Item 1. Financial Statements
PROTALIX
BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars in
thousands)
(Unaudited)
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
34,533
|
|
|
$
|
63,281
|
|
Accounts receivable – Trade
|
|
|
3,005
|
|
|
|
693
|
|
Other assets
|
|
|
4,081
|
|
|
|
2,321
|
|
Inventories
|
|
|
7,059
|
|
|
|
5,245
|
|
Assets of discontinued operation
|
|
|
213
|
|
|
|
327
|
|
Total current assets
|
|
$
|
48,891
|
|
|
$
|
71,867
|
|
|
|
|
|
|
|
|
|
|
FUNDS IN RESPECT OF EMPLOYEE RIGHTS
UPON RETIREMENT
|
|
|
1,951
|
|
|
|
1,677
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
8,158
|
|
|
|
8,703
|
|
Total assets
|
|
$
|
59,000
|
|
|
$
|
82,247
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES NET OF CAPITAL DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accruals:
|
|
|
|
|
|
|
|
|
Trade
|
|
$
|
7,852
|
|
|
$
|
4,007
|
|
Other
|
|
|
9,339
|
|
|
|
7,496
|
|
Convertible notes
|
|
|
|
|
|
|
53,872
|
|
Deferred revenues
|
|
|
1,925
|
|
|
|
837
|
|
Total current liabilities
|
|
$
|
19,116
|
|
|
$
|
66,212
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
53,580
|
|
|
|
19,343
|
|
Liability for employee rights upon retirement
|
|
|
2,671
|
|
|
|
2,348
|
|
Promissory note
|
|
|
4,301
|
|
|
|
4,301
|
|
Total long term liabilities
|
|
$
|
60,552
|
|
|
$
|
25,992
|
|
Total liabilities
|
|
$
|
79,668
|
|
|
$
|
92,204
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL DEFICIENCY
|
|
|
(20,668
|
)
|
|
|
(9,957
|
)
|
Total liabilities net of capital deficiency
|
|
$
|
59,000
|
|
|
$
|
82,247
|
|
The accompanying
notes are an integral part of the condensed consolidated financial statements.
PROTALIX
BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
REVENUES
|
|
$
|
9,247
|
|
|
$
|
2,448
|
|
|
$
|
6,358
|
|
|
$
|
1,769
|
|
COST OF REVENUES
|
|
|
(7,611
|
)
|
|
|
(2,198
|
)
|
|
|
(5,523
|
)
|
|
|
(1,675
|
)
|
GROSS PROFIT
|
|
|
1,636
|
|
|
|
250
|
|
|
|
835
|
|
|
|
94
|
|
RESEARCH AND DEVELOPMENT EXPENSES (1)
|
|
|
(15,271
|
)
|
|
|
(17,347
|
)
|
|
|
(9,304
|
)
|
|
|
(10,013
|
)
|
Less –
grants
|
|
|
1,816
|
|
|
|
3,503
|
|
|
|
478
|
|
|
|
2,194
|
|
RESEARCH
AND DEVELOPMENT EXPENSES, NET
|
|
|
(13,455
|
)
|
|
|
(13,844
|
)
|
|
|
(8,826
|
)
|
|
|
(7,819
|
)
|
SELLING,
GENERAL AND ADMINISTRATIVE
EXPENSES (2)
|
|
|
(5,351
|
)
|
|
|
(4,201
|
)
|
|
|
(2,814
|
)
|
|
|
(2,206
|
)
|
OPERATING LOSS
|
|
|
(17,170
|
)
|
|
|
(17,795
|
)
|
|
|
(10,805
|
)
|
|
|
(9,931
|
)
|
FINANCIAL EXPENSES
|
|
|
(5,132
|
)
|
|
|
(1,805
|
)
|
|
|
(3,045
|
)
|
|
|
(901
|
)
|
FINANCIAL INCOME
|
|
|
1,665
|
|
|
|
338
|
|
|
|
40
|
|
|
|
96
|
|
(LOSS)
INCOME FROM CHANGE IN FAIR VALUE OF
CONVERTIBLE NOTES EMBEDDED DERIVATIVE
|
|
|
(38,061
|
)
|
|
|
|
|
|
|
14,260
|
|
|
|
|
|
FINANCIAL (EXPENSES) INCOME, NET
|
|
|
(41,528
|
)
|
|
|
(1,467
|
)
|
|
|
11,255
|
|
|
|
(805
|
)
|
(LOSS) INCOME FROM CONTINUING
OPERATIONS
|
|
|
(58,698
|
)
|
|
|
(19,262
|
)
|
|
|
450
|
|
|
|
(10,736
|
)
|
LOSS FROM DISCONTINUED
OPERATIONS
|
|
|
-
|
|
|
|
(189
|
)
|
|
|
-
|
|
|
|
(117
|
)
|
NET (LOSS) INCOME FOR THE PERIOD
|
|
$
|
(58,698
|
)
|
|
$
|
(19,451
|
)
|
|
$
|
450
|
|
|
$
|
(10,853
|
)
|
NET
(LOSS) EARNINGS PER SHARE OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
Loss)
earnings from continuing operations
|
|
|
(0.47
|
)
|
|
|
(0.20
|
)
|
|
|
0.00
|
|
|
|
(0.11
|
)
|
Earnings
from discontinued operations
|
|
|
-
|
|
|
|
0.00
|
|
|
|
-
|
|
|
|
0.00
|
|
Net
(loss) earnings per share of common stock
|
|
$
|
(0.47
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.11
|
)
|
DILUTE
D
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations
|
|
|
(0.47
|
)
|
|
|
(0.20
|
)
|
|
|
(0.06
|
)
|
|
|
(0.11
|
)
|
Earnings
from discontinued operations
|
|
|
-
|
|
|
|
0.00
|
|
|
|
-
|
|
|
|
0.00
|
|
N
et
loss per share of common stock
|
|
$
|
(0.47
|
)
|
|
$
|
(0.20
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.11
|
)
|
WEIGHTED AVERAGE NUMBER OF
SHARES OF
COMMON STOCK USED IN COMPUTING
(LOSS) INCOME PER SHARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
126,000,782
|
|
|
|
99,737,348
|
|
|
|
127,523,706
|
|
|
|
99,758,511
|
|
DILUTE
D
|
|
|
126,000,782
|
|
|
|
99,737,348
|
|
|
|
192,598,389
|
|
|
|
99,758,511
|
|
(1) Includes
share-based compensation
|
|
$
|
120
|
|
|
$
|
366
|
|
|
$
|
55
|
|
|
$
|
128
|
|
(2) Includes
share-based compensation
|
|
$
|
96
|
|
|
$
|
236
|
|
|
$
|
43
|
|
|
$
|
99
|
|
The accompanying
notes are an integral part of the condensed consolidated financial statements.
PROTALIX BIOTHERAPEUTICS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN
SHAREHOLDERS’ EQUITY (CAPITAL DEFICIENCY)
(U.S. dollars in thousands, except share
data)
(Unaudited)
|
|
Common
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Stock (1)
|
|
|
Common
|
|
|
paid–in
|
|
|
Accumulated
|
|
|
|
|
|
|
Number of
|
|
|
Stock
|
|
|
capital
|
|
|
deficit
|
|
|
Total
|
|
|
|
shares
|
|
|
Amount
|
|
Balance at December 31, 2015
|
|
|
99,800,397
|
|
|
$
|
100
|
|
|
$
|
194,064
|
|
|
$
|
(183,291
|
)
|
|
$
|
10,873
|
|
Changes during the six-month period ended June 30,
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation related to stock options
|
|
|
|
|
|
|
|
|
|
|
534
|
|
|
|
|
|
|
|
534
|
|
Share-based compensation related to restricted stock
award
|
|
|
7,843
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
68
|
|
Net loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,262
|
)
|
|
|
(19,262
|
)
|
Net loss from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(189
|
)
|
|
|
(189
|
)
|
Balance at June 30, 2016
|
|
|
99,808,240
|
|
|
|
100
|
|
|
|
194,666
|
|
|
|
(202,742
|
)
|
|
|
(7,976
|
)
|
Balance at December 31, 2016
|
|
|
124,134,085
|
|
|
$
|
124
|
|
|
$
|
202,575
|
|
|
$
|
(212,656
|
)
|
|
$
|
(9,957
|
)
|
Changes during the six-month period ended June 30,
2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation related to stock options
|
|
|
|
|
|
|
|
|
|
|
216
|
|
|
|
|
|
|
|
216
|
|
Reclassification of embedded derivative
|
|
|
|
|
|
|
|
|
|
|
43,634
|
|
|
|
|
|
|
|
43,634
|
|
Convertible notes conversions
|
|
|
4,948,821
|
|
|
|
5
|
|
|
|
4,132
|
|
|
|
|
|
|
|
4,137
|
|
Net loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,698
|
)
|
|
|
(58,698
|
)
|
Balance at June 30, 2017
|
|
|
129,082,906
|
|
|
$
|
129
|
|
|
$
|
250,557
|
|
|
$
|
(271,354
|
)
|
|
$
|
(20,668
|
)
|
|
*
|
Represents an amount less than $1.
|
|
(1)
|
Common Stock, $0.001 par value; Authorized – as of June 30, 2017 - 250,000,000 shares and as of June 30, 2016 - 150,000,000 shares.
|
The accompanying
notes are an integral part of the condensed consolidated financial statements.
PROTALIX BIOTHERAPEUTICS,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(U.S. dollars in thousands)
(Unaudited)
|
|
Six months ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(58,698
|
)
|
|
$
|
(19,451
|
)
|
Loss from discontinued operations
|
|
|
-
|
|
|
|
(189
|
)
|
Loss from continuing operations
|
|
|
(58,698
|
)
|
|
|
(19,262
|
)
|
Adjustments required to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
|
216
|
|
|
|
602
|
|
Depreciation
|
|
|
986
|
|
|
|
1,006
|
|
Financial (income) expenses, net (mainly exchange differences)
|
|
|
56
|
|
|
|
(167
|
)
|
Changes in accrued liability for employee rights upon retirement
|
|
|
89
|
|
|
|
107
|
|
Gain on amounts funded in respect of employee rights upon retirement
|
|
|
(19
|
)
|
|
|
(3
|
)
|
Gain on conversion of convertible notes
|
|
|
(739
|
)
|
|
|
-
|
|
Change in fair value of convertible notes embedded derivative
|
|
|
38,061
|
|
|
|
-
|
|
Amortization of debt issuance costs and debt discount
|
|
|
1,141
|
|
|
|
221
|
|
Issuance of shares for interest payment in connection
with conversions of convertible notes
|
|
|
634
|
|
|
|
-
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Decrease) increase in deferred revenues (including non-current portion)
|
|
|
1,088
|
|
|
|
(127
|
)
|
Increase in accounts receivable and other assets
|
|
|
(3,538
|
)
|
|
|
(4,952
|
)
|
Increase in inventories
|
|
|
(1,814
|
)
|
|
|
(300
|
)
|
Increase in accounts payable and accruals (including long term)
|
|
|
5,378
|
|
|
|
1,273
|
|
Net cash used in continuing operations
|
|
|
(17,159
|
)
|
|
|
(21,602
|
)
|
Net cash provided by discontinued operations
|
|
|
114
|
|
|
|
285
|
|
Net cash used in operating activities
|
|
$
|
(17,045
|
)
|
|
$
|
(21,317
|
)
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
$
|
(543
|
)
|
|
$
|
(575
|
)
|
Increase in restricted deposit
|
|
|
(343
|
)
|
|
|
|
|
Amounts funded in respect of employee rights upon retirement, net
|
|
|
(83
|
)
|
|
|
(84
|
)
|
Net cash used in investing activities
|
|
$
|
(969
|
)
|
|
$
|
(659
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net payment for conversion of convertible notes
|
|
|
(10,961
|
)
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
(10,961
|
)
|
|
|
-
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
$
|
227
|
|
|
$
|
228
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(28,748
|
)
|
|
|
(21,748
|
)
|
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
63,281
|
|
|
|
76,374
|
|
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
34,533
|
|
|
$
|
54,626
|
|
The accompanying
notes are an integral part of the condensed consolidated financial statements.
PROTALIX BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(U.S. dollars in thousands)
(Unaudited)
(Continued) - 2
|
|
Six
months ended
|
|
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
SUPPLEMENTARY INFORMATION
ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
$
|
493
|
|
|
$
|
656
|
|
Convertible notes conversions
|
|
$
|
3,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE
ON CASH FLOWS
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
2,330
|
|
|
$
|
1,553
|
|
The accompanying
notes are an integral part of the condensed consolidated financial statements.
PROTALIX
BIOTHERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Protalix BioTherapeutics, Inc.
(collectively with its subsidiaries, the “Company”), and its wholly-owned subsidiaries, Protalix Ltd. and Protalix
B.V. (the “Subsidiaries”), are biopharmaceutical companies focused on the development and commercialization of recombinant
therapeutic proteins based on the Company’s proprietary ProCellEx
®
protein expression system (“ProCellEx”).
To date, the Company has successfully developed taliglucerase alfa (marketed under the name Uplyso
TM
in Brazil and
certain other Latin American countries and Elelyso
TM
in the rest of the territories) for the treatment of Gaucher disease
that has been approved for marketing in the United States, Brazil, Israel and other markets. The Company has a number of product
candidates in varying stages of the clinical development process. The Company’s current strategy is to develop proprietary
recombinant proteins that are therapeutically superior to existing recombinant proteins currently marketed for the same indications.
The Company’s product pipeline
currently includes, among other candidates:
(1) PRX-102, or alpha-GAL-A, a
therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder;
(2) PRX-110, a proprietary plant
cell recombinant human Deoxyribonuclease 1, or DNase, under development for the treatment of cystic fibrosis, to be administered
by inhalation; and
(3) OPRX-106, the Company’s
oral antiTNF product candidate which is being developed as an orally-delivered anti-inflammatory treatment using plant cells as
a natural capsule for the expressed protein.
Obtaining marketing approval with
respect to any product candidate in any country is directly dependent on the Company’s ability to implement the necessary
regulatory steps required to obtain such approvals. The Company cannot reasonably predict the outcome of these activities.
Since its approval by the FDA,
taliglucerase alfa has been marketed mainly in the United States by Pfizer as provided in the exclusive license and supply agreement
by and between Protalix Ltd. and Pfizer, which is referred to herein as the Pfizer Agreement. In October 2015, the Company entered
into an Amended and Restated Exclusive License and Supply Agreement (the “Amended Pfizer Agreement”) which amends
and restates the Pfizer Agreement in its entirety. Pursuant to the Amended Pfizer Agreement, the Company sold to Pfizer its share
in the collaboration created under the Pfizer Agreement for the commercialization of Elelyso in exchange for a cash payment equal
to $36.0 million. As part of the sale, the Company agreed to transfer its rights to Elelyso in Israel to Pfizer while gaining
full rights to it in Brazil. Under the Pfizer Agreement, Pfizer and the Company shared revenues and expenses for the development
and commercialization of Elelyso on a 60%/40% basis globally, excluding Israel and Brazil. Under the Amended Pfizer Agreement,
Pfizer is entitled to all of the revenues, and is responsible for 100% of expenses globally for Elelyso, excluding Brazil where
the Company is responsible for all expenses and retains all revenues.
On June 18, 2013, the Company
entered into a Supply and Technology Transfer Agreement (the “Brazil Agreement”) with Fiocruz, an arm of the Brazilian
MoH, for taliglucerase alfa. Fiocruz’s purchases of Uplyso to date have been significantly below certain agreed upon purchase
milestones and, accordingly, the Company has the right to terminate the Brazil Agreement. Notwithstanding the low purchase amounts,
the Company is, at this time, continuing to supply Uplyso to Fiocruz under the Brazil Agreement, and patients continue to be treated
with Uplyso in Brazil. Approximately 10% of adult Gaucher patients in Brazil are currently treated with Uplyso. The Company is
discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations and, based on such discussions,
the Company will determine what it believes to be the course of action that is in the best interest of the Company.
PROTALIX BIOTHERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
In December 2016, the
Company received a letter from Fiocruz regarding an order from the Brazilian MoH to purchase alfataliglicerase to treat
Gaucher patients in Brazil. The Brazilian MoH’s order consists of a number of shipments during 2017 for a total of
approximately $24.3 million. Shipments started in June 2017 and are expected to continue through the end of the year, in
increasing volumes.
Based on its current cash resources
and commitments, the Company believes it will be able to maintain its current planned development activities and the corresponding
level of expenditures for at least 12 months, although no assurance can be given that it will not need additional funds prior
to such time. If there are unexpected increases in general and administrative expenses or research and development expenses, the
Company may need to seek additional financing.
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes
required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature)
considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results
for the interim period are not necessarily indicative of the results that may be expected for the full year.
These unaudited condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial statements in the Annual Report on Form 10-K
for the year ended December 31, 2016, filed by the Company with the Commission. The comparative balance
sheet at December 31, 2016 has been derived from the audited financial statements at that date.
|
c.
|
Net
(loss)
earnings per
share
|
Basic (loss) earnings per share (“LPS”)
are computed by dividing net loss (income) by the weighted average number of shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), outstanding for each period.
Diluted loss per share is calculated by dividing
the net income by the weighted-average number of shares of common stock outstanding during each period increased to include the
number of additional shares of common stock that would have been outstanding if the potentially dilutive shares had been issued.
Potentially dilutive shares include additional shares issuable upon the assumed conversion of the convertible notes (issued in
September 2013 and December 2016).
PROTALIX BIOTHERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
The loss and weighted average number of shares outstanding
used to calculate (loss) earnings per share were as follows:
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
Net loss (income) for the period
|
|
$
|
(58,698
|
)
|
|
$
|
(19,451
|
)
|
|
$
|
450
|
|
|
$
|
(10,853
|
)
|
Financial income, net of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
$
|
(11,847
|
)
|
|
|
-
|
|
Loss used for the computation of diluted loss per share
|
|
$
|
(58,698
|
)
|
|
$
|
(19,451
|
)
|
|
$
|
(11,397
|
)
|
|
$
|
(10,853
|
)
|
Weighted
average shares of common stock outstanding for basic calculation
|
|
|
126,000,782
|
|
|
|
99,737,348
|
|
|
|
127,523,706
|
|
|
|
99,758,511
|
|
Weighted average dilutive effect of shares issuable upon conversion of convertible notes
|
|
|
-
|
|
|
|
-
|
|
|
|
65,066,683
|
|
|
|
-
|
|
Weighted average dilutive effect of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
8,000
|
|
|
|
-
|
|
Weighted average shares of common stock outstanding for diluted calculation
|
|
|
126,000,782
|
|
|
|
99,737,348
|
|
|
|
192,598,389
|
|
|
|
99,758,511
|
|
Diluted LPS is calculated in continuing
operations. The calculation of diluted LPS does not include 19,617,149 and 74,087,411 shares of Common Stock underlying
outstanding options and restricted shares of Common Stock and shares issuable upon conversion of the convertible notes
(issued in September 2013 and December 2016) for the six months ended June 30, 2016 and 2017, respectively, and 19,586,488 of
Common Stock for the three months ended June 30, 2016 because the effect would be anti-dilutive. The calculation of diluted
LPS does not include 5,059,186 shares of Common Stock underlying outstanding options for the three months ended June 30,
2017, because the effect would be anti-dilutive.
NOTE 2 – INVENTORIES
Inventory at June 30, 2017 and December 31,
2016 consisted of the following:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(
U.S. dollars in thousands)
|
|
Raw materials
|
|
$
|
3,130
|
|
|
$
|
2,591
|
|
Work in progress
|
|
|
444
|
|
|
|
395
|
|
Finished goods
|
|
|
3,485
|
|
|
|
2,259
|
|
Total inventory
|
|
$
|
7,059
|
|
|
$
|
5,245
|
|
PROTALIX BIOTHERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 – FAIR VALUE MEASUREMENT
The Company measures fair value and discloses fair
value measurements for financial assets and liabilities. Fair value is based on the price that would be received from the sale
of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
The accounting standard establishes a fair value
hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described
below:
Level 1: Quoted prices (unadjusted) in active markets
that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to
Level 1 inputs.
Level 2: Observable prices that are based on inputs
not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little
or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company utilizes
valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible
and 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 is usually identical or close to their carrying value.
The fair value of the convertible notes derivative
is based on Level 3 measurement.
As of June 30, 2017, the fair value of the remaining
$14.9 million aggregate principal amount of the Company’s outstanding 4.5% convertible promissory notes due 2018, and of
the remaining $51.9 million aggregate principal amount of the Company’s outstanding 7.5% secured convertible promissory
notes due 2021, is approximately $11.5 million and $75.1 million, respectively, based on a Level 3 measurement.
NOTE 4 – DISCONTINUED OPERATIONS
The Company accounted for the
termination of the Pfizer Agreement and the sale of the license as a discontinued operation, in accordance with ASU
No. 2014-08. The following assets and liabilities associated with the Company’s discontinued operations have been
segregated and classified as assets and liabilities of discontinued operations, as appropriate, in the consolidated balance
sheets as of June 30, 2017 and December 31, 2016, respectively:
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
(
U.S. dollars in thousands)
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Accounts receivable - Trade
|
|
$
|
213
|
|
|
$
|
327
|
|
Total current assets of discontinued
operations
|
|
$
|
213
|
|
|
$
|
327
|
|
PROTALIX BIOTHERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 – DISCONTINUED OPERATIONS
(continued):
The following summarizes financial information related
to the Company’s discontinued operations in the Company’s consolidated statements of operations for the six
months ended June 30, 2017 and June 30, 2016:
|
|
Six months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(
U.S. dollars in thousands)
|
|
REVENUES
|
|
|
|
|
|
$
|
209
|
|
COST OF REVENUES
|
|
|
|
|
|
|
(373
|
)
|
GROSS PROFIT
|
|
|
|
|
|
|
(164
|
)
|
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
|
|
|
|
|
|
|
(25
|
)
|
NET (LOSS) FOR THE PERIOD FROM DISCONTINUED
OPERATIONS
|
|
|
|
|
|
$
|
(189
|
)
|
NOTE 5 – CONVERTIBLE NOTES
All of the Company’s outstanding convertible
notes are accounted for using the guidance set forth in the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (ASC) 815 requiring that the Company determine whether the embedded conversion option must be separated
and accounted for separately. ASC 470-20 regarding debt with conversion and other options requires the issuer of a convertible
debt instrument that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion
option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The Company
accounts for the 4.5% convertible notes as liability, on an aggregated basis, in their entirety. The conversion feature for the
Company’s 7.5% convertible notes is accounted for as a derivative which is bifurcated from the debt host contract and is
measured at fair value through the statement of operations. On April 12, 2017, the Company received approval from its stockholders
to issue shares of the Company’s Common Stock in excess of 19.9% of the Company’s outstanding shares of Common Stock
immediately prior to the closing of the issuance of the Company’s 7.5% convertible notes to settle conversion requests and
pay interest on the Company’s issued 7.5% convertible notes. As a result, the Company reclassified the embedded derivative
to equity. During the six months ended June 30, 2017 such measurement of the derivative resulted in a non-cash charge to the Company’s
statement of operations of $38,061 thousand.
The debt discount and debt issuance costs regarding
the issuance of the Company’s outstanding 4.5% convertible notes due 2018 are deferred and amortized over the applicable
convertible period (5 years).
Issuance costs regarding the issuance of the Company’s
7.5% convertible notes were allocated to the liability, equity component, derivative and shares of Common Stock based on their
relative fair values. Issuance costs that were allocated to liability will be amortized using the effective interest rate, other
than issuance costs that were allocated to derivative, which were expensed immediately.
During the six months ended June 30, 2017, note
holders converted approximately $10.8 million aggregate principal amount of the Company’s 7.5% convertible notes into a
total of 4,948,821 shares of Common Stock and cash payments equal to approximately $11 million.
NOTE 6 – SUBSEQUENT EVENTS
On July 24, 2017, the Company entered into a note
purchase agreement with certain institutional investors relating to the private issuance and sale by the Company of $10 million
aggregate principal amount of its 7.5% convertible notes due 2021.
PROTALIX BIOTHERAPEUTICS,
INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – SUBSEQUENT EVENTS
(continued):
Concurrently with the consummation of the purchase
described above, the Company entered into a privately negotiated exchange agreement with certain of its existing note holders holding
the Company’s 4.5% convertible note due 2018 to exchange $9 million aggregate principal amount of the Company’s 4.5%
convertible notes due 2018 for $8.55 million aggregate principal amount of 4.5% senior convertible notes due 2022.
Interest payments on both the 4.5% senior convertible
notes due 2022 and 7.5% convertible notes due 2021 are payable on a semiannual basis, and the initial conversion rate for the both
sets of notes is approximately 1,176 shares of Common Stock per $1,000 principal amount, which is equivalent to an initial conversion
price of approximately $0.85 per share of Common Stock, and is subject to adjustment in certain circumstances.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
You should read the following discussion
and analysis of our financial condition and results of operations together with our financial statements and the consolidated
financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the
year ended December 31, 2016. Some of the information contained in this discussion and analysis, particularly with respect to
our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.
You should read “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion
of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company focused on the development
and commercialization of recombinant therapeutic proteins based on our proprietary ProCellEx
®
protein expression
system, or ProCellEx. We developed our first commercial drug product, Elelyso
TM
, using our ProCellEx system and we
are now focused on utilizing the system to develop a pipeline of proprietary, clinically superior versions of recombinant therapeutic
proteins that primarily target large, established pharmaceutical markets and that in most cases rely upon known biological mechanisms
of action. With our experience to date, we believe ProCellEx will enable us to develop additional proprietary recombinant proteins
that are therapeutically superior to existing recombinant proteins currently marketed for the same indications. We are now also
applying the unique properties of our ProCellEx system for the oral delivery of therapeutic proteins.
On May 1, 2012, the FDA approved for sale our first commercial
product, taliglucerase alfa for injection, an enzyme replacement therapy, or ERT, for the long-term treatment of adult patients
with a confirmed diagnosis of type 1 Gaucher disease. Subsequently, taliglucerase alfa was approved for marketing by the regulatory
authorities of other countries. Taliglucerase alfa is called alfataliglicerase in Brazil and certain other Latin American countries,
where it is marketed under the name Uplyso
TM
. Taliglucerase alfa is marketed under the name Elelyso in other territories.
Since
its approval by the FDA, taliglucerase alfa has been marketed mainly in the United States by Pfizer, as provided in the exclusive
license and supply agreement by and between Protalix Ltd., our wholly-owned subsidiary, and Pfizer, which we refer to as the Pfizer
Agreement. In
October 2015, we entered into an Amended and Restated Exclusive License and Supply Agreement, or the Amended
Pfizer Agreement, which amends and restates the Pfizer Agreement in its entirety. Pursuant to the Amended Pfizer Agreement, we
sold to Pfizer our share in the collaboration created under the initial Pfizer Agreement for the commercialization of Elelyso
in exchange for a cash payment equal to $36.0 million. As part of the sale, we agreed to transfer our rights to Elelyso in Israel
to Pfizer, while gaining full rights to Elelyso in Brazil. We will continue to manufacture drug substance for Pfizer, subject
to certain terms and conditions. Under the initial Pfizer Agreement, Pfizer shared revenues and expenses for the development and
commercialization of Elelyso with us on a 60%/40% basis globally, excluding Israel and Brazil. Under the Amended Pfizer Agreement,
Pfizer is responsible for 100% of expenses, and entitled to all revenues globally for Elelyso, excluding Brazil, where we are
responsible for all expenses and retain all revenues.
For the first 10-year period after the execution of the Amended
Pfizer Agreement, we have agreed to sell drug substance to Pfizer for the production of Elelyso, and Pfizer maintains the right
to extend the supply period for up to two additional 30-month periods subject to certain terms and conditions. Any failure to
comply with our supply commitments may subject us to substantial financial penalties, which will have a material adverse effect
on our business, results of operations and financial condition. The Amended Pfizer Agreement also includes customary provisions
regarding cooperation for regulatory matters, patent enforcement, termination, indemnification and insurance requirements.
On
June 18, 2013, we entered into a Supply and Technology Transfer Agreement, or the Brazil Agreement, with
Fiocruz, an arm
of the Brazilian MoH,
for taliglucerase alfa.
In
December 2016, we received a letter from Fiocruz regarding an order from the Brazilian MoH to purchase alfataliglicerase to treat
Gaucher patients in Brazil. The Brazilian MoH’s order consists of a number of shipments during 2017 for a total of approximately
$24.3 million.
Shipments started in June 2017 and are expected to continue through the end of the year, in increasing volumes.
Fiocruz’s purchases of Uplyso to date have been significantly below
certain agreed upon purchase milestones and, accordingly, we have the right to terminate the Brazil Agreement. Notwithstanding
the low purchase amounts, we are, at this time, continuing to supply Uplyso to Fiocruz under the Brazil Agreement, and patients
continue to be treated with Uplyso in Brazil. We are discussing with Fiocruz potential actions that Fiocruz may take to comply
with its purchase obligations and, based on such discussions, we will determine what we believe to be the course of action that
is in the best interest of our company.
We are developing an innovative product pipeline using our
ProCellEx protein expression system. Our product pipeline currently includes, among other candidates:
(1) PRX-102, or alpha-GAL-A, a therapeutic protein candidate
for the treatment of Fabry disease, a rare, genetic lysosomal disorder in humans, currently in an ongoing phase III clinical trial.
(2) PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease
1, or alidornase alfa, under development for the treatment of cystic fibrosis, to be administered by inhalation. alidornase alfa
has successfully completed a phase II efficacy and safety study.
(3) OPRX-106, our oral antiTNF product candidate which is being
developed as an orally-delivered anti-inflammatory treatment using plant cells as a natural capsule for the expressed protein.
Patient enrollment in our phase II clinical trial of OPRX-106 for the treatment of ulcerative colitis was initiated in the fourth
quarter of 2016.
Except
for the rights to commercialize taliglucerase alfa worldwide (other than Brazil), which we licensed to Pfizer, we hold the worldwide
commercialization rights to all of our proprietary development
candidates.
In addition, we continuously evaluate potential strategic marketing partnerships as well as collaboration programs with biotechnology
and pharmaceutical companies and academic research institutes.
Critical Accounting Policies
Our significant accounting policies are more fully described
in Note 1 to our consolidated financial statements appearing in this Quarterly Report. There have not been any changes to
our significant accounting policies since the Annual Report on Form 10-K for the year ended December 31, 2016.
The discussion and analysis of our financial condition and
results of operations is based on our financial statements, which we prepared in accordance with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements,
as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and
judgments, including those described in greater detail below. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
Convertible Notes
All outstanding convertible notes are accounted for using the
guidance set forth in the Financial Accounting Standards Board, or FASB, Accounting Standards Codification (ASC) 815 requiring
that we determine whether the embedded conversion option must be separated and accounted for separately. ASC 470-20 regarding debt
with conversion and other options requires the issuer of a convertible debt instrument that may be settled in cash upon conversion
to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects
the issuer’s nonconvertible debt borrowing rate. We account for the 4.5% convertible notes as liability, on an aggregated
basis, in their entirety. The conversion feature for our 7.5% convertible notes is accounted for as a derivative which is bifurcated
from the debt host contract and is measured at fair value through the statement of operations. On April 12, 2017, we received approval
from our stockholders to issue shares of our common stock in excess of 19.9% of our outstanding shares of common stock immediately
prior to the closing of the issuance of our 7.5% convertible notes to settle conversion requests and pay interest on our issued
7.5% convertible notes. As a result, we reclassified the embedded derivative to equity.
The debt discount and debt issuance costs regarding the issuance
of 4.5% convertible notes due 2018 are deferred and amortized over the applicable convertible period (5 years).
Issuance costs regarding the issuance of our 7.5% convertible
notes were allocated to the liability, equity component, derivative and shares of common stock based on their relative fair values.
Issuance costs that were allocated to liability will be amortized using the effective interest rate, other than issuance costs
that were allocated to derivative, which were expensed immediately.
During the six months ended June 30, 2017, note holders converted
approximately $10.8 million aggregate principal amount of our 7.5% convertible notes into a total of 4,948,821 shares of our common
stock and cash payments equal to approximately $11 million.
Results of Operations
Three months ended June 30, 2017 compared to the three
months ended June 30, 2016
Revenues
We recorded revenues of $6.4 million during the three months
ended June 30, 2017, an increase of $4.6 million, or 259%, from revenues of $1.8 million for the three months ended June 30, 2016.
The increase resulted primarily from an increase in the amount of drug substance sold to Pfizer, and drug product sold to Brazil.
Cost of Revenues
Cost of revenues was $5.5 million for the three months
ended June 30, 2017, an increase of $3.8 million, or 230%, from cost of revenues of $1.7 million for the three months ended
June 30, 2016. The increase resulted primarily from costs related to the production of drug substance for sale to Pfizer, and
of drug product for sale to Brazil.
Research and Development Expenses, Net
Research and development expenses were $9.3 million for
the three months ended June 30, 2017, a decrease of $709,000, or 7%, from $10.0 million for the three months ended June 30,
2016.
We expect research and development expenses
for our various development programs to continue to be our primary expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
were $2.8 million for the three months ended June 30, 2017, an increase of $608,000, or 28%, from $2.2 million for the
three months ended June 30, 2016. The increase resulted primarily from an increase of $459,000 in sales expenses.
Financial Expenses, net
Financial Income, net was $11.3 million for
the three months ended June 30, 2017, compared to financial expenses net of $805,000 for the three months ended June 30, 2016.
During the three months ended June 30, 2017, financial income included an income of $14.3 million as a result of the re-measurement
of the fair value of the 7.5% convertible notes embedded derivative. In addition, financial expenses is composed primarily from
interest expense on convertible notes of $1.2 million for the period ended June 30, 2017.
Six months ended June 30, 2017 compared to the six months
ended June 30, 2016
Revenues
We recorded revenues of $9.2 million during the six months
ended June 30, 2017, an increase of $6.8 million, or 278%, from revenues of $2.4 million for the six months ended June 30,
2016. The increase resulted primarily from an increase in the amount of drug substance sold to Pfizer and drug products sold to
Brazil.
Cost of Revenues
Cost of revenues was $7.6 million for the six months ended
June 30, 2017, an increase of $5.4 million, or 246%, from cost of revenues of $2.2 million for the six months ended
June 30, 2016. The increase resulted primarily from costs related to the production of drug substance for sale to Pfizer, and
of drug product for sale to Brazil.
Research and Development Expenses, Net
Research and development expenses were $15.3 million for
the six months ended June 30, 2017, a decrease of $2.0 million, or 12%, from $17.3 million for the six months ended
June 30, 2016. The decrease resulted primarily from a decrease of $2.2 million in materials used in our development.
We expect research and development expenses
for our various development programs to continue to be our primary expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses
were $5.4 million for the six months ended June 30, 2017, an increase of $1.2 million, or 27%, from $4.2 million
for the six months ended June 30, 2016. The increase resulted primarily from an increase of $762,000 in sales expenses.
Financial Expenses, net
Financial expenses net were $41.5 million
for the six months ended June 30, 2017, an increase of $40 million, compared to financial expenses net of $1.5 million for
the six months ended June 30, 2016. During the six months ended June 30, 2017, financial expenses included a charge of $38.1 million
as a result of the re-measurement of the fair value of the 7.5% convertible notes embedded derivative. In addition, financial
expenses is composed primarily from interest expense on convertible notes.
Liquidity and Capital Resources
Sources of Liquidity
As a result of our significant research and
development expenditures and the lack of significant revenue from sales of taliglucerase alfa, we have generated operating losses
from our continuing operations since our inception. To date, we have funded our operations primarily with proceeds equal to $31.3 million
from the sale of shares of convertible preferred and ordinary shares of Protalix Ltd., and an additional $14.1 million in
connection with the exercise of warrants issued in connection with the sale of such shares, through December 31, 2008. In addition,
on October 25, 2007, we generated gross proceeds of $50 million in connection with an underwritten public offering of our
common stock and on each of March 23, 2011 and February 22, 2012, we generated gross proceeds of $22.0 million and $27.2 million,
respectively, in connection with underwritten public offerings of our common stock.
In addition to the foregoing, on September 18, 2013, we completed
a private placement of $69.0 million in aggregate principal amount of 4.50% convertible notes due 2018, including $9.0 million
aggregate principal amount of the of 4.50% convertible notes related to the offering’s initial purchaser’s over-allotment
option, which was exercised in full. In December 2016, we completed a private placement of $22.5 million in aggregate principal
amount of 7.5% convertible notes due 2021. Finally, on July 25, 2017, we completed a private placement of an additional $10.0 million in aggregate
principal amount of 7.5% convertible notes due 2021.
Pfizer
paid Protalix Ltd. $60.0 million as an upfront payment in connection with the execution of the Pfizer Agreement and subsequently
paid to Protalix Ltd. an additional $5.0 million upon Protalix Ltd.’s meeting a certain milestone. Protalix Ltd. also received
a milestone payment of $25.0
million
in connection with the
FDA’s approval of taliglucerase alfa in May 2012.
Pfizer has also paid Protalix Ltd. $8.3 million in connection with
the successful achievement of certain milestones under a clinical development agreement between Pfizer and Protalix Ltd. In connection
with the execution of the Amended Pfizer Agreement, we received a $36.0 million payment from Pfizer, and Pfizer purchased 5,649,079
shares of our common stock for $10.0 million.
We believe that our existing cash and cash
equivalents will be sufficient for at least 12 months. We have based this estimate on assumptions that are subject to change and
may prove to be wrong, and we may be required to use our available capital resources sooner than we currently expect. Because
of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are
unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated
clinical trials.
Cash Flows
Net cash used in operations was $17 million
for the six months ended June 30, 2017. The net loss for the six months ended June 30, 2017 of $58.7 million was further
increased by an increase of $3.5 million in accounts receivable and an increase of $1.8 million in inventories, but
was partially offset by change of $38 million in the fair value of convertible notes embedded derivative and increase of $5.4 million
in accounts payable. Net cash used in investing activities for the six months ended June 30, 2017 was $969,000 and consisted
primarily of purchases of property and equipment and an increase in restricted deposit. Net cash used in financing activities
for the six months ended June 30, 2017 was $11.0 million and consisted primarily of cash settlement for certain conversions of
our convertible notes.
Net cash used in operations was $21.3 million
for the six months ended June 30, 2016. The net loss for the six months ended June 30, 2016 of $19.5 million was further increased
by an increase of $5.0 million in accounts receivable, but was partially offset by an increase in accounts payable of $1.3 million.
Net cash used in investing activities for the six months ended June 30, 2016 was approximately $659,000 and consisted primarily
of purchases of property and equipment.
Future Funding Requirements
We expect to continue to incur significant
expenditures in the near future, including significant research and development expenses related primarily to the clinical trials
of PRX-102, alidornase alfa and OPRX-106, and the advancement of our other product candidates into anticipated later stage clinical
trials.
Our future capital requirements will depend
on many other factors, including our progress in commercializing Uplyso in Brazil, the progress and results of our clinical trials,
the duration and cost of discovery and preclinical development and laboratory testing and clinical trials for our product candidates,
conversions of our convertible notes from time to time, the timing and outcome of regulatory review of our product candidates,
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual
property rights, the number and development requirements of other product candidates that we pursue and the costs of commercialization
activities, including product marketing, sales and distribution.
We may need to finance our future cash needs
through corporate collaboration, licensing or similar arrangements, public or private equity offerings or debt financings. We
currently do not have any commitments for future external funding. We may need to raise additional funds more quickly if one or
more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently
anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are favorable.
Any sale of additional equity or debt securities will likely result in dilution to our stockholders. The incurrence of indebtedness
would result in increased fixed obligations and could also result in covenants that would restrict our operations. Additional
equity or debt financing, grants or corporate collaboration and licensing arrangements may not be available on acceptable terms,
if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and
development programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or
others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize
independently.
Effects of Inflation and Currency Fluctuations
Inflation generally affects us by increasing
our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations
during the six months ended June 30, 2017 and June 30, 2016.
Currency fluctuations could affect us through
increased or decreased acquisition costs for certain goods and services. We do not believe currency fluctuations have had a material
effect on our results of operations during the six months ended June 30, 2017 and June 30, 2016.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
as of each of June 30, 2017 and June 30, 2016.