $30,000 per annum, $1,200 for each board or committee meeting attended in
person, $720 for each board or committee meeting attended via telephone or videoconference, $600 for participation by written consent
and $3,000 for membership of each committee of the Board of Directors, and in the case of the Chairman of the Board of Directors, such
fees in amounts that are 50% higher than the foregoing fees, in each case provided that such fees do not exceed the maximum amounts payable
to external directors from time to time by us under the Israeli Companies Regulations (Rules Regarding Compensation and Expense Reimbursement
of External Directors), 2000 and the Israeli Companies Regulations (Relief for Companies whose Securities are Listed for Trading Outside
of Israel),
2000. For the
year ended December 31, 2024, we recorded $62,300
on account of cash compensation paid to the Chairman of our Board of Directors, Dr. Aharon Schwartz, and a $6,400 equity-based compensation
expense for equity-based compensation granted to Dr. Schwartz.
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For information concerning our equity compensation plan, see “— Beneficial
Ownership of Executive Officers and Directors — Equity Compensation Plan
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There are currently no arrangements or understandings between us,
on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their service as directors of
our Company.
C. Board Practices
Board of Directors
According to the Companies Law, the management of our business
is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically
granted to our shareholders. Our executive officers are responsible for our day-to-day management and have individual responsibilities
established by our board of directors. Executive officers are appointed by and serve at the discretion of our board of directors, subject
to any applicable employment agreements we have entered into with the executive officers.
According to our Articles of Association, our board of directors
must consist of at least five and not more than 10 directors, including external directors under Israeli law (if any). Currently, our
board of directors consists of eight directors. Our board of directors has determined that each of our directors other than Mr. Yan
is an “independent director” under Nasdaq Listing Rules.
Under our Articles of Association, as amended at our annual general
meeting of shareholders held in August 2023, our directors (other than external directors, if any) are divided into three classes with
staggered three-year terms. Each class of directors consists, as nearly as possible, of one-third of the total number of directors
constituting the entire board of directors. At each annual general meeting of our shareholders beginning in 2024, the election or
re-election of directors following the expiration of the term of office of the directors of that class of directors will be for a term
of office that expires on the third annual general meeting following such election or re-election. Each director (other than external
directors, if any) holds office until the third annual general meeting of our shareholders and until his or her successor is duly appointed,
unless the tenure of such director expires earlier pursuant to the Companies Law, or unless removed from office as described below.
Our directors are divided among three classes as follows:
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the Class I directors, consisting of Dr. Avraham Molcho, Mr. Rami Dar and Gal Cohen, will hold office until our annual general meeting
of shareholders to be held in 2027;
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the Class II directors, consisting of Dr. B.J. Bormann and Dr. Raphael Hofstein, will hold office until our annual general meeting
of shareholders to be held in 2025; and
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the Class III directors, consisting of Dr. Sandra Panem, Dr. Aharon Schwartz and Dr. Shaoyu Yan, will hold office until our annual
general meeting of shareholders to be held in 2026.
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In accordance with the exemption available to foreign private issuers
under applicable Nasdaq Rules, we do not follow the requirements of the Nasdaq Rules with regard to the process of nominating directors,
and instead follow Israeli law and practice, in accordance with which our board of directors is authorized to recommend to our shareholders
director nominees for election, and, in some circumstances, our shareholders may nominate candidates for election as directors by the
shareholders’ general meeting.
In addition, our board of directors may appoint directors (other
than external directors) to fill vacancies on our board of directors, including if the number of directors is below the maximum number
of directors who may serve as provided in our Articles of Association, for a term of office equal to the remaining period of the term
of office of the director(s) whose office(s) has been vacated, or in case of a vacancy due to the number of directors serving being less
than the maximum number stated in our Articles of Association, until the next annual general meeting of our shareholders for the class
he or she has been assigned by our board of directors.
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Under the Companies Law, our board of directors must determine
the minimum number of directors who are required to have financial and accounting expertise. Under applicable regulations, a director
with financial and accounting expertise is a director who, by reason of his or her education, professional experience and skill, has a
high level of proficiency in and understanding of business accounting matters and financial statements. He or she must be able to thoroughly
comprehend the financial statements of the listed company and initiate debate regarding the manner in which financial information is presented.
In determining the number of directors required to have such expertise, a company’s board of directors must consider, among other
things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that we
require at least one director with the requisite financial and accounting expertise. Our board of directors has determined that
Rami Dar has such financial and accounting expertise.
Chairperson of the Board.
Under the Companies Law, a person cannot hold the role of both chairperson of the board of directors and chief executive officer of a
public company, without shareholder approval by a special majority and for periods of time not exceeding three years each. Furthermore,
a person who is directly or indirectly subordinate to a chief executive officer of a public company may not serve as the chairperson of
the board of directors of that company and the chairperson of the board of directors of a public company may not otherwise serve in any
other capacity in that company or a subsidiary of that company other than as a director or the chairperson of the board of directors of
such a subsidiary.
External Directors
Under the Companies Law, the board of directors of Israeli companies whose shares are
publicly traded, including companies with shares listed on Nasdaq, are required to include at least two external directors who meet the
qualification requirements in the Companies Law. However, pursuant to the Israeli Companies Regulations (Relief for Companies whose Securities
are Listed for Trading Outside of Israel) – 2000, or the Relief Regulations, companies that do not have a controlling shareholder
(within the meaning of the Companies Law), whose shares are listed on an exchange outside Israel or are dual listed on the TASE and a
foreign exchange referenced in the second or third addendum to the Israeli Securities Law, 5728-1968, or the Israeli Securities Law (which
include, among others, the Nasdaq), such as us, may, subject to certain conditions, “opt out” from the Companies Law requirements
to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee
of the board of directors (other than the gender diversification rule under the Companies Law, which requires the appointment of a director
from the other gender if at the time of appointment of a director all members of the board of directors are of the same gender).
On March 25, 2024, in accordance with the Relief Regulations, our
board of directors elected to “opt out” from the Companies Law requirement to appoint external directors and related Companies
Law rules concerning the composition of the audit committee and compensation committee of the board of directors, effective immediately.
Under the Relief Regulations, the exemption from such Companies Law requirements will continue to be available to us so long as: (i) we
do not have a “controlling shareholder” (as such term is defined under the Companies Law), (ii) our shares are traded on an
exchange outside Israel or dual listed on the TASE and certain foreign stock exchanges, including the Nasdaq, and (iii) we comply with
the director independence requirements and the audit committee and compensation committee composition requirements under U.S. laws (including
applicable Nasdaq Rules) applicable to U.S. domestic issuers.
Audit Committee
In accordance with the Relief Regulations described above, on March
25, 2024, our board of directors elected to “opt out” from the Companies Law requirement to appoint external directors and
related rules concerning the composition of the audit committee and compensation committee, effective immediately. Under such exemption,
among other things, the composition of our audit committee must comply with the requirements of SEC and Nasdaq rules.
The Nasdaq Rules require us to establish an audit committee comprised
of at least three members, all of whom must be independent directors under the respective “independence” requirements of the
SEC and Nasdaq, each of whom is financially literate and one of whom has accounting or related financial management expertise at senior
levels within a company.
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Our Audit Committee is currently comprised of Mr. Rami Dar, Dr.
Avraham Molcho and Dr. Raphael Hofstein. Mr. Rami Dar serves as the Chairperson of the Audit Committee. Our board of directors has
determined that Mr. Rami Dar (Chairperson) qualifies as an audit committee financial expert as defined by the rules of the SEC and Nasdaq.
Our board of directors has determined that each member of our audit committee is “independent” as such term is defined in
Rule 10A-3(b)(1) under the Exchange Act, which is different from the test for independence of board and committee members under the Nasdaq
Rules.
Our board of directors adopted an audit committee charter that
added to the responsibilities of our Audit Committee under the Companies Law, setting forth the responsibilities of the audit committee
consistent with the rules of the SEC and the Nasdaq Rules, including the following:
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oversight of the company’s independent registered public accounting firm and
recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to our board
of directors in accordance with Israeli law;
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recommending the engagement or termination of the office of our internal auditor;
and
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reviewing and pre-approving the terms of audit and non-audit services provided by
our independent auditors.
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Our Audit Committee provides assistance to our board of directors
in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control
and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding
our accounting practices and systems of internal control over financial reporting. Our Audit Committee also oversees the audit efforts
of our independent accountants and takes those actions it deems necessary to satisfy itself that the accountants are independent of management.
Pursuant to the Companies Law, the audit committee of a company shall be responsible for: (i) determining whether there are delinquencies
in the business management practices of a company, including in consultation with an internal auditor or independent auditor, and making
recommendations to the company’s board of directors to improve such practices; (ii) determining whether to approve certain related
party transactions (including compensation of office holders or transactions in which an office holder has a personal interest and whether
such transaction is material or otherwise an extraordinary transaction); (iii) where the company’s board of directors approves the
work plan of the internal auditor, examining such work plan before its submission to the board of directors and proposing amendments thereto;
(iv) examining internal controls and the internal auditor’s performance, including whether the internal auditor has sufficient resources
and tools to dispose of its responsibilities (taking into consideration the special needs and size of a company); (v) examining the scope
of the auditor’s work and compensation and submitting its recommendation with respect thereto to the corporate body considering
the appointment thereof (either the board of directors or the general meeting of shareholders); and (vi) establishing procedures for the
handling of employees’ complaints as to the management of the business and the protection to be provided to such employees. The
responsibilities of the audit committee under the Companies Law also include the following matters: (i) the establishment of procedures
to be followed in respect of related party transactions with a controlling shareholder (whether or not it is an extraordinary transaction),
which may include, where applicable, the establishment of a competitive process for such transaction, under the supervision of the audit
committee, or individual, or other committee or body selected by the audit committee, in accordance with criteria determined by the audit
committee; and (ii) to determine procedures for approving certain related party transactions with a controlling shareholder, which having
been determined by the audit committee not to be extraordinary transactions, were also determined by the audit committee not to be negligible
transactions. Under the Companies Law, the approval of the audit committee is required for specified actions and transactions with office
holders and controlling shareholders. See “— Approval of Related Party Transactions under Israeli Law.”
Compensation Committee
In accordance with the Relief Regulations described above, on March
25, 2024, our board of directors elected to “opt out” from the Companies Law requirement to appoint external directors and
related rules concerning the composition of the audit committee and compensation committee, effective immediately. Under such exemption,
among other things, the composition of our compensation committee must comply with the requirements of the Nasdaq Rules.
Under the Nasdaq Rules, we are required to maintain a compensation
committee consisting of at least two directors, each of whom is an independent director within the meaning of the Nasdaq Rules.
Our Compensation Committee is currently comprised of Mr. Rami Dar,
Dr. Avraham Molcho, Dr. Raphael Hofstein and Dr. B.J Bormann. Dr. Avraham Molcho serves as the Chairperson of our Compensation Committee.
Our board of directors has determined that each member of our compensation committee is independent under the Nasdaq Rules, including
the additional independence requirements applicable to the members of a compensation committee.
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The responsibilities of the compensation committee include the
following:
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to make recommendations to the board of directors for its approval of (i) a compensation
policy for office holders, (ii) once every three years whether to extend the then current compensation policy (approval of either a new
compensation policy or the continuation of an existing compensation policy must, in any case, occur every three years); and (iii) periodic
updates to the compensation policy which may be required from time to time. In addition, the compensation committee is required
to periodically examine the implementation of the compensation policy; and
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to approve transactions relating to terms of office and employment of company office
holders that require the approval of the compensation committee pursuant to the Companies Law (including determining whether the compensation
terms of a candidate for chief executive officer of the company need not be brought to approval of the shareholders).
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In addition, our Compensation Committee makes recommendations to
the board of directors regarding equity compensation (with the board also approving the compensation of our executive officers) and administers
our share incentive plan.
Compensation Policy
Under the Companies Law, the board of directors of a publicly traded
company is required to adopt a compensation policy according to which the compensation of the company’s office holders will be determined.
The compensation policy must be approved at least once every three years by the board of directors, after considering the recommendations
of the compensation committee, and subject to limited exceptions, by the shareholders of the company by a majority vote of the shares
present and voting at a shareholder meeting on the matter, subject to a certain special majority requirement, or the Special Majority
for Compensation, as set forth in the Companies Law, pursuant to which one of the following must be met:
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the majority of the votes voted in favor includes at least a majority of all the votes
of shareholders who are not controlling shareholders of the company and shareholders who do not have a personal interest in the compensation
policy, present and voting on the matter (excluding abstentions); or
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the total of opposing votes from among the shareholders who are non-controlling shareholders
and shareholders who do not have a personal interest in the matter does not exceed 2% of all the voting rights in the company.
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Nonetheless, even if the shareholders of the company do not approve
the compensation policy, the board of directors may still approve the compensation policy, provided that the compensation committee and,
thereafter, the board of directors determine, based on detailed, documented, reasons and after further discussion of the compensation
policy, that despite the objection of shareholders, the approval of the compensation policy is in the best interests of the company.
Our current Compensation Policy was approved at the annual general
meeting of our shareholders held in 2022. Below is a summary discussion of the main provisions of our Compensation Policy:
The Compensation Policy includes (among other things) a framework
for establishing the terms of office and employment of our office holders, a recoupment policy and guidelines with respect to the structure
of the variable pay of our office holders.
Compensation is considered performance-based to the extent that
a direct link is maintained between compensation and performance and that rewards are consistent with long-term stakeholder value creation.
At the company level, we analyze the overall compensation trends of the market in order to make informed decisions about our compensation
approach.
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According to the Compensation Policy, the fixed components of our
office holder compensation will be examined at least every two years and compared to the market. Our board of directors may change the
amount of the fixed components for one or more of our executives after receiving a recommendation for such from our Compensation Committee,
provided such change is within the limits determined by the Compensation Policy and subject to applicable law. The change may be made
if our board of directors concludes that such a change would promote our goals, operating plans and objectives and after taking into account
the business and legal implications of the proposed change and its impact on our internal labor relations. Any such changes are subject
to formal approval by the relevant parties. Under Israeli law, our board of directors has the authority to approve a change in the incentive
structure of all executive officers, including the chief executive officer, up to an immaterial amount. The fixed component of compensation
remunerates the specific role covered and scope of responsibilities and reflects the experience and skills required for each position,
as well as the level of excellence demonstrated and the overall quality of the office holder’s contribution to our business. The
weighting of fixed compensation within the overall package is designed to reduce the risk of excessively risk-oriented behavior, to discourage
initiatives focused on short-term results which might jeopardize our mid and long-term business sustainability and value creation, and
to allow us a flexible compensation approach. We offer our employees benefit plans based on common practice in the local labor market
of the office holder.
Variable components of compensation are determined with an aim
at creating maximum alignment between the Compensation Policy and our operating plan and objectives. Variable components of compensation
are primarily based on measurable long-term criteria, except that a non-material portion of variable compensation may be based on qualitative
non-measurable criteria which focus on the office holder’s contribution to the Company. Our variable compensation aims to remunerate
for achievements by directly linking pay to performance outcomes in the short and long term. To strengthen the alignment of shareholder
interests and the interests of management and employees, performance measurements reflect our actual results overall, as well as that
of the individual office holder. To support the aforementioned principles, we provide two types of variable compensation: short-term -
annual bonuses; and long-term - equity compensation.
Annual bonuses are based on achievement of the business goals set
out in our annual operating plan approved by the board of directors at the beginning of each year. The operating plan encompasses all
aspects of our activities and as such sets the business targets for each member of the management team. Consequently, our Compensation
Committee and board of directors should be able to judge the suitability of a bonus payment by deliberating retrospectively at year end
and comparing actual performance and target achievements against the forecasted operating plan. The annual bonus mechanism will be directly
tied to meeting objectives - both our business objectives and the office holder’s personal objectives. The board of directors’
satisfaction with the officer’s performance will also affect the bonus amount. Annual bonus payments are subject to the limitations
set out in the Compensation Policy and are also subject to the discretion of our Compensation Committee and approval by the board of directors.
In order to maintain some measure of flexibility, after calculating the compensation amount, the board of directors may exercise discretion
about the final amount of the bonus but may not increase the recommended bonus amount by more than 25%.
Equity-based compensation may be granted in any form permitted
under our share incentive plan in effect from time to time and shall be made in accordance with the terms of such share incentive plan.
Equity-based compensation to office holders shall be granted from time to time and be individually determined and awarded according to
the performance, prior business experience, qualifications, role and the personal responsibilities of each officer. The vesting period
will generally be four years, with the vesting schedule to be determined in accordance with market compensation trends. Our policy is
to grant equity-based compensation with exercise prices at market value. Furthermore, in order to create a ceiling for the variable compensation:
(1) the aggregate value of annual grants to any one office holder (based on the Black Scholes calculation as of the date of grant) will
be no more than the higher of 2% of our market capitalization at the end of the measurement period or $1.5 million; and (2) it is our
intention that the maximum outstanding equity awards under its share incentive plan will not exceed 12% of our total fully-diluted share
capital. Our board of directors may, following approval by our Compensation Committee, make provisions with respect to the acceleration
of the vesting period of any office holder’s awards, including, without limitation, in connection with a corporate transaction involving
a change of control (subject to any other approvals required by applicable law).
We have also established a defined ratio between the variable and
the fixed components of compensation, as well as a maximum amount for all variable components as of the date on which they are paid (or
as of the grant date for non-cash variable equity components), and subject to the limitations on variable compensation components which
are set out in the Compensation Policy. In all events, the weight of all the variable components (out of the total compensation amount
which is to be granted for any year) will not be greater than 80% for each office holder and may vary from one office holder to the other.
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According to the Companies Law, our Compensation Policy provides
that in the event of an accounting restatement, we shall be entitled to recover from office holders’ bonus compensation granted,
earned or vested based on a pre-accounting restatement of our financial results in the amount of the excess over what would have been
paid under the accounting restatement, with a three-year look-back period. However, the compensation recovery will not be triggered in
the event of a financial restatement required due to changes in applicable financial reporting standards. In addition, in November
2023 we adopted an Executive Officer Clawback Policy in accordance with the rules of the SEC and Nasdaq.
All compensation arrangements of office holders are to be approved
in the manner prescribed by applicable law. Our Compensation Committee will review the Compensation Policy on an annual basis, and monitor
its implementation, and recommend to our board of directors and shareholders to amend the Compensation Policy as it deems necessary from
time to time.
Investment Monitoring Committee
Our board of directors has established an Investment Monitoring
Committee which currently consists of the following three members: our directors Dr. Sandra Panem (Chairperson) and Mr. Rami Dar; Ms.
Mali Zeevi, our Chief Financial Officer; and Mr. Raziel Fried, our Treasurer and Budgetary Control Director. The role of the Investment
Monitoring Committee includes providing recommendations to our board of directors regarding investment guidelines and performing an on-going
review of the fulfillment of established investment guidelines. The Investment Monitoring Committee convenes for meetings in accordance
with our needs, but in any event at least twice per year.
Internal Auditor
Under the Companies Law, the board of directors of an Israeli public
company must appoint an internal auditor recommended by the audit committee and nominated by the board of directors. An internal auditor
may not be:
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a person (or a relative of a person) who holds more than 5% of the company’s
shares;
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a person (or a relative of a person) who has the power to appoint a director or the
general manager of the company;
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an executive officer or director of the company (or a relative thereof); or
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a member of the company’s independent accounting firm.
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The role of the internal auditor is to examine, among other things,
our compliance with applicable law and orderly business procedures. The audit committee is required to oversee the activities and to assess
the performance of the internal auditor as well as to approve the internal auditor’s work plan. Our internal auditor is Tali Yaron
Adv. (LLB, LLM), a director at Deloitte Israel.
Fiduciary Duties and Approval of Related Party Transactions under
Israeli Law
Fiduciary duties of office holders
The Companies Law imposes a duty of care and a duty of loyalty
on all office holders of a company. The duty of care of an office holder is based on the duty of care set forth in connection with the
tort of negligence under the Israeli Torts Ordinance (New Version) 5728-1968. This duty of care requires an office holder to act with
the degree of care with which a reasonable office holder in the same position would have acted under the same circumstances.
The duty of care includes a duty to use reasonable means, in light
of the circumstances, to obtain:
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information on the advisability of a given action brought for his or her approval
or performed by virtue of his or her position; and
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all other important information pertaining to these actions.
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The duty of loyalty requires an office holder to act in good faith
and for the benefit of the company, and includes the duty to:
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refrain from any act involving a conflict of interest between the performance of his
or her duties in the company and his or her other duties or personal affairs;
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refrain from any activity that is competitive with the business of the company;
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refrain from exploiting any business opportunity of the company for the purpose of
gaining a personal advantage for himself or herself or others; and
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disclose to the company any information or documents relating to the company’s
affairs which the office holder received as a result of his or her position as an office holder.
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We may approve an act performed in breach of the duty of loyalty
of an office holder provided that the office holder acted in good faith, the act or its approval does not harm the company, and the office
holder discloses his or her personal interest, as described below.
Disclosure of personal interests of an office holder
The Companies Law requires that an office holder promptly disclose
to the company any personal interest that he or she may have and all related material information or documents relating to any existing
or proposed transaction by the company, and in any event no later than the first meeting of the board of directors at which the transaction
is considered. An office holder is not, however, obliged to disclose a personal interest and related information if the personal interest
of the office holder derives solely from the personal interest of his or her relative in a transaction that is not considered an extraordinary
transaction (as defined in the Companies Law).
The term personal interest is defined under the Companies Law to
include the personal interest of a person in an action or transaction of a company, including the personal interest of such person’s
relative or the interest of any entity in which the person or any of his/her relatives serves as a director or the chief executive officer,
owns at least 5% of its issued share capital or its voting rights or has the right to appoint a director or the chief executive officer,
but excluding a personal interest stemming solely from the ownership of shares in such entity. A personal interest includes the personal
interest of a person for whom the office holder holds a voting proxy and the personal interest of the office holder voting as a proxy,
even if the shareholder granting the proxy has no personal interest in the approval of the matter.
Under the Companies Law, an extraordinary transaction is defined
as any of the following:
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a transaction other than in the ordinary course of business;
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a transaction that is not on market terms; or
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a transaction that may have a material impact on the company’s profitability, assets or liabilities.
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Under the Companies Law, once an office holder has complied with
the disclosure requirement described above, a company may approve a transaction between the company and the office holder or a third party
in which the office holder has a personal interest, or approve an action by the office holder that would otherwise be deemed a breach
of duty of loyalty. However, a company may not approve a transaction or action that is adverse to the company’s interest or that
is not performed by the office holder in good faith.
A director who has a personal interest in a matter that is considered
at a meeting of the board of directors or the audit committee may generally not be present at the meeting or vote on the matter unless
a majority of the directors or members of the audit committee have a personal interest in the matter, or, unless the chairman of the audit
committee or board of directors (as applicable) determines that he or she should be present to present the transaction that is subject
to approval. If a majority of the directors have a personal interest in the matter, such matter also requires approval of the shareholders
of the company.
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Approval of transactions with officer holders
Under the Companies Law, unless the articles of association of
a company provide otherwise, a transaction with an office holder or with a third party in which the office holder has a personal interest
that is not an extraordinary transaction and an action of an office holder that would otherwise be deemed a breach of duty of loyalty
that may have a material impact on a company’s profitability, assets or liabilities, requires approval by the board of directors.
Our Articles of Association do not provide otherwise. If the transaction or action considered is (i) an extraordinary transaction or (ii)
an action of an office holder that would otherwise be deemed a breach of duty of loyalty and may have a material impact on a company’s
profitability, assets or liabilities, then audit committee approval is required prior to approval by the board of directors.
Approval of compensation of office holders
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Executive officers other than the Chief Executive
Officer
. The compensation of an office holder in a public company who is neither a director nor the chief executive officer
generally requires approval by the (i) compensation committee; and (ii) the board of directors. Approval of terms of office and
employment for such officers which do not comply with the compensation policy may nonetheless be approved, in special circumstances, subject
to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken
into account the various considerations and mandatory requirements set forth in the Companies Law with respect a compensation policy,
and (ii) the shareholders of the company have approved the terms by the Special Majority for Compensation . However, if the shareholders
do not approve a compensation arrangement with an executive officer that is inconsistent with the company’s compensation policy,
a company’s compensation committee and board of directors, may, in special circumstances approve the compensation despite shareholder
objection, provided that the compensation committee and thereafter the board of directors have determined to approve the compensation
based on detailed reasoning, after each having re- discussed the terms of compensation, and after examining the objection of the shareholders.
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Chief Executive Officer
. The compensation
of a chief executive officer in a public company generally requires approval by the (i) compensation committee; (ii) the board of directors;
and (iii) the shareholders of the company by the Special Majority for Compensation. Approval of the compensation terms of a chief executive
officer which do not comply with the compensation policy may nonetheless be approved, in special circumstances, subject to two cumulative
conditions: (i) the compensation committee and thereafter the board of directors, approved the terms after having taken into account the
various considerations and mandatory requirements set forth in the Companies Law with respect to a compensation policy and (ii) the shareholders
of the company have approved the terms by means of the Special Majority for Compensation . However, a company’s compensation committee
and board of directors, may, in special circumstances approve the compensation of a chief executive officer (who is not a director) that
is not approved by shareholders despite shareholder objection, provided that the company’s compensation committee and thereafter
the board of directors have determined to approve the compensation, based on detailed reasoning, after each having re-discussed the terms
of office and employment, and after examining the objection of the shareholders. In addition, the compensation committee may exempt from
shareholder approval the compensation terms of a candidate for the office of chief executive officer where such officer has no prior business
relationship with the controlling shareholder or the company, if it has found, based on detailed reasons, that bringing the compensation
to the approval of the shareholders would impede the employment of such candidate by the company, provided that the terms of office and
employment are in accordance with the company’s compensation policy.
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Directors
. The compensation of a director
(who is not the chief executive officer) of a public company generally requires approval by the (i) compensation committee; (ii) the board
of directors; and (iii) unless exempted under regulations promulgated under the Companies Law, the shareholders of the company. Approval
of terms of the compensation of directors of a company which do not comply with the compensation policy may nonetheless be approved, in
special circumstances, subject to two cumulative conditions: (i) the compensation committee and thereafter the board of directors, approved
the terms after having taken into account the various considerations and mandatory requirements set forth in the Companies Law with respect
to a compensation policy and (ii) the shareholders of the company have approved the terms by means of the Special Majority for Compensation.
|
82
With respect to compensation of an officer (including a chief
executive officer) or director who is also a controlling shareholder, see “—
Disclosure of
personal interests of a controlling shareholder and approval of transactions
.”
Disclosure of personal interests of a controlling shareholder and
approval of certain transactions
Under the Companies Law, the disclosure requirements that apply
to an office holder also apply to a controlling shareholder of a public company. In the context of a transaction involving a shareholder
of the company, the definition of “controlling shareholder” also includes shareholders that hold 25% or more of the voting
rights if no other shareholder owns more than 50% of the voting rights in the company (and the holdings of two or more shareholders which
each have a personal interest in such matter will be aggregated for the purposes of determining such threshold), but excludes a shareholder
whose power derives solely from his or her position as a director of the company or from any other position with the company. For this
purpose, the holdings of all shareholders who have a personal interest in the approval of the same transaction will be aggregated.
Under the Companies Law, extraordinary transactions with a controlling
shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder
has a personal interest, as well as transactions for the provision of services, whether directly or indirectly, by a controlling shareholder
or his or her relative, or a company such controlling shareholder controls, require the approval of the audit committee, the board of
directors and the shareholders, in that order. Transactions concerning the compensation terms of a controlling shareholder or a controlling
shareholder’s relative, whether as an office holder or an employee, require the approval of the compensation committee, the board
of directors and the shareholders, in that order. The shareholder approval must meet one of the following requirements:
|
|
•
|
at least a majority of the shares held by shareholders who have no personal interest in the matter who
are present and voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or
|
|
|
•
|
the shares voted by shareholders who have no personal interest in the matter who are present and vote against
the transaction represent no more than 2% of the voting rights in the company.
|
The terms of service and employment of a controlling shareholder
approved by the compensation committee and board of directors shall be in accordance with the compensation policy of the company. Nonetheless,
the compensation committee and the board of directors may, in special circumstances, approve a compensation arrangement of a controlling
shareholder that does not comply with the company’s compensation policy, provided that (i) the compensation committee and, thereafter,
the board of directors approve such terms, based on, among other things, the considerations and mandatory requirements with respect to
a compensation policy set forth in the Companies Law and (ii) the shareholders have approved the terms by means of the Special Majority
for Compensation.
To the extent that any such transaction with a controlling shareholder
is for a period extending beyond three years, approval, in the same manner described above, is required once every three years, unless,
with respect to transactions not involving the receipt of services or compensation can be approved for a longer term, the audit committee
determines that the duration of the transaction for such longer term is reasonable given the related circumstances.
Pursuant to regulations promulgated under the Israeli Companies
Law, certain transactions, including with respect to compensation, with a controlling shareholder or his or her relative, or with directors
or other office holders, that would otherwise require approval of a company’s shareholders may be exempt from shareholder approval
under certain conditions.
83
Approval of Significant Private Placements
Under the Companies Law, a significant private placement of securities
requires approval by the board of directors and the shareholders by a simple majority. A private placement is considered a significant
private placement if it will cause a person to become a controlling shareholder (within the meaning of the Companies Law) or if all of
the following conditions are met: (i) the securities issued amount to 20% or more of the company’s outstanding voting rights before
the issuance; (ii) some or all of the consideration is other than cash or listed securities or the transaction is not on market terms;
and (iii) the transaction will increase the relative holdings of a shareholder who holds 5% or more of the company’s outstanding
share capital or voting rights or that will cause any person to become, as a result of the issuance, a holder of more than 5% of the company’s
outstanding share capital or voting rights. However, pursuant to the Relief Regulations, the foregoing shareholder approval requirements
shall not apply to a company whose shares are listed on an exchange outside Israel or dual listed on the TASE and a foreign exchange referenced
in the second or third addendum to the Israeli Securities Law (which include, among others, the Nasdaq), if the law of the foreign jurisdiction
sets forth requirements regarding the approval of private placements and the company complies with such requirements as they apply to
companies incorporated in such foreign jurisdiction.
Duties of shareholders
Under the Companies Law, a shareholder has a duty to act in good
faith and in an acceptable manner in exercising its rights and performing its obligations to the company and other shareholders, and must
refrain from abusing its power in the company, including, among other things, voting at general meetings of shareholders on the following
matters:
|
|
•
|
an amendment to the articles of association;
|
|
|
•
|
an increase in the company’s authorized share capital;
|
|
|
•
|
a merger; and
|
|
|
•
|
the approval of related party transactions and acts of office holders that require shareholder approval
under the Companies Law.
|
A shareholder also has a general duty to refrain from discriminating
against other shareholders.
The remedies generally available upon a breach of contract will
also apply to a breach of the above-mentioned duties, and in the event of discrimination against other shareholders, additional remedies
are available to the injured shareholder.
In addition, a controlling shareholder, any shareholder that knows
that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association,
has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty
to act with fairness towards the company. The Companies Law does not describe the substance of this duty of fairness except to state that
the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness,
taking the shareholder’s position in the company into account.
Exculpation, insurance and indemnification of office holders
Under the Companies Law, a company may not exculpate an office
holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability
to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care, but only if a provision
authorizing such exculpation is included in its articles of association. Our Articles of Association include such a provision. An Israeli
company may not exculpate a director from liability arising out of a prohibited dividend or distribution to shareholders.
An Israeli company may indemnify an office holder in respect of
the following liabilities and expenses incurred for acts performed as an office holder, either pursuant to an undertaking given by the
company in advance of an event or following an event, provided a provision authorizing such indemnification is contained in its articles
of association:
|
|
•
|
monetary liability imposed on him or her in favor of another person pursuant to a
judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder
with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the
board of directors, can be foreseen based on the company’s activities when the undertaking to indemnify is given, and to an amount
or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail
the abovementioned foreseen events and amount or criteria;
|
84
|
|
•
|
reasonable litigation expenses, including attorneys’ fees, incurred by the office
holder (i) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation
or proceeding, provided that (1) no indictment was filed against such office holder as a result of such investigation or proceeding; and
(2) no financial liability was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or
proceeding or, if such financial liability (such as a criminal penalty) was imposed, it was imposed with respect to an offense that does
not require proof of criminal intent and (ii) in connection with a monetary sanction;
|
|
|
•
|
a monetary liability imposed on an office holder in favor of an injured party at an Administrative Procedure
(as defined below) pursuant to Section 52(54)(a)(1)(a) of the Israeli Securities Law;
|
|
|
•
|
expenses incurred by an office holder or certain compensation payments made to an injured party that were
instituted against an office holder in connection with an Administrative Procedure under the Israeli Securities Law, including reasonable
litigation expenses and reasonable attorneys’ fees; and
|
|
|
•
|
reasonable litigation expenses, including attorneys’ fees, incurred by the office
holder or imposed by a court in proceedings instituted against him or her by the company, on its behalf or by a third party or in connection
with criminal proceedings in which the office holder was acquitted or as a result of a conviction for an offense that does not require
proof of criminal intent.
|
An “Administrative Procedure” is defined as a procedure
pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative
Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to the Israeli Securities
Law, which may result in sanctions, including monetary sanctions and certain restrictions on serving as a director or senior officer of
a public company for certain periods of time.
An Israeli company may insure an office holder against the following
liabilities incurred for acts performed as an office holder if and to the extent provided in the company’s articles of association:
|
|
•
|
a breach of duty of loyalty to the company, provided that the office holder acted in good faith and had
a reasonable basis to believe that the act would not prejudice the company;
|
|
|
•
|
a breach of duty of care to the company or to a third party, including a breach arising out of the negligent
(but not intentional or reckless) conduct of the office holder;
|
|
|
•
|
a financial liability imposed on the office holder in favor of a third party;
|
|
|
•
|
a monetary liability imposed on the office holder in favor of an injured party in an Administrative Procedure
pursuant to Section 52(54)(a)(1)(a) of the Israeli Securities Law; and
|
|
|
•
|
expenses, including reasonable litigation expenses and reasonable attorneys’ fees, incurred by an
office holder in connection with an Administrative Procedure instituted against him or her pursuant to certain provisions of the Israeli
Securities Law.
|
An Israeli company may not indemnify, exculpate or insure an office
holder against any of the following, and any provision in a company’s articles of association which allows for any of the following
is invalid:
|
|
•
|
a breach of duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty
to the company to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice
the company;
|
|
|
•
|
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent
conduct of the office holder;
|
|
|
•
|
an act or omission committed with intent to derive illegal personal benefit; or
|
|
|
•
|
a fine, monetary sanction or forfeit levied against the office holder.
|
85
Under the Companies Law and the regulations promulgated thereunder,
exculpation, indemnification and insurance of office holders must be approved by the compensation committee and the board of directors
and, with respect to the chief executive officer and a director, also by the shareholders. See “— Approval of Related
Party Transactions under Israeli Law.” However, under regulations promulgated under the Companies Law, the insurance of office
holders shall not require shareholder approval and may be approved by only the compensation committee, if the engagement terms are determined
in accordance with the company’s compensation policy, that compensation policy was approved by the shareholders by the same special
majority required to approve a compensation policy, and provided that the insurance policy is on market terms and the insurance policy
is not likely to materially impact the company’s profitability, assets or obligations.
Our Articles of Association permit us to exculpate, indemnify and
insure our office holders to the fullest extent permitted by law. We have entered into agreements with each of our directors and executive
officers exculpating them, to the fullest extent permitted by law, from liability to us for damages caused to us as a result of a breach
of duty of care, and undertaking to indemnify them to the fullest extent permitted by law. The indemnification for a monetary liability
imposed in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court, is
limited to events determined as foreseeable by the board of directors based on our activities, and to an amount determined by the board
of directors as reasonable under the circumstances. The maximum indemnification amount for all office holders, cumulatively, for
one or more of such events, shall be equal to the higher of (i) 25% of our total shareholders’ equity as reflected in our audited
annual financial statements for the year preceding the year in which the event for which the indemnity is sought occurred, and (ii) $5
million. The terms of such agreements are consistent with the provisions of our Compensation Policy that was approved by our shareholders
in July 2022. However, in the opinion of the SEC, indemnification of office holders for liabilities arising under the Securities
Act is against public policy and therefore unenforceable.
Our office holders are currently covered by a directors’
and officers’ liability insurance policy. The terms of such directors’ and officers’ insurance are consistent with the
provisions of our current Compensation Policy that was approved by our shareholders in July 2022.
As of the date of this Annual Report on Form 20-F, except as disclosed
in Item 8.A below, no claims have been filed under our directors’ and officers’ liability insurance policy, there is no pending
litigation or proceeding against any of our directors or officers as to which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification by any director or officer.
D. Employees
As of March 16, 2025, we had 24 full-time employees and 4 part-time
employees, all of whom are employed in Israel. Of our employees, 11 hold M.D. or Ph.D. degrees.
|
|
December 31,
|
|||||||||||
|
|
2022
|
2023
|
2024
|
|||||||||
|
|
||||||||||||
|
Management and administration
|
12
|
12
|
8
|
|||||||||
|
Research and development
|
29
|
29
|
19
|
|||||||||
|
Commercialization and business development
|
8
|
38
|
1
|
|||||||||
|
Total
|
49
|
79
|
28
|
|||||||||
While none of our employees are party to any collective bargaining
agreements, in Israel we are subject to certain labor statutes and national labor court precedent rulings, as well as to certain provisions
of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic
Organizations and/or the Industrialists’ Association which are applicable to our employees by virtue of expansion orders issued
in accordance with relevant labor laws by the Israel Ministry of Labor and Welfare, and which apply such agreement provisions to our employees
even though they are not directly part of a union that has signed a collective bargaining agreement. The laws and labor court rulings
that apply to our employees principally concern the minimum wage laws, procedures for dismissing employees, determination of severance
pay, leaves of absence, sick pay and other conditions for employment. The expansion orders which apply to our employees principally concern
the requirement for length of the workday and work week, mandatory contributions to a pension fund, annual recreation allowance, travel
expenses payment and other conditions of employment. We generally provide our employees with benefits and working conditions beyond the
required minimums.
We have never experienced any employment-related work stoppages
and believe our relationship with our employees is good.
86
E. Share Ownership
See “Item 7.A. Major Shareholders” below.
Equity Compensation Plan
2003 Amended and Restated Share Incentive Plan
In 2003, we adopted the BioLineRx Ltd. 2003 Share Incentive Plan,
or the Plan. In August 2013, our board of directors approved certain amendments to the Plan and extended the term of the Plan until November
2023, and the Plan was renamed as the BioLineRx Ltd. 2003 Amended and Restated Share Incentive Plan. In January 2016, our board of directors
approved amendments to the Plan in order to permit the granting RSUs and PSUs to eligible grantees. In November 2023, our board of directors
approved a six-month extension of the term of the Plan until May 2024 and, in May 2024, our board of directors approved a further extension
until May 2044. References below to the “Plan” refer to the Plan as amended in August 2013, January 2016, November 2023
and May 2024.
The Plan provides for the granting of options, ordinary shares, RSUs and PSUs to our
directors, employees, consultants and service providers, and to the directors, employees, consultants and service providers of our subsidiaries
and affiliates. The Plan provides for equity grants to be made at the determination of our board of directors in accordance with applicable
law. As of March 16, 2025, options to purchase 107,746,200 ordinary shares or 179,577 ADSs, an aggregate 13,832,400 PSUs or 23,054 ADSs
and an aggregate of 9,588,600 RSUs or 15,981 ADSs were outstanding under the Plan.
From time to time, our board of directors has approved an increase in the number of
shares reserved for the purpose of equity grants pursuant to the Plan. As of March 16, 2025, 68.9 million ordinary shares, or 0.1 million
ADSs, were reserved for future issuance under the Plan.
The Plan is administered by our board of directors for the purposes
of making equity grants and approving the terms of those grants, including, exercise price (in the case of options), vesting schedule,
acceleration of vesting and the other matters necessary in the administration of the Plan. Equity grants made under the Plan to eligible
employees and office holders who are Israeli residents are made under Section 102 of the Israeli Income Tax Ordinance [New Version], 5721-1961,
or the Israeli Tax Ordinance, pursuant to which the securities granted must be allocated or issued to a trustee and be held in trust for
two years from the date of grant. Under Section 102 of the Israeli Tax Ordinance, any tax payable by an employee from the grant of securities
or the exercise of options or vesting of RSUs or PSUs is deferred until the transfer of the securities (or ordinary shares issued upon
the exercise of options or the vesting of RSUs or PSUs) by the trustee to the employee or upon the sale of the securities or ordinary
shares, as the case may be, and gains may qualify to be taxed as capital gains at a rate equal to 25%, subject to compliance with specified
conditions.
Options and RSUs granted under the Plan generally vest over four
years. Options generally expire 10 years from the grant date. If we terminate an employee’s employment or service for cause, all
of the grantee’s vested and unvested equity awards expire immediately from the time of delivery of the notice of discharge, unless
determined otherwise by the compensation committee or the board of directors. Upon termination of employment or service for any other
reason other than for cause, vested options may be exercised within three months of the termination date or if termination of employment
or service is due to death or disability of the employee, but in no event after the expiration date of the awards, within 12 months following
such death or disability, in each case unless otherwise determined by the compensation committee or the board of directors. Vested options
which are not exercised and unvested options, RSUs or PSUs return to the pool of reserved ordinary shares under the Plan for future grants.
The right to receive ordinary shares pursuant to PSUs granted under the Plan will vest upon the achievement of certain performance goals
to be established by the board of directors.
In the event of a merger, consolidation, reorganization or similar
transaction or our voluntary liquidation or dissolution, all of our unexercised vested equity grants and any unvested equity grants will
be automatically terminated. However, in the event of a change of control, or merger, consolidation, reorganization or similar transaction
resulting in the acquisition of at least 50% of our voting power, or the sale or transfer of all or substantially all of our outstanding
shares assets, the equity grants then outstanding may be assumed or substituted for an appropriate number of shares of each class of shares
or other securities and/or assets of the successor company in such transaction (or a parent or subsidiary or another affiliate of such
successor company) as were distributed to our shareholders in respect of the transaction. In addition to the foregoing, our board of directors
has approved the inclusion in the option agreements of the Company’s officers of a provision for accelerated vesting of options
if both a change of control of the Company occurs and, following such change of control, the officer’s employment is terminated
or there is a significant demotion in the officer’s new job or position.
87
F. Disclosure of a registrant’s action to recover erroneously
awarded compensation.
There was no erroneously awarded compensation that was required
to be recovered pursuant to the BioLineRx Ltd. Executive Officer Clawback Policy during the fiscal year ended December 31, 2024.
ITEM 7. MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth information with respect to the
beneficial ownership of our ordinary shares as of March 16, 2025 by:
|
|
●
|
each of our directors and senior management;
|
|
|
●
|
all of our directors and senior management as a group; and
|
|
|
●
|
each person (or group of affiliated persons) known by us to be the beneficial owner
of 5% or more of the outstanding ordinary shares.
|
The following table sets forth information regarding the beneficial
ownership of our outstanding ordinary shares as of March 16, 2025 of each of our current directors and executive officers individually
and as a group. The percentages shown are based on 2,232,601,990 ordinary shares issued and outstanding as of March 26, 2025.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting power or investment power with
respect to securities. All ordinary shares subject to options currently exercisable or exercisable into ordinary shares within 60
days of March 26, 2025, and underlying restricted stock units, or RSUs, and performance stock units, or PSUs, that shall vest within 60
days of March 26, 2025, are deemed to be outstanding and beneficially owned by the shareholder holding such options or PSUs for the purpose
of computing the number of shares beneficially owned by such shareholder. Such shares are also deemed outstanding for purposes of computing
the percentage ownership of the person holding the option or PSU. They are not, however, deemed to be outstanding and beneficially owned
for the purpose of computing the percentage ownership of any other shareholder.
|
|
Number of
|
|||||||
|
|
Ordinary Shares
|
|||||||
|
|
Beneficially
|
Percent of
|
||||||
|
|
Held
|
Class
|
||||||
|
|
||||||||
|
5% or Greater Shareholder
|
||||||||
|
Hong Seng Technology Limited
(1)
|
102,437,055
|
4.6
|
%
|
|||||
|
Intracoastal Capital LLC
(2)
|
102,236,115
|
4.6
|
%
|
|||||
|
Directors
|
||||||||
|
|
||||||||
|
Aharon Schwartz
(3)
|
6,071,400
|
*
|
||||||
|
B.J. Bormann
(4)
|
2,366,400
|
*
|
||||||
|
Rami Dar
(5)
|
1,917,600
|
*
|
||||||
|
Raphael Hofstein
(6)
|
2,366,400
|
*
|
||||||
|
Avraham Molcho
(7)
|
2,366,400
|
*
|
||||||
|
Sandra Panem
(8)
|
2,366,400
|
*
|
||||||
|
Shaoyu Yan
|
-
|
|||||||
|
Gal Cohen
(9)
|
342,600
|
*
|
||||||
|
|
||||||||
|
Executive officers
|
||||||||
|
|
||||||||
|
Philip A. Serlin
(10)
|
16,166,400
|
*
|
||||||
|
Mali Zeevi
(11)
|
4,279,200
|
*
|
||||||
|
Ella Sorani
(12)
|
4,176,000
|
*
|
||||||
|
All directors and executive officers as a group (11 persons)
(13)
|
42,418,800
|
1.1
|
%
|
|||||
* Less than 1.0%.
88
|
(1)
|
Based on Schedule 13D filed with the SEC on October 26, 2023. According to the Schedule
13D, includes 170,728 ADS, representing 102,437,055 ordinary shares held by Hong Seng Technology Limited. Lepu (Hong Kong) Co.,
Limited holds 66.67% equity interest of Hong Seng Technology Limited. Lepu Holdings Limited holds 99.5% equity interest of Lepu
(Hong Kong) Co., Limited. Lepu Medical (Europe) Cooperatief U.A. holds 100% equity interest of Lepu Holdings Limited. Lepu Medical
Technology (Beijing) Co., Ltd. holds 99.95% equity interest of Lepu Medical (Europe) Cooperatief U.A. Lepu Medical Technology (Beijing)
Co., Ltd. is a company publicly listed on Shenzhen Stock Exchange in the PRC (300003.SZ).
|
|
(2)
|
Based on Schedule 13G filed with the SEC on January 10, 2025.
According to the Schedule 13G, includes (i) 3,125 ADSs representing 1,875,000 ordinary shares and (ii) 45,394 ADSs representing 27,236,115
ordinary shares issuable upon exercise of a warrant issued in January 2025. Mitchell P. Kopin and Daniel B. Asher, each of whom
are managers of Intracoastal Capital LLC, or Intracoastal, have shared voting control and investment discretion over the securities reported
herein that are held by Intracoastal. As a result, each of Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership (as determined
under Section 13(d) of the Exchange Act) of the securities reported herein that are held by Intracoastal. The warrant is subject to a
beneficial ownership limitation of 4.99%, which such limitation restricts the shareholder from exercising that portion of the warrant
that would result in the shareholder and its affiliates owning, after exercise, a number of shares in excess of the beneficial ownership
limitation. The principal business office of Intracoastal is 245 Palm Trail, Delray Beach, FL 33483.
|
|
(3)
|
Includes 3,705,000 ordinary shares and 2,366,400 ordinary shares issuable upon exercise
of outstanding options currently exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,937,400 ordinary shares
issuable upon exercise of outstanding options that are not exercisable within 60 days of March 26, 2025.
|
|
(4)
|
Includes 2,366,400 ordinary shares issuable upon exercise of outstanding options currently exercisable
or exercisable within 60 days of March 26, 2025. Does not include 1,937,400 ordinary shares issuable upon exercise of outstanding options
that are not exercisable within 60 days of March 26, 2025.
|
|
(5)
|
Includes 1,917,600 ordinary shares issuable upon exercise of outstanding options currently
exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,937,400 ordinary shares issuable upon exercise of outstanding
options that are not exercisable within 60 days of March 26, 2025.
|
|
(6)
|
Includes 2,366,400 ordinary shares issuable upon exercise of
outstanding options currently exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,937,400 ordinary shares
issuable upon exercise of outstanding options that are not exercisable within 60 days of March 26, 2025.
|
|
(7)
|
Includes 2,366,400
ordinary
shares
issuable upon exercise of outstanding options currently exercisable or exercisable within 60 days of March 26, 2025. Does
not include 1,937,400 ordinary shares issuable upon exercise of outstanding options that are not exercisable within 60 days of March 26,
2025.
|
|
(8)
|
Includes 2,366,400 ordinary shares issuable upon exercise of outstanding options currently exercisable
or exercisable within 60 days of March 26, 2025. Does not include 1,937,400 ordinary shares issuable upon exercise of outstanding options
that are not exercisable within 60 days of March 26, 2025.
|
|
(9)
|
Includes 342,600 ordinary shares issuable upon exercise of outstanding
options currently exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,712,400 ordinary shares issuable upon
exercise of outstanding options that are not exercisable within 60 days of March 26, 2025.
|
|
(10)
|
Includes 171,600 ordinary shares and 15,994,800
ordinary
shares
issuable upon exercise of outstanding options and PSUs currently exercisable or exercisable within 60 days of March 26,
2025. Does not include 6,006,000 ordinary shares issuable upon exercise of outstanding options and PSUs that are not exercisable within
60 days of March 26, 2025.
|
89
|
(11)
|
Includes 329,400 ordinary shares and 3,949,800 ordinary shares issuable upon exercise of outstanding options
and PSUs currently exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,441,200 ordinary shares issuable upon
exercise of outstanding options and PSUs that are not exercisable within 60 days of March 26, 2025.
|
|
(12)
|
Includes 66,600 ordinary shares and 4,109,400 ordinary shares issuable upon exercise of outstanding options
and PSUs currently exercisable or exercisable within 60 days of March 26, 2025. Does not include 1,441,200 ordinary shares issuable upon
exercise of outstanding options and PSUs that are not exercisable within 60 days of March 26, 2025.
|
|
(13)
|
See footnotes (3)-(12) for certain information regarding beneficial ownership.
|
To our knowledge, other than as disclosed in the table above, our
other filings with the SEC and this Annual Report on Form 20-F, there has been no significant change in the percentage ownership held
by any major shareholder since January 1, 2022.
None of our shareholders has different voting rights from other shareholders.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
Record Holders
Bank of New York Mellon, or BNY, is the holder of record for the
Company’s American Depositary Receipt program, pursuant to which each ADS represents 600 ordinary shares. As of March 16, 2025,
BNY held 1,670,120,400 ordinary shares representing 74.8% of our issued share capital held at that date. Certain of these ordinary shares
were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the United States is not
representative of the number of beneficial holders or of the residence of beneficial holders.
B. Related Party Transactions
The following is a description of the material terms of those transactions with related
parties to which we, or our subsidiaries, have been a party since January 1, 2024.
Agreements with Directors and Officers
Employment Agreements
We have entered into employment agreements with each of our executive
officers. See “Item 6.B. Directors, Senior Management and Employees — Compensation.”
Options and Restricted Share Units.
We have granted, from time to time, options to purchase our ordinary
shares, RSUs and PSUs to our executive officers and directors. We describe our share incentive plan under “Item 6.E. Directors,
Senior Management and Employees—Share Ownership—Equity Compensation Plan.”
Exculpation, Insurance and Indemnification
Our Articles of Association and Compensation Policy approved by
our shareholders permit us to exculpate, indemnify and insure our directors and office holders to the fullest extent permitted by law.
We have entered into agreements with each of our office holders exculpating them, to the fullest extent permitted by law, from liability
to us for damages caused to us as a result of a breach of duty of care, and undertaking to indemnify them to the fullest extent permitted
by law, to the extent that these liabilities are not covered by insurance. We have obtained directors’ and officers’ liability
insurance for each of our officers and directors. See “Item 6. C — Directors, Senior Management and Employees — Board
Practices — Exculpation, insurance and indemnification of office holders.”
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Gloria License Agreement and Securities Purchase Agreement
On August 27, 2023, we entered into the Gloria License Agreement
with HST and Gloria, collectively, the Purchaser Party, pursuant to which we granted HST an exclusive, royalty-bearing, sublicensable
license with respect to the intellectual property rights and know-how associated with motixafortide in order to develop and commercialize
motixafortide in Asia (other than Israel and certain other countries) and to engage and authorize Gloria to perform services under the
Gloria License Agreement in such territory. In connection with the Gloria License Agreement, on August 27, 2023, we also entered into
a securities purchase agreement with HST and Gloria pursuant to which we agreed to sell and issue to HST, in a private placement, an aggregate
of 170,728 of our ADSs. Aggregate gross proceeds from the sale were approximately $14.6 million. In connection with the closing of the
private placement, Dr. Shaoyu Yan, a nominee of HST, was appointed to our board of directors to serve as one of our Class III directors
until our annual general meeting of shareholders to be held in 2026. The appointment was made effective in November 2023. In addition,
effective as of the annual general meeting to be held in 2026 and for so long as the Purchaser Party is the owner of at least 5% of our
issued and outstanding ordinary shares, the Purchaser Party shall have the right, but not the obligation, to nominate one person for election
by our shareholders to serve as a member of our board of directors, provided that such nominee provides the requisite certifications required
for appointment as a director of a public company under Israeli law.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and other Financial Information
See “Item 18. Financial Statements.”
Legal Proceedings
Securities Class Action Complaints
On January 5, 2023, a putative securities class action complaint captioned Winston Peete
v. BioLineRx Ltd. and Philip A. Serlin (Case no: Case 2:23-cv-00041 was filed in the U.S. District Court for the District of New Jersey
by purported shareholder Winston Peete, naming us and our chief executive officer, Mr. Serlin, as defendants. The complaint asserted violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, claiming that the defendants
made false and materially misleading statements and failed to disclose material adverse facts pertaining to our financial position with
regard to the development of motixafortide and that we would require a loan and a securities offering to commercialize motixafortide.
The complaint asserted a putative class period of February 23, 2021 to September 19, 2022, inclusive, and sought certification as a class
action and an unspecified amount of damages. On July 5, 2023, plaintiffs filed an amended complaint alleging the same claims and adding
the Company’s Chief Financial Officer, Mali Zeevi, as a defendant. On September 5, 2023, defendants filed a motion to dismiss the
amended complaint in its entirety, and on July 15, 2024, the court granted the order to dismiss without prejudice. The plaintiffs did
not file an amended claim by the deadline, which passed on August 14, 2024. In addition, on February 5, 2023, we received a lawsuit and
motion to approve the lawsuit as a class action lawsuit pursuant to the Class Action Lawsuits Law 5766-2006, which was filed against us
and Mr. Serlin in the Tel Aviv District Court (Economic Division). The motion asserts substantially similar allegations as the U.S. action
described above. The motion asserts to define the class as all shareholders who held the company's securities traded on the TASE, on September
19, 2022 and the class period relates to the company's statements between February 23, 2021, and September 19, 2022. The total amount
claimed, if the lawsuit is certified as a class action, as set forth in the motion is approximately NIS 113.5 million (approximately $32
million). On December 10, 2024, the Tel Aviv District Court (Economic Division) granted an order to dismiss the claim.
Biokine
Claim
On June 16, 2024, Biokine filed
a complaint with the District Court of Jerusalem against us. The complaint alleges breach of contract and a purported failure to make
certain payments to Biokine under our in-licensing agreement with Biokine for motixafortide. The lawsuit seeks compensatory damages in
the amount of approximately $6.5 million and a declaratory judgment in favor of Biokine. We filed a statement of defense on November
17, 2024. We believe the claim is without merit and intend to vigorously defend ourselves against such action. On November 20, 2024,
we and Biokine entered into an agreement to refer the dispute to arbitration.
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Dividend Distributions
We have never declared or paid cash dividends to our shareholders.
Currently we do not intend to pay cash dividends. We currently intend to reinvest any future earnings in developing and expanding our
business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend
on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements,
business prospects, applicable Israeli law and other factors our board of directors may deem relevant. Israeli law limits the distribution
of cash dividends to the greater of retained earnings or earnings generated over the two most recent years (referred to as the “profit
test”), in either case provided that we reasonably believe that the dividend will not render us unable to meet our existing and
foreseeable obligations when due (referred to as the “solvency test”). Notwithstanding the foregoing, in the event that
a company does meet the profit test, dividends may be paid with the approval of a court, provided that the court is convinced that the
company meets the solvency test. However, in accordance with the Relief Regulations, as a company whose shares are dual listed on
the TASE and a foreign exchange referenced in the second or third addendum to the Israeli Securities Law (which include, among others,
the Nasdaq), our board of directors may resolve to distribute a dividend by way of a share repurchase program (buy-back) if the company
does not meet the profit test without seeking the approval of the court, subject to the following: (i) the company meets the solvency
test; and (ii) we provide a notice to certain creditors regarding our intention to distribute a dividend by way of a share repurchase
program in accordance with the notice requirements set forth in the Relief Regulations and no such creditor submits an objection within
30 days of the notice (otherwise, court approval would be required for such distribution in accordance with the requirements of the Companies
Law). For information regarding taxation of dividends, see “Item 10E. Additional Information — Taxation — Israeli Tax
Considerations.”
B. Significant Changes
None.
ITEM 9. THE OFFER AND
LISTING
A. Offer and Listing Details
Our ADSs have been trading on Nasdaq under the symbol “BLRX”
since July 2011. Our ordinary shares have been trading on the TASE under the symbol “BLRX” since February 2007.
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs trade on Nasdaq under the symbol “BLRX.” Our
ordinary shares trade on the TASE under the symbol “BLRX.”
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
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ITEM 10. ADDITIONAL
INFORMATION
A. Share Capital
Not applicable.
B. Articles of Association
A copy of our Articles of Association is attached as Exhibit 1.1
to this Annual Report on Form 20-F. Other than as set forth below, the information called for by this Item is set forth in Exhibit 2.2
to this Annual Report on Form 20-F and is incorporated by reference into this Annual Report on Form 20-F.
Board of Directors
See “Item 6. Directors, Senior Management and Employees — C. Board Practices.”
Borrowing Powers
Pursuant to the Companies Law and our Articles of Association,
our board of directors may exercise all powers and take all actions that are not required under law or under our Articles of Association
to be exercised or taken by our shareholders, including the power to borrow money for company purposes.
Shareholder Meetings
Under the Companies Law, annual general meetings of shareholders
are required to be held at least once in every calendar year (within 15 months after the last preceding annual general meeting of shareholders).
All general meetings other than the annual meeting of shareholders are referred to in our Articles of Association as extraordinary meetings.
The Companies Law provides that an extraordinary general meeting
of shareholders may be called by the board of directors as it deems fit. In addition, the board of directors is required to convene
an extraordinary general meeting of shareholders upon the written request of (i) two or more directors or 25% of the directors in office,
or (ii) one or more shareholders holding, in the aggregate, at least (a) 5% of the issued share capital and 1% of the voting rights; or
(b) 5% of the voting rights of the company.
The Companies Law requires that resolutions regarding the following
matters must be passed at a general meeting of our shareholders:
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amendments to our Articles of Association;
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appointment, termination or the terms of service of our auditors;
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appointment of external directors (if applicable);
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approval of certain related party transactions;
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increases or reductions of our authorized share capital;
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a merger; and
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the exercise of our board of directors’ powers by a general meeting, if our
board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management.
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Shareholders entitled to participate and vote at our general meetings
are the shareholders of record on a date to be determined by the board of directors, which, according to the Relief Regulations, as a
company dual listed on the TASE and the Nasdaq, may be between 4 and 60 days prior to the date of the meeting.
Under the Companies Law, shareholder meetings generally require
prior notice of not less than 21 days or, with respect to certain matters, such as election of directors and affiliated party transactions,
not less than 35 days. Only shareholders of record as reflected on our share register at the close of business on the date fixed by the
board of directors as the record date determining the then shareholders who will be entitled to vote, shall be entitled to notice of,
and to vote, in person or by proxy, at a general meeting and any postponement or adjournment thereof.
C. Material Contracts
We have not entered into any material contract within the two years
prior to the date of this Annual Report on Form 20-F, other than contracts entered into in the ordinary course of business, or as otherwise
described elsewhere in this Annual Report on Form 20-F.
D. Exchange Controls
There are currently no Israeli governmental laws, decrees or regulations
that restrict or affect our import or export of capital, including the availability of cash and cash equivalents for use by us and our
wholly owned subsidiaries, or the remittance of dividends, interest or other payments to non-resident holders of our securities, except
for shareholders who are subjects of countries that are, or have been, in a state of war with Israel or otherwise as set forth under “Item
10E. Additional Information — Taxation.”
E. Taxation
The following description is not intended to
constitute a complete analysis of all tax consequences relating to the ownership or disposition of our ordinary shares or ADSs, both referred
to in this Item 10E as the ordinary shares. You should consult your own tax advisor concerning the tax consequences of your particular
situation, as well as any tax consequences that may arise under the laws of any state, local, non-U.S., including Israeli, or other taxing
jurisdiction.
Israeli Tax Considerations
The following is a summary of the material Israeli tax laws applicable
to us. This section also contains a discussion of material Israeli tax consequences concerning the ownership and disposition of our shares.
This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her
personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of this kind
of investor include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion.
To the extent that this discussion is based on new tax legislation that has not yet been subject to judicial or administrative interpretation,
we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion. The discussion
below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations
of Israeli law, which change could affect the tax consequences described below.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax on their
taxable income. The regular corporate tax rate in Israel is 23% for the year 2018 and thereafter. Capital gains derived by an Israeli
company are now generally subject to tax at the same rate as the corporate tax rate.
As of December 31, 2024, the tax loss carryforwards of BioLineRx
were approximately $343 million with no expiration date.
Taxation of Israeli Individual
Shareholders on Receipt of Dividends.
Israeli residents who are individuals are generally subject to Israeli income tax for dividends
paid on our ordinary shares (other than a pro-rata distribution of bonus shares or share dividends) at a rate of either 25% or 30%, if
the recipient of such dividend is a substantial shareholder (as defined below) at the time of distribution or at any time during the preceding
12-month period.
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Taxation of Israeli Resident Corporations
on Receipt of Dividends.
Israeli resident corporations are generally exempt from Israeli corporate tax for dividends paid on our
ordinary shares.
Taxation of Non-Israeli Shareholders
on Receipt of Dividends.
Non-residents of Israel (individuals or corporations) are generally subject to Israeli income tax on the
receipt of dividends paid on our ordinary shares at the rate of 25% (or 30% if such person is a “substantial shareholder”
at the time receiving the dividend or on any date in the 12 months preceding such date), which tax will be withheld at the source, unless
a lower rate is provided in the Israeli Tax Ordinance and/or regulations promulgated thereunder or under a tax treaty between Israel and
the shareholder’s country of residence and subject to the receipt in advance of a valid certificate from the Israeli Tax Authorities.
Under the U.S.-Israel Tax Treaty (the “Treaty”), Israeli
withholding tax on dividends paid to a U.S. resident for treaty purposes may not, in general, exceed 25%. Where the recipient is a U.S.
corporation owning 10% or more of the voting stock of the paying corporation during the part of the paying corporation’s taxable
year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any) and the dividend is not
paid from the profits of a Benefited Enterprise, the Israeli tax withheld may not exceed 12.5%, subject to certain conditions.
A “substantial shareholder” is generally a person who
alone, or together with his relative or another person who collaborates with him on a regular basis, holds, directly or indirectly, at
least 10% of any of the “means of control” of the corporation. “Means of control” generally include the right
to vote, receive profits, nominate a director, a general manager of the company or holders of similar offices in other bodies of persons,
receive assets upon liquidation, or instruct someone who holds any of the aforesaid rights regarding the manner in which he or she is
to exercise such right(s), and all regardless of the source of such right.
A non-resident of Israel who receives dividends from which tax
was withheld is generally exempt from the duty to file returns in Israel in respect of such income, provided that: (1) such income was
not derived from a business conducted in Israel by the taxpayer (2) the taxpayer has no other taxable sources of income in Israel
with respect to which a tax return is required to be filed and (3) the taxpayer is not obliged to pay excess tax.
Payers of dividends on our shares, including the Israeli stockbroker
effectuating the transaction or the financial institution through which the securities are held, are required, subject to any of the foregoing
exemptions, reduced tax rates and the demonstration of a shareholder of his, her or its foreign residency, to withhold taxes upon the
distribution of dividends at a rate of 25%, provided that the shares are registered with a nominee company.
Taxation of Capital Gains
.
Israeli law imposes a capital gains tax on the sale or exchange of any capital assets by residents of Israel, as defined for Israeli tax
purposes, and on the sale or exchange of assets located in Israel, including shares in Israeli companies, by non-residents of Israel,
unless a specific exemption is available pursuant to the Israeli Tax Ordinance or the regulations thereunder or unless a tax treaty between
Israel and the shareholder’s country of residence provides otherwise and subject to the receipt in advance of a valid certificate
from the Israeli Tax Authorities. The law distinguishes between real capital gain and inflationary surplus. The inflationary surplus is
a portion of the total capital gain that is equivalent to the increase of the relevant asset’s purchase price which is attributable
to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of
purchase and the date of sale. The real capital gain is the excess of the total capital gain over the inflationary surplus. The inflationary
surplus is generally exempt from tax.
Capital Gains Taxes Applicable
to Israeli Resident Shareholders.
An individual is subject to a tax at a rate of 25% on real capital gains derived from the sale
of shares, as long as the individual is not a substantial shareholder at the time of sale or at any time during the 12-month period preceding
the company’s issuance of the shares.
An individual who is a substantial shareholder at the time of sale
or at any time during the preceding 12-month period is subject to tax at a rate of 30% in respect of real capital gains derived from the
sale of shares issued by the company in which he or she is a substantial shareholder.
Real capital gains derived by an Israeli company are generally
subject to tax at the same rate as the corporate tax rate (currently 23%).
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Capital Gains Taxes Applicable
to Non-Israeli Resident Shareholders
. Shareholders that are not Israeli residents are generally exempt from Israeli capital gains
tax on any gains derived from the sale, exchange or disposition of our ordinary shares, provided that such shareholders did not acquire
their ordinary shares prior to our initial public offering on the TASE and such gains were not derived from a permanent establishment
or business activity of such shareholders in Israel. However, non-Israeli corporations will not be entitled to the foregoing exemptions
if one or more Israeli residents (a) have a controlling interest of more than 25% in such non-Israeli corporation or (b) are the beneficiaries
of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In addition, under the Treaty, the sale, exchange or disposition
of our ordinary shares by a shareholder who is a U.S. resident (for purposes of the Treaty) holding the ordinary shares as a capital asset
is exempt from Israeli capital gains tax unless (1) the shareholder holds, directly or indirectly, shares representing 10% or more of
our voting capital during any part of the 12-month period preceding such sale, exchange or disposition; (2) the capital gains arising
from such sale are attributable to a permanent establishment of the shareholder located in Israel; (3) a shareholder who is an individual
is present in Israel for a period or periods aggregating 183 days or more during a taxable year. In either case, the sale, exchange or
disposition of ordinary shares would be subject to Israeli tax, to the extent applicable (subject to the receipt in advance of a valid
certificate from the Israeli tax authorities); however, under the Treaty, the U.S. resident would be permitted to claim a credit for the
tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S.
laws applicable to foreign tax credits. The Treaty does not cover U.S. state or local taxes.
Shareholders may be required to demonstrate that they are exempt
from tax on their capital gains in order to avoid withholding at source at the time of sale.
The purchaser, the Israeli stockbrokers or financial institution
through which the shares are held are obliged, subject to the above mentioned exemptions, to withhold tax upon the sale of securities
on the amount of the consideration paid upon the sale of the securities (or on the real capital gain realized on the sale, if known),
at the rate of 25% in respect of an individual or at a corporate rate in respect of a corporation (23%).
Upon the sale of securities traded on a stock exchange, a detailed
return, including a computation of the tax due, must be filed and an advance payment must be paid on January 31 and July 31 of every tax
year in respect of sales of securities made within the previous six months (or within 30 days of the sale if the seller is not otherwise
required to file a tax return in Israel). However, if all tax due was withheld at source according to applicable provisions of the Israeli
Tax Ordinance and regulations promulgated thereunder, the aforementioned return need not be filed and no advance payment must be paid.
Capital gain is also reportable on the annual income tax returns.
Excess Tax
. Individuals
who are subject to tax in Israel (whether such individual is an Israeli resident or non-Israeli resident) are also subject to an additional
tax on taxable income exceeding a certain threshold in a tax year (NIS 698,280 NIS 698,280 for 2023 and NIS 721,560 for 2024 and 2025),
at the rate of 3% on any such taxable income prior to January 1, 2025 and commencing January 1, 2025, at the rate of 3% of any such active
taxable income and 5% of any such passive taxable income. For this purpose, passive taxable income includes taxable capital gains from
the sale of securities and taxable income from interest and dividends, subject to the provisions of an applicable double tax treaty.
Certain Material U.S. Federal Income Tax Considerations
The following is a general summary of certain material U.S. federal
income tax considerations relating to the purchase, ownership and disposition of our ordinary shares and ADSs by U.S. Investors (as defined
below) that are initial purchasers of such ordinary shares or ADSs and that hold such ordinary shares or ADSs as capital assets for U.S.
federal income tax purposes (generally, property held for investment). This summary is based on the Internal Revenue Code of 1986, as
amended, or the Code, the regulations of the U.S. Department of the Treasury issued pursuant to the Code, or the Treasury Regulations,
the Treaty, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject
to change, possibly with retroactive effect, or to different interpretation. No ruling has been sought from the IRS with respect to any
U.S. federal income tax consequences described below, and there can be no assurance that the IRS or a court will not take a contrary position.
This summary is for general information only and does not address all of the tax considerations that may be relevant to specific U.S.
Investors in light of their particular circumstances or to U.S. Investors subject to special treatment under U.S. federal income tax law
(such as, without limitation, banks, insurance companies, tax-exempt entities, retirement plans, regulated investment companies, partnerships,
dealers in securities, brokers, real estate investment trusts, grantor trusts, persons who acquire our ordinary shares through the exercise
or cancellation of employee stock options or otherwise as compensation for their services, certain former citizens or residents of the
United States, persons who acquire our ordinary shares or ADSs as part of a straddle, hedge, conversion transaction or other integrated
investment, persons that have a “functional currency” other than the Dollar, persons that own (or are deemed to own, indirectly
or by attribution) 10% or more of our ordinary shares or ADSs (by vote or value), persons subject to special tax accounting rules under
section 451(b), or persons that generally mark their securities to market for U.S. federal income tax purposes). This summary does not
address any U.S. state or local or non-U.S. tax considerations, any U.S. federal estate, gift or alternative minimum tax considerations
or any additional U.S. federal tax consequences other than U.S. federal income tax consequences.
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As used in this summary, the term “U.S. Investor” means
a beneficial owner of our ordinary shares or ADSs that is, for U.S. federal income tax purposes, (i) an individual citizen or resident
of the United States, (ii) a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized
in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject
to U.S. federal income tax regardless of its source or (iv) a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial
decisions, or a trust that has validly elected to be treated as a U.S. person for U.S. federal income tax purposes, whose status as a
U.S. person is not overwritten by an applicable tax treaty.
If an entity treated as a partnership for U.S. federal income tax
purposes holds our ordinary shares or ADSs, the tax treatment of such entity and each person treated as a partner thereof will generally
depend upon the status and activities of the entity and such person. An investor that is treated as a partnership for U.S. federal income
tax purposes should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners
of the purchase, ownership and disposition of its ordinary shares or ADSs.
Prospective investors should be aware that this summary does not
address the tax consequences to investors who are not U.S. Investors. Prospective investors should consult their own tax advisors as to
the particular tax considerations applicable to them relating to the purchase, ownership and disposition of their ordinary shares or ADSs,
including the applicability of U.S. federal, state and local tax laws and non-U.S. tax laws.
Ownership of ADSs
For U.S. federal income tax purposes, we expect that a holder of
ADSs generally should be treated as the owner of the ordinary shares represented by such ADSs. As a result, gain or loss is generally
not expected to be recognized on account of exchanges of ordinary shares for ADSs, or of ADSs for ordinary shares.
Taxation of U.S. Investors
The discussions under “— Distributions,” and
under “— Sale, Exchange or Other Disposition of Ordinary Shares or ADSs” below assumes that we will not be treated as
a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. However, we have not determined whether we will be
a PFIC for the taxable year ending December 31, 2025, and it is possible that we will be a PFIC for the taxable year ending December 31,
2025 or in any subsequent year. For a discussion of the rules that would apply if we are treated as a PFIC, see the discussion under “—
Passive Foreign Investment Company.”
Distributions.
We have
no current plans to pay dividends. To the extent we pay any dividends, a U.S. Investor will be required to include in gross income as
a taxable dividend the amount of any distributions made on the ordinary shares or ADSs, including the amount of any Israeli taxes withheld,
when actually or constructively received, to the extent that those distributions are paid out of our current or accumulated earnings and
profits as determined for U.S. federal income tax purposes. Any distributions in excess of our earnings and profits will be applied against
and will reduce the U.S. Investor’s tax basis in its ordinary shares or ADSs and to the extent they exceed that tax basis, will
be treated as gain from the sale or exchange of those ordinary shares or ADSs. We do not intend to calculate our earnings and profits
under U.S. federal income tax principles. Therefore, a U.S. Investor should expect that a distribution will be treated as a dividend even
if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.
If we were to pay dividends to holders of our ordinary shares, we expect to pay such dividends in NIS; however, dividends paid to holders
of our ADSs will be paid in dollars. A dividend paid in NIS, including the amount of any Israeli taxes withheld, will be includible in
a U.S. Investor’s income as a dollar amount calculated by reference to the exchange rate in effect on the date such dividend is
received, regardless of whether the payment is in fact converted into dollars. If the dividend is converted to dollars on the date of
receipt, a U.S. Investor generally will not recognize a foreign currency gain or loss. However, if the U.S. Investor converts the NIS
into dollars on a later date, the U.S. Investor must include, in computing its income, any gain or loss resulting from any exchange rate
fluctuations. The gain or loss will be equal to the difference between (i) the dollar value of the amount included in income when the
dividend was received and (ii) the amount received on the conversion of the NIS into dollars. Such gain or loss will generally be ordinary
income or loss and United States source for U.S. foreign tax credit purposes. U.S. Investors should consult their own tax advisors regarding
the tax consequences to them if we pay dividends in NIS or any other non-U.S. currency.
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Subject to certain significant conditions and limitations, including
potential limitations under the Treaty, any Israeli taxes paid on or withheld from distributions from us and not refundable to a U.S.
Investor may be credited against the investor’s U.S. federal income tax liability or, alternatively, may be deducted from the investor’s
taxable income. This election is made on a year-by-year basis and applies to all foreign taxes paid by a U.S. Investor or withheld from
amounts paid to a U.S. Investor that year. Dividends paid on the ordinary shares or ADSs generally will constitute income from sources
outside the United States and be categorized as “passive category income” or, in the case of some U.S. Investors, as “general
category income” for U.S. foreign tax credit purposes.
As a result of recent changes to the U.S. foreign tax credit rules,
a withholding tax may need to satisfy certain additional requirements in orders to be considered a creditable tax for a U.S. investor.
We have not determined whether these requirements have been met and, accordingly, no assurance can be given that any withholding tax on
dividends paid by us will be creditable. Since the rules governing foreign tax credits are complex, U.S. Investors should consult their
own tax advisor regarding the availability of foreign tax credits in their particular circumstances.
Dividends paid on the ordinary shares and ADSs will not be eligible
for the “dividends-received” deduction generally allowed to corporate U.S. Investors with respect to dividends received from
U.S. corporations.
Distributions treated as dividends that are received by an individual
U.S. Investor from “qualified foreign corporations” generally qualify for a reduced maximum tax rate so long as certain holding
period and other requirements are met. A non-U.S. corporation (other than a PFIC for the taxable year in which the dividend is paid or
the preceding taxable year) generally will be considered to be a qualified foreign corporation (i) if it is eligible for the benefits
of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines is satisfactory for
purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays on stock
which is readily tradable on an established securities market in the United States. Any dividend paid by us in a taxable year in which
we are a PFIC (or with respect to which we were a PFIC in the preceding taxable year) will be subject to tax at regular ordinary income
rates. As mentioned above, we believe we may have been a PFIC for our 2024 taxable year and have not determined whether we will be a PFIC
for our 2025 taxable year. U.S. Investors should consult their own tax advisors regarding the availability of the lower rate for
dividends paid with respect to our ordinary shares and ADSs.
The additional 3.8% Medicare tax (described below) may apply to
dividends received by certain U.S. Investors who meet certain modified adjusted gross income thresholds.
Sale, Exchange or Other Disposition
of Ordinary Shares and ADSs.
Subject to the discussion under “— Passive Foreign Investment Company” below, a
U.S. Investor generally will recognize capital gain or loss upon the sale, exchange or other taxable disposition of ordinary shares or
ADSs in an amount equal to the difference between the amount realized on the sale, exchange or other taxable disposition and the U.S.
Investor’s adjusted tax basis in such ordinary shares or ADSs. This capital gain or loss will be long-term capital gain or loss
if the U.S. Investor’s holding period in the ordinary shares or ADSs exceeds one year. Preferential tax rates for long-term capital
gain will apply to individual U.S. Investors. The deductibility of capital losses is subject to limitations. The gain or loss will generally
be income or loss from sources within the United States for U.S. foreign tax credit purposes, subject to certain possible exceptions under
the Treaty. The additional 3.8% Medicare tax (described below) may apply to gains recognized upon the sale, exchange, or other taxable
disposition of our ordinary shares or ADSs by certain U.S. Investors who meet certain modified adjusted gross income thresholds.
U.S. Investors should consult their own tax advisors regarding
the U.S. federal income tax consequences of receiving currency other than Dollars upon the disposition of ordinary shares or ADSs.
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Medicare Tax
. In addition,
certain U.S. persons, including individuals, estates and trusts, will be subject to an additional 3.8% Medicare tax, or net investment
income tax, on unearned income. For individuals, the additional Medicare tax applies to the lesser of (i) “net investment income”
or (ii) the excess of “modified adjusted gross income” over $200,000 ($250,000 if married and filing jointly or $125,000 if
married and filing separately). “Net investment income” generally equals the taxpayer’s gross investment income reduced
by the deductions that are allocable to such income. Investment income generally includes passive income such as interest, dividends,
annuities, royalties, rents, and capital gains. U.S. Investors are urged to consult their own tax advisors regarding the implications
of the additional Medicare tax resulting from their ownership and disposition of ordinary shares or ADSs.
Passive Foreign Investment Company
In general, a corporation organized outside the United States will
be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (i) at least 75% of its gross income is
“passive income” or (ii) on average at least 50% of its assets by value produce passive income or are held for the production
of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents
and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive
income also includes amounts derived by reason of the temporary investment of funds, including those raised in the public offering. Assets
that produce or are held for the production of passive income may include cash, even if held as working capital or raised in a public
offering, as well as marketable debt securities and other assets that may produce passive income. In determining whether a non-U.S. corporation
is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25%
interest (by value) is taken into account.
Under the tests described above, whether or not we are a PFIC will
be determined annually based upon the composition of our income and the composition and valuation of our assets, all of which are subject
to change.
We believe that we were a PFIC for U.S. federal income tax purposes
during certain prior taxable years, and that we may have been a PFIC for the year ended December 31, 2024. We have not determined whether
we will be a PFIC for the taxable year ending December 31, 2025. Because the PFIC determination is highly fact intensive and made at the
end of each taxable year, there can be no assurance that we will not be a PFIC for taxable year ending December 31, 2025 or in any subsequent
year. Upon request, we intend to annually inform U.S. Investors if we and any of our subsidiaries were a PFIC with respect to the preceding
year.
U.S. Investors should be aware of certain tax consequences of investing
directly or indirectly in us if we are a PFIC. A U.S. Investor is subject to different rules depending on whether the U.S. Investor makes
an election to treat us as a “qualified electing fund,” known as a QEF election, for the first taxable year that the U.S.
Investor holds ordinary shares or ADSs, which is referred to in this disclosure as a “timely QEF election,” makes a “mark-to-market”
election with respect to the ordinary shares or ADSs (if such election is available) or makes neither election.
QEF Election.
A U.S. Investor
who makes a timely QEF election, referred to in this disclosure as an “Electing U.S. Investor,” with respect to us must report
for U.S. federal income tax purposes his pro rata share of our ordinary earnings and net capital gain, if any, for our taxable year that
ends with or within the taxable year of the Electing U.S. Investor. The “net capital gain” of a PFIC is the excess, if any,
of the PFIC’s net long-term capital gains over its net short-term capital losses. The amount so included in income generally will
be treated as ordinary income to the extent of such Electing U.S. Investor’s allocable share of the PFIC’s ordinary earnings
and as long-term capital gain to the extent of such Electing U.S. Investor’s allocable share of the PFIC’s net capital gains.
Such Electing U.S. Investor generally will be required to translate such income into Dollars based on the average exchange rate for the
PFIC’s taxable year with respect to the PFIC’s functional currency. Such income generally will be treated as income from sources
outside the United States for U.S. foreign tax credit purposes. Amounts previously included in income by such Electing U.S. Investor under
the QEF rules generally will not be subject to tax when they are distributed to such Electing U.S. Investor. The Electing U.S. Investor’s
tax basis in ordinary shares or ADSs generally will increase by any amounts so included under the QEF rules and decrease by any amounts
not included in income when distributed.
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An Electing U.S. Investor will be subject to U.S. federal income
tax on such amounts for each taxable year in which we are a PFIC, regardless of whether such amounts are actually distributed to such
Electing U.S. Investor. However, an Electing U.S. Investor may, subject to certain limitations, elect to defer payment of current U.S.
federal income tax on such amounts, subject to an interest charge. If an Electing U.S. Investor is an individual, any such interest will
be treated as non-deductible “personal interest.”
Any net operating losses or net capital losses of a PFIC will not
pass through to the Electing U.S. Investor and will not offset any ordinary earnings or net capital gain of a PFIC recognized by Electing
U.S. Investors in subsequent years.
So long as an Electing U.S. Investor’s QEF election with
respect to us is in effect with respect to the entire holding period for ordinary shares or ADSs, any gain or loss recognized by such
Electing U.S. Investor on the sale, exchange or other disposition of such ordinary shares or ADSs generally will be long-term capital
gain or loss if such Electing U.S. Investor has held such ordinary shares or ADSs for more than one year at the time of such sale, exchange
or other disposition. Preferential tax rates for long-term capital gain will apply to individual U.S. Investors. The deductibility of
capital losses is subject to limitations.
A U.S. Investor makes a QEF election by completing the relevant
portions of and filing IRS Form 8621 in accordance with the instructions thereto. A QEF election generally may not be revoked without
the consent of the IRS. Upon request, we intend to annually furnish U.S. Investors with information needed in order to complete IRS
Form 8621 (which form would be required to be filed with the IRS on an annual basis by the U.S. Investor) and to make and maintain a valid
QEF election for any year in which we are a PFIC. There is no assurance, however, that we will have timely knowledge of our status as
a PFIC, or that the information that we provide will be adequate to allow U.S. Investors to make a QEF election. A QEF election will not
apply to any taxable year during which we are not a PFIC but will remain in effect with respect to any subsequent taxable year in which
we become a PFIC. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of a QEF election with
respect to us.
Mark-to-Market Election
.
Alternatively, if our ordinary shares or ADSs are treated as “marketable stock,” a U.S. Investor would be allowed to make
a “mark-to-market” election with respect to our ordinary shares or ADSs, provided the U.S. Investor completes and files IRS
Form 8621 in accordance with the relevant instructions and related Treasury Regulations. If that election is made, the U.S. Investor generally
would include as ordinary income in each taxable year the excess, if any, of the fair market value of the ordinary shares or ADSs at the
end of the taxable year over such investor’s adjusted tax basis in the ordinary shares or ADSs. Thus, the U.S. Investor may recognize
taxable income without receiving any cash to pay its tax liability with respect to such income. The U.S. Investor would also be permitted
an ordinary loss in respect of the excess, if any, of the U.S. Investor’s adjusted tax basis in the ordinary shares or ADSs over
their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result
of the mark-to-market election. A U.S. Investor’s tax basis in the ordinary shares or ADSs would be adjusted to reflect any such
income or loss amount. Gain realized on the sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary
income, and any loss realized on the sale, exchange or other disposition of the ordinary shares or ADSs would be treated as ordinary loss
to the extent that such loss does not exceed the net mark-to-market gains previously included in income by the U.S. Investor, and any
loss in excess of such amount will be treated as capital loss. Amounts treated as ordinary income will not be eligible for the favorable
tax rates applicable to qualified dividend income or long-term capital gains.
Generally, stock will be considered marketable stock if it is “regularly
traded” on a “qualified exchange” within the meaning of applicable Treasury Regulations. A class of stock is regularly
traded on an exchange during any calendar year during which such class of stock is traded, other than in
de
minimis
quantities, on at least 15 days during each calendar quarter. To be marketable stock, our ordinary shares or ADSs must
be regularly traded on a qualifying exchange (i) in the United States that is registered with the SEC or a national market system established
pursuant to the Exchange Act or (ii) outside the United States that is properly regulated and meets certain trading, listing, financial
disclosure and other requirements. A mark-to-market election will not apply to our ordinary shares or ADSs held by a U.S. Investor for
any taxable year during which we are not a PFIC, but will remain in effect with respect to any subsequent taxable year in which we become
a PFIC unless our ordinary shares or ADSs cease to be marketable. A mark-to-market election generally may not be revoked without the consent
of the IRS. Such election will not apply to any PFIC subsidiary that we own. Each U.S. Investor is encouraged to consult its own tax advisor
with respect to the availability and tax consequences of a mark-to-market election with respect to our ordinary shares or ADSs.
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Default PFIC Rules
. A U.S.
Investor who does not make a timely QEF election or a mark-to-market election, referred to in this disclosure as a “Non-Electing
U.S. Investor,” will be subject to special rules with respect to (a) any “excess distribution” (generally, the portion
of any distributions received by the Non-Electing U.S. Investor on the ordinary shares or ADSs in a taxable year in excess of 125% of
the average annual distributions received by the Non-Electing U.S. Investor in the three preceding taxable years, or, if shorter, the
Non-Electing U.S. Investor’s holding period for the ordinary shares or ADSs), and (b) any gain realized on the sale or other disposition
of such ordinary shares or ADSs. Under these rules:
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the excess distribution or gain would be allocated ratably over the Non-Electing U.S.
Investor’s holding period for the ordinary shares or ADSs;
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the amount allocated to the current taxable year and any year prior to us becoming
a PFIC would be taxed as ordinary income; and
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the amount allocated to each of the other taxable years would be subject to tax at
the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit
would be imposed with respect to the resulting tax attributable to each such other taxable year.
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If a Non-Electing U.S. Investor who is an individual dies while
owning our ordinary shares or ADSs, the Non-Electing U.S. Investor’s successor would be ineligible to receive a step-up in tax basis
of the ordinary shares or ADSs. Non-Electing U.S. Investors are encouraged to consult their tax advisors regarding the application of
the PFIC rules to their specific situation.
A Non-Electing U.S. Investor who wishes to make a QEF election
for a subsequent year may be able to make a special “purging election” pursuant to Section 1291(d) of the Code. Pursuant to
this election, a Non-Electing U.S. Investor would be treated as selling his or her ordinary shares or ADSs for fair market value on the
first day of the taxable year for which the QEF election is made. Any gain on such deemed sale would be subject to tax under the rules
for Non-Electing U.S. Investors as discussed above. Non-Electing U.S. Investors are encouraged to consult their tax advisors regarding
the availability of a “purging election” as well as other available elections.
To the extent a distribution on our ordinary shares or ADSs does
not constitute an excess distribution to a Non-Electing U.S. Investor, such Non-Electing U.S. Investor generally will be required to include
the amount of such distribution in gross income as a dividend to the extent of our current or accumulated earnings and profits (as determined
for U.S. federal income tax purposes) that are not allocated to excess distributions. The tax consequences of such distributions are discussed
above under “— Taxation of U.S. Investors — Distributions.” Each U.S. Investor is encouraged to consult its own
tax advisor with respect to the appropriate U.S. federal income tax treatment of any distribution on our ordinary shares or ADSs.
If we are treated as a PFIC for any taxable year during the holding
period of a Non-Electing U.S. Investor, we will continue to be treated as a PFIC for all succeeding years during which the Non-Electing
U.S. Investor is treated as a direct or indirect Non-Electing U.S. Investor even if we are not a PFIC for such years. A U.S. Investor
is encouraged to consult its tax advisor with respect to any available elections that may be applicable in such a situation, including
the “deemed sale” election of Section 1298(b)(1) of the Code. In addition, U.S. Investors should consult their tax advisors
regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares in a PFIC, including
IRS Form 8621.
We may invest in the equity of foreign corporations that are PFICs
or may own subsidiaries that own PFICs. U.S. Investors will be subject to the PFIC rules with respect to their indirect ownership interests
in such PFICs, such that a disposition of the shares of the PFIC or receipt by us of a distribution from the PFIC generally will be treated
as a deemed disposition of such shares or the deemed receipt of such distribution by the U.S. Investor, subject to taxation under the
PFIC rules. There can be no assurance that a U.S. Investor will be able to make a QEF election or a mark-to-market election with respect
to PFICs in which we invest. Each U.S. Investor is encouraged to consult its own tax advisor with respect to tax consequences of an investment
by us in a corporation that is a PFIC.
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The U.S. federal income tax rules relating to PFICs are complex.
U.S. Investors are urged to consult their own tax advisors with respect to the purchase, ownership and disposition of ordinary shares
or ADSs, any elections available with respect to such ordinary shares or ADSs and the IRS information reporting obligations with respect
to the purchase, ownership and disposition of ordinary shares or ADSs.
Certain Reporting Requirements
Certain U.S. Investors may be required to file IRS Form 926, Return
by U.S. Transferor of Property to a Foreign Corporation and IRS Form 5471, Information Return of U.S. Persons With Respect to Certain
Foreign Corporations, reporting transfers of cash or other property to us and information relating to the U.S. Investor and us. Substantial
penalties may be imposed upon a U.S. Investor that fails to comply.
Certain U.S. Investors owning “specified foreign financial
assets” with an aggregate value in excess of $50,000 on the last day of the taxable year or $75,000 at any time during the taxable
year (or such higher dollar amount as may be prescribed by applicable IRS guidance) may be required to file IRS Form 8938, Statement of
Specified Foreign Financial Assets, with respect to such assets with their tax returns. “Specified foreign financial assets”
generally include any financial accounts maintained by foreign financial institutions, as well as any of the following held for investment
and not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, which may include
the ordinary shares or ADSs, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties
and (iii) interests in foreign entities. The IRS has issued guidance exempting “specified foreign financial assets” held in
a financial account from reporting under this provision (although the financial account itself, if maintained by a foreign financial institution,
may remain subject to this reporting requirement). U.S. Investors are urged to consult their tax advisors regarding the application of
these requirements to their ownership of the ordinary shares or ADSs.
If we are treated as a PFIC, U.S. Investors generally are required
to file annual tax returns (including on IRS Form 8621) containing such information as the U.S. Treasury requires (whether or not a mark-to-market
election is or has been made). A U.S. Investor that is not otherwise required to file a U.S. tax return must still file IRS Form 8621
in accordance with the instructions for the Form. Failure to file IRS Form 8621 for each applicable taxable year may result in substantial
penalties and the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Investor for the related
taxable year may not close until three years after the date on which the required information is filed. U.S. Investors should consult
their tax advisors regarding the IRS information reporting and filing obligations that may arise as a result of the ownership of shares
in a PFIC, including IRS Form 8621.
Backup Withholding Tax and Information Reporting Requirements
Generally, information reporting requirements will apply to distributions
on our ordinary shares or ADSs or proceeds on the disposition of our ordinary shares or ADSs paid within the United States (and, in certain
cases, outside the United States) to U.S. Investors other than certain exempt recipients, such as corporations. Furthermore, backup withholding
may apply to such amounts if the U.S. Investor fails to (i) provide a correct taxpayer identification number, (ii) report interest and
dividends required to be shown on its U.S. federal income tax return, or (iii) make other appropriate certifications in the required manner.
U.S. Investors who are required to establish their exempt status generally must provide such certification on IRS Form W-9.
Backup withholding is not an additional tax. Amounts withheld as
backup withholding from a payment may be credited against a U.S. Investor’s U.S. federal income tax liability and such U.S. Investor
may obtain a refund of any excess amounts withheld by timely filing the appropriate claim for refund with the IRS and furnishing any required
information in a timely manner.
U.S. Investors should consult their own tax advisors concerning
the tax consequences relating to the purchase, ownership and disposition of the ordinary shares or ADSs.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
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H. Documents on Display
We are currently subject to the information and periodic reporting
requirements of the Exchange Act, and file periodic reports and other information with the SEC through its electronic data gathering,
analysis and retrieval (EDGAR) system. Our filings with the SEC are available to the public through the SEC’s website at
www.sec.gov
.
Our SEC filings are also generally available on the ISA’s website at
www.magna.isa.gov.il
and the TASE’s website at http://www.maya.tase.co.il.
As a foreign private issuer, we are exempt from the rules under
the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are
not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently
or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We maintain a corporate website at
www.biolinerx.com.
Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report on Form 20-F.
We have included our website address in this Annual Report on Form 20-F solely as an inactive textual reference.
I. Subsidiary Information
Not applicable.
J. Annual Report to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE
AND QUALITATIVE DISCLOSURE ON MARKET RISK
Our consolidated financial statements are prepared in conformity
with IFRS, as issued by the IASB. We are exposed to a variety of risks in the ordinary course of our business, including, but not limited
to, interest rate risk, foreign exchange risk, liquidity risk and credit risk, as discussed below. We regularly assess each of these risks
to minimize any adverse effects on our business as a result of those factors. See Note 3 to our consolidated financial statements, which
are included elsewhere in this Annual Report on Form 20-F, for further discussion of our exposure to these risks.
Risk of Interest Rate Fluctuation
Our investments consist primarily of cash, cash equivalents and
short-term bank deposits. We may also invest in investment-grade marketable securities with maturities of up to three years, including
commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities
is to preserve principal, while maximizing the income that we receive from our investments without significantly increasing risk and loss.
Our investments are exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market
value of our investments. We manage this exposure by performing ongoing evaluations of our investments. Due to the short-term maturities
of our investments to date, their carrying value has always approximated their fair value. It is our policy to hold investments to maturity
in order to limit our exposure to interest rate fluctuations.
Foreign Currency Exchange Risk
Our reporting and functional currency is the dollar. However, we
pay a significant portion of our expenses in NIS and in euro, and we expect this to continue. If the dollar weakens against the NIS or
the euro in the future, there may be a negative impact on our results of operations. The revenues from our current out-licensing and co-development
arrangements are payable in dollars and euros. Although we expect our revenues from future licensing arrangements to be denominated primarily
in dollars, we are exposed to the currency fluctuation risks relating to the recording of our revenues in currencies other than dollars.
For example, if the euro strengthens against the dollar, our reported revenues in dollars may be lower than anticipated. To date, fluctuations
in the exchange rates have not materially affected our results of operations or financial condition for the periods under review.
From time to time, we have engaged in currency hedging transactions
to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies, and we may continue
to do so in the future. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
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ITEM 12. DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
Not applicable.
C. Other Securities
Not applicable.
D. American Depositary Shares
Set forth below is a summary of some of the material terms of the
deposit agreement among BioLineRx, The Bank of New York Mellon as depositary, or the Depositary, and the owners and holders from time
to time of our ADSs.
Description of the ADSs
Each of our ADSs represents 600 of our ordinary shares deposited
with the principal Tel Aviv office of Bank Leumi Le-Israel, as Custodian for the Depositary. Our ADSs trade on Nasdaq.
The form of the deposit agreement for the ADS and the form of American
Depositary Receipt (ADR) that represents an ADS have been incorporated by reference as exhibits to this Annual Report on Form 20-F. Copies
of the deposit agreement are available for inspection at the principal office of The Bank of New York Mellon, located at 101 Barclay Street,
New York, New York 10286.
Charges of Depositary
We will pay the fees, reasonable expenses and out-of-pocket charges
of the Depositary and those of any registrar only in accordance with agreements in writing entered into between us and the Depositary
from time to time. The following charges shall be incurred by any party depositing or withdrawing ordinary shares or by any party surrendering
ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or
an exchange of stock regarding the ADRs or deposited ordinary shares or a distribution of ADRs pursuant to the terms of the deposit agreement):
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taxes and other governmental charges;
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any applicable transfer or registration fees;
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certain cable, telex and facsimile transmission charges as provided in the deposit
agreement;
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any expenses incurred in the conversion of foreign currency;
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a fee of $5.00 or less per 100 ADSs (or a portion thereof) for the execution and delivery
of ADRs and the surrender of ADRs, including if the deposit agreement terminates;
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a fee of $.01 or less per ADS (or portion thereof) for any cash distribution made
pursuant to the deposit agreement;
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a fee for the distribution of securities pursuant to the deposit agreement;
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in addition to any fee charged for a cash distribution, a fee of $.01 or less per
ADS (or portion thereof) per annum for depositary services;
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a fee for the distribution of proceeds of rights that the Depositary sells pursuant
to the deposit agreement; and
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any other charges payable by the Depositary, any of the Depositary’s agents,
or the agents of the Depositary’s agents in connection with the servicing of ordinary shares or other Deposited Securities.
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The Depositary may own and deal in our securities and in ADSs.
The Depositary collects its fees for delivery and surrender of
ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.
The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling
a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deduction from
cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The
Depositary may collect any of its fees by deduction from any cash distribution payable (or by selling a portion of securities or other
property distributable) to ADS holders that are obligated to pay those fees. The Depositary may generally refuse to provide fee-attracting
services until its fees for those services are paid.
From time to time, the Depositary may make payments to us to reimburse
us for costs and expenses generally arising out of establishment and maintenance of the ADS program, waive fees and expenses for services
provided to us by the Depositary or share revenue from the fees collected from ADS holders. In performing its duties under the deposit
agreement, the Depositary may use brokers, dealers, foreign currency dealers or other service providers that are owned by or affiliated
with the Depositary and that may earn or share fees, spreads or commissions.
The Depositary may convert currency itself or through any of its
affiliates and, in those cases, acts as principal for its own account and not as agent, advisor, broker or fiduciary on behalf of any
other person and earns revenue, including, without limitation, transaction spreads, that it will retain for its own account. The revenue
is based on, among other things, the difference between the exchange rate assigned to the currency conversion made under the deposit agreement
and the rate that the Depositary or its affiliate receives when buying or selling foreign currency for its own account. The Depositary
makes no representation that the exchange rate used or obtained in any currency conversion under the deposit agreement will be the most
favorable rate that could be obtained at the time or that the method by which that rate will be determined will be the most favorable
to ADS holders, subject to the Depositary’s obligations under the deposit agreement. The methodology used to determine exchange
rates used in currency conversions is available upon request.
Liability of Holders for Taxes, Duties or Other Charges
Any tax or other governmental charge with respect to ADSs or any
deposited ordinary shares represented by any ADS shall be payable by the holder of such ADS to the Depositary. The Depositary may refuse
to effect transfer of such ADS or any withdrawal of deposited ordinary shares represented by such ADS until such payment is made, and
may withhold any dividends or other distributions or may sell for the account of the holder any part or all of the deposited ordinary
shares represented by such ADS and may apply such dividends or distributions or the proceeds of any such sale in payment of any such tax
or other governmental charge and the holder of such ADS shall remain liable for any deficiency.
ITEM 13. DEFAULTS,
DIVIDENDS ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS
TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
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Disclosure Controls and Procedures
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We have performed an evaluation of the effectiveness of our disclosure
controls and procedures that are designed to ensure that the material financial and non-financial information required to be disclosed
to the SEC is recorded, processed, summarized and reported timely. Based on our evaluation, our Chief Executive Officer, or the CEO, and
the Chief Financial Officer, or the CFO, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act) as of the end of the period covered by this report are effective. Notwithstanding the foregoing, there
can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within the Company to disclose
material information otherwise required to be set forth in our reports.
105
|
b.
|
Management’s Annual Report on Internal
Control over Financial Reporting
|
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Exchange Act. Our
internal control system was designed to provide reasonable assurance to our management and board of directors regarding the reliability
of financial reporting and the preparation and fair presentation of published financial statements for external purposes in accordance
with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures
may deteriorate.
Our management, including the CEO and CFO, conducted an evaluation,
pursuant to Rule 13a-15(c) promulgated under the Exchange Act, of the effectiveness, as of the end of the period covered by this Annual
Report on Form 20-F, of its internal control over financial reporting based on the framework in
Internal
Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based
on the results of this evaluation, management concluded that our internal control over financial reporting was effective as of December
31, 2024.
|
c.
|
Attestation Report of Registered Public Accounting
Firm
|
Not applicable (we are exempt from this requirement due to our status under the Exchange
Act as a non-accelerated filer as of the current time).
|
d.
|
Changes in Internal Control over Financial
Reporting
|
There were no changes in our internal control over financial reporting
that occurred during the year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A
. AUDIT COMMITTEE
FINANCIAL EXPERTS
Our board of directors has determined that Mr. Rami Dar is an audit
committee financial expert. Mr. Dar is one of our independent directors for the purposes of the Nasdaq Rules.
ITEM 16B
. CODE OF
ETHICS
In July 2011, our board of directors adopted a Code of Business
Conduct and Ethics, or the Code of Conduct, that applies to all our employees, including without limitation our CEO, CFO and controller.
Our Code of Conduct may be viewed on our website at
www.biolinerx.com
.
The information contained on or through our website, or any other website referred to herein, is not incorporated by reference into this
Annual Report on Form 20-F. A copy of our Code of Conduct may be obtained, without charge, upon a written request addressed to our investor
relations department, 2 HaMa’ayan Street, Modi’in 7177871, Israel (Telephone no. +972-8-642-9100) (e-mail:
info@BioLineRx.com
).
106
ITEM 16C
. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Fees Paid to Independent Registered Public Accounting Firm
The following table sets forth, for each of the years indicated,
the fees billed by Kesselman Kesselman, a member firm of PricewaterhouseCoopers International Ltd., our independent registered public
accounting firm.
|
|
Year Ended December 31,
|
|||||||
|
|
2023
|
2024
|
||||||
|
Services Rendered
|
(in thousands of U.S. dollars)
|
|||||||
|
|
||||||||
|
Audit Fees
(1)
|
130
|
160
|
||||||
|
Audit-Related Fees
(2)
|
17
|
40
|
||||||
|
Tax Fees
(3)
|
52
|
41
|
||||||
|
Total
|
199
|
211
|
||||||
|
(1)
|
Audit fees consist of services that would normally be provided in connection with statutory and regulatory
filings or engagements, including services that generally only the independent accountant can reasonably provide.
|
|
|
|
|
|
|
(2)
|
Audit-related services relate to reports to the IIA and work regarding a public listing or offering.
|
|
|
|
|
|
|
(3)
|
Tax fees relate to tax reports for BioLineRx USA, Inc., tax compliance, planning
and advice.
|
Our Audit Committee, in accordance with its charter, reviews and
pre-approves all audit services and permitted non-audit services (including the fees and other terms) to be provided by our independent
auditors.
ITEM 16D
. EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E
. PURCHASES OF EQUITY
SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F
. CHANGE IN REGISTRANT’S
CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G
. CORPORATE
GOVERNANCE
The Nasdaq Rules permit listed companies that are foreign private
issuers, such as us, to follow home country practice in lieu of the corporate governance provisions specified by the Nasdaq Rules with
limited exceptions.
In accordance with Israeli law and practice and subject to the
exemption set forth in Rule 5615 of the Nasdaq Rules, we have elected to follow the provisions of the Companies Law, rather than the Nasdaq
Rules, with respect to the following requirements:
|
|
•
|
Distribution of periodic reports to shareholders
.
Under Israeli law, a public company whose shares are traded on the TASE, is not required to distribute periodic reports directly to shareholders
and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports publicly
available through a public website. We will only mail such reports to shareholders upon request. In addition, we make our audited financial
statements available to our shareholders at our offices.
|
|
|
•
|
Quorum
. While the Nasdaq Rules require that
the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s
bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, as permitted under the Companies Law, our Articles
of Association provide that a quorum of two or more shareholders holding at least 25% of the voting rights in person or by proxy is required
for commencement of business at a general meeting (and, with respect to an adjourned meeting, a quorum consists of any number of shareholders
present in person or by proxy).
|
107
|
|
•
|
Nomination of Directors
. We follow Israeli
corporate governance practices instead of the requirements of the Nasdaq Rules with regard to the nomination committee and director nomination
procedures. Israeli law and practice does not require director nominations to be made by a nominating committee of our board of
directors consisting solely of independent directors, as required under the Nasdaq Rules. In accordance with Israeli law and practice,
directors are recommended by our board of directors for election by our shareholders (other than directors elected by our board of directors
to fill a vacancy), and certain of our shareholders may nominate candidates for election as directors by the general meeting of shareholders
in accordance with the Companies Law and our Articles of Association.
|
|
|
•
|
Compensation of Officers
. We follow Israeli
law and practice with respect to the approval of officer compensation, pursuant to which transactions with office holders regarding their
terms of office and employment generally require the approval of the compensation committee, the board of directors and under certain
circumstances (such as if the officer is a director or controlling shareholder) the shareholders, either in accordance with our compensation
policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Companies Law.
See “Item 6.C— Directors, Senior Management and Employees — Board Practices — Compensation Committee” for
information regarding the Compensation Committee, and “Item 6.C — Directors, Senior Management and Employees — Approval
of Related Party Transactions under Israeli Law” for information regarding the approvals required with respect to approval of terms
of office and employment of office holders, pursuant to the Companies Law.
|
|
|
•
|
Approval of Related Party Transactions
.
We follow Israeli law and practice with respect to the approval of interested party acts and transactions, as set forth in sections 268
to 275 of the Companies Law, and the regulations promulgated thereunder, which generally require the approval of the audit committee,
the board of directors and, under certain circumstances (such as if the transaction is with a controlling shareholder or another party
in which the controlling shareholder has a personal interest) the shareholders, as may be applicable, for specified transactions. See
“Item 6.C— Directors, Senior Management and Employees —Board Practices — Approval of Related Party Transactions
under Israeli Law” for information regarding the approvals required with respect to approval of related party transactions pursuant
to the Companies Law.
|
|
|
•
|
Shareholder Approval
. We intend to seek shareholder
approval for all corporate actions requiring such approval in accordance with the requirements of the Companies Law, which are different
or in addition to the requirements for seeking shareholder approval under Nasdaq Listing Rule 5635, rather than seeking approval for corporation
actions in accordance with such listing rules.
|
|
|
•
|
Equity Compensation Plans
. We do not necessarily
seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in Nasdaq
Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law and practice. However, any equity-based
compensation arrangement with a director or the chief executive officer or the material amendment of such an arrangement must be approved
by our Compensation Committee, board of directors and shareholders, in that order.
|
Except as stated above, we currently intend to comply with the
rules generally applicable to U.S. domestic companies listed on Nasdaq. We may in the future decide to use the foreign private issuer
exemption with respect to some or all of the other Nasdaq corporate governance rules. Following our home country governance practices,
as opposed to the requirements that would otherwise apply to a company listed on Nasdaq, may provide less protection than is accorded
to investors under Nasdaq listing requirements applicable to domestic issuers. For more information, see “Item 3.D — Key Information
- Risks Related to our Ordinary Shares and ADSs -
As a foreign private issuer, we follow certain home
country corporate governance practices instead of applicable Nasdaq requirements, which may result in less protection than is accorded
to investors under rules applicable to domestic issuers.
”
ITEM 16H. MINE SAFETY
DISCLOSURE
Not applicable.
ITEM 16I
. DISCLOSURE REGARDING
FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
108
ITEM 16J. INSIDER TRADING POLICIES
We have
adopted a statement of trading policies
that governs the trading in our securities by our directors, officers, employees and certain other covered persons, and which is reasonably designed to promote compliance with applicable insider trading laws, rules and regulations, and the Nasdaq Rules. A copy of the Insider Trading Policy is included as Exhibit 11.1 to this Annual Report on Form 20-F. In addition, with regard to any trading in our own securities, it is our policy to comply with the federal securities laws and the applicable exchange listing requirements.
ITEM 16K. CYBERSECURITY
Risk management and strategy
We have developed and maintain a cybersecurity risk management program that focuses primarily on securing and safeguarding computer systems, networks, cloud services, business applications, and data and that is integrated in our overall risk management strategy and framework. We have implemented protocols to protect against cyber threats and ensure the containment and security of sensitive business data, including ongoing security reviews of critical systems, continuous monitoring of event data, and employee training programs, which processes are aligned with our overall business and operational goals and strategies. Our risk assessment occurs on an ongoing basis and covers identification of risks that could act against the company’s objectives as well as specific risks related to a compromise to the security of data.
Governance
109
ITEM 17. FINANCIAL STATEMENTS
The Registrant has responded to Item 18 in lieu of responding to this Item.
ITEM 18. FINANCIAL STATEMENTS
See the financial statements beginning on page F-1. The following financial statements are filed as part of this Annual Report on Form 20-F together with the report of the independent registered public accounting firm.
ITEM 19. EXHIBITS
|
Exhibit
Number
|
|
Exhibit Description
|
110
|
101
|
The following financial information from BioLineRx Ltd.’s Annual Report on Form 20-F for the fiscal year ended December 31, 2023 formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Position at December 31, 2023 and 2022; (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2023, 2022 and 2021; (iii) Statements of Changes in Equity for the years ended December 31, 2023, 2022 and 2021; (iv) Consolidated Cash Flow Statements for the years ended December 31, 2023, 2022 and 2021; and (v) Notes to the Consolidated Financial Statements.
|
111
|
*
|
Filed herewith.
|
|
†
|
Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.
|
|
(1)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on February 23, 2021.
|
|
(2)
|
Incorporated by reference to Exhibit 1 of the Registration Statement on Form F-6EF (No. 333-218969) filed by the Bank of New York Mellon on June 26, 2017 with respect to the Registrant’s American Depositary Shares.
|
|
(3)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 23, 2017.
|
|
(4)
|
Incorporated by reference to the Registrant’s Registration Statement on Form 20-F (No. 001-35223) filed on July 1, 2011.
|
|
(5)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 10, 2016.
|
|
(6)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on May 31, 2016.
|
|
(7)
|
Incorporated by reference to the Registrant’s Form 6-K filed on October 3, 2018.
|
|
(8)
|
Incorporated by reference to the Registrant’s Form 6-K filed on May 27, 2022.
|
|
(9)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 12, 2020.
|
|
(10)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 23, 2015.
|
|
(11)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F/A filed on September 22, 2015.
|
|
(12)
|
Incorporated by reference to the Registrant’s Form 6-K filed on February 7, 2019.
|
|
(13)
|
Incorporated by reference to the Registrant’s Form 6-K filed on January 21, 2021.
|
|
(14)
|
Incorporated by reference to the Registrant’s Form 6-K filed on September 3, 2021.
|
|
(15)
|
Incorporated by reference to the Registrant’s Form 6-K filed on September 15, 2022.
|
|
(16)
|
Incorporated by reference to the Registrant’s Form 6-K filed on September 21, 2022.
|
|
(17)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 16, 2022.
|
|
(18)
|
Incorporated by reference to the Registrant’s Form 6-K filed on August 30, 2023.
|
|
(19)
|
Incorporated by reference to the Registrant’s Annual Report on Form 20-F filed on March 26, 2024.
|
|
(20)
|
Incorporated by reference to the Registrant’s Form 6-K filed on April 1, 2024.
|
|
(21)
|
Incorporated by reference to the Registrant’s Form 6-K filed on November 21, 2024.
|
|
(22)
|
Incorporated by reference to the Registrant’s Form 6-K filed on January 7, 2025.
|
112
SIGNATURES
The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
|
BIOLINERX LTD.
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Philip A. Serlin
|
|
|
|
|
Philip A. Serlin
|
|
|
|
|
Chief Executive Officer
|
|
Date: March 31, 2025
113
BioLineRx Ltd.
INDEX TO FINANCIAL STATEMENTS:
| Page | |
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(PCAOB name: Kesselman Kesselman C.P.A.s and PCAOB ID No.
|
F-2 |
|
CONSOLIDATED FINANCIAL STATEMENTS:
|
|
| F-4 | |
| F-5 | |
| F-6 | |
| F-7 | |
| F-9 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of BioLineRx Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of BioLineRx Ltd. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1(c) to the consolidated financial statements, the Company has suffered recurring losses from operations and has cash outflows from operating activities that indicate that a material uncertainty exists that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1(c). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F - 2
Intellectual Property Impairment Assessment
As described in Notes 4 and 9 to the consolidated financial statements, the Company's intangible assets relating to its intellectual property used for development services was $10.2 million as of December 31, 2024. Management conducts an annual impairment test, or more frequently if events or circumstances indicate that the carrying value of the intellectual property may be impaired. Potential impairment is identified by comparing the recoverable amount of the intellectual property to its carrying value. Value in use to the Company is estimated by management using a discounted cash flow model. Management's cash flow projections included significant judgments and assumptions relating to the weighted average cost of capital and the amount and timing of projected future cash flows.
The principal considerations for our determination that performing procedures relating to the intellectual property impairment assessment is a critical audit matter are (i) the significant judgment by management in developing the weighted average cost of capital and the amount and timing of projected future cash flows; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the weighted average cost of capital and the amount and timing of projected future cash flows ; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included among others: (i) testing management’s process for developing the value in use estimate; (ii) evaluating the appropriateness of the discounted cash flow model used by management; (iii) testing the completeness, accuracy, and relevance of underlying data used in the discounted cash flow model; and (iv) evaluating the reasonableness of the significant assumptions used by management, related to the weighted average cost of capital and the amount and timing of projected future cash flows. Evaluating management’s assumptions related to the weighted average cost of capital and the amount and timing of projected future cash flows involved evaluating whether the assumptions used by management were reasonable considering the consistency with external market and industry data. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow model and (ii) the reasonableness of the weighted average cost of capital assumption.
|
/s/
|
|
Certified Public Accountants (Isr.)
|
|
A member firm of PricewaterhouseCoopers International Ltd.
|
March 31, 2025
We have served as the Company's auditor since
2003.
F - 3
BioLineRx Ltd.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
|
Note
|
December 31,
|
||||||||||
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
|||||||||||
|
Assets
|
|||||||||||
|
CURRENT ASSETS
|
|||||||||||
|
Cash and cash equivalents
|
5
|
|
|
||||||||
|
Short-term bank deposits
|
6
|
|
|
||||||||
|
Trade receivables
|
|
|
|||||||||
|
Prepaid expenses
|
|
|
|||||||||
|
Other receivables
|
20a
|
|
|
||||||||
|
Inventory
|
7
|
|
|
||||||||
|
Total current assets
|
|
|
|||||||||
|
NON-CURRENT ASSETS
|
|||||||||||
|
Property and equipment, net
|
8
|
|
|
||||||||
|
Right-of-use assets, net
|
10
|
|
|
||||||||
|
Intangible assets, net
|
9
|
|
|
||||||||
|
Total non-current assets
|
|
|
|||||||||
|
Total assets
|
|
|
|||||||||
|
Liabilities and equity
|
|||||||||||
|
CURRENT LIABILITIES
|
|||||||||||
|
Current maturities of long-term loan
|
11
|
|
|
||||||||
|
Contract liabilities
|
16
|
|
|
||||||||
|
Accounts payable and accruals:
|
|||||||||||
|
Trade
|
20b
|
|
|
||||||||
|
Other
|
20b
|
|
|
||||||||
|
Current maturities of lease liabilities
|
10
|
|
|
||||||||
|
Warrants
|
12c
|
|
|
||||||||
|
Total current liabilities
|
|
|
|||||||||
|
NON-CURRENT LIABILITIES
|
|||||||||||
|
Long-term loan, net of current maturities
|
11
|
|
|
||||||||
|
Lease liabilities
|
10
|
|
|
||||||||
|
Total non-current liabilities
|
|
|
|||||||||
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
15
|
||||||||||
|
Total liabilities
|
|
|
|||||||||
|
EQUITY
|
12
|
||||||||||
|
Ordinary shares
|
|
|
|||||||||
|
Share premium
|
|
|
|||||||||
|
Warrants
|
|
|
|||||||||
|
Capital reserve
|
|
|
|||||||||
|
Other comprehensive loss
|
(
|
)
|
(
|
)
|
|||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
|||||||
|
Total equity
|
|
|
|||||||||
|
Total liabilities and equity
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
BioLineRx Ltd.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
|
Note
|
Year ended December 31,
|
||||||||||||||
|
2022
|
2023
|
2024
|
|||||||||||||
|
in USD thousands
|
|||||||||||||||
|
REVENUES:
|
|||||||||||||||
|
License revenues
|
16, 17
|
|
|
|
|||||||||||
|
Product sales, net
|
|
|
|
||||||||||||
|
Total revenues
|
|
|
|
||||||||||||
|
COST OF REVENUES
|
20c
|
|
(
|
)
|
(
|
)
|
|||||||||
|
GROSS PROFIT
|
|
|
|
||||||||||||
|
RESEARCH AND DEVELOPMENT EXPENSES
|
20d
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
SALES AND MARKETING EXPENSES
|
20e
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
20f
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
IMPAIRMENT OF INTANGIBLE ASSETS
|
9
|
|
(
|
)
|
(
|
)
|
|||||||||
|
OPERATING LOSS
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
NON-OPERATING INCOME (EXPENSES), NET
|
20g
|
|
(
|
)
|
|
||||||||||
|
FINANCIAL INCOME
|
20h
|
|
|
|
|||||||||||
|
FINANCIAL EXPENSES
|
20i
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
LOSS AND COMPREHENSIVE LOSS
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
in USD
|
|||||||||||||||
|
LOSS PER ORDINARY SHARE – BASIC AND DILUTED
|
14
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
WEIGHTED AVERAGE NUMBER OF SHARES USED IN CALCULATION OF LOSS PER ORDINARY SHARE
|
14
|
|
|
|
|||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
BioLineRx Ltd.
STATEMENTS OF CHANGES IN EQUITY
|
Ordinary
shares
|
Share
premium
|
Warrants
|
Capital
reserve
|
Other
comprehensive
loss
|
Accumulated
deficit
|
Total
|
||||||||||||||||||||||
|
in USD thousands
|
||||||||||||||||||||||||||||
|
BALANCE AT JANUARY 1, 2022
|
|
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||
|
CHANGES IN 2022:
|
||||||||||||||||||||||||||||
|
Issuance of share capital and warrants, net
|
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||
|
Employee stock options exercised
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Employee stock options expired
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Comprehensive loss for the year
|
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2022
|
|
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||
|
CHANGES IN 2023:
|
||||||||||||||||||||||||||||
|
Issuance of share capital, net
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Warrants exercised
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Employee stock options exercised
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Employee stock options expired
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Comprehensive loss for the year
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2023
|
|
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||
|
CHANGES IN 2024:
|
||||||||||||||||||||||||||||
|
Issuance of share capital and warrants, net
|
|
(
|
)
|
|
|
|
|
|
||||||||||||||||||||
|
Pre-funded warrants exercised
|
|
|
(
|
)
|
|
|
|
|
||||||||||||||||||||
|
Employee stock options exercised
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Employee stock options expired
|
|
|
|
(
|
)
|
|
|
|
||||||||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|
|
|||||||||||||||||||||
|
Comprehensive loss for the year
|
|
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||||||||
|
BALANCE AT DECEMBER 31, 2024
|
|
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
BioLineRx Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
CASH FLOWS - OPERATING ACTIVITIES
|
||||||||||||
|
Loss
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Adjustments required to reflect net cash used in operating activities (see appendix below)
|
(
|
)
|
|
(
|
)
|
|||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
CASH FLOWS - INVESTING ACTIVITIES
|
||||||||||||
|
Investments in short-term deposits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Maturities of short-term deposits
|
|
|
|
|||||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Purchase of intangible assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by investing activities
|
|
|
|
|||||||||
|
CASH FLOWS - FINANCING ACTIVITIES
|
||||||||||||
|
Issuance of share capital and warrants, net of issuance costs
|
|
|
|
|||||||||
|
Exercise of warrants
|
|
|
|
|||||||||
|
Employee stock options exercised
|
|
|
|
|||||||||
|
Proceeds from long-term loan, net of issuance costs
|
|
|
|
|||||||||
|
Repayments of loan
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Repayments of lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by financing activities
|
|
|
|
|||||||||
|
INCREASE
(
DECREASE
)
IN CASH AND CASH EQUIVALENTS
|
(
|
)
|
(
|
)
|
|
|||||||
|
CASH AND CASH EQUIVALENTS - BEGINNING
OF YEAR
|
|
|
|
|||||||||
|
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS
|
(
|
)
|
(
|
)
|
|
|||||||
|
CASH AND CASH EQUIVALENTS - END OF YEAR
|
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
BioLineRx Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
APPENDIX
|
||||||||||||
|
Adjustments required to reflect net cash used in operating activities:
|
||||||||||||
|
Income and expenses not involving cash flows:
|
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Exchange differences on cash and cash equivalents
|
|
|
(
|
)
|
||||||||
|
Fair value adjustments of warrants
|
(
|
)
|
|
(
|
)
|
|||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Interest and exchange differences on short-term deposits
|
(
|
)
|
|
|
||||||||
|
Interest on loan
|
|
|
(
|
)
|
||||||||
|
Warrant issuance costs
|
|
|
|
|||||||||
|
Exchange differences on lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Intangible assets impairment
|
|
|
|
|||||||||
|
Loss on abandonment of right-of-use asset
|
|
|
|
|||||||||
|
(
|
)
|
|
(
|
)
|
||||||||
|
Changes in operating asset and liability items:
|
||||||||||||
|
Increase in trade receivables
|
|
(
|
)
|
(
|
)
|
|||||||
|
Increase in inventory
|
|
(
|
)
|
(
|
)
|
|||||||
|
Increase in prepaid expenses and other receivables
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Increase (decrease) in accounts payable and accruals
|
|
|
(
|
)
|
||||||||
|
Increase (decrease) in contract liabilities
|
|
|
(
|
)
|
||||||||
|
|
|
(
|
)
|
|||||||||
|
(
|
)
|
|
(
|
)
|
||||||||
|
Supplemental information on interest received in cash
|
|
|
|
|||||||||
|
Supplemental information on interest paid in cash
|
|
|
|
|||||||||
|
Supplemental information on non-cash transactions:
|
||||||||||||
|
Changes in right-of-use asset and lease liabilities
|
|
|
|
|||||||||
|
Warrant issuance costs
|
|
|
|
|||||||||
|
Purchase of property and equipment
|
|
|
|
|||||||||
|
Fair value of exercised warrants (portion related to accumulated fair value adjustments)
|
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL INFORMATION
| a. |
General
|
BioLineRx Ltd. (“BioLineRx”), headquartered in Modi’in, Israel, was incorporated and commenced operations in April 2003. BioLineRx and its subsidiaries (collectively, the “Company”) are engaged in the development (primarily in clinical stages) and commercialization of therapeutics, with a focus on the fields of oncology and hematology.
The Company’s American Depositary Shares (“ADSs”) are traded on the NASDAQ Capital Market, and its ordinary shares are traded on the Tel Aviv Stock Exchange. Each ADS represents 600 ordinary shares.
The Company has two substantially wholly owned subsidiaries: (i) BioLineRx USA, Inc., incorporated in the U.S., and engaged in commercialization activities associated with the launch of motixafortide for stem-cell mobilization in the U.S.; and (ii) Agalimmune Ltd., incorporated in the United Kingdom, and engaged in clinical development activities with a focus on the field of immuno-oncology. In December 2023, the Company notified the former shareholders of Agalimmune Ltd. of its decision to terminate the development of AGI-134, the principal asset of Agalimmune Ltd., with an effective termination date of March 15, 2024, and, accordingly, substantially all amounts related to Agalimmune Ltd. in the consolidated financial statements were written-off in 2023. It is the intention of BioLineRx to either transfer ownership of Agalimmune Ltd. to a third party, or to liquidate it, during 2025.
In September 2023, the U.S. Food and Drug Administration (“FDA”) approved motixafortide in stem cell mobilization for autologous transplantation for multiple myeloma patients, and the Company began to independently commercialize motixafortide in the U.S.
In October 2023, the Company out-licensed the rights to motixafortide for all indications in substantially all of Asia (see Note 16), and in November 2024, the Company out-licensed the global rights (other than in Asia) to motixafortide for all indications, other than solid tumors, and closed on an equity investment (see Note 17). In connection with the November 2024 transactions, the Company shut down its independent commercialization activities in the U.S., and entered into an agreement to repay a substantial portion of its outstanding debt, as well as restructure the remaining debt balance (see Note 11). Following these actions, the Company has refocused its operations on development activities in Israel in the fields of oncology (including solid tumors) and rare diseases, at a significantly reduced annual cash burn rate.
F - 9
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL INFORMATION
(cont.)
| b . |
War in Israel
|
On October 7, 2023, an unprecedented invasion was launched against Israel from the Gaza Strip by terrorists from the Hamas terrorist organization that infiltrated Israel’s southern border and other areas within the country, attacking civilians and military targets while simultaneously launching extensive rocket attacks on the Israeli civilian population. These attacks resulted in extensive deaths, injuries and the kidnapping of civilians and soldiers. In response, the Security Cabinet of the State of Israel declared war against Hamas, with commencement of a military campaign against the terrorist organization, in parallel to its continued rocket and terror attacks. In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization), which have escalated into a military campaign against Hezbollah, and maritime and air attacks from the Houthi movement in Yemen. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries will join the hostilities. In addition, Iran launched two direct attacks on Israel in April and October 2024, involving hundreds of drones and ballistic missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. To date, the State of Israel continues to be at war with Hamas, and has reached a ceasefire agreement with Lebanon.
The Company’s headquarters and principal development operations are located in the State of Israel. In addition, most of its key employees, officers and directors are residents of Israel. The ongoing war in Israel has not, to date, materially impacted the Company’s business or operations. Nevertheless, since this is an event beyond the Company’s control, its continuation or cessation may affect the Company’s operations. The Company continues to monitor its ongoing activities and will make any needed adjustments to ensure continuity of its business, while supporting the safety and well-being of its employees.
F - 10
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – GENERAL INFORMATION
(cont.)
| c. |
Going concern
|
The Company has incurred accumulated losses in the amount of $
400
million through December 31, 2024, and it expects to continue incurring losses and negative cash flows from operations until the cash flows from its strategic partnerships reach a level to offset its ongoing development costs. In this regard,
Company management monitors rolling forecasts of the Company’s liquidity reserves on the basis of anticipated cash flows and
seeks to
maintain liquidity balances at levels that are sufficient to meet its needs. Following the out-licensing transaction, the equity investment, and the debt repayment and restructuring agreements entered into in November 2024 (see Notes 11 and 17), as well as the registered direct offering entered into in January 2025 (see Note 21). Management believes that the Company’s current cash and other resources will be sufficient to fund its projected cash
requirements through the second half of 2026.
T
he Company’s
cash flow projections are subject to various risks and uncertainties concerning their fulfilment, and these factors and the risks inherent in the Company’s operations indicate that a material uncertainty exists that may cast significant doubt (or raise substantial doubt as contemplated by PCAOB standards) on the Company’s ability to continue as a going concern. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.
Management’s plans include the realization of capital inflows from its strategic partnerships and, if and when required, raising capital through the issuance of debt or equity securities. There are no assurances, however, that the Company will be successful in obtaining the level of financing needed for its operations. If the Company is unsuccessful in realizing the potential cash flows from its strategic partnerships and/or in raising capital, it may need to reduce activities, or curtail or cease operations.
| d. |
Change in ratio of ADSs
|
On January 30, 2025, the Company effected a change in the ratio of its ADSs to ordinary shares, from one ADS representing 15 ordinary shares to a new ratio of one ADS representing 600 ordinary shares. All ADSs and per ADSs amounts in these financial statements have been retroactively adjusted as if the change in ratio had been effected at the earliest date of these financial statements.
| e. |
Approval of consolidated financial statements
|
The consolidated financial statements of the Company for the year ended December 31, 2024 were approved by the Board of Directors on March 26, 2025, and signed on its behalf by the Chairman of the Board, the Chief Executive Officer and the Chief Financial Officer.
F - 11
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
| a. |
Basis of presentation
|
The Company’s consolidated financial statements as of December 31, 2023 and 2024, and for each of the three years in the period ended December 31, 2024, have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”) (hereinafter “IFRS”). The material
accounting policies described below have been applied on a consistent basis for all years presented, unless noted otherwise (see Note 2n).
The consolidated financial statements have been prepared on the basis of historical cost, subject to adjustment of warrant liabilities to their fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires management to
make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity and expenses, as well as the related disclosures of contingent assets and liabilities,
in the process of applying the Company’s accounting policies.
Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are material
to the consolidated financial statements, are disclosed in Note 4. Actual results may differ materially from estimates and assumptions used by the Company’s management.
| b. |
Functional and reporting currency
|
The functional and reporting currency in these financial statements is the U.S. dollar (“dollar”, “USD” or “$”), which is the primary currency of the economic environment in which the Company operates. Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are generally recognized in profit or loss.
| c. |
Inventory
|
Inventory is measured at the lower of cost or net realizable value. The cost of inventories includes purchase costs, packaging and labeling costs, and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price of the inventories in the ordinary course of business, less the estimated costs necessary to make the sale. Pre-launch inventory is held as an asset when there is a high probability of regulatory approval for the product (see Note 1a). Before that point, a provision is made against the value to its recoverable amount; the provision is then reversed at the point when regulatory approval is received.
Inventory is written down for estimated obsolescence based upon management assumptions about future demand, expiration due date and market conditions.
F - 12
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
(cont.)
| d. |
Property and equipment
|
Property and equipment are stated at historical cost less depreciation. Historical cost includes expenditures that are directly attributable to acquisition of the items. Assets are depreciated by the straight-line method over the estimated useful lives of the assets, provided that Company management believes the residual values of the assets to be negligible, as follows:
|
%
|
|
|
Computers and communications equipment
|
|
|
Office furniture and equipment
|
|
|
Laboratory equipment
|
|
Leasehold improvements are amortized by the straight-line method over the shorter of the lease term or the estimated useful life of the improvements.
| e. |
Intangible assets
|
The Company applies the cost method of accounting for initial and subsequent measurements of intangible assets. Under this method of accounting, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses.
Intellectual property
The Company recognizes in its financial statements intellectual property developed by the Company to the extent that the conditions stipulated in paragraph j. below are met. Intellectual property acquired by the Company is initially measured at cost. Intellectual property used by the Company for development purposes and not yet generating revenues is not amortized and is tested annually for impairment. See f. below.
Computer software
Acquired computer software licenses are capitalized based on the costs incurred to acquire and bring to use the specific software. These costs are amortized over the estimated useful lives of the software (
5
years).
| f. |
Impairment of non-financial assets
|
Impairment of intellectual property is required when the Company decides to terminate or suspend the development of a project based on such intellectual property. In addition, the Company performs impairment reviews on an annual basis, or more frequently if events or changes in circumstances indicate a potential impairment. Property and equipment, as well as computer software, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized equal to the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the asset’s value in use to the Company. See Note 9 for information about an impairment loss recorded in 2023 in connection with the decision to terminate the AGI-134 project, as well as an impairment loss recorded in 2024 in connection with the remaining rights to motixafortide in solid tumor indications.
F - 13
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
(cont.)
| g. |
Warrants
|
Receipts in respect of warrants are classified as equity to the extent that they confer the right to purchase a fixed number of shares for a fixed exercise price. In the event that the exercise price or the numbers of shares to be issued are not deemed to be fixed, the warrants are classified as a derivative financial liability. This liability is initially recognized at its fair value on the date the contract is entered into and subsequently accounted for at fair value at each reporting date. The fair value changes are charged to non-operating income and expense on the statement of comprehensive loss. Issuance costs allocable to warrants classified as a liability are also recorded as non-operating expense on the statement of comprehensive loss.
| h . |
Borrowings
|
Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method.
With respect to long-term loans (see Note 11), a financial liability is recognized for each tranche upon drawdown. Upon initial recognition, the effective interest rate is calculated by estimating the future cash flows, including loan principal repayments, interest and royalties, if any. The royalty feature does not meet the definition of a derivative, is not classified separately, and is not measured separately, since it is an integral part of the loan terms and conditions and cannot be transferred or settled separately from the loan.
Determining the weighted effective interest rate requires certain judgments and estimations regarding the timing and amount of the Company’s future revenues. The loans are subsequently measured at amortized cost. Furthermore, revisions to the estimated amounts or timing of future cash flows, if necessary, may result in an adjustment of the amortized cost of the loan to reflect the present value of actual and revised estimated contractual cash flows, discounted using the original effective interest rate. This adjustment will be recognized in profit or loss as financial income or expense.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months subsequent to the reporting period.
F - 14
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
(cont.)
| i. |
Revenues
|
The Company accounts for contract revenue in accordance with IFRS 15, “Revenue from Contracts with Customers.”
IFRS 15 introduces a five-step model for recognizing revenue from contracts with customers, as follows:
| • |
identify the contract with a customer;
|
| • |
identify the performance obligations in the contract;
|
| • |
determine the transaction price;
|
| • |
allocate the transaction price to the performance obligations in the contract; and
|
| • |
recognize revenue when (or as) the entity satisfies a performance obligation.
|
Revenues from selling products
In September 2023, the FDA approved motixafortide in stem cell mobilization for autologous transplantation for multiple myeloma patients, and shortly thereafter, the Company began to independently commercialize motixafortide in the U.S. These activities terminated in November 2024, as a result of the out-licensing transaction entered into with Ayrmid Ltd. (see Note 17) and the shutdown of the Company’s U.S. commercial operations. The information below relates to the period during which the Company carried out direct sales activities.
The Company sells products mainly to wholesale distributors. Gross revenues are recognized at a point in time when control over the product is transferred to the distributors (upon delivery), at the gross selling price. The net revenues reflect gross revenues, reduced by amounts attributable to distributor fees, as well as accruals of chargebacks, rebates and returns.
The specific considerations the Company uses in estimating these amounts relating to variable consideration are as follows:
| 1. |
Distribution fees - The Company pays distribution fees to its three main distributors. The distribution fees are paid based on contractually determined rates from the gross consideration. When the service is received and the products sold to distributors, it is recognized as a reduction of revenues in the period the related revenues from the sale of products are recognized.
|
| 2. |
Rebates and patient discount programs - The Company offers various rebate and patient discount programs, which result in discounted prescriptions to qualified patients. The Company estimates the allowance for these rebates, based on the estimated utilization of the rebate and discount programs, at the time the revenues are recognized. These estimates are recognized as a reduction of revenues.
|
| 3. |
Product returns - The Company offers customers a right of return as part of the distributor agreements. The Company estimates the amount of product sales that may be returned by its customers and records this estimate as a reduction of revenues at the time of sale, based on estimates of product returns based on its own sales information, its visibility into the inventory remaining in the distribution channel, and product dating.
|
F - 15
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.)
| i. |
Revenues (cont.)
|
|
Revenues from
licensing agreement
According to IFRS 15, performance obligations are a promise to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service, either on its own or together with other resources that are readily available to the customer, and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
IFRS 15 defines the ‘Transaction Price’ as the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to a customer.
In accordance with IFRS 15, the Company identified a number of performance obligations (components) in the contract – in respect of which revenue will be recognized separately for each component.
The following assumptions were taken into account, as part of the revenue recognition process:
| 1) |
Development milestones: Variable payments, contingent on achieving additional milestones, are included in the transaction price based on the most likely amount method. Amounts included in the transaction price are recognized only when it is highly probable that a
material
reversal of cumulative revenues will not occur, usually upon achievement of the specific milestone, in accordance with the relevant agreement.
|
| 2) |
Sales-based royalties and sales-based milestones are recognized as the related sale occurs, due to the specific exception of IFRS 15 for sales-based royalties from licensing of intellectual properties.
|
For more information, see Notes 16 and 17.
| j. |
Research and development expenses
|
Research expenses are charged to profit or loss as incurred. As of December 31, 2024, the Company has not yet capitalized development expenses.
F - 16
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
(cont.)
| k. |
Share-based payments
|
The Company operates an equity-settled, share-based compensation plan, under which it grants equity instruments (options, restricted stock units and performance stock units) of the Company as additional consideration for services from employees and service providers. The fair value of the employee services received in exchange for the grant of the equity instruments is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the equity instruments granted including any market performance conditions (for example, the Company’s share price).
Non-market performance and service conditions are included in assumptions about the number of equity instruments that are expected to vest. Performance stock unit expenses are recognized only if it is probable that the performance condition will be achieved.
| l. |
Loss per share
|
| 1) |
Basic
|
The basic loss per share is calculated by dividing the loss attributable to the holders of ordinary shares by the weighted average number of ordinary shares, including pre-funded warrants, outstanding during the year.
| 2) |
Diluted
|
The diluted loss per share is calculated by adjusting the weighted average number of outstanding ordinary shares, assuming conversion of all dilutive potential shares. The Company’s dilutive potential shares consist of warrants issued to investors, as well as equity instruments granted to employees and service providers. The dilutive potential shares were not taken into account in computing loss per share in 2022, 2023 and 2024, as their effect would have been anti-dilutive.
The calculation of diluted loss per share for the years ended December 31, 2022, 2023 and 2024 does not include
347,113,402
,
585,109,579
and
566,924,859
of shares underlying options and warrants, respectively, because the effect would be anti-dilutive.
F - 17
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES (cont.)
| m. |
Leases |
The Company’s leases include property and motor vehicle leases.
At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. Simultaneously, the Company recognizes a right-of-use asset in the amount of the lease liability.
Since the interest rate implicit in the lease cannot be readily determined, the Company uses the Company’s incremental borrowing rate.
The lease term is the non-cancellable period for which the Company has the right to use an underlying asset, together with both the periods covered by an option to extend the lease, if the Company is reasonably certain to exercise that option, and periods covered by an option to terminate the lease, if the Company is reasonably certain not to exercise that option.
After the commencement date, the Company measures the right-of-use asset applying the cost model, less any accumulated depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease liability.
Assets are depreciated by the straight-line method over the estimated useful lives of the right of use assets or the lease period, whichever is shorter, as follows:
|
Years
|
|
|
Property
|
|
|
Motor vehicles
|
|
F - 18
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 – MATERIAL ACCOUNTING POLICIES
(cont.)
| n. |
New International Financial Reporting Standards, amendments to standards and new
interpretations:
|
New standards and interpretations adopted
Classification of Liabilities as Current or Non-Current (Amendment to IAS 1)
The narrow-scope amendments to IAS 1, “Presentation of Financial Statements,” clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the entity’s expectations or events after the reporting date (e.g., the receipt of a waiver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The amendments may affect the classification of liabilities, particularly for entities that previously considered management’s intentions to determine classification and for some liabilities that can be converted into equity, and must be applied retrospectively in accordance with the normal requirements in IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors.” In this regard, the amendment was applied retrospectively in these financial statements as of January 1, 2024 and, accordingly, effective with these financial statements, the Company’s warrant liabilities were classified in current liabilities.
New standards and interpretations not yet adopted
IFRS 18, Presentation and Disclosure in the Financial Statements
This standard replaces the international accounting standard IAS 1, ”Presentation of Financial Statements.” As part of the new disclosure requirements, companies will be required to present new defined subtotals in the statements of income, as follows: (1) operating profit and (2) profit before financing and tax. In addition, income statement items will be classified into three defined categories: operating, investment and financing. The standard also includes a requirement to provide separate disclosure in the financial statements regarding the use of management-defined performance measures (“non-GAAP measures”), and specific instructions were added for the grouping and splitting of items in the financial statements and in the notes to the financial statements. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027, with an option for early adoption. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statement disclosures.
F - 19
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
Based on assessments by Company management, the Company’s exposure to credit risk as of December 31, 2024, is immaterial (see Note 3b). The activities of the Company expose it to market risk, primarily as a result of currency risk.
The Company’s Finance Department is responsible for carrying out risk management activities in accordance with policies approved by its Board of Directors. In this regard, the Finance Department identifies, defines and assesses financial risk in close cooperation with other Company departments. The Board of Directors provides written guidelines for overall risk management, as well as written policies dealing with specific areas, such as exchange rate risk, interest rate risk, credit risk, use of financial instruments and investment of excess cash.
| a. |
Market risk
|
| 1) |
Concentration of currency risk
|
The Company’s activities are partly denominated in non-dollar currencies (primarily the New Israeli Shekel, or “NIS,” and the Euro), which exposes the Company to risks resulting from changes in exchange rates.
The effect of fluctuations in various exchange rates on the Company’s income and equity is as follows:
|
December 31, 2024
|
||||||||||||||||||||
|
Income (loss)
|
Value on
|
Income (loss)
|
||||||||||||||||||
|
Sensitive instrument
|
10% increase
|
5% increase
|
balance sheet
|
5% decrease
|
10% decrease
|
|||||||||||||||
|
in USD thousands
|
||||||||||||||||||||
|
NIS-linked balances:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
|
Other receivables
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
|
Trade payables
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Other payables
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Total NIS-linked balances
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Euro-linked trade payables
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
||||||||||||
|
Total
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
December 31, 2023
|
||||||||||||||||||||
|
Income (loss)
|
Value on
|
Income (loss)
|
||||||||||||||||||
|
Sensitive instrument
|
10% increase
|
5% increase
|
balance sheet
|
5% decrease
|
10% decrease
|
|||||||||||||||
|
in USD thousands
|
||||||||||||||||||||
|
NIS-linked balances:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
|
Short term deposit
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
|
Other receivables
|
(
|
)
|
(
|
)
|
|
|
|
|||||||||||||
|
Trade payables
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Other payables
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Total NIS-linked balances
|
(
|
)
|
|
|
|
|
||||||||||||||
|
Euro-linked trade payables
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
||||||||||||
|
Total
|
(
|
)
|
(
|
)
|
(
|
)
|
|
|
||||||||||||
The Company also maintains cash and cash equivalent balances in other currencies in amounts that are not material.
F - 20
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(cont.)
| a. |
Market risk
(cont.)
|
| 1) |
Concentration of currency risk (cont.)
|
|
Set forth below is information on the linkage of monetary items:
|
December 31, 2023
|
December 31, 2024
|
|||||||||||||||||||||||
|
Dollar
|
NIS
|
Other currencies
|
Dollar
|
NIS
|
Other Currencies
|
|||||||||||||||||||
|
USD in thousands
|
USD in thousands
|
|||||||||||||||||||||||
|
Assets:
|
||||||||||||||||||||||||
|
Current assets:
|
||||||||||||||||||||||||
|
Cash and cash equivalents
|
|
|
|
|
|
|
||||||||||||||||||
|
Short-term bank deposits
|
|
|
|
|
|
|
||||||||||||||||||
|
Other receivables
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
|
Liabilities:
|
||||||||||||||||||||||||
|
Current liabilities:
|
||||||||||||||||||||||||
|
Current maturities of long-term loan
|
|
|
|
|
|
|
||||||||||||||||||
|
Accounts payable and accruals:
|
||||||||||||||||||||||||
|
Trade
|
|
|
|
|
|
|
||||||||||||||||||
|
Other
|
|
|
|
|
|
|
||||||||||||||||||
|
Non-current liabilities
|
||||||||||||||||||||||||
|
Long-term loan, net of current maturities
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
|
Net balance
|
|
|
(
|
)
|
|
(
|
)
|
(
|
)
|
|||||||||||||||
F - 21
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(cont.)
| a. |
Market risk
(cont.)
|
|
| 2) |
Fair value of financial instruments
|
As of December 31, 2024, the financial instruments of the Company consist of non-derivative assets and liabilities (primarily working capital items, deposits, and current and long-term loans), as well as warrants classified as a liability.
With regard to non-derivative assets and liabilities, given their nature, the fair value of the financial instruments included in working capital is generally close or identical to their carrying amount.
With regard to the warrants classified as a current financial liability, see Note 12c. With regard to long-term loans, see Note 11.
| 3) |
Exposure to market risk and management thereof
|
In the opinion of Company management, the market risk to which the Company is exposed is primarily related to currency risk exposure, as mentioned above.
| 4) |
Interest rate risk
|
Company management does not consider interest rate risk to be material, as the Company holds deposits whose fair value and/or cash flows are not materially affected by changes in interest rates.
| b. |
Credit risk
|
Credit risk is managed at the Company level. These risks relate to cash and cash equivalents, bank deposits, trade receivables, and other receivables.
The Company’s cash, cash equivalents and short-term bank deposits at December 31, 2023, and 2024 were deposited with highly rated major Israeli and U.S. banks. In the Company’s opinion, the credit risk associated with these balances is remote.
The Company considers its maximum exposure to credit risk to be as follows:
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
in USD thousands
|
||||||||
|
Assets:
|
||||||||
|
Cash and cash equivalents
|
|
|
||||||
|
Short-term bank deposits
|
|
|
||||||
|
Trade receivables
|
|
|
||||||
|
Other receivables
|
|
|
||||||
|
Total
|
|
|
||||||
F - 22
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(cont.)
| c. |
Liquidity risk
|
Company management monitors rolling forecasts of the Company’s liquidity reserves on the basis of anticipated cash flows and seeks to maintain the liquidity balances at a level that is sufficient to meet its needs.
Although the Company has succeeded in generating revenues from a number of out-licensing transactions, as well as the commercialization of its lead program, motixafortide, during 2024, it cannot determine with reasonable certainty if and when it will become profitable on a current basis. Management believes that the Company’s current cash and other resources will be sufficient to fund its projected cash requirements through the second half of 2026. However, in the event that the Company does not begin to generate sustainable cash flows from its operating activities in the future, the Company will need to carry out significant cost reductions and/or raise additional funding. See also Note 1c regarding the material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.
| d. |
Fair value of financial instruments
|
The different levels of valuation of financial instruments are defined as follows:
|
Level 1
|
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
|
|
Level 2
|
Inputs, other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
|
|
Level 3
|
Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, and also considers counterparty credit risk, in its assessment of fair value. The fair value of the financial instruments included in the working capital of the Company, as well as the long-term loan, is usually identical or close to their carrying value. The fair value of the warrants is based on Level 3 measurements.
The fair value of the warrants, calculated based on the Black-Scholes model, was $
1,691,000
as of December 31, 2024.
For more information on the parameters used to value the warrants, see Note 12c.
F - 23
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
(cont.)
| e. |
Changes in financial liabilities with cash flows included in financing activities
|
|
|
Long-term loan
|
Warrants
|
Total
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Balance as of January 1, 2022
|
|
|
|
|||||||||
|
Changes during the year 2022:
|
||||||||||||
|
Net proceeds
|
|
|
|
|||||||||
|
Principal and interest payments
|
(
|
)
|
|
(
|
)
|
|||||||
|
Amounts recognized through profit and loss
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2022
|
|
|
|
|||||||||
|
Changes during the year 2023:
|
||||||||||||
|
Principal and interest payments
|
(
|
)
|
|
(
|
)
|
|||||||
|
Amounts recognized through profit and loss
|
|
|
|
|||||||||
|
Share premium resulting from exercise of warrants
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2023
|
|
|
|
|||||||||
|
Changes during the year 2024:
|
||||||||||||
|
Net proceeds
|
|
|
|
|||||||||
|
Principal and interest payments
|
(
|
)
|
|
(
|
)
|
|||||||
|
Amounts recognized through profit and loss
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2024
|
|
|
|
|||||||||
| f. |
Fair value measurement of warrants using significant unobservable inputs (level 3)
|
The following table presents the changes in level 3 instruments for the years ended December 31, 2022, 2023 and 2024:
|
Warrants
|
||||
|
in USD thousands
|
||||
|
Balance as of January 1, 2022
|
|
|||
|
Changes during 2022:
|
||||
|
Issuance
s
|
|
|||
|
Changes in fair value through profit and loss
|
(
|
)
|
||
|
Balance as of December 31, 2022
|
|
|||
|
Changes during 2023:
|
||||
|
Exercises
|
(
|
)
|
||
|
Changes in fair value through profit and loss
|
|
|||
|
Balance as of December 31, 2023
|
|
|||
|
Changes during 2024:
|
||||
|
Issuance
s
|
|
|||
|
Changes in fair value through profit and loss
|
(
|
) | ||
|
Balance as of December 31, 2024
|
|
|||
F - 24
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
As part of the financial reporting process, Company management is required to make estimates that affect the value of assets, liabilities, income, expenses and certain disclosures included in the Company’s consolidated financial statements. By their very nature, such accounting estimates are subjective and complex and consequently may differ from actual results. The estimates are continually evaluated and adjusted based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances.
Below are the critical accounting estimates used in the preparation of the financial statements that required Company management to make assumptions involving significant uncertainty.
Impairment of indefinite-lived intangible assets
As mentioned in Notes 2f and 2e, the Company performs impairment reviews of intangible assets not subject to amortization on an annual basis, or more frequently if events or changes in circumstances indicate a potential impairment.
The recoverable amount is determined using discounted cash flow calculations. The analysis estimates the future cash flows the Company expects to derive from the asset, incorporates expectations about possible variations in the amount or timing of those future cash flows, as well as the uncertainty inherent in the asset, and the risk-adjusted cash flows are then discounted using the Company’s estimated post-tax weighted average cost of capital (“WACC”). The main estimates used in calculating the recoverable amount include the WACC estimation and the amounts and timing of projected future cash flows. Such amounts and timing are influenced by the expected outcome of development activities, the probability of success and timing in gaining regulatory approval, size of the potential market and the Company’s specific market share, either via direct sales or a potential out-licensing deal.
In light of the Company’s decision to terminate AGI-134, the value of its intangible asset was written off in its entirety in 2023.
As a result of an impairment review of its remaining rights to motixafortide in solid tumor indications in the fourth quarter of 2024, the Company recorded an impairment loss (see Note 9).
Fair value estimations of warrants
As described in Notes 3d and 12c, the Company completed financing transactions in which it issued ADSs and warrants to purchase additional ADSs. The fair value of the warrants, which are not traded on an active market, is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates.
F - 25
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (cont.)
License revenue recognition
In determining the amounts to be recognized as revenue relating to the out-licensing transactions with HST and Gloria, the Company was required to use significant judgement in the following matters:
| • |
The allocation of consideration between the license agreement and the SPA, based on the fair value of the Company’s shares on the date considered as the closing date of the transaction
|
| • |
The estimated stand-alone, selling-price value between the contract components (i.e., between the main therapeutic areas covered by the contract), as well as the performance obligations relating to each of the components
|
| • |
The period of time over which revenue should be recognized for each component. The revenue recognition method is the ratio of support hours to the total hours expected to be incurred.
|
Similar judgement (with the exception of the second and third bullets above, which were not relevant) was required in determining the amounts to be recognized as revenue relating to the out-licensing transaction with Ayrmid.
Recognition and measurement of allowance for rebates, chargebacks and returns
The Company makes several key estimations related to gross-to-net (GTN) revenue, which are recognized as revenue reductions and for which unsettled amounts are accrued. The primary measures calculated include rebates, Medicaid and other governmental rebates, chargebacks, and returns.
The allowance is calculated based on common practices in the industry and the estimated utilization of rebate and chargeback programs at the time revenue is recognized. The main estimates used in recognizing and measuring this allowance relate to the volume of products sold to distributors but not yet prescribed to patients. The Company periodically evaluates its estimates against actual results and updates them accordingly as necessary.
NOTE 5 – CASH AND CASH EQUIVALENTS
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
in USD thousands
|
||||||||
|
Cash on hand and in bank
|
|
|
||||||
|
Short-term bank deposits
|
|
|
||||||
|
|
|
|||||||
The short-term bank deposits included in cash and cash equivalents bear interest at annual rates of between
0.70
% and
5.66
%.
F - 26
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 – SHORT-TERM BANK DEPOSITS
The short-term bank deposits are primarily in dollars and bear interest at annual rates of between
4.20
% and
6.63
%.
NOTE 7 – INVENTORY
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
in USD thousands
|
||||||||
|
Raw materials
|
|
|
||||||
|
Work-in-progress
|
|
|
||||||
|
Finished goods
|
|
|
||||||
|
|
|
|||||||
F - 27
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 – PROPERTY AND EQUIPMENT
Set forth below are the composition of property and equipment and the related accumulated depreciation, grouped by major classifications:
|
Cost
|
Accumulated depreciation
|
|||||||||||||||||||||||||||||||||||||||
|
Balance at
|
Additions
|
Deletions
|
Balance at
|
Balance at
|
Additions
|
Deletions
|
Balance at
|
Net book value
|
||||||||||||||||||||||||||||||||
|
beginning
|
during
|
during
|
end of
|
beginning
|
during
|
during
|
end of
|
December 31,
|
||||||||||||||||||||||||||||||||
|
of year
|
year
|
year
|
year
|
of year
|
year
|
year
|
year
|
2023
|
2024
|
|||||||||||||||||||||||||||||||
|
in USD thousands
|
in USD thousands
|
in USD thousands
|
||||||||||||||||||||||||||||||||||||||
|
Composition in 2024
|
||||||||||||||||||||||||||||||||||||||||
|
Office furniture and equipment
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Computers and communications equipment
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Laboratory equipment
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Leasehold improvements
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
F - 28
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – INTANGIBLE ASSETS
Intellectual property included the following intangible assets acquired by the Company:
| - |
$
|
| - |
$
|
Set forth below are the composition of intangible assets and the related accumulated depreciation, grouped by major classifications:
|
Cost
|
Accumulated depreciation and impairment
|
|||||||||||||||||||||||||||||||||||||||||||||||
|
Balance at
|
Additions
|
Deletions
|
Disposal
|
Balance at
|
Balance at
|
Additions
|
Deletions
|
Impairment
|
Balance at
|
Net book value
|
||||||||||||||||||||||||||||||||||||||
|
beginning
|
during
|
during
|
during
|
end of
|
beginning
|
during
|
during
|
during
|
end of
|
December 31,
|
||||||||||||||||||||||||||||||||||||||
|
of year
|
year
|
year
|
year
|
year
|
of year
|
year
|
year
|
year
|
year
|
2023
|
2024
|
|||||||||||||||||||||||||||||||||||||
|
in USD thousands
|
in USD thousands
|
in USD thousands
|
||||||||||||||||||||||||||||||||||||||||||||||
|
Composition in 2023
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Intellectual property
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Computer software
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
|
Composition in 2024
|
||||||||||||||||||||||||||||||||||||||||||||||||
|
Intellectual property
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
Computer software
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||
F - 29
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – LEASES
| A. |
Right-of-use assets
|
|
Cost
|
Accumulated depreciation
|
|||||||||||||||||||||||||||||||||||||||
|
Balance at
|
Additions
|
Deletions
|
Balance at
|
Balance at
|
Additions
|
Deletions
|
Balance at
|
Net book value
|
||||||||||||||||||||||||||||||||
|
beginning
|
during
|
during
|
end of
|
beginning
|
during
|
during
|
end of
|
December 31,
|
||||||||||||||||||||||||||||||||
|
of year
|
year
|
year
|
year
|
of year
|
year
|
year
|
year
|
2023
|
2024
|
|||||||||||||||||||||||||||||||
|
in USD thousands
|
in USD thousands
|
in USD thousands
|
||||||||||||||||||||||||||||||||||||||
|
Composition in 2024
|
||||||||||||||||||||||||||||||||||||||||
|
Property
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
Motor vehicles
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
| B. |
Lease liabilities
|
|
Balance at
|
Additions
|
Deletions
|
Interest expense
|
Exchange differences
|
Payments
|
Balance at
|
||||||||||||||||||||||
|
beginning
|
during
|
during
|
during
|
during
|
during
|
end of
|
||||||||||||||||||||||
|
of year
|
year
|
year
|
year
|
year
|
year
|
year
|
||||||||||||||||||||||
|
in USD thousands
|
||||||||||||||||||||||||||||
|
Composition in 2024
|
||||||||||||||||||||||||||||
|
Property
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||
|
Motor vehicles
|
|
|
|
|
(
|
)
|
|
|
||||||||||||||||||||
|
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||||||
F - 30
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 – LEASES
(cont.)
| C. |
Additional disclosures
|
| 1) |
The Company leases
|
| a. |
The Company leases its premises in Israel under a lease agreement entered into in August 2014. Payments under the lease commenced in June 2015, and the initial term of the lease expired in June 2020. The lease agreement included
|
In addition to the monthly lease payments, the Company also pays building monthly maintenance charges of approximately $
9,000
.
| b. |
The Company leases its premises in Boston under a lease agreement entered into and commencing in October 2022. The lease term will expire in December 2025. The monthly lease fee is approximately $
|
| 2) |
The Company has entered into lease agreements in connection with a number of vehicles. The lease periods are generally for
|
| 3) |
As of December 31, 2024, minimum future rental payments (taking into consideration the aforementioned extension periods) under the leases are as follows:
|
|
Year
|
Property
|
Motor vehicles
|
Total
|
||||||||||
|
in USD thousands
|
|||||||||||||
|
2025
|
|
|
|
||||||||||
|
2026
|
|
|
|
||||||||||
|
2027
|
|
|
|
||||||||||
|
2028-2030
|
|
|
|
||||||||||
|
|
|
|
|||||||||||
Extension and termination options are included in most of the property leases. These are used to maximize operational flexibility in terms of managing the assets used in the Company’s operations. The substantial majority of extension and termination options are exercisable solely by the Company and not by the lessors.
F - 31
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – LONG-TERM LOAN
In September 2022, the Company entered into a loan agreement with BlackRock EMEA Venture and Growth Lending (previously Kreos Capital VII Aggregator SCSP) (“BlackRock”), with an aggregate principal amount of up to $
40
million comprised of three tranches of up to $
10
million, $
20
million and $
10
million. The Company drew down the initial tranche of $
10
million following execution of the loan agreement in September 2022 and it drew down the second tranche of $
20
million in April 2024, following fulfilment of the requisite milestones. The third tranche was available for drawdown until October 1, 2024, upon the achievement of certain milestones. No drawdown was made by the indicated date, and thus, availably of the third tranche under the facility was cancelled.
Each tranche of the loan carried a pre-defined interest-only payment period, followed by a loan principal amortization period of up to 36 months subsequent to the interest-only period. The interest-only periods were subject to possible extension based on certain pre-defined milestones. Borrowings under the financing bear interest at a fixed annual rate of
9.5
% (~
11.0
%, including associated cash fees). As security for the loan, BlackRock received a first-priority secured interest in all Company assets, including intellectual property, and the Company undertook to maintain a $
10
million minimum cash balance. In addition, BlackRock was entitled to mid-to-high single-digit revenue-based payments on motixafortide sales in the U.S., up to a pre-defined cap.
In November 2024, in connection with the Ayrmid License Agreement, the Company entered into an amendment to the loan Agreement with BlackRock. Pursuant to the amendment: (i) the Company made a payment of $
16.5
million as partial repayment of the loan to BlackRock and in lieu of future revenue-based payments, which were fully cancelled, (ii) effective December 1, 2024, the Company began to pay the remaining amounts outstanding under the loan (in principal and interest) over a three-year period ending December 1, 2027, and (iii) the Company’s minimum cash balance requirement under the Loan Agreement was reduced to $4 million. In addition, pursuant to the amendment, 10% of any future milestone payments received by the Company from its out-licensing agreements through December 1, 2027 will be used to repay outstanding loan principal, and the repayments in (ii) above will be adjusted accordingly. All other terms of the Loan Agreement remain the same.
The above amendment met the criteria in IFRS 9 regarding a substantial modification of the terms of a financial liability. In accordance with this paragraph, such modification is to be accounted for as the extinguishment of the original financial liability and the recognition of a new financial liability, with the difference between the carrying amount of the derecognized financial liability, versus any consideration paid plus any new liability undertaken, recorded as interest expense or income in the statement of comprehensive loss. Accordingly, the above amendment resulted in approximately $4.0 million of interest expense in the fourth quarter of 2024.
F - 32
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
| a. |
Share capital
|
The Company’s share capital is composed of ordinary shares, as follows:
|
Number of Ordinary Shares
|
||||||||
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
Authorized share capital
|
|
|
||||||
|
Issued and paid-up share capital
|
|
|
||||||
|
In USD and NIS Amounts
|
||||||||
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
Authorized share capital (in NIS)
|
|
|
||||||
|
Issued and paid-up share capital (in NIS)
|
|
|
||||||
|
Issued and paid-up share capital (in USD)
|
|
|
||||||
| b. |
Rights related to shares
|
The ordinary shares confer upon their holders voting and dividend rights and the right to receive assets of the Company upon its liquidation. As of December 31, 2023 and 2024, all outstanding share capital consisted of ordinary shares.
F - 33
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| c. |
Changes in the Company’s equity
|
| 1) |
In September 2022, the Company completed a registered direct offering of
The warrants issued to the investors have been classified
as a financial liability due to a net settlement provision
.
This liability was initially recognized at its fair value on the issuance date and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.
The fair value of the warrants is computed using the Black-Scholes option pricing model. The fair value of the warrants upon issuance was computed based on the then-current price of an ADS, a risk-free interest rate of
The fair value of the warrants amounted to $
The changes in fair value for the years ended December 31, 2023 and 2024 of ($
As of December 31, 2024,
The
placement agent
warrants have been classified in shareholders’ equity, with initial recognition at fair value on the date issued, using the same assumptions as the investor warrants.
|
| 2) |
In August 2023, the Company entered into a securities purchase agreement, pursuant to which the Company agreed to sell in a private placement an aggregate of
|
|
F - 34
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| c. |
Changes in the Company’s equity
(cont.)
|
|
| 3) |
In April 2024, the Company completed a registered direct offering of
The warrants have been classified as a financial liability due to a net settlement provision. This liability was initially recognized at its fair value on the issuance date and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.
The fair value of the warrants is computed using the Black-Scholes option pricing model and is determined by using a level 3 valuation technique. The fair value of the warrants upon issuance was computed based on the then-current price of an ADS, a risk-free interest rate of
Due to a difference between the fair value at initial recognition and the transaction price (“day 1 loss”), upon initial recognition, the fair value of the warrants was adjusted by the amount of $250,000, to reflect the unrecognized day 1 loss. Following initial recognition, the unrecognized day 1 loss of the warrants is being amortized over its contractual life.
The fair value of the warrants amounted to $
As of December 31, 2024, none of these warrants had been exercised.
|
|
F - 35
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| c. |
Changes in the Company’s equity
(cont.)
|
| 4) |
In November 2024, the Company completed a registered direct offering to certain funds associated with Highbridge Capital Management LLC (“Highbridge”) of
The pre-funded warrants are exercisable immediately, do not expire until exercised in full, and have an exercise price of $
A holder of the pre-funded or ordinary warrants cannot exercise such warrants if the holder, together with its affiliates, would beneficially own in excess of
The ordinary warrants have been classified
as a financial liability due to a net settlement provision
.
This liability was initially recognized at its fair value on the issuance date and is subsequently accounted for at fair value at each balance sheet date. The fair value changes are charged to non-operating income and expense in the statement of comprehensive loss.
The pre-funded warrants have been classified in shareholders’ equity, with initial recognition at fair value on the date issued, using the same assumptions as the ordinary warrants.
The fair value of the ordinary warrants is computed using the Black-Scholes option pricing model. The fair value of the ordinary warrants upon issuance was computed based on the then-current price of an ADS, a risk-free interest rate of
The fair value of the ordinary warrants amounted to $
The changes in fair value for the years ended December 31, 2024 of $
As of December 31, 2024,
|
F - 36
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| d. |
Share purchase agreement
|
In September 2021, the Company entered into an ATM sales agreement with H.C. Wainwright Co., LLC (“HCW”), pursuant to which the Company is entitled, at its sole discretion, to offer and sell through HCW, acting as sales agent, ADSs having an aggregate offering price of up to $
25.0
million throughout the period during which the ATM facility remains in effect. The Company agreed to pay HCW a commission of
3.0
% of the gross proceeds from the sale of ADSs under the facility.
During 2024, no ADSs were sold under the facility. From the effective date of the agreement through the issuance date of this report,
194,656
ADSs have been sold under the facility for total gross proceeds of approximately $
6.0
million and total fees of approximately $
0.2
million.
| e. |
Share-based payments
|
| 1) |
Share Incentive plan – general
|
In 2003, the Company adopted the 2003 Share Incentive Plan (the “Plan”). The Plan provides for the granting of stock options and ordinary shares to the Company’s employees, directors, consultants and other service providers. Options are issued at the determination of the Board of Directors in accordance with applicable law. The options are generally exercisable for a ten-year period and the grants generally vest over a four-year period. In 2013, the Company’s Board of Directors approved amendments to the Plan to take into account changes in laws and regulations that had occurred since its adoption and to extend the term of the plan until November 2023. In 2016, the Board of Directors approved amendments to the Plan to allow for the grant of restricted stock units (“RSUs”) and performance stock units (“PSUs”). In 2022, the Board approved certain amendments to the Plan in order to conform the Plan to U.S. tax regulations for the benefit BioLineRx USA, Inc. employees. In November 2023, the Company’s Board of Directors approved extension of the Plan through May 2024, and subsequently further approved extension of the Plan through May 2044.
PSUs are RSUs that are linked to any one or more performance goals (in addition to, or in lieu of, time-based vesting terms) determined appropriate by the Board of Directors. The specific performance goals, as well as the time period associated with achieving such goals, are approved by the Board and are set forth in the grantee’s grant agreement. To date, each PSU grant has had between three to five performance goals on which vesting is based, each such goal being either a specified Company milestone and or the success of a specific project, with vesting of 20-40% on the achievement of each goal. The tranche of PSUs associated with a given milestone expires 12 months after the target date established for that milestone. As of December 31, 2024,
10,371,510
PSUs were vested in accordance with their original terms.
F - 37
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| e. |
Share-based payments
(cont.)
|
|
| 1) |
Share Incentive plan – general (cont.)
|
As of December 31, 2024, there were
142,559,280
ordinary shares issuable upon the exercise of outstanding equity instruments under the Plan.
Company employees and directors in Israel are granted options under Section 102 of the Israeli Income Tax Ordinance (the “Ordinance”), primarily under the “capital gains” track. Israeli non-employees of the Company (consultants and other service providers) are granted options under Section 3(i) of the Ordinance. All non-Israeli employees and non-employees of the Company are granted options as non-qualifies.
As of December 31, 2024, there were
53.1
million remaining authorized but unissued ordinary shares in the pool reserved for future share-based incentive grants.
| 2) |
Employee share incentive plan:
|
The following table contains additional information concerning equity instruments granted to employees and directors under the existing share incentive plans.
|
Year ended December 31,
|
||||||||||||||||||||||||
|
2022
|
2023
|
2024
|
||||||||||||||||||||||
|
Number
of options
|
Weighted average exercise price
(in NIS)
|
Number
of options
|
Weighted average exercise price
(in NIS)
|
Number
of options
|
Weighted average exercise price
(in NIS)
|
|||||||||||||||||||
|
Outstanding at beginning of year
|
|
|
|
|
|
|
||||||||||||||||||
|
Granted
|
|
|
|
|
|
|
||||||||||||||||||
|
Expired
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||
|
Forfeited
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||
|
Exercised
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||
|
Outstanding at end of year*
|
|
|
|
|
|
|
||||||||||||||||||
|
Exercisable at end of year
|
|
|
|
|
|
|
||||||||||||||||||
| * |
As of December 31, 2022, 2023 and 2024, includes
|
F - 38
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| e. |
Share-based payments
(cont.)
|
|
| 2) |
Employee share incentive plan (cont.):
|
The total consideration received from the exercise of equity instruments during 2022, 2023 and 2024 was not material.
Set forth below is data regarding the range of exercise prices and weighted-average remaining contractual life (in years) for the equity instruments outstanding at the end of each of the years indicated.
|
As of December 31,
|
|||||||||||||||||
|
2023
|
2024
|
||||||||||||||||
|
Range of
exercise
prices
(in NIS)
|
Number
of options
outstanding
|
Weighted
average
remaining
contractual
life (in yrs.)
|
Number
of options
outstanding
|
Weighted
average
remaining
contractual
life (in yrs.)
|
|||||||||||||
|
Up to 0.49
|
|
|
|
|
|||||||||||||
|
0.5-0.99
|
|
|
|
|
|||||||||||||
|
1.00-2.00
|
|
|
|
|
|||||||||||||
|
2.01-3.4
|
|
|
|
|
|||||||||||||
|
|
|
|
|
||||||||||||||
The fair value of equity instruments granted to employees through December 31, 2024 has been determined using the Black-Scholes option-pricing model. These values are based on the following assumptions as of the applicable grant dates:
|
2022
|
2023
|
2024
|
||||||||||
|
Expected dividend yield
|
|
%
|
|
%
|
|
%
|
||||||
|
Expected volatility
|
|
%
|
|
%
|
|
%
|
||||||
|
Risk-free interest rate
|
|
%
|
|
%
|
|
%
|
||||||
|
Expected life of options (in years)
|
|
|
|
|||||||||
The remaining unrecognized deferred compensation expense as of December 31, 2024 was $
0.85
million. This amount will be expensed over the remaining vesting period of the equity instruments.
F - 39
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 – EQUITY
(cont.)
| e. |
Share-based payments
(cont.)
|
| 3) |
Stock options to consultants
|
From inception through December 31, 2022, the Company issued to consultants options for the purchase of
3,495,270
ordinary shares at a weighted average exercise price of NIS
1.81
per share.
In 2023 and 2024 the Company did not issue additional options to consultants.
Company management estimates the fair value of the options granted to consultants based on the value of services received over the vesting period of the applicable options. The value of such services (primarily in respect of clinical advisory services) is estimated based on the additional cash compensation the Company would need to pay if such options were not granted. The value of services recorded in each of the years 2022, 2023 and 2024 was not material.
NOTE 13 – TAXES ON INCOME
| a. |
Corporate taxation
|
The taxable income of BioLineRx Ltd. is taxed at the standard Israeli corporate tax rate, which was
23
% for all years included in these financial statements. The taxable income of BioLineRx USA, Inc. is subject to a federal tax rate of
21
%.
| b. |
Tax loss carryforwards
|
As of December 31, 2024, the tax loss carryforwards of BioLineRx Ltd. were approximately $
343
million. The tax loss carryforwards have no expiration date.
| c. |
Tax assessments
|
In accordance with Israeli tax regulations, the tax returns filed by BioLineRx Ltd. through the 2020 tax year are considered final.
F - 40
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 – TAXES ON INCOME
(cont.)
| d. |
Theoretical taxes
|
The Company has not recognized any deferred tax assets in the financial statements, as it does not expect to generate taxable income in the foreseeable future. The reported tax on the Company’s income before taxes differs from the theoretical amount that would arise using the weighted average tax rate applicable to income of the consolidated entities as follows:
|
Year ended December 31,
|
||||||||||||||||||||||||
|
2022
|
2023
|
2024
|
||||||||||||||||||||||
|
in USD
|
in USD
|
in USD
|
||||||||||||||||||||||
|
thousands
|
thousands
|
thousands
|
||||||||||||||||||||||
|
Loss before taxes
|
|
%
|
(
|
)
|
|
%
|
(
|
)
|
|
%
|
(
|
)
|
||||||||||||
|
Theoretical tax benefit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||||||||
|
Disallowed deductions (tax exempt income):
|
||||||||||||||||||||||||
|
Loss (gain) on adjustment of warrants to fair value
|
(
|
) |
|
(
|
)
|
|||||||||||||||||||
|
Share-based compensation
|
|
|
|
|||||||||||||||||||||
|
Impairment of intangible asset
|
|
|
|
|||||||||||||||||||||
|
Other
|
|
|
|
|||||||||||||||||||||
|
Increase in taxes for tax losses and timing differences incurred in the reporting year for which deferred taxes were not created
|
|
|
|
|||||||||||||||||||||
|
Taxes on income for the reported year
|
|
|
|
|||||||||||||||||||||
NOTE 14 – LOSS PER SHARE
The following table contains the data used in the computation of the basic loss per share:
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Loss attributed to ordinary shares
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
in thousands
|
||||||||||||
|
Number of shares used in basic calculation
|
|
|
|
|||||||||
|
in USD
|
||||||||||||
|
Basic and diluted loss per ordinary share
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
In 2024, the number of shares used in the basic calculation includes
7,348,587
pre-funded warrants.
Outstanding options and ordinary warrants have been excluded from the calculation of the diluted loss per share for all years presented, since their effect was anti-dilutive.
F - 41
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES
| a. |
Commitments
|
| 1) |
Obligation to pay royalties to the State of Israel
|
Royalties may be payable to the State of Israel (represented by the Israel Innovation Authority, or IIA), on proceeds from the sale or license of products whose development was supported by grants from
the IIA. Such royalties are generally
3
% in the first three years from initial repayment,
4
% of sales in the three subsequent years and
5
% of sales in the seventh year until repayment of
100
% of the grants (linked to the dollar) received, plus annual interest at the 12-month SOFR rate as published on the first trading day of each calendar year. Under certain circumstances, the royalty rate is calculated according to a formula based on the ratio of participation by the IIA in the project to the project’s total accumulated costs.
Other than motixafortide (see next paragraph), the Company does not have any royalty obligation in respect of products supported by the IIA.
In connection with the in-licensing of motixafortide from Biokine Therapeutics Ltd. (“Biokine”), and as a condition to IIA consent to the transaction, the Company agreed to abide by any obligations resulting from funds previously received by Biokine from the IIA. The contingent liability to the IIA assumed by the Company relating to this transaction amounts to $
2.7
million as of December 31, 2024. In this regard, and in connection with the outlicensing transactions with Gloria (see Note 16) and with Ayrmid (see Note 17), as well as with the direct sales of motixafortide in the U.S. during the period from product launch through the transaction with Ayrmid, the royalty rate agreed with the IIA for motixafortide consideration received is 3.9% for sub-license consideration and 4% for direct product sales. The Company has a full right of offset for amounts payable to the IIA from all payments due to Biokine in the future.
| 2) |
Licensing agreements
|
In connection with the development of therapeutic compounds, the Company may enter into in-licensing agreements with academic institutions, research institutions and companies (the “licensors”). Pursuant to these licensing agreements, the Company generally obtains the rights for one or more therapeutic compounds in pre-clinical and early clinical stages of development, in order to continue development of the compounds through more advanced stages of development and, subsequently, to manufacture, distribute and market the drugs or to out-license the development, manufacturing and commercialization rights to third parties.
F - 42
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES
(cont.)
| a. |
Commitments
(cont.)
|
| 2) |
Licensing agreements (cont.)
|
|
The licenses that have been granted to the Company are broad and comprehensive, and generally include various provisions and usage rights as follows: (i) territorial scope of the license (global); (ii) term of the license (unrestricted but not shorter than the life of the patent); and (iii) development of the therapeutic compound (allowing the Company to perform all development activities on its own, or by outsourcing under Company supervision, as well as out-licensing development under the license to other companies, subject to the provisions of the licensing agreements).
According to the provisions of the licensing agreements, the intellectual property rights in the development of any licensed technology, through the date the applicable license agreement is effective, remain with the licensor, while the rights in products and/or other deliverables developed by the Company after the license is granted belong to the Company. In cases where the licensor has a claim to an invention that was jointly developed with the Company, the licensor also co-owns the related intellectual property. In any event, the scope of the license also covers these intellectual property rights.
In addition, the Company generally undertakes in the licensing agreements to protect registered patents resulting from developments under the various licenses, to promote the registration of patents covering new developments in cooperation with the licensor, and to bear responsibility for all related costs. Pursuant to the various agreements, the Company generally works to register the various patents on a broad basis worldwide, and if the Company decides not to initiate or continue a patent registration proceeding in a given country, the Company is required to notify the applicable licensor to this effect and the licensor is entitled to take action for registration of the patent in such country.
The consideration paid pursuant to the licensing agreements generally includes several components that may be payable over the license period and that relate, inter alia, to the progress made in research and development activities, as well as commercial success, as follows: (a) a one-time, up-front payment and/or periodic payments; (b) payments through the early stages of development (i.e., through the end of phase 2); (c) payments upon the achievement of milestones necessary for advancing to phase 3; (d) payments from the end of a successful phase 3 trial through approval of the therapeutic compound; and e) royalties on sales of the final product resulting from development under the license or including any component thereof, generally less than
5
% of the Company’s net sales of the product, although in specific instances (for example, with regard to motixafortide, where the royalty rate on net sales directly commercialized by the Company payable to Biokine is 10%) the royalty rate has been higher or lower than this range. In instances where the Company has out-licensed the product for further development, the Company pays a percentage of the net consideration received from the licensee (“Sublicense Receipts”) to the upstream licensor that generally range from
20
% to
29.5
% of such consideration, although in specific instances the percentage paid has been higher or lower than this range. These Sublicense Receipts generally take the place of most or all of the milestone and royalty payments set forth in (b) through (e) above.
F - 43
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES
(cont.)
| a. |
Commitments
(cont.)
|
| 2) |
Licensing agreements (cont.)
|
|
The license agreements may be cancelled by the licensor only in specific circumstances, generally upon the occurrence of one of the following events: (a) the Company’s failure to meet certain milestones stipulated in the applicable license agreement and appended timetables; (b) default, insolvency, receivership, liquidation, etc., of the Company that is not imposed and/or lifted within the timeframe stipulated in the license agreement; and (c) fundamental breach of the license agreement that is not corrected within the stipulated timeframe. The Company may generally cancel a license agreement with prior notice of 30 to 90 days, due to unsuccessful development or any other cause.
Some of the license agreements have been accompanied by consulting, support and cooperation agreements, pursuant to which the Company may be committed to pay the various licensers a fixed monthly amount over the period stipulated in the agreement for their assistance in the continued research and development under the license.
| 3) |
Commitments in respect of Biokine
|
In accordance with the license agreement of motixafortide with Biokine (as amended), the Company is required to pay Biokine a payment of
20
% of amounts received as consideration in connection with any sublicensing or sale of the licensed technology. Biokine is also eligible to receive up to a total of $
2.5
million in future milestone payments. Subject to certain limitations, if the Company independently sells products related to motixafortide, the Company will pay Biokine a royalty payment of
10
% of net sales.
| 4) |
Purchase orders
|
The Company’s outstanding open purchase order commitments as of December 31, 2024 amounted to $
2.0
million.
F - 44
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES
(cont.)
| b. |
Guarantees
|
To secure the Company’s lease obligation on its Israeli premises, the Company has provided a bank guarantee in the amount of $
100,000
for the benefit of the lessor, which remains outstanding as of December 31, 2024.
| c. |
Contingent liabilities
|
In January 2023, a putative securities class action complaint was filed in the U.S. against the Company and its Chief Executive Officer. The complaint claimed that the Company made false and materially misleading statements and failed to disclose material adverse facts pertaining to its financial position with regard to the development of motixafortide and that the Company would require a loan and a securities offering to commercialize motixafortide. In September 2023, the Company, its Chief Executive Officer and its Chief Financial Officer filed a motion to dismiss the amended complaint in its entirety and in July 2024 the court granted the order to dismiss without prejudice. In addition, in February 2023, a substantially similar lawsuit and motion to approve the lawsuit as a class action was filed against the Company and its Chief Executive Officer in the Tel Aviv District Court. Following dismissal of the claim in the U.S., the claim in the Tel Aviv District Court was dismissed as well.
In June 2024, Biokine Therapeutics Ltd. (“Biokine”), filed a complaint with the District Court of Jerusalem against the Company. The complaint alleged breach of contract and a purported failure to make certain payments to Biokine under the Company’s in-licensing agreement with Biokine for motixafortide. The lawsuit sought compensatory damages in the amount of approximately $
6.5
million and a declaratory judgment in favor of Biokine. The Company filed a statement of defense in November 2024. Subsequent to this filing, in November 2024, the Company and Biokine entered into an agreement to refer the dispute to arbitration, and the claim was withdrawn. The outcome of the arbitration is uncertain at this point. Nevertheless, management of the Company believes the claims in the arbitration are without merit and intends to vigorously defend itself against such action.
F - 45
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 – LICENSE AND SECURITIES PURCHASE AGREEMENTS – HST/GLORIA
In October 2023, the Company closed on a license agreement (the “Gloria License Agreement”) with Hong Seng Technology Limited (“HST”) and Guangzhou Gloria Biosciences Co., Ltd. (“Gloria” and together with HST, the “Gloria Licensee”), pursuant to which the Company granted HST an exclusive, royalty-bearing, sublicensable license to develop and commercialize motixafortide in Asia (other than Israel and certain other countries) (collectively, the “Gloria Territory”) and to engage and authorize Gloria to perform services under the Gloria License Agreement in the Gloria Territory. In addition, the Company granted the Gloria Licensee a first offer right with respect to the grant of certain rights in motixafortide outside of the Gloria Territory.
Pursuant to the terms of the Gloria License Agreement, the Gloria Licensee paid an upfront payment of $
15
million, which was received by the Company at closing. The Company is also entitled to up to $
49
million based on the achievement of certain development and regulatory milestones in China and Japan, and up to $
197
million in sales milestones based on defined sales targets of motixafortide in the Gloria Territory. In addition, the Company is eligible to receive tiered double-digit royalties (ranging from
10
-
20
%), on a country-by-country basis until the longer of (i) fifteen years from the date of the first sale of motixafortide by the Gloria Licensee, (ii) the last to expire valid claim of any licensed patents with respect to motixafortide in such country and (iii) the expiration of motixafortide’s orphan drug status in such country. The royalties payable by Gloria Licensee are to be reduced by 50% following the end of the initial royalty term and are also to be reduced upon the occurrence of certain events, including, on a country-by-country basis, the entry of a generic product in such country.
In addition, in October 2023, the Company closed on a securities purchase agreement (the “Gloria Purchase Agreement”) with HST and Gloria, pursuant to which the Company issued in a private placement an aggregate of
170,728
ADSs of the Company, at a purchase price of $
85.44
per ADS. Aggregate gross proceeds from the sale were approximately $
14.6
million, with related issuance costs amounting to approximately $
0.9
million. No warrants were issued in the transaction.
In accordance with IFRS 15, both agreements have been treated as a single unit of account, with the consideration combined and subsequently allocated between the Gloria Purchase Agreement and the Gloria License Agreement. Of the total consideration amounting to $
29.6
million, $
12.0
million were allocated to the Purchase Agreement, and $
17.6
million were allocated to the Gloria License Agreement. Costs in the amount of $
0.7
million directly attributable to the Purchase Agreement were recognized as a reduction in equity.
The Company identified the following performance obligations in the contract, each to be recognized separately: (1) stem-cell mobilization (“SCM”) license; (2) SCM support services; and (3) pancreatic cancer (“PDAC”) license and related support services.
With regard to PDAC, the Company determined that the license, together with the associated support services, should be combined into a single performance obligation, since the Licensee cannot benefit from the license without the associated support services. The support services are highly specialized for the licensed product in this indication. Licensing rights for other indications and related support were deemed immaterial.
F - 46
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 – LICENSE AND SECURITIES PURCHASE AGREEMENTS – HST/GLORIA
(cont.)
The fixed transaction price has been allocated among the performance obligations based on similar price offers received by the Company, with the assistance of a valuation specialist. The variable consideration related to the performance obligations was not taken into account in the fixed transaction price due to uncertainty.
Revenue has been recognized in the Company’s financial statements as follows:
| a. |
Revenue for the SCM license was recognized in the fourth quarter of 2023, upon transfer of control over the license to the licensee, in the amount of $
|
| b. |
Revenue from providing the SCM support services has been recognized using the input method, which is based on costs incurred and labor hours expended, resulting in straight-line revenue recognition for the year ended December 31, 2024 totaling $
|
| c. |
Revenue from the PDAC performance obligation has been recognized over time, with the percentage of completion determined based on support hours incurred, with a total amount of $
|
Based on the above methodology, as well as the achievement of a specific regulatory milestone, the Company recognized revenues from the license agreement of $
4.6
million and $
15.0
million for the years ended December 31, 2023 and 2024, respectively. Due to a delay in payment of $
2.4
million to be received from the Gloria Licensee during 2024, a provision for doubtful accounts receivable in the amount of $
0.8
million was recorded in the fourth quarter of 2024.
NOTE 17 – LICENSE AND SECURITIES PURCHASE AGREEMENTS – AYRMID/HIGHBRIDGE
In November 2024, the Company entered into a license agreement (the “Ayrmid License Agreement”) with Ayrmid Pharma Ltd. (the “Ayrmid Licensee”), pursuant to which the Company granted the Ayrmid Licensee an exclusive, transferable, royalty-bearing, sublicensable license with respect to the intellectual property rights and know-how associated with motixafortide, to commercialize motixafortide across all indications, except solid tumor indications, in all territories other than Asia (collectively, the “Ayrmid Territory”).
Pursuant to the terms of the Ayrmid License Agreement, the Company received a non-refundable $
10
million upfront payment and is entitled to up to $
87
million of certain commercial and sales milestones based on defined sales targets of motixafortide in the Ayrmid Territory. Additionally, the Company is eligible to receive tiered double-digit royalties (ranging from
18
-
23
%) on aggregate net sales of motixafortide on a country-by-country basis until the longer of (i) fifteen years from the date of the first sale of motixafortide by the Ayrmid Licensee in such country, (ii) the last to expire of any licensed patents with respect to motixafortide in such country, (iii) the expiration of regulatory exclusivity in such country and (iv) the expiration of motixafortide’s orphan drug status, if any, in such country, it being noted that such royalties may be subject to reduction in certain specific circumstances.
F - 47
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – LICENSE AND SECURITIES PURCHASE AGREEMENTS – AYRMID/HIGHBRIDGE
(cont.)
In connection with the Ayrmid License Agreement, the Company and the Ayrmid Licensee also entered into a manufacturing and supply agreement (the “Supply Agreement”), according to which the Company has committed to supply motixafortide to the Ayrmid Licensee during the term, on a cost-plus basis, for both commercial and development supply. Furthermore, the Supply Agreement provides the Ayrmid Licensee with “step-in rights” with respect to the manufacture and supply of motixafortide upon the occurrence of certain trigger events.
The Ayrmid License Agreement will continue on a country-by-country basis in the Ayrmid Territory until the expiration of the royalty term or earlier termination thereof. The Ayrmid License Agreement may also be terminated by either party in the case of a material breach or bankruptcy.
Concurrent with the above transaction, the Company completed a registered direct offering with gross proceeds of $
9.0
million to certain funds associated with Highbridge, a related party to Ayrmid (see Note 12c(4)).
In accordance with IFRS 15, both transactions have been treated as a single unit of account, with the consideration combined and subsequently allocated between the Ayrmid License agreement and the registered direct offering. Of the total consideration amounting to $
19.0
million, $
7.8
million were allocated to the Ayrmid License Agreement, and $
11.2
million were allocated to the registered direct offering. Costs in the amount of $
0.1
million directly attributable to the registered direct offering were recognized as a reduction in equity. The proceeds allocated to the ordinary warrants in the registered direct offering were measured with reference to their fair value as financial instruments issued to a customer.
The consideration allocated to the Ayrmid License Agreement of $
7.8
million was attributed to a single material performance obligation – i.e., the granting of the license to commercialize and develop motixafortide in the Ayrmid Territory. Accordingly, revenue from the license of $
7.8
million was recognized during the fourth quarter of 2024, upon transfer of control over the Ayrmid License to the licensee. Sales-based milestone payments and royalties based on motixafortide net sales are subject to the “royalties exception” of IFRS 15 and will be recognized as revenue when the related sale occurs.
F - 48
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 – TRANSACTIONS AND BALANCES WITH RELATED PARTIES
Transactions with related parties
Expenses:
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Benefits to related parties:
|
||||||||||||
|
Compensation and benefits to senior management, including benefit component of equity instrument grants
|
|
|
|
|||||||||
|
Compensation and benefits to directors, including benefit component of equity instrument grants
|
|
|
|
|||||||||
Regarding transactions and balances related to Gloria, see Note 16.
Key management compensation
Key management includes directors and executive officers. The compensation paid or payable to key management for services during each of the years indicated is presented below.
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Salaries and other short-term employee benefits
|
|
|
|
|||||||||
|
Post-employment benefits
|
|
|
|
|||||||||
|
Other long-term benefits
|
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
|
|
|
||||||||||
NOTE 19 – SEGMENT REPORTING
The Company operates in a
reportable operating segment – the development and commercialization of therapeutics. Its corporate headquarters and development activities are in Israel, while its revenues stem from activities carried out in the U.S. and Asia (primarily Greater China). In this regard, product sales relate to the Company’s direct commercialization activities in the U.S. from October 2023 through November 2024, while license revenues relate to outlicensing agreements entered into in Asia and in the U.S. in October 2023 and November 2024, respectively. Set forth below is a breakdown of revenues from external parties by geographic region.
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
China
|
|
|
|
|||||||||
|
U.S.
|
|
|
|
|||||||||
|
|
|
|
||||||||||
Substantially all of the Company’s non-current assets are located in Israel. See Notes 16 and 17 for information on customers representing 10% or more of total revenues.
F - 49
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
| a. |
Other receivables
|
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
in USD thousands
|
||||||||
|
Government institutions
|
|
|
||||||
|
Advance payments
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
| b. |
Accounts payable and accruals
|
|
December 31,
|
||||||||
|
2023
|
2024
|
|||||||
|
in USD thousands
|
||||||||
|
1)
Trade:
|
||||||||
|
Accounts payable:
|
||||||||
|
Overseas
|
|
|
||||||
|
In Israel
|
|
|
||||||
|
|
|
|||||||
|
2)
Other:
|
||||||||
|
Payroll and related expenses
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
Accrual for vacation and recreation pay
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
The carrying amounts of accounts payable and accruals approximate their fair value, as the effect of discounting is not material.
F - 50
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
(cont.)
| c. |
Cost of revenues
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
License fees and royalties payable to licensor
|
|
|
|
|||||||||
|
Direct costs related to license revenues
|
|
|
|
|||||||||
|
Amortization of intangible asset
|
-
|
|
|
|||||||||
|
Cost of product sales
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| d. |
Research and development expenses
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Payroll and related expenses
|
|
|
|
|||||||||
|
Research and development services
|
|
|
|
|||||||||
|
Lab, occupancy and telephone
|
|
|
|
|||||||||
|
Professional fees
|
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| e. |
Sales and marketing expenses
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Payroll and related expenses
|
|
|
|
|||||||||
|
Medical Affairs
|
|
|
|
|||||||||
|
Marketing
|
|
|
|
|||||||||
|
Travel
|
|
|
|
|||||||||
|
Office-related expenses
|
|
|
|
|||||||||
|
Business Analytics
|
|
|
|
|||||||||
|
Market Access
|
|
|
|
|||||||||
|
Professional fees
|
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Loss on abandonment of right-of-use asset
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
||||||||||
F - 51
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
(cont.)
| f. |
General and administrative expenses
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Payroll and related expenses
|
|
|
|
|||||||||
|
Professional fees
|
|
|
|
|||||||||
|
Provision for doubtful accounts receivable
|
|
|
|
|||||||||
|
Insurance
|
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Depreciation
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| g. |
Non-operating income (expenses), net
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Changes in fair value of warrants
|
|
(
|
)
|
|
||||||||
|
Issuance costs
|
(
|
)
|
|
(
|
)
|
|||||||
|
Other
|
|
|
|
|||||||||
|
|
(
|
)
|
|
|||||||||
| h. |
Financial income
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
||||||||||
|
in USD thousands
|
||||||||||||
|
Interest income
|
|
|
|
|||||||||
|
Exchange differences, net
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| i. |
Financial expenses
|
|
Year ended December 31,
|
||||||||||||
|
2022
|
2023
|
2024
|
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in USD thousands
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Interest expense
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Bank commissions
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Exchange differences, net
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F - 52
BioLineRx Ltd.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 – SUBSEQUENT EVENT – REGISTERED DIRECT OFFERING
In January 2025, the Company completed a registered direct offering to certain institutional investors of
858,303
ADSs and
391,967
pre-funded warrants to purchase ADSs. Each ADS and pre-funded warrant was sold at a purchase price of $
8.00
and $
7.996
, respectively. The Company also issued to the investors unregistered ordinary warrants to purchase an aggregate of
1,250,000
ADSs. The pre-funded warrants are exercisable immediately, do not expire until exercised in full, and have an exercise price of $
0.004
per ADS. The ordinary warrants are exercisable immediately, expire
four years
from the date of issuance, and have an exercise price of $
8.00
per ADS.
A holder of the pre-funded or ordinary warrants cannot exercise such warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder) of the outstanding share capital of the Company immediately after giving effect to such exercise.
In addition, the Company granted to the placement agent in the offering, as part of the placement fee, warrants to purchase
62,500
ADSs. These warrants are exercisable immediately, expire
five years
from the date of issuance and have an exercise price of $
10.00
per ADS.
Gross proceeds from the offering totaled $
10.0
million, with net proceeds of $
8.9
million, after deducting fees and expenses.
The offering purchase agreements include lock-up, variable rate transaction, warranty, indemnification, and other provisions customary for transactions of this nature.
F - 53
TABLE OF CONTENTS
Part IItem 1. Identity Of Directors, Senior Management and AdvisersItem 2. Offer Statistics and Expected TimetableItem 3. Key InformationItem 4. Information on The CompanyItem 4A. Unresolved Staff CommentsItem 5. Operating and Financial Review and ProspectsItem 6. Directors, Senior Management and EmployeesItem 7. Major Shareholders and Related Party TransactionsItem 8. Financial InformationItem 9. The Offer and ListingItem 10. Additional InformationItem 11. Quantitative and Qualitative Disclosure on Market RiskItem 12. Description Of Securities Other Than Equity SecuritiesItem 13. Defaults, Dividends Arrearages and DelinquenciesItem 14. Material Modifications To The Rights Of Security Holders and Use Of ProceedsItem 15. Controls and ProceduresItem 16. [reserved]Item 16A. Audit Committee Financial ExpertsItem 16B. Code Of EthicsItem 16C. Principal Accountant Fees and ServicesItem 16D. Exemptions From The Listing Standards For Audit CommitteesItem 16E. Purchases Of Equity Securities By The Issuer and Affiliated PurchasersItem 16F. Change in Registrant S Certifying AccountantItem 16G. Corporate GovernanceItem 16H. Mine Safety DisclosureItem 16I. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsItem 16J. Insider Trading PoliciesItem 16K. CybersecurityItem 17. Financial StatementsItem 18. Financial StatementsItem 19. ExhibitsNote 1 General InformationNote 1 General Information (cont.)Note 2 Material Accounting PoliciesNote 2 Material Accounting Policies (cont.)Note 3 Financial Instruments and Financial Risk ManagementNote 3 Financial Instruments and Financial Risk Management (cont.)Note 4 Critical Accounting Estimates and JudgmentsNote 4 Critical Accounting Estimates and Judgments (cont.)Note 5 Cash and Cash EquivalentsNote 6 Short-term Bank DepositsNote 7 InventoryNote 8 Property and EquipmentNote 9 Intangible AssetsNote 10 LeasesNote 10 Leases (cont.)Note 11 Long-term LoanNote 12 EquityNote 12 Equity (cont.)Note 13 Taxes on IncomeNote 13 Taxes on Income (cont.)Note 14 Loss Per ShareNote 15 Commitments and Contingent LiabilitiesNote 15 Commitments and Contingent Liabilities (cont.)Note 16 License and Securities Purchase Agreements Hst/gloriaNote 16 License and Securities Purchase Agreements Hst/gloria (cont.)Note 17 License and Securities Purchase Agreements Ayrmid/highbridgeNote 17 License and Securities Purchase Agreements Ayrmid/highbridge (cont.)Note 18 Transactions and Balances with Related PartiesNote 19 Segment ReportingNote 20 Supplementary Financial Statement InformationNote 20 Supplementary Financial Statement Information (cont.)Note 21 Subsequent Event Registered Direct Offering