SLGL 20-F Report ended Dec. 31, 2020

☐

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020

☐

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

☐

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

	Sol-Gel Technologies Ltd.
	(Exact name of Registrant as specified in its charter)
	N/A
	(Translation of Registrant’s name into English)
	Israel
	(Jurisdiction of incorporation or organization)

7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650, Israel

(Address of principal executive offices)

Gilad Mamlok, Chief Financial Officer

7 Golda Meir St., Weizmann Science Park, Ness Ziona, 7403650, Israel

Tel: 972-8-9313429; Fax: 972-153-523044444

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, par value NIS 0.1 per share		SLGL		The Nasdaq Stock Market LLC

None

(Title of Class)

None

(Title of Class)

Large Accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒ Emerging growth company ☒

ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	6
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	6
ITEM 3.	KEY INFORMATION	6
ITEM 4.	INFORMATION ON THE COMPANY	54
ITEM 4A.	UNRESOLVED STAFF COMMENTS	87
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	87
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	97
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	119
ITEM 8.	FINANCIAL INFORMATION	122
ITEM 9.	THE OFFER AND LISTING	122
ITEM 10.	ADDITIONAL INFORMATION	123
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	141
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	142
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	142
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	142
ITEM 15.	CONTROLS AND PROCEDURES	143
ITEM 16.	[RESERVED]	144
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	144
ITEM 16B.	CODE OF ETHICS	144
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	145
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.	145
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.	145
ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.	145
ITEM 16G.	CORPORATE GOVERNANCE	145
ITEM 16H.	MINE SAFETY DISCLOSURE	146
ITEM 17.	FINANCIAL STATEMENTS	146
ITEM 18.	FINANCIAL STATEMENTS	146
ITEM 19.	EXHIBITS	146
EXHIBIT INDEX		147

•

the adequacy of our financial and other resources, particularly in light of our history of recurring losses and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives;

•

our ability to complete the development of, and obtain market approval for, our product candidates;

•

our ability to find suitable co-development, contract manufacturing and marketing partners;

•

our ability to obtain and maintain regulatory approvals for our product candidates in our target markets and the possibility of adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained;

•

our ability to commercialize and launch our pharmaceutical product candidates;

•

our ability to obtain and maintain adequate protection of our intellectual property;

•

our ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost;

•

our ability to establish adequate sales, marketing and distribution channels;

•

acceptance of our product candidates by healthcare professionals and patients;

•

the possibility that we may face third-party claims of intellectual property infringement;

•

the timing and results of clinical trials that we may conduct or that our competitors and others may conduct relating to our or their products;

•

intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do;

•

potential product liability claims;

•

potential adverse federal, state and local government regulation in the United States, Europe or Israel;

•

the impact of pandemics such as Novel Coronavirus Disease 2019, or COVID-19, on our business and financial condition; and

•

loss or retirement of key executives and research scientists.

		Year Ended December 31,
		2016				2017				2018				2019				2020
		(in thousands, except share and per share data)
Statement of Operations Data:
Collaboration Revenues		$	-			$	174			$	129			$	22,904			$	8,771
Research and development expenses			17,023				25,805				28,146				40,578				27,913
General and administrative expenses			3,773				6,002				5,504				8,276				11,091
Total operating loss			20,756				31,633				33,521				25,950				30,233
Financial expenses (income), net			15				(65	)			(1,318	)			(1,374	)			(943	)
Loss before income taxes			20,771				31,568				32,203				24,576				29,290
Income taxes															33
Loss for the year		$	20,771			$	31,568			$	32,203			$	24,609			$	29,290
Basic and diluted loss per ordinary share*		$	3.30			$	5.02			$	1.80			$	1.26			$	1.3
Weighted average number of ordinary shares outstanding – basic and diluted*			3,494,579				6,290,244				17,867,589				19,534,562				22,574,688

						As of December 31,
		2016				2017				2018				2019				2020
Balance Sheet Data:						(in thousands)
Cash and cash equivalents		$	7,001			$	5,024			$	5,325			$	9,412			$	7,122
Total Assets			10,985				15,315				69,682				61,301				59,161
Total liabilities			42,322				68,014				5,773				8,836				8,312
Accumulated deficit			(63,693	)			(95,261	)			(127,464	)			(152,073	)			(181,363	)
Total shareholders’ equity (capital deficiency)			(31,337	)			(52,699	)			63,909				52,465				50,849

•

We are a clinical-stage company and have incurred significant losses since our inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

•

We have a limited operating history in the dermatological prescription drug space which may make it difficult to evaluate the success of our business to date and to assess our future viability.

•

We may need substantial additional funding to pursue our business objectives. If we are unable to raise capital when needed, we could be forced to curtail our planned operations and the pursuit of our growth strategy. If we are successful in raising additional capital, this may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

•

We are largely dependent on the success of our branded product candidates for the treatment of topical dermatological conditions.

•

We currently have limited marketing capabilities. If we are unable to establish adequate sales and marketing capabilities through third parties we may be required to establish sales and marketing capabilities on our own, or we may be unable to successfully commercialize Twyneo®, Epsolay® or any other of our other product candidates, if approved, or generate product revenues.  In addition, establishing our own sales and marketing capabilities would significantly increase our expenses and require us to raise additional capital sooner that an anticipated .

•

We have not obtained regulatory approval for most of our product candidates in the United States or any other country.

•

Our continued growth is dependent on our ability to successfully develop and commercialize new product candidates in a timely manner. We expend a significant amount of resources on research and development efforts that may not lead to successful product candidate introductions or the recovery of our research and development expenditures.

•

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and clinical trials may not be predictive of future trial results, which could result in development delays or a failure to obtain marketing approval.

•

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

•

Adverse side effects or other safety risks associated with our product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon product candidates, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any, such as the risk of product liability claims.

•

Even if our branded product candidates or our other product candidates receive regulatory approval, they may fail to achieve the broad degree of physician adoption and market acceptance necessary for commercial success.

•

Our product candidates, if approved, will face significant competition and our failure to compete effectively may prevent us from achieving significant market penetration and expansion.

•

The ongoing COVID-19 pandemic may adversely affect our business, revenues, results of operations and financial condition.

•

Any collaborative arrangements that we have or may establish in the future may not be successful or we may otherwise not realize the anticipated benefits from these collaborations.

•

We rely on third parties and consultants to assist us in conducting our clinical trials. If these third parties or consultants do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

•

The manufacture of pharmaceutical products is complex, and manufacturers often encounter difficulties in production. If we or any of our third-party manufacturers encounter any difficulties, our ability to provide product candidates for clinical trials or our product candidates to patients, once approved, and the development or commercialization of our product candidates could be delayed or stopped.

•

We depend on our intellectual property, and our future success is dependent on our ability to protect our intellectual property and not infringe on the rights of others.

•

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.

•

If we are not able to retain our key management, or attract and retain qualified scientific, technical and business personnel, our ability to implement our business plan may be adversely affected.

•

seek marketing approval and conduct pre-commercialization and launch activities for Twyneo® and Epsolay®;

•

conduct Phase I proof of concept clinical studies of SGT-210, and continue the research and development of erlotinib, an epidermal growth factor receptor inhibitor, tapinarof, an investigational aryl hydrocarbon receptor modulator, and roflumilast, an investigational phosphodiesterase 4 inhibitor, and other future branded product candidates;

•

seek regulatory approvals for any product candidate that successfully completes clinical development;

•

establish commercial manufacturing capabilities through one or more contract manufacturing organizations to commercialize any product candidates for which we may obtain regulatory approval;

•

continue the development, bioequivalence and other studies required for abbreviated new drug application, or ANDA, submissions for our generic product candidates;

•

seek to enhance our technology platform;

•

maintain, expand and protect our intellectual property portfolio;

•

seek new drug candidates and expand our disease portfolio;

•

add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development; and

•

experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

•

the timing and success for obtaining marketing approval for Twyneo® and Epsolay®;

•

the progress and results of our development activities for SGT-210, erlotinib, tapinarof and roflumilast;

•

the scope, progress, results and costs of development, laboratory testing and clinical trials for our generic product candidates;

•

the cost of manufacturing clinical supplies and exhibition batches of our product candidates;

•

the costs, timing and outcome of regulatory reviews of any of our product candidates;

•

the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims by third parties that we are infringing upon their intellectual property rights;

•

the amount of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and

•

the extent to which we acquire or invest in businesses, product candidates and technologies, including entering into licensing or collaboration arrangements for any of our product candidates.

•

we may not have adequate financial or other resources;

•

we may not be able to manufacture our product candidates in commercial quantities, in an adequate quality or at an acceptable cost;

•

we may not be able to establish adequate sales, marketing and distribution channels;

•

we may not be able to find suitable co-development, contract manufacturing or marketing partners;

•

healthcare professionals and patients may not accept our product candidates;

•

we may not be aware of possible complications from the continued use of our product candidates since we have limited clinical experience with respect to the actual use of our product candidates;

•

changes in the market, new alliances between existing market participants and the entrance of new market participants may interfere with our market penetration efforts;

•

third-party payors may not agree to reimburse patients for any or all of the purchase price of our product candidates, which may adversely affect patients’ willingness to purchase our product candidates;

•

uncertainty as to market demand may result in inefficient pricing of our product candidates;

•

we may face third-party claims of intellectual property infringement;

•

we may fail to obtain and maintain regulatory approvals for our product candidates in our target markets or may face adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained;

•

we are dependent upon the results of ongoing clinical trials relating to our product candidates and the products of our competitors; and

•

we may become involved in lawsuits pertaining to our clinical trials.

•

the timing of any FDA or other regulatory authority approvals;

•

the timing of process validation for particular product candidates;

•

the timing of product launches and market acceptance of such products launched;

•

changes in the amount we spend to research, develop, acquire, license or promote new product candidates;

•

the outcome of our research, development and clinical trial programs;

•

serious or unexpected health or safety concerns related to our product candidates or the branded product candidates we have genericized;

•

the introduction of new products by others that render our product candidates obsolete or noncompetitive;

•

the ability to maintain selling prices and gross margins on our product candidates;

•

the ability to comply with complex governmental regulations applicable to many aspects of our business;

•

changes in coverage and reimbursement policies of health plans and other health insurers, including changes to Medicare, Medicaid and similar government healthcare programs;

•

increases in the cost of raw materials used to manufacture our product candidates;

•

manufacturing and supply interruptions, including product rejections or recalls due to failure to comply with manufacturing specifications;

•

timing of revenue recognition related to our collaboration agreements;

•

the ability to protect our intellectual property and avoid infringing the intellectual property of others; and

•

the outcome and cost of possible litigation over patents with third parties.

•

inability to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to support the initiation or continuation of clinical trials;

•

reaching a consensus with regulatory authorities on study design or implementation of clinical trials;

•

obtaining regulatory authorization to commence a trial;

•

reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

•

identifying, recruiting and training suitable clinical investigators;

•

obtaining institutional review board, or IRB, or ethics committee approval at each site;

•

recruiting suitable patients to participate in a trial;

•

having patients complete a trial or return for post-treatment follow-up;

•

clinical sites deviating from FDA regulations, including GCPs, or the study protocol, or dropping out of a trial;

•

adding new clinical trial sites;

•

occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits, or occurrence of adverse events in trial of the same class of agents conducted by other companies;

•

the cost of clinical trials of our product candidates being greater than we anticipate;

•

transfer of manufacturing processes to larger-scale facilities operated by a contract manufacturing organization, or CMO, and delays or failure by our CMOs or us to make any necessary changes to such manufacturing process;

•

third parties being unwilling or unable to satisfy their contractual obligations to us;

•

manufacturing sufficient quantities of a product candidate for use in clinical trials; and

•

damage to clinical supplies of a product candidate caused during storage and/or transportation.

•

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

•

we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

•

the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

•

we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

•

the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;

•

the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere;

•

the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; or

•

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

•

severity of the disease under investigation;

•

size and nature of the patient population;

•

eligibility criteria for the trial;

•

design of the trial protocol;

•

perceived risks and benefits of the product candidate under study;

•

physicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any drugs that may be approved for the same indications we are investigating;

•

proximity to and availability of clinical trial sites for prospective patients;

•

availability of competing therapies and clinical trials;

•

ability to monitor patients adequately during and after treatment; and

•

the effects of COVID-19

•

the FDA could suspend or impose restrictions on operations, including costly new manufacturing requirements;

•

the FDA could refuse to approve pending applications or supplements to applications;

•

the FDA could suspend any ongoing clinical trials;

•

the FDA could suspend or withdraw marketing approval;

•

the FDA could seek an injunction or impose civil or criminal penalties or monetary fines;

•

the FDA could ban or restrict imports and exports;

•

the FDA could issue warning letters or untitled letters or similar enforcement actions alleging noncompliance with regulatory requirements; or

•

the FDA or other governmental authorities could take other actions, such as imposition of product seizures or detentions, clinical holds or terminations, refusals to allow the import or export of products, disgorgement, restitution, or exclusion from federal healthcare programs.

•

the clinical indications for which the product is approved;

•

the safety and efficacy of our product as compared to existing therapies for those indications;

•

the prevalence and severity of adverse side effects;

•

patient satisfaction with the results and administration of our product and overall treatment experience, including relative convenience, ease of use and avoidance of, or reduction in, adverse side effects;

•

patient demand for the treatment of acne and rosacea or other indications;

•

the cost of treatment in relation to alternative treatments, the extent to which these costs are reimbursed by third-party payors, and patients’ willingness to pay for our product candidates; and

•

the effectiveness of our sales and marketing efforts, including any head-to-head studies, if conducted, especially the success of any targeted marketing efforts directed toward dermatologists, pediatricians, other physicians, clinics and any direct-to-consumer marketing efforts we may initiate.

•

revisions to the Medicaid rebate program by: (a) increasing the rebate percentage for branded drugs to 23.1% of the average manufacturer price, or AMP, with limited exceptions, (b) increasing the rebate for outpatient generic, multiple source drugs dispensed to 13% of AMP; (c) changing the definition of AMP; and (d) extending the Medicaid rebate program to Medicaid managed care plans, with limited exceptions;

•

the imposition of annual fees upon manufacturers or importers of branded prescription drugs, which fees will be in amounts determined by the Secretary of Treasury based upon market share and other data;

•

providing a discount on brand-name prescriptions filled in the Medicare Part D coverage gap as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

•

imposing increased penalties for the violation of fraud and abuse laws and funding for anti-fraud activities; and

•

expanding the definition of  “covered entities” that purchase certain outpatient drugs in the 340B Drug Pricing Program of Section 340B of the Public Health Service Act.

•

the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;

•

the federal false claims laws, including the civil False Claims Act, impose criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

•

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false or fraudulent statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

•

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

•

the federal Physician Payment Sunshine Act, 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 certain exceptions) to report annually to the government information related to certain payments or other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care providers beginning in 2022, and teaching hospitals, and requires applicable manufacturers and group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners. Covered manufacturers are required to submit reports to the government by the 90 th day of each calendar year;

•

federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

•

analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or that require the reporting of pricing information and marketing expenditures; and state laws governing 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. For example, the California Consumer Privacy Act, or the CCPA, which went into effect on January 1, 2020, gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation; and

•

similar healthcare laws and regulations in the European Union and other non-U.S. jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing the privacy and security of certain protected information, such as the General Data Protection Regulation, or GDPR, which imposes obligations and restrictions on the collection and use of personal data relating to individuals located in the EU (including health data) and the United Kingdom until the end of the transition period on 31 December 2020 provided for in the Withdrawal Agreement between the EU and the U.K.

•

we may not be able to control the amount and timing of resources that our collaborators may devote to our product candidates;

•

should a collaborator fail to comply with applicable laws, rules, or regulations when performing services for us, we could be held liable for such violations;

•

our current or future collaborators may fail to comply with local or any foreign health authorities’ laws and regulations, and as a result, the receipt of a site manufacturing, export or import license may be delayed or withheld for an undefined period;

•

our current or future collaborators may experience financial difficulties or changes in business focus;

•

our current or future collaborators’ partners may fail to secure adequate commercial supplies of our product candidates upon marketing approval, if at all;

•

our current or future collaborators’ partners may have a shortage of qualified personnel;

•

we may be required to relinquish important rights, such as marketing and distribution rights;

•

business combinations or significant changes in a collaborator’s business strategy may adversely affect a collaborator’s willingness or ability to complete its obligations under any arrangement;

•

under certain circumstances, a collaborator could move forward with a competing product developed either independently or in collaboration with others, including our competitors;

•

our current or future collaborators may utilize our proprietary information in a way that could expose us to competitive harm; and

•

collaborative arrangements are often terminated or allowed to expire, which could delay the development and may increase the cost of developing our product candidates.

•

any of our future processes or product candidates will be patentable;

•

our processes or product candidates will not infringe upon the patents of third parties; or

•

we will have the resources to defend against charges of patent infringement or other violation or misappropriation of intellectual property by third parties or to protect our own intellectual property rights against infringement, misappropriation or violation by third parties.

•

these agreements may be breached;

•

these agreements may not provide adequate remedies for the applicable type of breach;

•

our trade secrets or proprietary know-how will otherwise become known; or

•

our competitors will independently develop similar technology or proprietary information.

•

we established a quorum requirement such that the quorum for any meeting of shareholders is two or more shareholders holding at least 33 1∕3% of our voting rights, which complies with Nasdaq requirements; however, if the meeting is adjourned for lack of quorum, the quorum for such adjourned meeting will be any number of shareholders, instead of 33 1∕3% of our voting rights;

•

we also intend to adopt and approve material changes to equity incentive plans in accordance with Israeli Companies Law, 5759-1999, or with the Companies Law, which does not impose a requirement of shareholder approval for such actions. In addition, we intend to follow Israeli corporate governance practice in lieu of Nasdaq Marketplace Rule 5635(c), which requires shareholder approval prior to an issuance of securities in connection with equity-based compensation of officers, directors, employees or consultants;

•

as opposed to making periodic reports to shareholders in the manner specified by the Nasdaq corporate governance rules, the Companies Law does not require us 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 available through a public website. We will only mail such reports to shareholders upon request; and

•

we will follow Israeli corporate governance practice instead of Nasdaq requirements to obtain shareholder approval for certain dilutive events (such as issuances that will result in a change of control, certain transactions other than a public offering involving issuances of a 20% or greater interest in us and certain acquisitions of the stock or assets of another company). Accordingly, our shareholders may not be afforded the same protection as provided under Nasdaq corporate governance rules.

•

positive or negative results of testing and clinical trials by us, strategic partners and competitors;

•

delays in entering into strategic relationships with respect to development and/or commercialization of our product candidates or entry into strategic relationships on terms that are not deemed to be favorable to us;

•

technological innovations or commercial product introductions by us or competitors;

•

changes in government regulations;

•

developments concerning proprietary rights, including patents and litigation matters;

•

public concern relating to the commercial value or safety of any of our product candidates;

•

financing or other corporate transactions;

•

publication of research reports or comments by securities or industry analysts;

•

general market conditions in the pharmaceutical industry or in the economy as a whole; or

•

other events and factors, many of which are beyond our control.

•

Twyneo ® , a novel, once-daily, non-antibiotic topical cream, which we are developing for the treatment of acne, containing a fixed-dose combination of encapsulated benzoyl peroxide, or E-BPO, and encapsulated tretinoin. Acne is one of the three most prevalent skin diseases in the world and is the most commonly treated skin disease in the United States. According to the American Academy of Dermatology, acne affects approximately 40 to 50 million people in the United States, of which approximately 10% are treated with prescription medications. In July 2017, we reported positive top-line results from a double-blind, dose-ranging active- and placebo-controlled, six-arm, multi-center Phase II clinical trial of Twyneo ® in the United States in 726 subjects, 128 of which subjects across six treatment groups did not complete the study. The clinical trial evaluated the efficacy, tolerability and safety of two Twyneo ® concentrations, Twyneo ® Low and Twyneo ® High, each containing a lower or higher concentration, respectively, of encapsulated tretinoin and an identical concentration of encapsulated benzoyl peroxide. Tretinoin and benzoyl peroxide, the two active components in Twyneo ® , are both widely-used therapies for the treatment of acne that historically have not been conveniently co-administered due to stability concerns. The trial also evaluated the contribution of encapsulated tretinoin and encapsulated benzoyl peroxide, in the same concentrations as those in the respective Twyneo ® treatment groups, to the efficacy of Twyneo ® High and Twyneo ® Low. In this trial, Twyneo ® showed statistically significant improvements in all pre-defined co-primary and secondary efficacy endpoints, as compared to vehicle. In addition, Twyneo ® was well tolerated with no treatment-related serious adverse events. Based on the efficacy data we observed in the Phase II trial, we believe Twyneo ® , if approved, has the potential to become a preferred treatment for acne. On December 30, 2019, we announced top-line results from two pivotal Phase 3 clinical trials evaluating Twyneo ® for the treatment of acne. Twyneo ® met all co-primary endpoints in both Phase 3 trials. The Phase 3 program enrolled an aggregate of 858 patients aged nine and older in two multicenter, randomized, double-blind, parallel group, vehicle-controlled trials at 63 sites across the United States. Twyneo ® demonstrated statistically significant improvement in each of the co-primary endpoints of (1) the proportion of patients who succeeded in achieving at least a two grade reduction from baseline and Clear (grade 0) or Almost Clear (grade 1) at Week 12 on a 5-point Investigator Global Assessment (IGA) scale, (2) an absolute change from baseline in inflammatory lesion count at Week 12, and (3) and an absolute change from baseline in non-inflammatory lesion count at Week 12. In addition, Twyneo ® was found to be well-tolerated. Our NDA for Twyneo ® has been accepted for filing by the FDA, which assigned a PDUFA goal date of August 1, 2021.

•

Epsolay®, a topical cream containing 5% encapsulated benzoyl peroxide, which we are developing for the treatment of papulopustular (subtype II) rosacea. Rosacea is a chronic skin disease characterized by facial redness, inflammatory lesions, burning and stinging. According to the U.S. National Rosacea Society, approximately 16 million people in the United States are affected by rosacea. According to a study we commissioned, approximately 4.8 million people in the United States experience subtype II symptoms. Subtype II rosacea is characterized by small, dome-shaped erythematous papules, tiny surmounting pustules on the central aspects of the face, solid facial erythema and edema, and thickening/overgrowth of skin. Subtype II rosacea resembles acne, except that comedowns are absent, and patients may report associated burning and stinging sensations. We evaluated Epsolay® in a double blind, randomized, dose-ranging Phase II clinical trial involving 92 adult subjects at ten centers in the United States. In this trial, Epsolay® showed statistically significant improvements in the Investigator Global Assessment, or IGA, pre-defined co-primary efficacy endpoint and in the percent change in inflammatory lesion count at week 12, as compared to vehicle. Epsolay® was also well tolerated in this trial. Current topical therapies for subtype II rosacea are limited due to tolerability concerns. For example, BPO, a common therapy for acne, is not used for the treatment of subtype II rosacea due to side effects. As encapsulated BPO, Epsolay® is designed to redefine the standard of care for the treatment of subtype II rosacea. If approved, we expect Epsolay® to be the first product containing BPO that is marketed for the treatment of subtype II rosacea. On July 8, 2019, we announced positive top-line results from our Phase 3 program evaluating Epsolay ® .  The program enrolled 733 patients aged 18 and older in two identical, double-blind, vehicle-controlled Phase 3 clinical trials at 54 sites across the United States. Epsolay ® demonstrated statistically significant improvement in both co-primary endpoints of (1) the number of patients achieving “clear” or “almost clear” in the Investigator Global Assessment (IGA) relative to baseline at week 12 and (2) absolute mean reduction from baseline in inflammatory lesion count at week 12. In an additional analysis, Epsolay ® demonstrated rapid efficacy, achieving statistically significant improvements on both co-primary endpoints compared with vehicle as early as Week 2. In addition, Epsolay® was found to be well-tolerated. On February 12, 2020, we announced positive topline results from our open-label, long-term safety study, evaluating Epsolay® for a treatment duration up to 52 weeks.  Our NDA for Epsolay ® has been accepted for filing by the FDA, which assigned a PDUFA goal date of April 26, 2021.

•

SGT-210 (erlotinib gel) that we are developing for the treatment of palmoplantar keratoderma, or PPK, a group of skin conditions characterized by thickening of the skin on the hands and soles of the feet. SGT-210 is designed to be used alone or in combination for the treatment of hyperproliferation and hyperkeratinization disorders, including PPK. On January 2, 2020, we announced the initiation of a Phase 1 proof of concept clinical study of SGT-210 in patients with palmoplantar keratoderma. The Phase 1 proof of concept study SGT-84-01 is a single-center, single-blinded, vehicle-controlled study designed to evaluate the bioavailability, safety and tolerability of SGT-210 as well as inform on potential efficacy. The study is targeting enrollment of approximately 15 patients to undergo a three-month treatment period, followed by a three-month follow-up period. The enrollment of patients in the Phase 1 proof of concept study with SGT-210 has been slowed  by the COVID-19 pandemic. We expect to report top-line data in the third quarter of 2021.

•

We are conducting pre-clinical testing to explore the possible activity of erlotinib, tapinarof (an investigational aryl hydrocarbon receptor modulator) and roflumilast (an investigational phosphodiesterase 4 inhibitor) in various new pharmaceutical indications. A total of 25 provisional patent applications for these project candidates have been submitted to date, including patent applications covering the use of tapinarof in ophthalmic disorders such as dry eye, uveitis, and blepharitis with or without demodex involvement.

•

blockage of hair follicles through abnormal keratinization in the follicle, which narrows pores;

•

increase in oils, or sebum production, secreted by the sebaceous gland;

•

overgrowth of naturally occurring bacteria caused by the colonization by the anaerobic lipohilic bacterium Propionibacterium acnes , or P. acnes ;

•

inflammatory response due to relapse of pro-inflammatory mediators into the skin.

•

Mild acne : characterized by few papules or pustules (both comedonal and inflammatory); treated with an over-the-counter product or topical prescription therapies.

•

Moderate acne : characterized by multiple papules and pustules with moderate inflammation and seborrhea (scaly red skin); treated with a combination of oral antibiotics and topical therapies.

•

Severe acne : characterized by substantial papulopustular disease, many nodules and/or cysts and significant inflammation and seborrhea; treated with oral and topical combination therapies and photodynamic therapy as a third-line treatment.

•

Topical over-the-counter monotherapies such as adapalene 0.1%, benzoyl peroxide and salicylic acid, in different concentrations, are the most commonly used therapies. These are generally tolerable first-line treatments for mild acne, but less efficacious than prescription therapies.

•

Topical prescription antibiotic monotherapies such as clindamycin and erythromycin that are most commonly used as topical therapies in cases of mild-to-moderate acne.

•

Topical prescription retinoid monotherapies such as tretinoin, adapalene 0.3% and tazarotene. Physicians view retinoids as moderately efficacious, but they have high rates of skin irritation.

•

Topical prescription combination products such as combinations of BPO/adapalene, BPO/clindamycin, BPO/erythromycin and clindamycin/tretinoin. These target multiple components that contribute to the development of acne, though topical side effects are common.

•

Oral prescription antibiotics such as doxycycline and minocycline. These are typically used as step-up treatments for more severe cases of acne, with risk of systemic side effects.

•

Oral prescription isotretinoin , which is primarily used for severe cystic acne and acne that has not responded to other treatments. The use of oral prescription isotretinoin is tightly controlled due to tolerability issues.

•

We designed Twyneo ® to protect tretinoin from oxidative decomposition, which occurs when it is combined with benzoyl peroxide, with the goal of enhancing stability without reducing efficacy. We believe this could allow for a suitable clinical and commercial shelf life.

•

The silica shell creates a barrier between the two drug substances and the skin. As a result, we believe Twyneo ® can reduce irritation typically associated with topical application of benzoyl peroxide and tretinoin, leading to greater tolerability to acne-affected skin.

•

the proportion of subjects who achieve at least a two-grade reduction in the IGA score and either “clear” or “almost clear” at week 12;

•

the mean absolute change from baseline in the number of inflammatory acne lesions at week 12; and

•

the mean absolute change from baseline in the number of non-inflammatory acne lesions at week 12.

•

Epsolay® creates a silica-based barrier between benzoyl peroxide crystals and the skin and, as a result, can reduce irritation typically associated with topical application of benzoyl peroxide, increasing the potential for more tolerable application to rosacea-affected skin.

•

Epsolay®'s release of the drug can reduce irritation while maintaining efficacy.

•

completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practices, or GLP, requirements or other applicable regulations;

•

submission to the FDA of an investigational new drug application, or IND, which must become effective before human clinical trials in the United States may begin;

•

approval by an independent institutional review board, or IRB, or ethics committee at each clinical site before each trial may be initiated;

•

performance of adequate and well-controlled human clinical trials in accordance with good clinical practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for its intended use;

•

preparation and submission to the FDA of an NDA;

•

satisfactory completion of an FDA advisory committee review, if applicable;

•

satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with current good manufacturing practices, or cGMPs, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

•

satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; and

•

payment of user fees and FDA review and approval of the NDA.

•

Phase 1 : The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.

•

Phase 2 : The drug is administered to a limited patient population to identify possible short-term adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

•

Phase 3 : The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

•

restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;

•

fines, warning letters or holds on post-approval clinical trials;

•

refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals;

•

product seizure or detention, or refusal to permit the import or export of products; or

•

injunctions or the imposition of civil or criminal penalties.

•

In general, the Recipient Company is obligated to pay the IIA royalties from the revenues generated from the sale of products (and related services) developed (in all or in part) as a result of, a research and development program funded by the IIA at rates which are determined under the IIA’s rules and guidelines (currently a yearly rate of 1.3% to 5% on sales of products or services developed under the approved programs, depending on the type of the Recipient Company — i.e., whether it is a “Small Company,” a “Large Company” or a “Traditional Industrial Company” as such terms are defined in the IIA’s rules and guidelines), up to the aggregate amount of the total grants received by the IIA, plus annual interest (as determined in the IIA’s rules and guidelines);

•

Products developed as a result of the IIA funded R&D must, as a general matter, be manufactured in Israel. The Recipient Company is prohibited from manufacturing products developed using these IIA grants outside of the State of Israel without receiving prior approval from the IIA (except for the transfer of less than 10% of the manufacturing capacity in the aggregate which requires only a notice). If the Recipient Company receives approval to manufacture products developed with government grants outside of Israel, it will be required to pay increased royalties to the IIA, up to 300% of the grant amount plus interest, depending on the manufacturing volume that is performed outside of Israel. The Recipient Company may also be subject to an accelerated royalty repayment rate. A Recipient Company also has the option of declaring in its IIA grant application its intention to exercise a portion of the manufacturing capacity abroad, thus avoiding the need to obtain additional approval following the receipt of the grant; and

•

Under the IIA’s rules and guidelines, a Recipient Company is prohibited from transferring the IIA-financed know-how and related intellectual property rights outside of Israel except under limited circumstances, and only with the approval of the Research Committee and subject to certain payments to the IIA calculated according to formulas provided under the IIA’s rules and guidelines (which are capped to amounts specified under such rules and guidelines).

•

salaries for research and development staff and related expenses, including employee benefits and share-based compensation expenses;

•

expenses paid to suppliers of disposables and raw materials, including drug substances, and related expenses, such as, external laboratory testing and development of analytical methods;

•

expenses for production of our product candidates both in-house and by contract manufacturers;

•

expenses paid to contract research organizations and other third parties in connection with the performance of pre-clinical studies, clinical trials and related expenses;

•

expenses incurred under agreements with other third parties, including subcontractors, suppliers and consultants that conduct formulation development, regulatory activities and pre-clinical studies;

•

expenses incurred to acquire, develop and manufacture materials for use in pre-clinical and other studies;

•

expenses incurred from the purchase and transfer of product candidates; and

•

facilities, depreciation of fixed assets used to develop our product candidates, maintenance of equipment used to develop our product candidates and other expenses, including direct and allocated expenses for rent, maintenance of facilities, insurance and other operating expenses.

•

the scope, rate of progress and expense of our research and development activities;

•

clinical trials and early-stage results;

•

the terms and timing of regulatory requirements and approvals;

•

the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

•

the ability to market, commercialize and achieve market acceptance of any product candidate that we are developing or may develop in the future.

		Year ended December 31,
		2018				2019				2020
		(in thousands)
Collaboration Revenues		$	129			$	22,904			$	8,771
Research and development			28,146				40,578				27,913
General and administrative			5,504				8,276				11,091
Total operating loss			33,521				25,950				30,233
Financial income, net			(1.318	)			(1,374	)			943
Loss before income taxes			32,203				24,576				29,290
Income taxes							33
Loss for the year		$	32,203			$	24,609			$	29,290

		Year Ended December 31,
		2019				2020
		(in thousands)
Payroll and related expenses		$	6,001			$	6,194
Clinical trial expenses			23,037				5,179
Professional consulting and subcontracted work			7,425				12,855
Other			4,115				3,685
Total research and development expenses		$	40,578			$	27,913

		Year Ended December 31,
		2018				2019				2020
		(in thousands)
Net cash used in operating activities		$	(23,467	)		$	(22,500	)		$	(25,241	)
Net cash provided by (used in) investing activities			(54,735	)			16,024				(2,694	)
Net cash provided by financing activities			78,819				10,613				26,457
Increase (decrease) in cash and cash equivalents		$	617			$	4,137			$	(1,478	)

•

the progress and expenses of our pre-clinical 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 expenses and timing of obtaining regulatory approval, if any, for our product candidates;

•

the expenses of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

•

the expenses of, and timing for, expanding our manufacturing agreements for production of sufficient clinical and commercial quantities of our product candidates; and

•

the potential expenses of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally.

		Total				Less than 1 year				1 – 3 years				3 – 5 years				More than 5 years
		(in thousands)
Operating lease obligations (1)		$	2,140			$	778			$	1,362				-				-
Total		$	2,140			$	778			$	1,362				-				-

(1)	Operating lease obligations consist of payments pursuant to several lease agreements that are scheduled to expire on December 31, 2023.

Name			Age			Position
Moshe Arkin			68			Chairman of the Board of Directors
Alon Seri-Levy			59			Chief Executive Officer and Director
Gilad Mamlok			52			Chief Financial Officer
Ofer Toledano			55			Vice President Research and Development
Ofra Levy-Hacham			54			Vice President Clinical and Regulatory Affairs
Karine Neimann			49			Vice President Projects and Planning, Chief Chemist
Itzik Yosef			44			Vice President Operations
Dov Zamir			67			Vice President Special Projects
Nissim Bilman			59			Vice President  Quality
John Vieira			51			U.S. Head of Commercialization
Itai Arkin			32			Director
Shmuel Ben Zvi			60			Director
Hani Lerman			48			Director
Yaffa Krindel-Sieradzki			66			Director
Jonathan B. Siegel			47			Director
Ran Gottfried			76			External Director
Jerrold S. Gattegno			68			External Director

Name and Position of director or officer		Base Salary or Other Payment (1)				Value of Social Benefits (2)				Value of Equity Based Compensation Granted (3)				All Other Compensation (4)				Total
(Amounts in U.S. dollars are based on 2020 monthly average representative U.S. dollar – NIS rate of exchange)
Alon Seri-Levy / CEO			314				61				239				22				636
Gilad Mamlok / CFO			262				54				137				48				501
John Vieira / U.S. Head of Commercialization			241				17				113				26				398
Ofer Toledano / VP R&D			206				57				79				24				366
Ofra Levy-Hacham / VP Clinical & RA			152				45				63				21				280

(1)	“Base Salary or Other Payment” means the aggregate yearly gross monthly salaries or other payments with respect to the Company's Executive Officers and members of the board of directors for the year 2020.

(2)	“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.

(3)

Consists of the fair value of the equity-based compensation granted during 2020 in exchange for the directors and officers services recognized as an expense in profit or loss and is carried to the accumulated deficit under equity. The total amount recognized as an expense over the vesting period of the options.

(4)	“All Other Compensation” includes, among other things, car-related expenses, communication expenses, basic health insurance, holiday presents, and 2018, 2019 and 2020 special bonuses that officers received.

•

Class I directors consist of Ms. Yaffa Krindel-Sieradzki, Dr. Shmuel Ben Zvi and Mr. Jonathan B. Siegel, who are all independent directors, and their term will expire at our annual general meeting of our shareholders to be held in 2022;

•

Class II directors consist of Ms. Hani Lerman and Dr. Alon Seri-Levy, and their term will expire at our annual general meeting of our shareholders to be held in 2023; and

•

Class III directors consist of Mr. Itai Arkin and Mr. Moshe Arkin, and their term will expire at our annual general meeting of our shareholders to be held in 2021.

•

an employment relationship;

•

a business or professional relationship maintained on a regular basis;

•

control; and

•

service as an office holder, excluding service as a director in a private company prior to the first offering of its shares to the public if such director was appointed as a director of the private company in order to serve as an external director following the initial public offering.

•

the majority of the shares that are voted at the meeting in favor of the election of the external director, excluding abstentions, include at least a majority of the votes of shareholders who are not controlling shareholders and do not have a personal interest in the appointment (excluding a personal interest that did not result from the shareholder’s relationship with the controlling shareholder); or

•

the total number of shares held by non-controlling shareholders or any one on their behalf that are voted against the election of the external director does not exceed two percent of the aggregate voting rights in the company.

•

his or her service for each such additional term is recommended by one or more shareholders holding at least 1% of the company’s voting rights and is approved at a shareholders meeting by a disinterested majority, where the total number of shares held by non-controlling, disinterested shareholders voting for such reelection exceeds 2% of the aggregate voting rights in the company and subject to additional restrictions set forth in the Companies Law with respect to the affiliation of the external director nominee;

•

the external director proposed his or her own nomination, and such nomination was approved in accordance with the requirements described in the paragraph above; or

•

his or her service for each such additional term is recommended by the board of directors and is approved at a meeting of shareholders by the same majority required for the initial election of an external director (as described above).

•

the chairman of the board of directors;

•

a controlling shareholder or a relative of a controlling shareholder;

•

any director employed by us or by one of our controlling shareholders or by an entity controlled by our controlling shareholders (other than as a member of the board of directors); or

•

any director who regularly provides services to us, to one of our controlling shareholders or to an entity controlled by our controlling shareholders.

•

retaining and terminating our independent auditors, subject to board of directors and shareholder ratification;

•

overseeing the independence, compensation and performance of the Company’s independent auditors;

•

the appointment, compensation, retention and oversight of any accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit services;

•

pre-approval of audit and non-audit services to be provided by the independent auditors;

•

reviewing with management and our independent directors our financial statements prior to their submission to the SEC; and

•

approval of certain transactions with office holders and controlling shareholders, as described below, and other related party transactions.

(1)

to recommend to the board of directors the compensation policy for directors and officers, and to recommend to the board of directors once every three years whether the compensation policy that had been approved should be extended for a period of more than three years;

(2)

to recommend to the board of directors updates to the compensation policy, from time to time, and examine its implementation;

(3)

to decide whether to approve the terms of office and employment of directors and officers that require approval of the compensation committee; and

(4)

to decide whether the compensation terms of the chief executive officer, which were determined pursuant to the compensation policy, will be exempted from approval by the shareholders because such approval would harm the ability to engage the chief executive officer.

•

the education, skills, experience, expertise and accomplishments of the relevant office holder;

•

the office holder’s position, responsibilities and prior compensation agreements with him or her;

•

the ratio between the cost of the terms of employment of an office holder and the cost of the employment of other employees of the company, including employees employed through contractors who provide services to the company, in particular the ratio between such cost, the average and median salary of the employees of the company, as well as the impact of such disparities on the work relationships in the company;

•

if the terms of employment include variable components — the possibility of reducing variable components at the discretion of the board of directors and the possibility of setting a limit on the value of non-cash variable equity-based components; and

•

if the terms of employment include severance compensation — the term of employment or office of the office holder, the terms of his or her compensation during such period, the company’s performance during the such period, his or her individual contribution to the achievement of the company goals and the maximization of its profits and the circumstances under which he or she is leaving the company.

•

with regards to variable components:

–

with the exception of office holders who report directly to the chief executive officer, determining the variable components on long-term performance basis and on measurable criteria; however, the company may determine that an immaterial part of the variable components of the compensation package of an office holder’s shall be awarded based on non-measurable criteria, if such amount is not higher than three monthly salaries per annum, while taking into account such office holder contribution to the company;

–

the ratio between variable and fixed components, as well as the limit of the values of variable components at the time of their grant.

•

a condition under which the office holder will return to the company, according to conditions to be set forth in the compensation policy, any amounts paid as part of his or her terms of employment, if such amounts were paid based on information later to be discovered to be wrong, and such information was restated in the company’s financial statements;

•

the minimum holding or vesting period of variable equity-based components to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and

•

a limit to retirement grants.

•

information on the business advisability of a given action brought for his or her approval or performed by virtue of his or her position; and

•

all other important information pertaining to such action.

•

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;

•

refrain from any activity that is competitive with the business of the company;

•

refrain from exploiting any business opportunity of the company for the purpose of gaining a personal advantage for himself or herself or others; and

•

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.

•

a transaction other than in the ordinary course of business;

•

a transaction that is not on market terms; or

•

a transaction that may have a material impact on the company’s profitability, assets or liabilities.

•

a majority of the shares held by shareholders who have no personal interest in the transaction and are 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 transaction who vote against the transaction represent no more than two percent (2%) of the voting rights in the company.

•

at least a majority of the shares held by all shareholders who are not controlling shareholders and do not have a personal interest in such matter, present and voting at such meeting, are voted in favor of the compensation package, excluding abstentions; or

•

the total number of shares of non-controlling shareholders and shareholders who do not have a personal interest in such matter voting against the compensation package does not exceed two percent (2%) of the aggregate voting rights in the company.

•

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.

•

a monetary liability incurred by or imposed on the office holder in favor of another person pursuant to a court judgment, including pursuant to a settlement confirmed as judgment or arbitrator’s decision approved by a competent 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;

•

reasonable litigation expenses, including reasonable attorneys’ fees, which were incurred by the office holder as a result of an investigation or proceeding filed against the office holder by an authority authorized to conduct such investigation or proceeding, provided that such investigation or proceeding was either (i) concluded without the filing of an indictment against such office holder and without the imposition on him of any monetary obligation in lieu of a criminal proceeding; (ii) concluded without the filing of an indictment against the office holder but with the imposition of a monetary obligation on the office holder in lieu of criminal proceedings for an offense that does not require proof of criminal intent; or (iii) in connection with a monetary sanction;

•

a monetary liability imposed on the office holder in favor of a payment for a breach offended at an Administrative Procedure (as defined below) as set forth in Section 52(54)(a)(1)(a) to the Securities Law;

•

expenses expended by the office holder with respect to an Administrative Procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees;

•

reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or which were imposed on the office holder by a court (i) in a proceeding instituted against him or her by the company, on its behalf, or by a third party, (ii) in connection with criminal indictment of which the office holder was acquitted, or (iii) in a criminal indictment which the office holder was convicted of an offense that does not require proof of criminal intent; and

•

any other obligation or expense in respect of which it is permitted or will be permitted under applicable law to indemnify an office holder, including, without limitation, matters referenced in Section 56H(b)(1) of the Securities Law.

•

a breach of the fiduciary duty to the company, provided that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;

•

a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the office holder;

•

a monetary 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 at an Administrative Procedure pursuant to Section 52(54)(a)(1)(a) of the Securities Law; and

•

expenses incurred by an office holder in connection with an Administrative Procedure, including reasonable litigation expenses and reasonable attorneys’ fees.

•

a breach of the fiduciary duty, except for indemnification and insurance for a breach of the fiduciary duty 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 or forfeit levied against the office holder.

		As of December 31,
		2018								2019								2020
		Company								Company								Company
		Employees				Consultants				Employees				Consultants				Employees				Consultants
Management			8								9								9
Research and development and other			48								52								56

•

each person or entity known by us to own beneficially 5% or more of our outstanding ordinary shares;

•

each of our directors, executive officers and director nominees; and

•

all of our executive officers, directors and director nominees as a group.

*	Less than 1%.

(1)

Based on the Schedule 13D/A filed with the SEC on April 20, 2020, Arkin Dermatology directly owns 14,432,266 ordinary shares. Mr. Moshe Arkin, the chairman of our board of directors, is the sole shareholder and sole director of Arkin Dermatology and may therefore be deemed to be the indirect beneficial owner of the ordinary shares owned directly by Arkin Dermatology. In addition, Mr. Moshe Arkin directly owns 86,000 ordinary shares.

(2)

Based on the Schedule 13G/A filed with the SEC on February 11, 2021, the ordinary shares are beneficially owned by various direct or indirect, majority or wholly-owned subsidiaries of the Phoenix Holding Ltd., or the Subsidiaries.  The Subsidiaries manage their own funds and/or the funds of others, including for holders of exchange-traded notes or various insurance policies, members of pension or provident funds, unit holders of mutual funds, and portfolio management clients. Each of the Subsidiaries operates under independent management and makes its own independent voting and investment decisions.

(3)

Consists of options to purchase 285,188 ordinary shares exercisable within 60 days of February 26, 2021. The exercise price of these options ranges between $1.59 and $11.21 per share and the options expire between March 2025 and May 2028.