Risk Factors Summary
The following is a summary of the principal risks that
could materially adversely affect our business, results of operations, and financial condition, all of which are more fully described
below. This summary should be read in conjunction with the other information discussed in this Item 3.D, and should not be relied
upon as an exhaustive summary of the material risks facing our business. Please carefully consider all of the information discussed in
this Item 3.D. “Risk Factors” and elsewhere in this Annual Report for a more thorough description of these and other
risks. Such risks include, but are not limited to:
| ● | We have incurred significant losses since inception and have not generated any revenue to date. |
| ● | We expect to incur losses over the next several years and may not be able to achieve or sustain revenues or profitability in
the future; |
| ● | We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce
or terminate the development of our Alpha DaRT technology or other product discovery and development programs or commercialization efforts; |
| ● | Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess its future
viability; |
| ● | Our approach to the development of our proprietary Alpha DaRT technology represents a novel approach to radiation therapy, which creates
significant and potentially unpredictable challenges for us; |
| ● | The commercial success of our Alpha DaRT technology, if authorized or certified for commercial sale, will depend in part upon public
perception of radiation therapies, and to a lesser extent, radiopharmaceuticals, and the degree of their market acceptance by physicians,
patients, healthcare payors and others in the medical community; |
| ● | The ongoing COVID-19 pandemic could continue to adversely impact our business, including its clinical trials, supply chain and business
development activities; |
| ● | The market opportunities for our Alpha DaRT technology may be smaller than it anticipated or may be limited to those patients who
are ineligible for or have failed prior treatments. If we encounter difficulties enrolling patients in its clinical trials, our clinical
development activities could be delayed or otherwise adversely affected; |
| ● | We do not currently engage in commercial marketing activities or sales efforts and we have no experience in marketing our products.
If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our Alpha
DaRT technology, if approved for commercial sale, we may not be able to generate product revenue; |
| ● | We currently conduct and in the future intend to continue conducting pre-clinical studies and clinical trials for our Alpha DaRT technology
outside the United States, and the FDA and similar foreign regulatory authorities or notified bodies may not accept data from such trials; |
| ● | Our Alpha DaRT technology and operations are subject to extensive government regulation and oversight both in the United States and
abroad, and our failure to comply with applicable requirements could harm our business; |
| ● | We may not receive, or may be delayed in receiving, the necessary marketing authorizations or certifications for our Alpha DaRT technology
or any future products or product candidates, and failure to timely obtain necessary marketing authorizations or certifications for our
product candidates would have a material adverse effect on our business; |
| ● | If we do not obtain and maintain international regulatory registrations, marketing authorizations or certifications for any product
candidates we develop, we will be unable to market and sell such product candidates outside of the United States; |
| ● | If in the future Alpha DaRT is approved or certified for commercial sale, but we are unable to obtain adequate reimbursement or insurance
coverage from third-party payors, we may not be able to generate significant revenue; |
| ● | We may be unable to obtain a sufficient or sufficiently pure supply of radioisotopes to support clinical development or at commercial
scale; |
| ● | If we are unable to obtain and maintain patent or other intellectual property protection for our Alpha DaRT technology and for any
other products or product candidates that we develop, or if the scope of the patent or other intellectual property protection obtained
is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to our products
and technology, and our ability to commercialize any product candidates that we may develop, and our technology may be adversely affected;
and |
| ● | We will continue to incur increased costs as a result of operating as a public company, and our management will continue to devote
substantial time to new compliance initiatives. |
Risks Related to Our Financial Condition and Capital Requirements
We have incurred significant losses
since inception and have not generated any revenue to date. We expect to incur losses over the next several years and may not be able
to achieve or sustain revenues or profitability in the future.
Investment in the medical
device industry and product development is a highly speculative undertaking and entails substantial upfront capital expenditures and significant
risk that our Alpha DaRT technology will fail to demonstrate adequate efficacy or an acceptable safety profile, gain marketing authorization
in the United States and similar authorization or certification in various other jurisdictions worldwide and become commercially viable.
We currently have no products authorized for commercial sale in the United States and have not generated any revenue to date, and we continue
to incur significant research and development and other expenses related to our ongoing operations. To date, we have financed our operations
primarily through private placements of our ordinary and preferred shares as well as through grants received from government authorities,
primarily in Israel.
We have incurred significant
net losses in each period since we commenced activity in 2016. Our net losses were $27,271 and 33,762 for the years ended December 31,
2021 and December 31, 2022, respectively. As of December 31, 2022, we had an accumulated deficit of $86,602. We expect to continue
to incur significant losses for the foreseeable future, and we expect these losses to increase substantially if and as we:
| ● | continue
our research and development efforts and submit applications seeking marketing authorizations in the United States or authorizations
or certifications outside the United States for our Alpha DaRT technology; |
| ● | conduct
and expand the scope of our preclinical studies and clinical trials for our Alpha DaRT technology; |
| ● | continue
to develop manufacturing facilities for our Alpha DaRT technology; |
| ● | seek
to identify additional potential indications for our Alpha DaRT technology; |
| ● | acquire
or in-license other products or product candidates or technologies; |
| ● | add
operational, financial and management information systems and personnel, including personnel to help us comply with our obligations as
a public company; |
| ● | hire
and retain additional personnel, such as clinical, quality control, scientific, commercial and administrative personnel, including personnel
to support the development and potential commercialization of our Alpha DaRT technology; |
| ● | seek
marketing authorizations or certifications for our Alpha DaRT technology or any other product candidates that successfully complete clinical
trials; |
| ● | establish
a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities, whether alone or with third parties,
to commercialize our Alpha DaRT technology or other products or product candidates for which we may obtain marketing authorization in
the United States or similar authorization or certification in other target jurisdictions, if any; |
| ● | expand,
maintain and protect our intellectual property portfolio; and |
| ● | operate
as a public company. |
Because of the numerous
risks and uncertainties associated with the medical device industry, we are unable to accurately predict the timing or amount of increased
expenses we will incur or when, if ever, we will be able to achieve profitability. Even if we succeed in commercializing our Alpha DaRT
technology in one indication, we will continue to incur substantial research and development and other expenditures to develop, seek marketing
authorizations or certifications for, and potentially market our Alpha DaRT technology in other indications. We may encounter unforeseen
expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future
net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and
expected future losses have had and will continue to have an adverse effect on our shareholders’ equity and working capital.
We have not generated any revenue to
date and may never be profitable.
Our ability to become
profitable depends upon our ability to generate revenue. To date, we have not generated any revenue. We do not expect to generate significant
product revenue unless or until we successfully complete clinical development and obtain marketing authorization in the United States
and similar authorization or certification in other target jurisdictions of, and then successfully commercialize, our Alpha DaRT technology
for at least one indication. Our Alpha-DaRT technology is currently in clinical trials for a number of forms of cancer, including skin,
oral, pancreatic, prostate and breast cancers, and preclinical studies for brain, lung and other cancers, which will all require additional
preclinical or clinical studies, clinical development and regulatory review and authorization or certification, substantial investment,
access to sufficient commercial manufacturing capacity and significant commercialization and marketing efforts before we can generate
any revenue from product sales.
We are conducting clinical
trials in a number of forms of cancer and, as such, face significant development risks as our Alpha DaRT technology advances further through
clinical development. Our ability to generate revenue depends on a number of factors, including, but not limited to:
| ● | timely
completion of our current and future preclinical studies and clinical trials, which may be significantly slower or more costly than we
currently anticipate and will depend substantially upon the performance of third-party contractors; |
| ● | our
ability to pre-clinical studies and successfully submit Investigational Device Exemptions, or IDEs, or comparable applications
to allow us to initiate clinical trials for our Alpha DaRT technology or any future products or product candidates, including similar
requirements as applicable in foreign jurisdictions; |
| ● | being
required by the U.S. Food and Drug Administration, or FDA, or similar foreign regulatory authorities or bodies to conduct additional
clinical trials or other studies beyond those planned to support the potential marketing authorization or certification and commercialization
of our Alpha DaRT technology or any future products or product candidates we develop or acquire; |
| ● | our
ability to demonstrate to the satisfaction of the FDA or similar foreign regulatory authorities or other bodies the safety and efficacy
of our Alpha DaRT technology or any future products or product candidates, if required; |
| ● | the
prevalence, duration and severity of potential side effects or other safety issues experienced with our Alpha DaRT technology or future
products or product candidates, if any; |
| ● | the
timely receipt of necessary marketing authorizations from the FDA or authorizations or certifications from similar foreign regulatory
authorities or other bodies; |
| ● | the
willingness of physicians, operators of clinics and patients to utilize or adopt our Alpha DaRT technology or future products or product
candidates as potential cancer treatments; |
| ● | the
availability of coverage and adequate reimbursement and pricing by third-party payors, including government authorities; |
| ● | our
ability, and the ability of third parties with whom we may choose to contract, to manufacture adequate clinical and commercial supplies
of our product using Alpha DaRT technology or any future products or product candidates, remain in good standing with regulatory authorities
and develop, validate and maintain commercially viable manufacturing processes that are compliant with current good manufacturing practices,
or cGMP; |
| ● | our
ability to successfully develop a commercial strategy and thereafter commercialize our Alpha DaRT technology or any future products or
product candidates in the United States and internationally, if licensed for marketing, reimbursement, sale and distribution in such
countries and territories, whether alone or in collaboration with others; and |
| ● | our
ability to establish and enforce intellectual property rights in and to our Alpha DaRT technology or any future products or product candidates. |
Many of the factors listed
above are beyond our control and could cause us to experience significant delays or prevent us from obtaining marketing authorizations
or certifications or commercializing our Alpha DaRT technology. Even if we are able to commercialize our Alpha DaRT technology, we may
not achieve profitability soon after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale
of our Alpha DaRT technology or any future products or product candidates, we may be unable to continue operations without continued funding.
We may need substantial additional funding,
and if we are unable to raise capital when needed, we could be forced to delay, reduce or terminate the development of our Alpha DaRT
technology or other product discovery and development programs or commercialization efforts.
Our operations have consumed
substantial amounts of cash since inception. We expect to continue to spend substantial amounts to continue the clinical and preclinical
development of our Alpha DaRT technology. We may need to raise additional capital to complete our currently ongoing planned clinical trials
and any future clinical trials. Other unanticipated costs may arise in the course of our development efforts. If we are able to gain marketing
authorization or certification for our Alpha DaRT technology or other future products or product candidates that we develop, we may require
significant additional amounts of funding in order to launch and commercialize such our Alpha DaRT technology or products or product candidates.
We cannot reasonably estimate the actual amounts necessary to successfully complete the development of and commercialize our Alpha DaRT
technology and we may need substantial additional funding after consummation of this transaction to complete the development and commercialization
of our Alpha DaRT technology.
Our future need for additional
funding depends on many factors, including:
| ● | the
scope, progress, results and costs of researching and developing our Alpha DaRT technology, as well as other additional products or product
candidates we may develop and pursue in the future; |
| ● | the
timing of, and the costs involved in, obtaining marketing authorizations or certifications for our Alpha DaRT technology and any other
additional products or product candidates we may develop and pursue in the future; |
| ● | subject
to receipt of marketing authorizations or certifications, the costs of commercialization activities for our Alpha DaRT technology or
future products or product candidates, to the extent such costs are not the responsibility of any future collaborators, including the
costs and timing of establishing product sales, marketing and distribution; |
| ● | the
timing of and costs involved in expanding our manufacturing capabilities as we roll out our Alpha DaRT technology, and any other additional
products or product candidates which we may develop, in order to establish necessary infrastructure; |
| ● | subject
to receipt of marketing authorization or certification, revenue, if any, received from commercial sales of our Alpha DaRT technology
or any other additional products or product candidates we may develop and pursue in the future; |
| ● | the
extent to which we in-license or acquire rights to other products, product candidates or technologies; |
| ● | our
ability to establish collaboration arrangements for the development of our Alpha DaRT technology or other future products or product
candidates on favorable terms, if at all; |
| ● | our
headcount growth and associated costs as we expand our research and development and manufacturing and establish a commercial infrastructure; |
| ● | the
costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including
enforcing and defending intellectual property related claims; and |
| ● | the
costs of operating as a public company. |
We cannot be certain
that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts
or on terms acceptable to us, we may have to significantly delay, reduce or terminate the development of our Alpha DaRT technology or
plans for commercialization.
We believe that our existing
cash and cash equivalents will enable us to fund its operating expenses and capital expenditure requirements into 2025. Our estimates
may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances,
some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may
need to seek additional funds sooner than planned.
Our limited operating history may make
it difficult for you to evaluate the success of our business to date and to assess our future viability.
We are a clinical-stage
medical device oncology therapy company with a limited operating history. We commenced operations in 2016, and our operations to date
have been limited to organizing and staffing our company, business planning, raising capital, conducting research activities, filing patent
applications, developing our Alpha DaRT technology, identifying target indications, initiating and conducting our clinical trials, undertaking
preclinical studies and establishing manufacturing infrastructure and capacity to produce our Alpha DaRT technology. We have not yet demonstrated
our ability to successfully initiate a pivotal trial in the United States, obtain marketing authorizations (other than in Israel) or similar
authorizations or certifications in other foreign jurisdictions, manufacture a commercial-scale product or arrange for a third party to
do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently,
any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In addition, as a young
business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need
to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities.
We may not be successful in such a transition.
We may be exposed to financial risk
related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates.
We may be adversely affected
by foreign currency fluctuations. Our reporting currency and the functional currency of our operating companies is the US Dollar.
To date, we have been primarily funded through issuances of equity that have been denominated in U.S. Dollar. However, a meaningful
portion of our expenditures are paid in New Israeli Shekel, particularly with respect to our employees, and we are therefore subject to
foreign currency fluctuations that may, from time to time, impact our financial position and results of operations.
Risks Related to Our Business and the Alpha DaRT Technology
Our approach to the development of our proprietary Alpha DaRT
technology represents a novel approach to radiation therapy, which creates significant and potentially unpredictable challenges for us.
Our future success depends on the successful development
of our Alpha DaRT technology, which is designed to treat solid tumors through alpha irradiation by intratumoral insertion of radium-224
impregnated sources, representing what we believe to be a novel approach to local radiotherapy. Alpha-emitting isotope oncology therapy
is relatively new, and only one alpha-emitting isotope therapy has been approved in the United States or the European Union, or EU, and
only a limited number of clinical trials of products based on alpha-emitting isotope therapies have commenced. In addition, the majority
of the clinical trials evaluating alpha-emitting isotope oncology therapy have focused on systemic delivery of drugs like radiopharmaceuticals
(including Xofigo or certain antibody-radionuclide conjugates), while our Alpha DaRT technology is designed to be a local therapy. As
such, it is difficult to accurately predict the developmental challenges we may incur for our Alpha DaRT technology as it proceeds through
preclinical studies and clinical trials. In addition, beyond the limited universe of patients treated with Xofigo, the sole alpha-emitting
isotope therapy approved in the United States or the EU, as well as other uses of alpha-emitting isotope therapy outside of oncology,
such as in the use in treating ankylosing spondylitis, assessments of the long-term safety of targeted alpha-emitting isotope therapies
in humans have been limited, and there may be long-term effects from treatment with our Alpha DaRT technology or any future products or
product candidates we develop that we cannot predict at this time. It is difficult for us to predict the time and cost of the regulatory
development of our Alpha DaRT technology, and we cannot predict whether the application of our technology, or any similar or competitive
technologies, will result in the identification, development, and marketing authorization or certification of any products. There can
be no assurance that any development problems we experience in the future related to our technology or any of our research programs will
not cause significant delays or unanticipated costs, or that such development problems can be solved at all. Any of these factors may
prevent us from completing our preclinical studies and clinical trials that we may initiate or commercializing any product candidates
we may develop on a timely or profitable basis, if at all. In addition, the success of our Alpha DaRT technology will depend on several
factors, including the following:
| ● | establishing manufacturing capabilities and infrastructure to produce and distribute adequate supply of Alpha DaRT sources in compliance
with applicable regulations governing the transport of radiological materials; |
| ● | generating meaningful clinical data to support widespread clinical adoption and reimbursement for the Alpha DaRT technology; |
| ● | educating medical personnel regarding the potential benefits and correct use of our Alpha DaRT technology; |
| ● | ensuring appropriate methods of handling and logistics of our products and appropriate capabilities at clinical use points; |
| ● | facilitating patient access to the facilities able to administer our Alpha DaRT technology, if authorized for sale or certified; |
| ● | establishing sales and marketing capabilities upon obtaining any marketing authorization in the United States and similar authorization
or certification in other target jurisdictions to gain market acceptance of a novel therapy; and |
| ● | sourcing clinical and, if successfully authorized or certified for commercial sale, commercial supplies for the materials used to
manufacture our Alpha DaRT technology, and especially our Alpha DaRT sources. |
The commercial success of our Alpha DaRT technology, if authorized
or certified for commercial sale, will depend in part upon public perception of radiation therapies, and to a lesser extent, radiopharmaceuticals,
and the degree of their market acceptance by physicians, patients, healthcare payors and others in the medical community.
Adverse events in clinical trials of our Alpha
DaRT technology or in clinical trials of others developing similar products and the resulting negative publicity, as well as any other
adverse events in the field of radiation therapies or radiopharmaceuticals that may occur in the future, could result in a decrease in
demand for our Alpha DaRT technology or any future products or any product candidates that we may develop that rely on radiation therapy.
If public perception is influenced by claims that radiation therapies or radiopharmaceuticals or specific therapies within radiation therapies
or radiopharmaceuticals are unsafe or if alternative therapies for cancer treatment are developed and proven to be more successful or
provide an actual or perceived, preferred course of treatment for cancer(s), our Alpha DaRT technology or any future products or any product
candidates we may develop may not be accepted by the general public or the medical community.
In particular, the future commercial success of
our Alpha DaRT technology or any future products or any product candidates we may develop, as applicable, depends and will depend upon,
among other things, these products and product candidates gaining and maintaining acceptance by physicians, patients, third-party payors
and other members of the medical community as efficacious and cost-effective alternatives to competing products and treatments. If any
of our products or product candidates do not achieve and maintain an adequate level of acceptance, we may not generate material sales
of that product or product candidate or be able to successfully commercialize it. The degree of market acceptance of our products and
product candidates, if authorized for sale or certified, will depend on a number of factors, including:
| ● | our ability to provide acceptable evidence of safety and efficacy; |
| ● | the prevalence and severity of any side effects; |
| ● | publicity concerning our products and product candidates or competing products and treatments; |
| ● | availability, relative cost and relative efficacy of alternative and competing treatments; |
| ● | the ability to offer our products for sale at competitive prices; |
| ● | the relative convenience and ease of administration of our products and product candidates; |
| ● | the willingness of the target patient population to try new products and product candidates and of physicians to prescribe these products
and product candidates; |
| ● | the strength of marketing and distribution support; and |
| ● | the sufficiency of coverage or reimbursement by third parties. |
If our Alpha DaRT technology or any of our other
future products or product candidates, if authorized or certified, do not become widely accepted by potential customers, physicians, patients,
third-party payors and other members of the medical community, such a lack of acceptance could have a material adverse effect on our business,
financial condition and results of operations.
If product liability lawsuits are brought against us, we may
incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability
as a result of the planned clinical testing of our product candidates and will face an even greater risk if we commercialize any products.
For example, we may be sued if our Alpha DaRT technology or any future products or product candidates we develop, cause or are perceived
to cause injury or are found to be otherwise unsuitable during clinical trials, manufacturing, marketing or sale. Any such product liability
claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product (which
may include inherent dangers in the use of radioactive materials), negligence, strict liability or a breach of warranties. Claims could
also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we
may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require
significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
| ● | decreased demand for our Alpha DaRT technology or any future products or product candidates we develop that we may develop; |
| ● | injury to our reputation; |
| ● | withdrawal of clinical trial participants; |
| ● | initiation of investigations by regulators; |
| ● | costs to defend the related litigation; |
| ● | a diversion of management’s time and our resources; |
| ● | substantial monetary awards to trial participants or patients; |
| ● | product recalls, withdrawals or labeling, marketing or promotional restrictions; |
| ● | exhaustion of any available insurance and our capital resources; the inability to commercialize our Alpha DaRT technology or any future
products or product candidates we develop; and |
| ● | a decline in our share price. |
Failure to obtain or retain sufficient product
liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization
of products we develop, alone or with corporate collaborators. Although we have clinical trial insurance, our insurance policies also
have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts
awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we
may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators
entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
We are exploring development of our Alpha DaRT technology in
combination with other therapies, which exposes us to additional risks.
We are conducting a combination trial evaluating
our Alpha DaRT technology in combination with pembrolizumab for the treatment of locally advanced or metastatic head and neck squamous
cell carcinoma, and in the future we may explore conduct additional combination trials with one or more currently approved or experimental
cancer therapies for this or other indications. Even if our Alpha DaRT technology receives marketing authorization or obtains certification
for use in combination with other existing therapies, we would continue to be subject to the risks that the FDA or similar foreign regulatory
authorities could revoke marketing authorization of the therapy used in combination with our Alpha DaRT technology or that safety, efficacy,
manufacturing or supply issues could arise with these other therapies. Combination therapies are commonly used for the treatment of cancer,
and we would be subject to similar risks if we develop any of our products or product candidates for use in combination with other drugs
or for indications other than cancer. This could result in our own products being removed from the market or being less successful commercially.
We may also evaluate our Alpha DaRT technology in
combination with one or more other cancer therapies that have not yet been approved for marketing by the FDA or similar foreign regulatory
authorities. We will not be able to market and sell our product candidate we develop in combination with any such unapproved cancer therapies
that do not ultimately obtain marketing authorization.
If the FDA or similar foreign regulatory authorities
do not approve these other drugs or revoke their marketing authorization, or if safety, efficacy, manufacturing, or supply issues arise
with, the drugs we choose to evaluate in combination with our product candidate, we may be unable to obtain marketing authorization or
certification of or market our product candidate.
The ongoing COVID-19 pandemic could continue to adversely impact
our business, including our clinical trials, supply chain and business development activities.
In connection with the ongoing COVID-19 pandemic,
governments have implemented significant measures, including closures of businesses, quarantines, travel restrictions and other social
distancing directives, intended to control the spread of the virus. The effects of government actions and our own policies and those of
third parties to reduce the spread of COVID-19 may negatively impact productivity and slow down or delay our ongoing and future clinical
trials, preclinical studies and research and development activities, may cause disruptions to our supply chain, to the administrative
functions of clinical trial sites and/or to the operations of our other partners, and as a result may impair our ability to execute our
programs and/or business development strategy. In the event that government authorities were to reinstate restrictions, our employees
who currently are not telecommuting may no longer be able to access our facilities, including our laboratories and our operations may
be further limited or curtailed.
The spread of COVID-19 and actions taken to reduce
its spread may also materially affect us economically. While the potential economic impact brought by, and the duration of, the ongoing
COVID-19 pandemic may be difficult to assess or predict, there have recently been, and could in the future be, significant disruptions
of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial
position. In addition, the trading prices for other medical device and other biopharmaceutical companies have been highly volatile as
a result of the ongoing COVID-19 pandemic. As a result, we may face difficulties raising capital or such capital raises may be on unfavorable
terms.
COVID-19 and actions taken to reduce its spread
continue to rapidly evolve. The extent to which COVID-19 may impede the development of our product Alpha DaRT technology or any future
products or product candidates, reduce the productivity of our employees, disrupt our supply chains, delay our clinical trials, reduce
our access to capital or limit our business development activities, will depend on future developments, which are highly uncertain and
cannot be predicted with confidence. To the extent the ongoing COVID-19 pandemic adversely affects our business and financial results,
it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those
relating to the timing and results of our clinical trials and our financing needs.
The market opportunities for our Alpha DaRT technology may be
smaller than we anticipated or may be limited to those patients who are ineligible for or have failed prior treatments. If we encounter
difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
Our current and future target patient populations
are based on our beliefs and estimates regarding the incidence or prevalence of certain types of cancers that may be addressable by our
Alpha DaRT technology or any future products or product candidates we develop, which is derived from a variety of sources, including scientific
literature, publications by medical societies and non-profit organizations, and surveys of clinics. Our projections may prove to be incorrect
and the number of potential patients may turn out to be lower than expected. Even if we obtain significant market share for our Alpha
DaRT technology, because the potential target populations could be small, we may never achieve profitability without obtaining marketing
authorizations for additional indications in the United States or similar authorizations or certifications in other target jurisdictions,
including use of our Alpha DaRT technology for front-line and second-line therapy.
We
do not currently engage in commercial marketing activities or sales efforts and we have no experience in marketing
our products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and
sell our Alpha DaRT technology, if approved or certified for commercial sale, we may not be able to generate product revenue.
While we have taken steps to build our a marketing
team, we do not currently engage in commercial marketing activities or sales efforts and we have no experience in marketing our products.
We intend to further develop an in-house marketing organization and sales force, which will require significant capital expenditures,
management resources and time. We will have to compete with other pharmaceutical, medical device and biotechnology companies to recruit,
hire, train and retain marketing and sales personnel.
If we are unable to establish internal sales and
marketing capabilities to our satisfaction, we will pursue collaborative arrangements regarding the sales and marketing of our products,
if licensed, as we have done in Canada and Israel. However, there can be no assurance that we will be able to establish or maintain such
collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend
upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts
of such third parties and our revenue from product sales may be lower than if we had commercialized our Alpha DaRT technology ourselves.
We also face competition in our search for third parties to assist us with the sales and marketing efforts of our Alpha DaRT technology.
There can be no assurance that we will be able
to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize
any product in the United States or overseas for which we are able to obtain marketing authorization or certification.
We may expend our resources to pursue a particular indication
and forgo the opportunity to capitalize on Alpha DaRT technology in indications that may ultimately be more profitable or for which there
is a greater likelihood of success.
We have limited financial and personnel resources
and are placing significant focus on the development of our Alpha DaRT technology in certain indications, and as such, we may forgo or
delay pursuit of opportunities with other future products or product candidates or other indications that later prove to have greater
commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable
market opportunities. Our spending on current and future research and development programs and other future products or product candidates
for specific indications may not yield any commercially viable future products or product candidates. If we do not accurately evaluate
the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to those future
products or product candidates through collaboration, licensing or other royalty arrangements in cases in which it would have been more
advantageous for us to retain sole development and commercialization rights to such future products or product candidates.
We currently conduct and in the future intend to continue conducting
pre-clinical studies, clinical trials for our Alpha DaRT technology outside the United States, and the FDA and similar foreign regulatory
authorities may not accept data from such trials.
We have conducted or are currently conducting
clinical trials in Israel, Canada, the United States, Japan and Europe and may in the future choose to conduct additional clinical trials,
including in Asia, Australia, elsewhere in Europe or other foreign jurisdictions. The acceptance of trial data from clinical trials conducted
outside the United States by the FDA may be subject to certain conditions. For example, in cases where data from clinical trials conducted
outside the United States are intended to serve as the sole basis for marketing authorization in the United States, the FDA will generally
not approve the application on the basis of foreign data alone unless such clinical trials were conducted in accordance with good clinical
practices, or GCP, and (i) the data are applicable to the United States population and United States medical practice; (ii) the trials
were performed by clinical investigators of recognized competence; and (iii) the data may be considered valid without the need for an
on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through
an on-site inspection or other appropriate means. In addition, even where the foreign study data are not intended to serve as the sole
basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed
and well-conducted in accordance with GCP requirements and the FDA is able to validate the data from the study through an onsite inspection
if deemed necessary. Many foreign regulatory bodies have similar requirements. In addition, such foreign trials would be subject to the
applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any similar
foreign regulatory authority or notified bodies will accept data from trials conducted outside of the United States or the applicable
jurisdiction. If the FDA or any similar foreign regulatory authority or other bodies does not accept such data, it would result in the
need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our
Alpha DaRT not receiving approval, clearance or certification for commercialization in the applicable jurisdiction.
Risks Related to Government Regulation
Our Alpha DaRT technology and operations are subject to extensive
government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could
harm our business.
Any products or product candidates which ultimately
integrate our Alpha DaRT technology are expected to be regulated as medical devices in the United States. Medical devices and their manufacturers
and product developers are subject to extensive regulation in the United States and elsewhere, including by the FDA and its foreign counterparts.
The FDA and foreign regulatory agencies regulate, among other things, with respect to medical devices: design, development and manufacturing;
testing, labeling, content and language of instructions for use and storage; clinical trials; product safety; establishment registration
and device listing; marketing, sales and distribution; premarket clearance, classification and approval or certification; recordkeeping
procedures; advertising and promotion; recalls and field safety corrective actions; postmarket surveillance, including reporting of deaths
or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market studies; and product
import and export.
The regulations to which we are subject are complex,
burdensome to understand and apply and have tended to become more stringent over time. Regulatory changes could result in restrictions
on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales, if our product candidate
receives marketing authorization or certification. The FDA and foreign regulatory authorities enforce their regulatory requirements through,
among other means, periodic unannounced inspections. We do not know whether we or any contract manufacturers we may utilize will be found
compliant in connection with any future FDA or foreign inspections. Failure to comply with applicable regulations could jeopardize our
ability to sell our Alpha DaRT technology or any future products or product candidates, if they obtain marketing authorization or certification,
and result in enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls
or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to
grant future clearances, approvals or certifications; withdrawals or suspensions of clearances, approvals or certifications, resulting
in prohibitions on sales of our products; and in the most serious cases, criminal penalties.
We may not receive, or may be delayed in receiving, the necessary
marketing authorizations or certifications for our Alpha DaRT technology or any future products or product candidates, and failure to
timely obtain necessary marketing authorizations or certifications for our product candidates would have a material adverse effect on
our business.
In the United States, before we can market a new
medical device, or a new use of, or other significant modification to an existing, marketed medical device, we must first receive either
clearance under Section 510(k) of the Federal Food, Drug, and Cosmetic Act, or the FDCA, approval of a premarket approval application,
or PMA, or grant of a de novo classification request from the FDA, unless an exemption applies. In the 510(k) clearance process,
before a device may be marketed, the FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed
“predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that
was legally marketed prior to May 28, 1976 (pre-amendments device), a device that was originally on the U.S. market pursuant to an
approved PMA and later down-classified, or a 510(k)-exempt device. To be “substantially equivalent,” the proposed device must
have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or
have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Clinical
data are sometimes required to support substantial equivalence. In the process of obtaining PMA approval, the FDA must determine that
a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical,
pre-clinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose
the greatest risk, such as life-sustaining, life-supporting or implantable devices. In the de novo classification process, a manufacturer
whose novel device under the FDCA would otherwise be automatically classified as Class III and require the submission and approval
of a PMA prior to marketing is able to request down-classification of the device to Class I or Class II on the basis that the
device presents a low or moderate risk. If the FDA grants the de novo classification request, the applicant will receive authorization
to market the device. This device type may be used subsequently as a predicate device for future 510(k) submissions.
The PMA approval, 510(k) clearance and de
novo classification processes can be expensive, lengthy and uncertain. The FDA’s 510(k) clearance process usually takes
from three to 12 months, but can take longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance
process and generally takes from one to three years, or even longer, from the time the application is submitted to the FDA. In addition,
a PMA generally requires the performance of one or more clinical trials. Clinical data may also be required in connection with an application
for 510(k) clearance or a de novo request. Despite the time, effort and cost, a device may not obtain marketing authorization
by the FDA. Any delay or failure to obtain necessary regulatory marketing authorizations could harm our business. Furthermore, even if
we are granted such marketing authorizations, they may include significant limitations on the indicated uses for the device, which may
limit the potential commercial market for the device.
To date, we have not obtained authorization from
the FDA to market any product candidate in the United States, and we expect to pursue either a PMA approval or de novo classification
process for our Alpha DaRT technology. If the FDA requires us to go through a lengthier, more rigorous examination for our products than
we had expected, our product introductions or modifications could be delayed or prevented, which would have a material impact on our business
and prospects. For example, if the FDA disagrees with our determination that the de novo classification pathway is the appropriate
path to obtain marketing authorization for Alpha DaRT, the FDA may require us to submit a PMA application, which is generally more costly,
time-consuming, and uncertain.
In the United States, any modification to a product
candidate for which we receive marketing authorization may require us to submit a new 510(k) premarket notification and obtain clearance,
to submit a PMA and obtain FDA approval, or to submit a de novo request prior to implementing the change. For example, any modification
to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use, design or manufacture, generally requires a new 510(k) clearance or other marketing authorization. The FDA requires
every manufacturer to make such determinations in the first instance, but the FDA may review any manufacturer’s decision. The FDA
may not agree with a manufacturer’s decisions regarding whether new clearances or approvals are necessary. If we obtain marketing
authorizations from the FDA, we may make modifications or add additional features in the future that we believe do not require a new 510(k) clearance,
de novo request or approval of a PMA. If the FDA disagrees with our determination and requires us to seek new marketing authorizations
for the modifications for which we have concluded that new marketing authorizations are unnecessary, we may be required to cease marketing
or to recall the modified product until we obtain such marketing authorization, and we may be subject to significant regulatory fines
or penalties. If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing
products than we had expected, product introductions or modifications could be delayed or canceled, which could adversely affect our business.
The FDA, applicable foreign regulatory entity
or notified body can delay, limit or deny marketing authorization or certification of a device for many reasons, including:
| ● | our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or notified body that our products
are substantially equivalent to a predicate device or are safe and effective for their intended uses; |
| ● | the disagreement of the FDA, foreign regulatory authorities or notified body with the design or implementation of our clinical trials
or the interpretation of data from preclinical studies or clinical trials; |
| ● | serious and unexpected adverse device effects experienced by participants in our clinical trials; |
| ● | the data from our preclinical studies and clinical trials may be insufficient to support clearance, de novo classification,
approval or certification, where required; |
| ● | our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; |
| ● | the manufacturing process or facilities we use may not meet applicable requirements; and |
|
● |
the potential for marketing authorization or certification policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for marketing authorization or certification. |
Subject to the transitional provisions and in
order to sell our products in member states of the EU, our products must comply with the general safety and performance requirements of
the EU Medical Devices Regulation (Regulation (EU) No 2017/745), which repeals and replaces the EU Medical Devices Directive (Council
Directive 93/42/EEC) and the Active Implantable Medical Devices Directive (Council Directive 90/385/EEC). Compliance with these requirements
is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed
in the EU. All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex
I to the EU Medical Devices Regulation including the requirement that a medical device must be designed and manufactured in such a way
that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective and must not
compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other
persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits
to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged
state of the art.
To demonstrate compliance with the general safety
and performance requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and
its (risk) classification. Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can
self-assess the conformity of its products with the general safety and performance requirements (except for any parts which relate to
sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body. The notified body
would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices.
If satisfied that the relevant product conforms to the general safety and performance requirements, the notified body issues a certificate
of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark
to the device, which allows the device to be placed on the market throughout the EU. If we fail to comply with applicable EU laws and
regulations, and corresponding EU member state laws, we would be unable to affix the CE mark to our products, which would prevent us from
selling them within the EU.
In the EU, we must inform the notified body that
carried out the conformity assessment of the devices that we market or sell in the EU and EEA of any planned substantial changes to our
quality system or substantial changes to our medical devices that could affect compliance with the general safety and performance requirements
laid down in Annex I to the EU Medical Devices Regulation or cause a substantial change to the intended use for which the device has been
CE marked. The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity
with the EU Medical Devices Regulation. If the assessment is favorable, the notified body will issue a new certificate of conformity or
an addendum to the existing certificate attesting compliance with the general safety and performance requirements and quality system requirements
laid down in the Annexes to the EU Medical Devices Regulation. The notified body may disagree with our proposed changes and product introductions
or modifications could be delayed or canceled, which could adversely affect our ability to grow our business.
The aforementioned EU rules are generally
applicable in the EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland. Non-compliance with the above
requirements would also prevent us from selling our products in these three countries.
From January 1, 2021 onwards, the Medicines and
Healthcare Products Regulatory Agency, or MHRA became the sovereign regulatory authority responsible for the Great Britain (i.e. England,
Wales and Scotland) medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618,
as amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical
devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern
Ireland Protocol. Following the end of the Brexit transitional period on January 1, 2021, new regulations require all medical devices
to be registered with the MHRA before being placed on the Great Britain market. The MHRA will only register devices where the manufacturer
or their United Kingdom, or UK, Responsible Person has a registered place of business in the UK. From January 1, 2022, manufacturers based
outside the UK will need to appoint a UK Responsible Person that has a registered place of business in the UK to register devices with
the MHRA.
On
June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices and
diagnostics. MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical
Devices Directive 93/42/EC and the EU In Vitro Diagnostic Medical Devices Directive 98/79/EC), in particular to create a new access pathway
to support innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform IVD
regulation and foster sustainability through the reuse and remanufacture of medical devices. Regulations implementing the new regime were
originally scheduled to come into force in July 2023, but have recently been postponed to July 2024. Devices bearing CE marks issued by
EU notified bodies under the EU Medical Devices Regulation or EU Medical Devices Directive are now subject to transitional arrangements.
In its consultation response, the MHRA indicated that the future UK regulations will allow devices certified under the EU Medical Devices
Regulation to be placed on the market in Great Britain under the CE mark until either the certificate expires or for five years after
the new regulations take effect, whichever is sooner. Devices certified under the EU Medical Devices Directive could continue to be placed
on the market until either the certificate expires or for three years after the new regulations take effect, whichever is sooner. Following
these transitional periods, it is expected that all medical devices will require a UK Conformity Assessed, or UKCA, mark. Manufacturers
may choose to use the UKCA mark on a voluntary basis until June 30, 2023. However, UKCA marking will not be recognized in the EU. Compliance
with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed
in Great Britain. The rules for placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those
in the rest of the UK. Under the terms of the Northern Ireland Protocol, Northern Ireland will follow EU rules on medical devices and
devices marketed in Northern Ireland will require assessment according to the EU regulatory regime. Such assessment may be conducted by
an EU notified body, in which case a CE mark will be required before placing the device on the market in the EU or Northern Ireland. Alternatively,
if a UK notified body conducts such assessment, a ‘UKNI’ mark will be applied and the device may only be placed on the market
in Northern Ireland and not the EU.
The clinical trial process is lengthy and expensive with uncertain
outcomes. Results of earlier studies may not be predictive of future clinical trial results.
Clinical testing is difficult to design and implement,
can take many years, can be expensive and carries uncertain outcomes. The results of preclinical studies and clinical trials of our
products conducted to date and ongoing or future studies and trials of our current, planned or future products may not be predictive of
the results of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. The data and results
from our clinical trials do not ensure that we will achieve similar results in future clinical trials. In addition, preclinical and clinical
data are often susceptible to various interpretations and analyses, and many companies that have believed their products performed satisfactorily
in preclinical studies and earlier clinical trials have nonetheless failed to replicate results in later clinical trials, or have viewed
such data in different ways than regulators do. Product candidates in later stages of clinical trials may fail to show the desired safety
and efficacy despite having progressed through nonclinical studies and earlier clinical trials. Failure can occur at any stage of clinical
testing. Our clinical studies or investigations may produce negative or inconclusive results, and we may decide, or regulators may require
us, to conduct additional clinical and nonclinical testing in addition to those we have planned.
The initiation and completion of clinical studies
may be prevented, delayed, or halted for numerous reasons. We may experience delays in our clinical trials for a number of reasons, which
could adversely affect the costs, timing or successful completion of our clinical trials, including related to the following:
| ● | we may be required to submit an IDE to the FDA, which must become effective prior to commencing certain human clinical trials of medical
devices, and the FDA may reject our IDE application and notify us that we may not begin clinical trials, or place restrictions on the
conduct of such trials; similar requirements may apply in foreign jurisdictions; |
| ● | regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; |
| ● | regulators and/or IRBs, or other bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue
a clinical trial at a prospective or specific trial site; |
| ● | we may not reach 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; |
| ● | clinical trials may produce negative or inconclusive results, and we may decide, or regulators or notified bodies may require us,
to conduct additional clinical trials or abandon product development programs; |
| ● | the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials
may be insufficient or slower than we anticipate (including as a result of delays in enrollment caused or resulting from the ongoing COVID-19
pandemic), and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for
any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; |
| ● | our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely
manner, or at all; |
| ● | we might have to suspend or terminate clinical trials for various reasons, including occurrence of adverse events or other findings
that the subjects in our clinical trials are being exposed to unacceptable health risks; |
| ● | we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance,
which we may be required to submit to an IRB, or other bodies and/or regulatory authorities for re-examination; |
| ● | regulators, IRBs, other bodies or other parties may require or recommend that we or our investigators suspend or terminate clinical
research for various reasons, including safety signals or noncompliance with regulatory requirements; |
| ● | the cost of clinical trials may be greater than we anticipate; |
| ● | clinical sites may not adhere to the clinical protocol or may drop out of a clinical trial; |
| ● | we may be unable to recruit a sufficient number of clinical trial sites; |
| ● | regulators, IRBs, or other bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of
third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials
necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions
in supply; |
| ● | marketing authorization or certification policies or regulations of FDA or applicable foreign regulatory authorities may change in
a manner rendering our clinical data insufficient for marketing authorization or certification; and |
| ● | our current or future products may have undesirable side effects or other unexpected characteristics. |
Any of these occurrences may significantly harm
our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement
or completion of clinical trials may also ultimately lead to the denial of marketing authorization or similar certification of any product
candidate.
Patient enrollment in clinical trials and completion
of patient follow-up depend on many factors, including the size of the patient population, the nature of the trial protocol, the proximity
of patients to clinical sites, the eligibility criteria for the clinical trial, patient compliance, competing clinical trials and clinicians’
and patients’ perceptions as to the potential advantages of the product being studied in relation to other available therapies,
including any new treatments that may be approved for the indications we are investigating. For example, patients may be discouraged from
enrolling in our clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess
the safety and efficacy of a product candidate or does not allow them to receive other treatments during the clinical trial, or they may
be persuaded to participate in contemporaneous clinical trials of a competitor’s product candidate. In addition, patients participating
in our clinical trials may drop out before completion of the trial or experience adverse medical events unrelated to our product candidate.
Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may delay commencement or completion
of the clinical trial, cause an increase in the costs of the clinical trial and delays, or result in the failure of the clinical trial.
Clinical trials must be conducted in accordance
with the laws and regulations of the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines,
and are subject to oversight by these governmental agencies and IRBs, or other bodies at the medical institutions where the clinical trials
are conducted. In addition, clinical trials must be conducted with supplies of our devices produced under current good manufacturing practice,
or cGMP or similar foreign requirements, and other regulations. Furthermore, we rely on CROs and clinical trial sites to ensure the proper
and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence
over their actual performance. We depend on our collaborators and on medical institutions and CROs to conduct our clinical trials in compliance
with good clinical practice, or GCP, requirements. To the extent our collaborators or the CROs fail to enroll participants for our clinical
trials, fail to conduct the study to GCP standards or are delayed for a significant time in the execution of trials, including achieving
full enrollment, we may be affected by increased costs, program delays or both. In addition, conducting clinical trials in various countries
may subject us to further delays and expenses as a result of increased shipment costs, additional regulatory requirements and the engagement
of non-U.S. CROs and other third party contractors, as well as expose us to risks associated with clinical investigators who are unknown
to the FDA, and different standards of diagnosis, screening and medical care.
Even if our Alpha DaRT technology obtains marketing
authorization in the United States, commercialization of our products in foreign countries would require similar authorization or certification
by regulatory authorities or notified bodies in those countries. Marketing authorization and certification practices vary among jurisdictions
and can involve requirements and administrative review periods different from, and greater than, those in the United States, including
additional preclinical studies, clinical trials. Any of these occurrences could have an adverse effect on our business, financial condition
and results of operations.
Interim, “top-line” and preliminary data from our
clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit
and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose interim,
top-line or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results
and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular
trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received
or had the opportunity to fully and carefully evaluate all data. As a result, the interim, top-line or preliminary results that we report
may differ from future results of the same trial, or different conclusions or considerations may qualify such results, once additional
data have been received and fully evaluated. Interim, top-line or preliminary data also remain subject to audit and verification procedures
that may result in the final data being materially different from the interim, top-line or preliminary data we previously announced. As
a result, interim, top-line and preliminary data should be viewed with caution until the final data are available.
In particular, we may disclose interim data from
our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or
more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences
between interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our
competitors could result in volatility in our share price.
Further, others, including regulatory agencies or
other bodies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh
the importance of data differently, which could impact the value of the particular program, or the approvability or potential for commercialization
of the particular product candidate. In addition, the information we choose to publicly disclose regarding a particular study, clinical
trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise
appropriate information to include in our disclosure. If the interim, top-line or preliminary data that we report differ from actual results,
or if others, including regulatory authorities and other bodies, disagree with the conclusions reached, our ability to obtain marketing
authorization or certification for, and commercialize, our Alpha DaRT technology may be harmed, which could harm our business, operating
results, prospects or financial condition.
Even if we obtain marketing authorization or certification, we
will be subject to ongoing regulatory review and scrutiny. Failure to comply with post-marketing regulatory requirements could subject
us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market.
If we obtain marketing authorization or certification
for a product candidate, we will remain subject to ongoing and pervasive regulatory requirements governing, among other things, the manufacture,
marketing, advertising, medical device reporting, sale, promotion, import, export, registration, and listing of devices. For example,
medical device manufacturers must submit periodic reports to the FDA as a condition of obtaining marketing authorization. These reports
include information about failures and certain adverse events associated with the device after its marketing authorization. Failure to
submit such reports, or failure to submit the reports in a timely manner, could result in enforcement action by the FDA. Following its
review of the periodic reports, the FDA might ask for additional information or initiate further investigation.
Regulatory changes could result in restrictions
on our ability to continue or expand our operations, higher than anticipated costs, or lower than anticipated sales. Even after we have
obtained marketing authorization or certification, we have ongoing responsibilities under FDA regulations and applicable foreign laws
and regulations. The FDA, state and foreign regulatory authorities have broad enforcement powers. Our failure to comply with applicable
regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory authorities, which may include any
of the following sanctions:
| ● | untitled letters or warning letters; |
| ● | fines, injunctions, consent decrees and civil penalties; |
| ● | recalls, termination of distribution, administrative detention, or seizure of our products; |
| ● | customer notifications or repair, replacement or refunds; |
| ● | operating restrictions or partial suspension or total shutdown of production; |
| ● | delays in or refusal to grant our requests for future clearances, de novo classifications or approvals or comparable foreign
marketing authorizations or certifications of new products, new intended uses, or modifications to existing products; |
| ● | withdrawals or suspensions of any granted marketing authorizations or certifications, resulting in prohibitions on sales of our products; |
| ● | FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and |
Any of these sanctions could result in higher
than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition
and results of operations.
In addition, the FDA may change its marketing
authorization policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay
marketing authorization of any product candidate under development or impact our ability to modify any products authorized for market
on a timely basis. Such changes may also occur in foreign jurisdictions where we intend to market our products. Such policy or regulatory
changes could impose additional requirements upon us that could delay our ability to obtain marketing authorizations or certifications,
increase the costs of compliance or restrict our ability to maintain any marketing authorizations we have obtained. For example, in recent
years, the FDA has announced plans to modernize the premarket notification pathway under Section 510(k) of the FDCA. For more
information, see “Legislative or regulatory reforms in the United States or the EU may make it more difficult and costly for
us to obtain marketing authorizations or certifications for any product candidate or to manufacture, market or distribute any product
candidates after such marketing authorizations or certifications have been obtained.”
Any product candidates we develop must be manufactured in accordance
with applicable laws and regulations, and we could be forced to recall our devices or terminate production if we fail to comply with these
regulations.
In the United States, the methods used in, and
the facilities used for, the manufacture of medical devices must comply with the FDA’s cGMPs for medical devices, known as the Quality
System Regulation, or QSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production,
process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical
devices. Furthermore, we will be required to verify that our suppliers maintain facilities, procedures and operations that comply with
our quality standards and applicable regulatory requirements. The FDA enforces the QSR through periodic announced or unannounced inspections
of medical device manufacturing facilities, which may include the facilities of subcontractors. Our product candidates are also subject
to similar state regulations and various laws and regulations of foreign countries governing manufacturing.
Our third-party manufacturers may not take the
necessary steps to comply with applicable regulations, which could cause delays in the delivery of product candidate. In addition, failure
to comply with applicable FDA or foreign requirements or later discovery of previously unknown problems with our products or manufacturing
processes could result in, among other things: warning letters or untitled letters; fines, injunctions or civil penalties; suspension
or withdrawal of marketing authorizations or certifications; seizures or recalls of our products; total or partial suspension of production
or distribution; administrative or judicially imposed sanctions; the FDA’s refusal to grant pending or future clearances or approvals
for our products or similar decisions by foreign regulatory authorities or notified bodies; clinical holds; refusal to permit the import
or export of our products; and criminal prosecution of us, our suppliers, or our employees. Similar requirements may apply in foreign
jurisdictions.
Any of these actions could significantly and negatively
affect supply of our product candidates, if authorized for sale or certified by the FDA, foreign regulatory authorities or notified bodies.
If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers
and experience reduced sales and increased costs.
Any product candidate we develop may cause or contribute to adverse
medical events, which could interrupt, delay, or prevent their continued development. If certain events occur after marketing authorization
or certification, we may be required to report them to the FDA or foreign regulatory authorities, and if we fail to do so, we would be
subject to sanctions that could harm our reputation, business, financial condition and results of operations. In addition, the discovery
of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA, another governmental
authority or foreign regulatory authorities, could have a negative impact on us.
As is the case with cancer therapies generally,
it is likely that there may be side effects and adverse events associated with our Alpha DaRT technology or any future product or product
candidate’s use. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or
unexpected characteristics. Undesirable side effects caused by our product candidates could cause us or regulatory authorities or other
bodies to interrupt, delay or halt clinical trials or, may cause us to abandon their development or limit development to more narrow uses
or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from
a risk-benefit perspective. Undesirable side effects could also affect patient recruitment or the ability of enrolled patients to complete
the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects
significantly.
Patients treated with our product candidates may
also be undergoing surgical, chemotherapy, immunotherapy or alternative radiation treatments, which can cause side effects or adverse
events that are unrelated to our product candidate, but may still impact the success of our clinical trials. The inclusion of critically
ill patients in our clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such
patients may be using or due to the gravity of such patients’ illnesses. Even if the side effects do not preclude the product candidate
from obtaining or maintaining marketing authorization or certification, undesirable side effects may inhibit market acceptance due to
its tolerability versus other therapies. Any of these developments could materially harm our business, financial condition and prospects.
Additionally, if our Alpha DaRT technology or
any future product candidate receives marketing authorization from the FDA, the side effects observed in clinical studies could result
in a more restrictive label and we will subject to the FDA’s medical device reporting regulations and similar foreign regulations,
which require us to report to the FDA or to foreign regulatory authorities when we receive or become aware of information that reasonably
suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that,
if the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is
triggered by the date we become aware of the event as well as the nature of the event. We may fail to report events of which we become
aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable event, especially if it
is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of the product.
If we fail to comply with our reporting obligations, the FDA or foreign regulatory authorities could take action, including warning letters,
untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our marketing authorizations
or certification, seizure of our products or delay in obtaining marketing authorizations or certification for our product candidates.
The FDA and foreign regulatory bodies have the
authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of
a product or in the event that a product poses an unacceptable risk to health. The FDA’s authority to require a recall must be based
on a finding that there is reasonable probability that the device could cause serious injury or death. We may also choose to voluntarily
recall a product if any material deficiency is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable
risk to health, component failures, malfunctions, manufacturing defects, labeling or design deficiencies, packaging defects or other deficiencies
or failures to comply with applicable regulations. Product defects or other errors may occur in the future.
Depending on the corrective action we take to
redress a product’s deficiencies or defects, the FDA or foreign regulatory bodies may require, or we may decide, that we will need
to obtain new marketing authorizations or certifications for the device before we may market or distribute the corrected device. Seeking
such clearances, certifications or approvals may delay our ability to replace the recalled devices in a timely manner. Moreover, if we
do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning
letters, product seizure, injunctions, administrative penalties or civil or criminal fines or similar actions by the foreign regulatory
bodies.
Companies are required to maintain certain records
of recalls and corrections, even if they are not reportable to the FDA or foreign regulatory authorities. We may initiate voluntary withdrawals
or corrections for our products in the future that we determine do not require notification of the FDA or foreign regulatory authorities.
If the FDA or foreign regulatory authorities disagrees with our determinations, it could require us to report those actions as recalls
and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to
product liability claims against us and negatively affect our sales. Any corrective action, whether voluntary or involuntary, as well
as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business
and may harm our reputation and financial results.
The misuse or off-label use of our product candidates, if authorized
or certified for marketing, may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result
in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any
of which could be costly to our business.
Any marketing authorization or certification we
may receive for a product candidate will be limited to specified indications for use. We plan to train our sales and marketing personnel,
as well as any direct sales force which may be hired in the future, to not promote our devices for uses outside of the FDA (or foreign
regulatory authorities)- authorized or -certified indications for use, known as “off-label uses.” We cannot, however, prevent
a physician from using our devices off-label, when in the physician’s independent professional medical judgment he or she deems
it appropriate. There may be increased risk of injury to patients if physicians attempt to use our devices off-label, which could harm
our reputation in the marketplace among physicians and patients.
If the FDA or any foreign regulatory body determines
that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional
materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used
for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that
other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws,
if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including,
but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, exclusion from participation in government
healthcare programs and the curtailment of our operations.
In addition, physicians may misuse our products
or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability.
If our devices are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.
As described above, product liability claims could divert management’s attention from our core business, be expensive to defend
and result in sizeable damage awards against us that may not be covered by insurance.
If we do not obtain and maintain international regulatory registrations,
marketing authorizations or certifications for any product candidates we develop, we will be unable to market and sell such product candidates
outside of the United States.
Sales of our product candidates outside of the
United States will remain subject to foreign regulatory requirements that vary widely from country to country. In addition, the FDA regulates
exports of medical devices from the United States. While the regulations of some countries may not impose significant barriers to marketing
and selling our products or only require notification to regulators or third parties, others require that we obtain affirmative marketing
authorization or certification from a notified body. Complying with foreign regulatory requirements, including obtaining registrations,
certifications, clearances or approvals, can be expensive and time-consuming, and we may not receive necessary marketing authorizations
or certifications in each country in which we plan to market our products or we may be unable to do so on a timely basis. The time required
to obtain registrations, certifications and marketing authorizations, if required by other countries, may be longer than that required
for FDA marketing authorizations, and requirements for such certifications, registrations or authorizations may significantly differ from
FDA requirements. If we modify our products, we may need to apply for additional marketing authorizations or certifications before we
are permitted to sell the modified product. In addition, we may not continue to meet the quality and safety standards required to maintain
the authorizations or certifications that we have received. If we are unable to maintain our marketing authorizations or certifications
in a particular country, we will no longer be able to sell the applicable product in that country.
Obtaining marketing authorization from the FDA
does not ensure similar marketing authorization or certifications by regulatory authorities or notified bodies in other countries, and
registration, marketing authorization or certification by one or more foreign regulatory authorities or notified bodies does not ensure
registration, marketing authorization or certification by regulatory authorities or notified bodies in other foreign countries or by the
FDA. However, a failure or delay in obtaining registration, marketing authorization or certification in one country may have a negative
effect on the regulatory process in others.
Legislative or regulatory reforms in the United States or the
EU may make it more difficult and costly for us to obtain marketing authorizations or certifications for any product candidate or to manufacture,
market or distribute any product candidates after such authorizations or certifications have been obtained.
From time to time, legislation is drafted and
introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition,
the FDA may change its policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent
or delay marketing authorization of our future products under development or impact our ability to modify any products for which we have
already obtained marketing authorizations on a timely basis. For example, on February 23, 2022, the FDA issued a proposed rule to amend
the Quality System Regulation, or QSR, which establishes current good manufacturing practice requirements for medical device manufacturers,
to align more closely with the International Organization for Standardization standards. This proposal has not yet been finalized or implemented.
Accordingly, it is unclear the extent to which this or any other proposals, if adopted, could impose additional or different regulatory
requirements on us that could increase the costs of compliance or otherwise create competition that may negatively affect our business.
Additionally, in September 2019, the FDA
issued revised final guidance describing an optional “safety and performance based” premarket review pathway for manufacturers
of “certain, well-understood device types” to demonstrate substantial equivalence under the 510(k) clearance pathway
by showing that such device meets objective safety and performance criteria established by the FDA, thereby obviating the need for manufacturers
to compare the safety and performance of their medical devices to specific predicate devices in the clearance process. The FDA maintains
a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance
documents that identify the performance criteria for each such device type, as well as recommended testing methods, where feasible. The
FDA may establish performance criteria for classes of devices similar to ours, and it is unclear the extent to which such performance
standards, if established, could impact our ability to obtain marketing authorization or otherwise create competition that may negatively
affect our business.
In addition, FDA regulations and guidance are
often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new statutes, regulations
or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of any product candidates
or make it more difficult to obtain marketing authorizations for, manufacture, market or distribute any product candidate we are developing.
If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not
able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.
In addition, the EU regulatory landscape concerning
medical devices evolved and on May 26, 2021, the EU Medical Devices Regulation (Regulation 2017/745) became applicable, which repeals
and replaces the EU Medical Devices Directive and the Active Implantable Medical Devices Directive (See – Regulation of Medical
Devices in the European Union) and these modifications may have an effect on the way we conduct our business in the EU and the EEA. For
example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions or
modifications could be delayed or canceled, which could adversely affect our ability to grow our business.
The
EU-UK Trade and Cooperation Agreement, or TCA, came into effect on January 1, 2021. The TCA does not specifically refer to medical devices
but does provide for cooperation and exchange of information in the area of product safety and compliance, including market surveillance,
enforcement activities and measures, standardization related activities, exchanges of officials, and coordinated product recalls (or other
similar actions). For medical devices that are locally manufactured but use components from other countries, the “rules of origin”
criteria will need to be reviewed. Depending on which countries products will be ultimately sold in, manufacturers may start seeking alternative
sources for components if this would allow them to benefit from no tariffs. The rules for placing medical devices on the Northern Ireland
market will differ from those in Great Britain. On June 26, 2022, the MHRA published its response to a 10-week consultation on
the post-Brexit regulatory framework for medical devices and diagnostics. Regulations implementing the new regime were originally scheduled
to come into force in July 2023, but have recently been postponed to July 2024. These modifications may have an effect on the way we intend
to conduct our business in these countries.
Changes in funding for, or disruptions caused by global health
concerns impacting, the FDA and other agencies or notified bodies could hinder their ability to hire and retain key leadership and other
personnel, or otherwise prevent new medical device products from being developed, authorized, certified or commercialized in a timely
manner, which could negatively impact our business.
The ability of the FDA, foreign regulatory authorities
and notified bodies to review and authorize or certify the sale of new products can be affected by a variety of factors, including government
budget and funding levels; its ability to hire and retain key personnel and accept the payment of user fees; statutory, regulatory, and
policy changes; and other events that may otherwise affect the FDA’s, foreign regulatory authorities’ and notified bodies’
ability to perform routine functions. Average review times at the FDA, foreign regulatory authorities and notified bodies have fluctuated
in recent years as a result. In addition, government funding of other government agencies that fund research and development activities
is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA, other agencies and foreign bodies
may also slow the time necessary for new devices to be reviewed and/or authorized or certified for marketing by necessary government agencies
or foreign bodies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down
several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.
Separately, in response to the COVID-19 pandemic,
the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points. Even though the FDA has since resumed
standard inspection operations of domestic facilities where feasible, the FDA has continued to monitor and implement changes to its inspectional
activities to ensure the safety of its employees and those of the firms it regulates as it adapts to the evolving COVID-19 pandemic, and
any resurgence of the virus or emergence of new variants may lead to further inspectional delays. Other regulatory authorities may adopt
similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global
health concerns continue to prevent the FDA, other regulatory authorities or notified bodies from conducting business as usual or conducting
inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA, foreign regulatory authorities
and notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
In the EU, notified bodies must be officially
designated to certify products and services in accordance with the EU Medical Devices Regulation. While several notified bodies have been
designated, the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified bodies are
facing a large amount of requests with the new regulation as a consequence of which review times have lengthened. This situation could
significantly impact the ability of notified bodies to timely review and process our regulatory submissions, which could have a material
adverse effect on our business in the EU and EEA.
Our business operations and current and future relationships
with investigators, healthcare professionals, consultants, third-party payors, and customers will be subject to applicable healthcare
regulatory laws, which could expose us to penalties.
Our business operations and current and future
arrangements with investigators, healthcare professionals, consultants, third-party payors, and customers, may expose us to broadly applicable
fraud and abuse and other healthcare laws and regulations. These laws may constrain the business or financial arrangements and relationships
through which we conduct our operations, including how we research, market, sell and distribute our product candidates, if approved or
certified. Such laws include:
| ● | the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting,
offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly
or covertly, 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 U.S. federal
and state healthcare programs such as Medicare and Medicaid. 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; |
| ● | the U.S. federal civil and criminal false claims laws, including the civil False Claims Act, which, among other things, 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 U.S. federal government, claims for payment or approval 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 from knowingly making a false
statement to avoid, decrease or conceal an obligation to pay money to the U.S. federal government. In addition, the government may assert
that a claim including items and services resulting from a violation of the U.S. federal Anti- Kickback Statute constitutes a false or
fraudulent claim for purposes of the False Claims Act; |
| ● | the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration
to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s
selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless
an exception applies; |
| ● | the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which 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 knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection
with the delivery of, or payment for, healthcare benefits, items or services; similar to the U.S. 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; |
| ● | the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices; |
| ● | the U.S. Physician Payments Sunshine Act and its implementing regulations, which require certain manufacturers of drugs, devices,
biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report
annually to the government information related to certain payments and other transfers of value to physicians, as defined by such law,
certain non-physician providers such as physician assistants and nurse practitioners, and teaching hospitals, as well as ownership and
investment interests held by the physicians described above and their immediate family members; |
| ● | federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially
harm consumers; |
| ● | analogous U.S. state laws and regulations, including: state anti-kickback and false claims laws, which may apply to our business practices,
including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services
reimbursed by any third- party payor, including private insurers; state laws that require medical device and pharmaceutical companies
to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal
government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and
regulations that require drug and device manufacturers to file reports relating to pricing and marketing information, which requires tracking
gifts and other remuneration and items of value provided to healthcare professionals and entities; and state and local laws that require
the registration of sales representatives; and |
| ● | similar healthcare laws and regulations in the EU and other jurisdictions, including reporting requirements detailing interactions
with and payments to healthcare providers. |
Ensuring that our internal operations and future
business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is
possible that governmental authorities will conclude that our business practices, including our relationships with physicians and other
healthcare providers, some of whom are compensated in the form of monetary payments and/or stock options for consulting services provided,
may not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other
healthcare laws and regulations.
If our operations are found to be in violation
of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant
penalties, including civil, criminal and administrative penalties, damages, fines, exclusion from government-funded healthcare programs,
such as Medicare and Medicaid or similar programs in other countries or jurisdictions, integrity oversight and reporting obligations to
resolve allegations of non-compliance, disgorgement, individual imprisonment, contractual damages, reputational harm, diminished profits
and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to
do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,
including exclusions from government funded healthcare programs and imprisonment, which could affect our ability to operate our business.
Further, defending against any such actions can be costly, time-consuming and may require significant personnel resources. Therefore,
even if we are successful in defending against any such actions that may be brought against us, our business and our ability to sell our
products may be materially harmed.
If in the future Alpha DaRT is approved or certified for commercial
sale, but we are unable to obtain adequate reimbursement or insurance coverage from third-party payors, we may not be able to generate
significant revenue.
Because the Alpha DaRT is still in the development
stage, it is not yet approved for third-party payor coverage or reimbursement. Coding and coverage determinations as well as reimbursement
levels and conditions are important to the commercial success of any product or offering. The future availability of insurance coverage
and reimbursement for newly approved medical devices is highly uncertain, and our future business will be greatly impacted by the level
of reimbursement provided by third-party payors.
In the United States, third-party payors decide
which cancer treatment products and services they will cover, how much they will pay and whether they will continue reimbursement. Third-party
payors may not cover or provide adequate reimbursement for the Alpha DaRT device, the Alpha DaRT sources or the procedures using the system,
assuming we are able to fully develop and obtain all marketing authorizations to market it in the United States or similar certifications
in other geographies. To date, we have not had any discussions with any third-party payors, including any regulatory agencies administering
any government funded healthcare programs, regarding the coding, coverage or reimbursement for treatment using the Alpha DaRT, which may
vary depending on the specific application or indication of our technology. Accordingly, unless government and other third-party payors
provide coverage and reimbursement for our products, patients and healthcare providers may choose not to use them, which would adversely
impact our future revenues.
No uniform policy of coverage and reimbursement
among payors in the United States exists and coverage and reimbursement for procedures can differ significantly from payor to payor. Some
third-party payors must approve coverage for new or innovative devices or procedures before they will reimburse healthcare providers who
use the products or therapies. Even though a new product may have been cleared for commercial distribution by the FDA, we may find limited
demand for the product unless and until reimbursement approval has been obtained from governmental and private third-party payors. We
can provide no assurances that we would be successful in obtaining coverage from Medicare or any other governmental or commercial third-party
payor. In addition, while we believe that we may be able to rely on certain existing procedure codes for certain elements of the physician’s
treatment efforts, we are not certain of this and as such may be required to seek new billing codes for our products, and regulatory authorities
may not approve the creation of separate codes. Additionally, even if we are successful, these billing codes or the payment amounts associated
with such codes may change in the future.
In addition to uncertainties surrounding coverage
policies, there are periodic changes to reimbursement levels. Third-party payors regularly update reimbursement amounts and also from
time to time revise the methodologies used to determine reimbursement amounts. This includes routine updates to payments to physicians,
hospitals and ambulatory surgery centers for procedures during which our products are used. These updates could directly impact the demand
for our products. By way of example, in the United States, payment rates under the Medicare Physician Fee Schedule are regularly subject
to updates to effectuate various policy goals. The Medicare Access and CHIP Reauthorization Act of 2015 repealed the formula by which
Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive
payments that began in 2019 that are based on various performance measures and physicians’ participation in alternative payment
models, such as accountable care organizations. The ongoing and future impact of these changes cannot be determined at this time.
A primary trend in the United States healthcare
industry and elsewhere is cost containment. Government authorities and other third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular products and services. Reimbursement may not be available, or continue to be available,
for the Alpha DaRT or the treatment services using the Alpha DaRT or any other products we may develop in the future, or even if reimbursement
is available, such reimbursement may not be adequate. We also will be subject to foreign reimbursement policies in the international markets
we expect to enter. Decisions by health insurers or other third-party payors in these markets not to cover, or to discontinue reimbursing,
our products could materially and adversely affect our business. If such decisions are made, they could also have a negative impact on
our ability to generate revenues.
On September 18, 2020, the Centers for Medicare
and Medicaid Services, or CMS, the federal agency responsible for administering the Medicare program, issued a final rule implementing
a new mandatory payment model for radiation oncology services: the Radiation Oncology Alternative Payment Model, or the RO Model. Although
the RO Model was originally intended to begin on January 1, 2022, subsequent legislation delayed its implementation until a date
to be determined through future rulemaking. The RO Model, as currently structured, would significantly alter CMS’ payment methodology
from a fee for service, or FFS, paradigm to a prospective payment for all radiotherapy services furnished during a 90-day episode of care
for fifteen (15) different cancer types, regardless of the modality used or site of service. Under the RO Model, all providers of radiotherapy
services, including physician group practices, hospital outpatient departments and free-standing radiation therapy centers located within
a randomly selected Core Based Statistical Area, or CBSA, would be required to participate. The CBSAs selected for the RO Model would
contain approximately 30% of all eligible Medicare FFS radiotherapy episodes in the U.S. Any provider outside of the CBSAs would continue
to receive Medicare reimbursement based on a FFS methodology. It is uncertain the impact, if any, of the RO Model, if implemented, on
the Medicare reimbursement to our customers when using our Alpha DaRT technology, if authorized for marketing, or our business, financial
condition, or results of operations.
Outside of the United States, reimbursement levels
vary significantly by country. For example, in the EU, member states impose controls on whether products are reimbursable by national
or regional health service providers and on the prices at which medical devices are reimbursed under state-run healthcare schemes.
Healthcare policy changes, including recently enacted legislation
reforming the U.S. healthcare system, could harm our business, financial condition and results of operations.
In the United States, there have been and continue
to be a number of legislative initiatives to contain healthcare costs. Federal and state lawmakers regularly propose and, at times, enact
legislation that would result in significant changes to the healthcare system, some of which are intended to contain or reduce the costs
of medical products and services. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may
limit coverage of or lower reimbursement for our product candidates and the treatment associated with the use of our products. The cost
containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the future
could impact our revenue from the sale of our product candidates, if approved or cleared.
By way of example, in the United States, the Affordable
Care Act, or ACA, made a number of substantial changes in the way healthcare is financed by both governmental and private insurers. Among
other ways in which it may affect our business, the ACA
| ● | Established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness
research in an effort to coordinate and develop such research; |
| ● | Implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other
providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models; and |
| ● | Expanded the eligibility criteria for Medicaid programs. |
Since its enactment, there have been judicial,
executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most
recent judicial challenge to the ACA without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s
decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August
15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain
governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among
others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary
barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how other healthcare reform measures
will impact our business. Any expansion in the government’s role in the U.S. healthcare industry may result in decreased profits
to us and/or lower reimbursement by payors for our product candidates, any of which may have a material adverse effect on our business,
financial condition or results of operations.
In addition, other legislative changes have been
proposed and adopted since the ACA was enacted. The Budget Control Act of 2011, among other things, reduced Medicare payments to providers,
effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with
the exception of a temporary suspension from May 1, 2020, through March 31, 2022, unless additional Congressional action is
taken. Additionally, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers,
including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three
to five years. The Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, enacted on April 16, 2015, repealed the formula
by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system
of incentive payments that are based on various performance measures and physicians’ participation in alternative payment models
such as accountable care organizations. It is unclear what effect new quality and payment programs, such as MACRA, may have on our business,
financial condition, results of operations or cash flows.
We expect additional state, federal and foreign
healthcare policies and reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and
services or otherwise result in reduced demand for our product candidates or additional pricing pressure and have a material adverse effect
on our industry generally and on our customers. We cannot predict what other healthcare programs and regulations will ultimately be implemented
at the federal or state level or the effect of any future legislation or regulation in the United States may negatively affect our business,
financial condition and results of operations. The continuing efforts of the government, insurance companies, managed care organizations
and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect our ability to set a price that
we believe is fair for our product candidates, our ability to generate revenue and achieve or maintain profitability or the availability
of capital.
For instance, on December 13, 2021, the EU Regulation
No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU, was adopted. While the Regulation entered into force
in January 2022, it will only begin to apply from January 2025 onwards, with preparatory and implementation-related steps to take place
in the interim. Once the Regulation becomes applicable, it will have a phased implementation depending on the concerned products. This
regulation intends to boost cooperation among EU member states in assessing health technologies, including some medical devices, and providing
the basis for cooperation at the EU level for joint clinical assessments in these areas. The regulation will permit EU member states to
use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment
of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can
seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing
voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic,
social, ethical) aspects of health technologies, and making decisions on pricing and reimbursement.
Any changes of, or uncertainty with respect to,
future coverage or reimbursement rates could affect demand for our product candidates, which in turn could impact our ability to successfully
commercialize these devices and could have a material adverse effect on our business, financial condition and results of operations.
Actual or perceived failures to comply with applicable data protection,
privacy and security laws, regulations, standards and other requirements could adversely affect our business, financial condition and
prospects.
The global data protection landscape is rapidly
evolving, and we are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection,
use, disclosure, retention, and security of personal data, such as information that we may collect in connection with clinical trials
in the U.S. and abroad. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future,
and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business.
This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer
use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose
additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future.
Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures
or our contracts governing our processing of personal information could result in negative publicity, government investigations, fines
and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our
business, financial condition and prospects.
As our operations and business grow, we may become
subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory
authorities. For example, the State of Israel has implemented data protection laws and regulations, including the Israeli Protection of
Privacy Law of 1981. Further, in the U.S., HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission
and breach reporting of individually identifiable health information. Certain states have also adopted comparable privacy and security
laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various
courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic
partners. In addition, the California Consumer Privacy Act of 2018, or CCPA, went into effect on January 1, 2020. The CCPA creates
individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal
information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches has increased
the likelihood, and risks associated with data breach litigation. The CCPA increases our compliance costs and potential liability, and
many similar laws have been proposed at the federal level and in other states, including in Utah, Connecticut, Virginia, and Colorado.
Further, the California Privacy Rights Act, or CPRA, generally went into effect on January 1, 2023 and significant amends the CCPA. The
CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations
on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data. It will also create a new
California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security
enforcement. Additional compliance investment and potential business process changes may also be required. In the event that we are subject
to or affected by Israeli data protection laws, HIPAA, the CCPA, the CPRA or other domestic or foreign privacy and data protection laws,
any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In Europe, the General Data Protection Regulation,
or GDPR, went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the European
Economic Area, or EEA. Companies that must comply with the GDPR face increased compliance obligations and risk, robust regulatory enforcement
of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of
the noncompliant company, whichever is greater. Among other requirements, the GDPR regulates transfers of personal data subject to the
GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. In
July 2020, the Court of Justice of the European Union, or CJEU limited how organizations could lawfully transfer personal data from the
EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions
on the use of standard contractual clauses, or SCCs. In March 2022, the US and EU announced a new regulatory regime intended to replace
the invalidated regulations; however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed
by President Biden on October 7, 2022 on Enhancing Safeguards for United States Signals Intelligence Activities. European court and regulatory
decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers. As supervisory
authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start
taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise
unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide
our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial
results.
Further, from January 1, 2021, companies have
had to comply with the GDPR and also the UK GDPR, or UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the
GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5
million) or 4% of global turnover. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional
laws and regulations that may affect how we conduct business.
Although we work to comply with applicable laws,
regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified,
interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations
with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators,
or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could
result in additional cost and liability to us, damage our reputation, and adversely affect our business, financial condition and prospects.
Risks Related to Our Reliance on Third Parties
We rely on a limited number of third-party suppliers and, in
some cases, sole suppliers, for the majority of our components, subassemblies and materials and may not be able to find replacements or
immediately transition to alternative suppliers.
We rely on several sole suppliers for certain
components of our Alpha DaRT technology. These sole suppliers, and any of our other suppliers, may be unwilling or unable to supply components
of these systems to us reliably and at the levels we anticipate or are required by us. For us to be successful, our suppliers must be
able to provide us with products and components in substantial quantities, in compliance with regulatory requirements, in accordance with
agreed upon specifications, at acceptable costs and on a timely basis. If we obtain marketing authorization or certification, and we encounter
delays or difficulties in securing these components, an interruption in our commercial operations could occur if we cannot then obtain
an acceptable substitute. If we are required to transition to new third-party suppliers for certain components of our Alpha DaRT technology
or any future product or product candidates, we believe that there are a few other manufacturers that are currently capable of supplying
the necessary components. In addition, the use of components or materials furnished by these alternative suppliers could require us to
alter our operations. Any such interruption or change in supplier could harm our reputation, business, financial condition and results
of operations.
Furthermore, if we are required to change the
manufacturer of a critical component of our product candidates, we will be required to verify that the new manufacturer maintains facilities,
procedures and operations that comply with our quality and applicable regulatory requirements, which could further impede our ability
to manufacture our implant systems in a timely manner. We currently do not carry inventory for components for more than three months
at any given time. Transitioning to a new supplier could be time- consuming and expensive, may result in interruptions in our operations
and product delivery, could affect the performance specifications of our product candidates or could require that we modify their design.
If the change in manufacturer results in a significant change to any product after its authorization or certification for marketing, a
new 510(k) clearance from the FDA or similar international regulatory authorization or certification may be necessary before we implement
the change, which could cause substantial delays. The occurrence of any of these events could harm our ability to meet the demand for
our products in a timely manner or cost-effectively.
We cannot assure you that we will be able to secure
alternative equipment and materials and utilize such equipment and materials without experiencing interruptions in our workflow. If we
should encounter delays or difficulties in securing, reconfiguring or revalidating the equipment and components we require for our implant
systems, our reputation, business, financial condition and results of operations could be negatively impacted.
We currently rely, and plan to rely in the future, on third parties
to conduct and support our portions of our preclinical studies and clinical trials. If these third parties do not properly and successfully
carry out their contractual duties or meet expected deadlines, we may not be able to obtain marketing authorization or certification of
or commercialize our product candidates.
We have utilized and plan to continue to utilize
and depend upon independent investigators and collaborators, such as medical institutions, CROs, contract manufacturing organizations,
or CMOs, and strategic partners to conduct and support portions of our preclinical studies and clinical trials under agreements with us.
We expect to have to negotiate budgets and contracts
with CROs, trial sites and CMOs and we may not be able to do so on favorable terms, which may result in delays to our development timelines
and increased costs. We will rely heavily on these third parties over the course of our preclinical studies and clinical trials, and we
control only certain aspects of their activities. As a result, we will have less direct control over the conduct, timing and completion
of these preclinical studies and clinical trials and the management of data developed through preclinical studies and clinical trials
than would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each of our
studies is conducted in accordance with applicable protocol, legal and regulatory requirements and scientific standards, and our reliance
on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with GCP requirements,
which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical
development. Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators
and trial sites.
If we or any of these third parties fail to comply
with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable
foreign regulatory authorities or other bodies may require us to perform additional clinical trials before approving our marketing applications
or certifications. We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials
comply with the GCP regulations. In addition, our product candidates must be produced in accordance with cGMP requirements known as the
QSR. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients
may require us to repeat clinical trials, which would delay the marketing authorization or certification process. Moreover, our business
may be implicated if any of these third parties violates federal, state or foreign fraud and abuse or false claims laws and regulations
or healthcare privacy and security laws.
Any third parties conducting or supporting portions
of our clinical trials will not be our employees and, except for remedies available to us under our agreements with such third parties,
we cannot control whether or not they devote sufficient time and resources to our product candidates. These third parties may also have
relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials, or other
product development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out
their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical
data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons,
our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain marketing authorizations
or certifications for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects
for our product candidates would be adversely affected, our costs could increase and our ability to generate revenue could be delayed.
Switching or adding third parties to conduct or
support portions of our preclinical studies and clinical trials involves substantial cost and requires extensive management time and focus.
In addition, there is a natural transition period when a new third party commences work. As a result, delays occur, which can materially
impact our ability to meet our desired clinical development timelines.
If we or third parties, such as CROs or trial sites, use hazardous
and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.
Our research and development activities involves
the controlled use of potentially hazardous substances, including radiological materials, by us or third parties, such as CROs and CMOs.
Our use of radioactive materials is regulated by the United States Nuclear Regulatory Commission and specified agencies of certain states,
as well as the Israeli Ministry for Environmental Protection, for the possession, transfer, import, export, use, storage, handling and
disposal of radioactive materials. We are also subject to international laws and regulations that apply to manufacturers of radiation-emitting
devices and products utilizing radioactive materials. These are often comparable to, if not more stringent than, the equivalent regulations
in the United States. The use of Thorium-228 in our manufacturing processes, and Radium-224 in our Alpha DaRT technology, involves the
inherent risk of exposure from alpha and beta particle emissions to the patient receiving the sources implanted, the clinicians administering
the Alpha DaRT technology, our employees and others who may handle our products, which can alter or harm healthy cells in the body. Additionally,
as we continue to develop our Alpha DaRT technology we may experiment with increased amounts of radiation in an attempt to increase the
potential efficacy of our technology, which could heighten the potential risk of radiation exposure. We and such third parties are subject
to the Israeli and U.S. federal, state, provincial and local laws and regulations governing the use, manufacture, storage, handling, and
disposal of radiological, medical and hazardous materials. Although we believe that our and such third-parties’ procedures for using,
handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of
contamination or injury resulting from radiological, medical or hazardous materials. As a result of any such contamination or injury,
we may incur liability or Israeli and U.S. local, city, state, provincial or federal authorities may curtail the use of these materials
and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the
liability could exceed our resources. Compliance with applicable environmental laws and regulations is expensive, and current or future
environmental regulations may impair our research, development and production efforts, which could harm our business, prospects, financial
condition, or results of operations. We currently maintain insurance coverage for injuries resulting from the hazardous materials we use;
however, future claims may exceed the amount of our coverage. Also, we do not have insurance coverage for pollution cleanup and removal.
Currently the costs of complying with such Israeli and U.S. federal, state, provincial, local and foreign environmental regulations are
not significant, and consist primarily of waste disposal expenses. However, they could become expensive, and current or future environmental
laws or regulations may impair our research, development, production and commercialization efforts.
Additionally, our manufacture and distribution
of devices utilizing radioactive material or emitting radiation also requires us to obtain a number of licenses and certifications for
these devices and materials. Handling of these products must also be in accordance with a specific radioactive materials license. Obtaining
licenses and certifications may be time consuming, expensive, and uncertain. If we fail to obtain such licenses and registrations or if
substantial delays are incurred in obtaining such licenses and registrations, we may be unable to manufacture, distribute and ultimately
sell our Alpha DaRT technology, if approved or certified. Additionally, any lapse in our licenses, or the licenses of our facilities,
could increase our costs and adversely affect our operations and financial results.
We may be unable to obtain a sufficient or sufficiently pure
supply of radioisotopes to support clinical development or at commercial scale.
Thorium-228 is a key component of our Alpha DaRT
technology, as it naturally decays into Radium-224 that is collected onto the sources which comprise an integral part of our Alpha DaRT
technology. We have entered into a multi-year supply contract with Eckert & Ziegler AG in Germany, and also acquire Thorium-228
from the Oak Ridge National Laboratory of the United States Department of Energy. We are also aware of or have spoken with other potential
suppliers of Thorium-228, such that we anticipate a steady, unrestricted supply of thorium for the production of the Alpha DaRT. We will
continually evaluate Thorium-228 manufacturers and suppliers and intend to have redundant suppliers prior to the commercial launch of
the Alpha DaRT technology, if approved. While we consider Thorium-228 to be readily available, there can be no guarantee that we will
be able to secure another Thorium-228 supplier or obtain on terms that are acceptable to us.
Our ability to conduct clinical trials to advance
our Alpha DaRT technology is dependent on our ability to obtain the radioisotope Thorium-228 and other isotopes we may choose to utilize
in the future. Currently, we are dependent on third-party manufacturers and suppliers for our isotopes. These suppliers may not perform
their contracted services or may breach or terminate their agreements with us, or may provide a product not of sufficient quality to allow
successful use in our manufacturing processes. Our suppliers are subject to regulations and standards that are overseen by regulatory
and government agencies and we have no control over our suppliers’ compliance to these standards. Failure to comply with regulations
and standards may result in their inability to supply isotope could result in delays in our clinical trials, which could have a negative
impact on our business. We have developed intellectual property, know-how and trade secrets related to the manufacturing process of the
Alpha DaRT technology.
We may form or seek collaborations or strategic alliances or
enter into additional licensing arrangements in the future, and we may not realize the benefits of such collaborations, alliances or licensing
arrangements.
We have formed and may continue to form or seek
strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties that
we believe will complement or augment our development and commercialization efforts with respect to our Alpha DaRT technology and any
future products or product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other
charges, increase our near and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management
and business.
In addition, we face significant competition in
seeking appropriate strategic partners and the negotiation process is time-consuming and complex. We may not be successful in our efforts
to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at
too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite
potential to demonstrate safety, potency and quality and obtain marketing authorization or certification.
Further, collaborations involving our product
candidates are subject to numerous risks, which may include the following:
| ● | collaborators
have significant discretion in determining the efforts and resources that they will apply
to a collaboration; |
| ● | collaborators
may not pursue development and commercialization of our product candidates or may elect not
to continue or renew development or commercialization of our product candidates based on
clinical trial results, changes in their strategic focus due to the acquisition of competitive
products, availability of funding or other external factors, such as a business combination
that diverts resources or creates competing priorities; |
| ● | collaborators
may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical
trial, abandon a product candidate, repeat or conduct new clinical trials or require a new
formulation of a product candidate for clinical testing; |
| ● | collaborators
could independently develop, or develop with third parties, products that compete directly
or indirectly with our product candidates; |
| ● | a
collaborator with marketing and distribution rights to one or more products may not commit
sufficient resources to their marketing and distribution; |
| ● | collaborators
may not properly maintain or defend our intellectual property rights or may use our intellectual
property or proprietary information in a way that gives rise to actual or threatened litigation
that could jeopardize or invalidate our intellectual property or proprietary information
or expose us to potential liability; |
| ● | disputes
may arise between us and a collaborator that cause the delay or termination of the research,
development or commercialization of our product candidates, or that result in costly litigation
or arbitration that diverts management attention and resources; |
| ● | collaborations
may be terminated and, if terminated, may result in a need for additional capital to pursue
further development or commercialization of the applicable product candidates; and |
| ● | collaborators
may own or co-own intellectual property covering our products that results from our collaborating
with them, and in such cases, we would not have the exclusive right to commercialize such
intellectual property. |
As a result, if we enter into collaboration agreements
and strategic partnerships or license our product candidates, we may not be able to realize the benefit of such transactions if we are
unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely
affect our business. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific
net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related
to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain
indications, which would harm our business, prospects, financial condition and results of operations.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent or other intellectual
property protection for our Alpha DaRT technology and for any other products or product candidates that we develop, or if the scope of
the patent or other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize
products and technology similar or identical to ours, and our ability to commercialize any product candidates we may develop, and our
technology may be adversely affected.
Our success depends in large part on our ability
to obtain and maintain patents, trademarks and other intellectual property rights in the United States and other countries with respect
to our Alpha DaRT technology or other products or product candidates we may develop, their respective components, formulations, combination
therapies, methods used to manufacture them and methods of treatment and development that are important to our business, as well as our
ability to operate without infringing the proprietary rights of others. We rely on a combination of contractual provisions, patent protection,
as well as a combination of trade secret and trademark laws, to protect our core technology and commercial products and prevent others
from copying our treatment delivery devices and methods. However, these legal measures afford only limited protection, and competitors
or others may gain access to or use of our intellectual property and proprietary information. For example, patent protection and intellectual
property laws may not: (i) prevent competitors from obtaining access to our trade secrets, proprietary information, data, know-how
and technology; (ii) prevent others from copying our systems and methods; or (iii) provide a sustained competitive advantage.
If we do not adequately protect our intellectual property rights, competitors may be able to erode or negate any competitive advantage
we may have, which could harm our business and ability to achieve profitability.
To protect our proprietary position, we file patent
applications in the United States and abroad related to our novel product candidates that are important to our business. We may in the
future also license or purchase patents and patent applications owned or controlled by others. As of December 31, 2022, our patent
portfolio included 88 issued patents, and 122 pending patent applications including two allowed patent applications, in the United States,
Europe, Canada, Japan, Australia, China, South Korea, Russia, Mexico, India, Hong Kong, Singapore, South Africa and the African Regional
Intellectual Property Organization, or the ARIPO. Some of our earlier filed patents are expected to expire between 2024 and 2026, subject
to patent term extensions and adjustments that may be available in certain jurisdictions. When key patents covering our core technology
expire, competitors and other third parties may be able to make competing products and encroach on our market share.
It is possible that defects of form in the preparation
or filing of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims,
inventorship, claim scope, or requests for patent term adjustments. If we are unable to secure or maintain patent protection with respect
to our Alpha DaRT technology and any proprietary products and technology we develop, our business, financial condition, results of operations,
and prospects could be materially harmed. Our pending and future patent applications may not result in patents being issued or that issued
patents will afford sufficient protection of our product candidates or their intended uses against competitors, nor can there be any assurance
that the patents issued will not be infringed, designed around, invalidated by third parties, or effectively prevent others from commercializing
competitive technologies, products or product candidates. Further, some of our pending patent applications may be allowed in the future,
but we cannot be certain that an allowed patent application will become an issued patent. There may be events that cause withdrawal of
the allowance of a patent application. For example, after a patent application has been allowed, but prior to being issued, material that
could be relevant to patentability may be identified. In such circumstances, the applicant may pull the application from allowance in
order for the USPTO to review the application in view of the new material. We cannot be certain that the USPTO will issue the application
in view of the new material. We anticipate additional patent applications will be filed both in the United States and in other countries,
as appropriate. However, we cannot predict: (i) if additional patent applications covering new technologies related to our product
candidates will be filed; (ii) if and when patents will issue; (iii) the degree and range of protection any issued patents will
afford us against competitors, including whether third parties will find ways to invalidate or otherwise circumvent our patents; (iv) whether
any of our intellectual property will provide any competitive advantage; (v) whether any of our patents that may be issued may be
challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise provide any competitive advantage; (vi) whether
others will obtain patents claiming inventions similar to those covered by our patents and patent applications; or (vii) whether
we will need to initiate or defend litigation or administrative proceedings which may be costly regardless of whether we win or lose.
The patent prosecution process is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file,
prosecute, maintain, enforce, or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner.
In addition, we may not pursue or obtain patent protection in all relevant markets. It is possible that we will fail to identify important
patentable aspects of our research and development efforts in time to obtain appropriate or any patent protection. If we delay filing
a patent application, and a competitor files a patent application on the same or a similar invention before we do, our ability to secure
patent rights may be limited. We may not be able to patent the invention at all. Even if we can patent the invention, we may be able to
patent only a limited scope of the invention, and the limited scope may be inadequate to protect our products, or to block competitor
products that are similar or adjacent to ours. Our earliest patent filings have been published. A competitor may review our published
patents and arrive at the same or similar technology advances for our products as we developed. If the competitor files a patent application
on such an advance before we do, then we may no longer be able to protect that aspect of our products and we may require a license from
the competitor. If the license is not available on commercially-viable terms, then we may not be able to launch our product.
Going forward, the growth of our business may
depend in part on our ability to acquire or in-license additional proprietary rights. For example, our programs may involve additional
product candidates that may require the use of additional proprietary rights held by third parties. We may be unable to acquire or in-license
any relevant third-party intellectual property rights that we identify as necessary or important to our business operations. We may fail
to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all, which would adversely affect our business. We
may need to cease use of, and may need to seek to develop alternative approaches that do not infringe on, such intellectual property rights
which may entail additional costs and development delays and such alternative approaches may not be feasible. Even if we are able to obtain
a license under such intellectual property rights, any such license may be non-exclusive, and may allow our competitors access to the
same technologies licensed to us.
The patent positions of medical device companies
may involve complex legal and factual questions and have been the subject of much litigation in recent years, and therefore, the
scope, validity and enforceability of any patent claims that we have or may obtain cannot be predicted with certainty. Our pending and
future patent applications may not result in patents being issued in the United States or in other jurisdictions that protect our technology
or products or that effectively prevent others from commercializing competitive technologies and products. Changes in either the patent
laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the
scope of our patent protection. In addition, the laws of foreign countries may not protect our products and inventions to the same extent
as the laws of the United States. While we enter into non-disclosure and confidentiality agreements with parties who have access to confidential
or patentable aspects of our research and development efforts, including for example, our employees, corporate collaborators, external
academic scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties, any of these parties may
breach the agreements and disclose such output before a patent application is filed, thereby endangering our ability to seek patent protection.
In addition, publications of discoveries in the scientific and scholarly literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases
not until issuance as a patent. Consequently, we cannot be certain that we were the first to file for patent protection on the inventions
claimed in our patents or pending patent applications. In addition, the USPTO might require that the term of a patent issuing from a pending
patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result,
the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.
Our competitors may be able to circumvent our
owned or any future in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner. The
issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and future in-licensed patents may be
challenged in the courts or patent offices in the United States and abroad. For example, we may become involved in opposition, interference,
derivation, inter partes review or other proceedings challenging our patent rights, and the outcome of any proceedings are highly
uncertain. Such challenges may result in the patent claims of our owned or any future in-licensed patents being narrowed, invalidated
or held unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar
or identical technology and products, or limit the duration of the patent protection of our technology and products.
In addition, given the amount of time required
for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or
shortly after such candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to
exclude others from commercializing products similar or identical to ours. Moreover, some of our patents and patent applications are,
and may in the future be, co-owned with third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’
interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including
our competitors, and our competitors could market competing products and technology. In addition, we or our future licensors may need
the cooperation of any such co-owners of our owned and in-licensed patents in order to enforce such patents against third parties, and
such cooperation may not be provided to us or our future licensors. Any of the foregoing could have a material adverse effect on our competitive
position, business, financial conditions, results of operations and prospects.
Patent terms may be inadequate to protect our competitive position
on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United
States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S.
non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited.
Even if patents covering our products are obtained, once the patent life has expired for a product, we may be open to competition. Given
the amount of time required for the development, testing and regulatory review of new products, patents protecting such products might
expire before or shortly after such products are commercialized. As a result, our patent portfolio may not provide us with sufficient
rights to exclude others from commercializing products similar or identical to ours for a meaningful amount of time, or at all.
If we are unable to protect the confidentiality of our trade
secrets, our business and competitive position would be harmed.
In addition to the protection afforded by patents,
we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes
for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary
know-how, information, or technology that is not covered by our patents. Elements of our products, including processes for their preparation
and manufacture, may involve proprietary know-how, information, or technology that is not covered by patents, and thus for these aspects
we may consider trade secrets and know-how to be our primary intellectual property. Any disclosure, either intentional or unintentional,
by our employees or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities,
or misappropriation by third parties (such as through a cybersecurity breach) of our trade secrets or proprietary information could enable
competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market. Because we expect
to rely on third parties in the development and manufacture of our products, we must, at times, share trade secrets with them. Our reliance
on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that
our trade secrets will be misappropriated or disclosed.
Trade secrets and know-how can be difficult to
protect. We require all of our employees to enter into written employment agreements containing provisions of confidentiality and obligations
to assign any inventions generated in the course of their employment to us. Further, we enter into non-disclosure and confidentiality
agreements with our corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers,
consultants, advisors and any other third parties who have access to our proprietary know-how, information, or technology. With our consultants,
contractors, and outside scientific collaborators, these agreements typically include invention assignment obligations. We cannot guarantee
that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology
and processes. We cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that
competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.
Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated
a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside
the United States are less willing or unwilling to protect trade secrets.
We may need to share our proprietary information,
including trade secrets, with future business partners, collaborators, contractors and others located in countries at heightened risk
of theft of trade secrets, including through direct intrusion by private parties or foreign actors, and those affiliated with or controlled
by state actors. Further, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other
third-party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade
secrets were to be disclosed to or independently developed by a competitor or other third-party, our competitive position would be harmed.
In addition, we take other appropriate precautions,
such as physical and technological security measures, to guard against misappropriation of our proprietary technology by third parties.
While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may
not have adequate remedies for any breach. We have also adopted policies and conduct training that provides guidance on our expectations,
and our advice for best practices, in protecting our trade secrets. Despite these undertakings, we may not be able to effectively protect
our trade secrets.
We may not identify relevant third-party patents or may incorrectly
interpret the relevance, scope or expiration of a third-party patent, which might adversely affect our ability to develop and market our
products.
The intellectual property landscape around our
radiotherapeutic product candidates is crowded, rapidly evolving and interdisciplinary, and it is difficult to conclusively assess our
freedom to operate without infringing on third-party rights. We may analyze patents or patent applications of our competitors that we
believe are relevant to our activities, and consider that we are free to operate in relation to our product candidates, but our competitors
may obtain issued claims, including in patents we consider to be unrelated to our products or activities, which block our efforts or may
potentially result in our product candidates or our activities infringing such claims. We cannot guarantee that any of our patent searches
or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete
or thorough, nor can we be certain that we have identified each and every third-party patent and pending application in the United States
and abroad that is relevant to or necessary for the commercialization of our product candidates in any jurisdiction.
The scope of a patent claim is determined by an
interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance
or the scope of a patent or a pending application may be incorrect. For example, we may incorrectly determine that our products are not
covered by a third-party patent or may incorrectly predict whether a third-party’s pending application will issue with claims of
relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be
incorrect. Our failure to identify and correctly interpret relevant patents may negatively impact our ability to develop and market our
products.
Third parties may initiate legal proceedings alleging that we
are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain. Defending
against such law suits will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse
effect on our business.
Our commercial success depends in part on our
ability to avoid infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation involving
the infringement of patents and other intellectual property rights in the biotechnology and pharmaceutical industries. We may be exposed
to, or threatened with, future litigation by third parties having patent or other intellectual property rights and who allege that our
product candidates, uses and/or other proprietary technologies infringe their intellectual property rights. Numerous United States and
foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing
our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk that our product
candidates may give rise to claims of infringement of the patent rights of others increases. Moreover, it is not always clear to industry
participants, including us, which patents exist which may be found to cover various types of products or their methods of use or manufacture.
Thus, because of the large number of patents issued and patent applications currently pending in our fields, there may be a risk that
third parties may allege they have patent rights which are infringed by our product candidates, technologies or methods.
If a third party alleges that we infringe its
intellectual property rights, we may face a number of issues, including, but not limited to:
| ● | infringement
and other intellectual property misappropriation which, regardless of merit, may be expensive
and time-consuming to litigate and may divert our management’s attention from our core
business; |
| ● | substantial
damages for infringement or misappropriation, which we may have to pay if a court decides
that the product candidate or technology at issue infringes on or violates the third-party’s
rights, and, if the court finds we have willfully infringed intellectual property rights,
we could be ordered to pay treble damages and the patent owner’s attorneys’ fees; |
| ● | an
injunction prohibiting us from manufacturing, marketing or selling our product candidates,
or from using our proprietary technologies, unless the third party agrees to license its
patent rights to us; |
| ● | even
if a license is available from a third party, we may have to pay substantial royalties, upfront
fees and other amounts, and/or grant cross-licenses to intellectual property rights protecting
our products; and |
| ● | we
may be forced to try to redesign our product candidates or processes so they do not infringe
third-party intellectual property rights, an undertaking which may not be possible or which
may require substantial monetary expenditures and time. |
Some of our competitors may be able to sustain
the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any
uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to
raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, results of operations,
financial condition and prospects.
Third parties may assert that we are employing
their proprietary technology without authorization. Generally, conducting preclinical and clinical trials or investigations and other
development activities in the United States is not considered an act of infringement. If our product candidate is approved by the FDA,
a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While we may believe that patent
claims or other intellectual property rights of a third party would not have a materially adverse effect on the commercialization of our
product candidates, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents issued
in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,”
a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims to compositions,
formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Patent applications
can take many years to issue. There may be currently pending patent applications which may later result in issued patents that may
be infringed by our product candidates. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is invalid,
not enforceable, exhausted, or not infringed by our activities. If any third-party patents, held now or obtained in the future by a third
party, were found by a court of competent jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules
used in or formed during the manufacturing process, or any final product or methods use of the product, the holders of any such patents
may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or
until such patents expire or they are finally determined to be held invalid or unenforceable. Similarly, if any third-party patent were
held by a court of competent jurisdiction to cover any aspect of our formulations, any combination therapies or patient selection methods,
the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained
a license or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may
not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on
commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could
in turn significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to
the same technologies licensed to us. In addition, if the breadth or strength of protection provided by our patents and patent applications
is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize our current or future product
candidates.
Parties making claims against us may seek and
obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product
candidates. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be a substantial
diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial
damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties,
pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot
predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore,
even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our research or allow commercialization
of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that
event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.
We may not be successful in obtaining or maintaining necessary
rights through acquisitions and in-licenses to product components and processes that may be required to complete development of and commercialize
our Alpha DaRT Technology.
Presently we own various patents and patent applications
related to our Alpha DaRT technology and, other than our collaboration agreement with MIM with respect to MIM’s own software offerings,
we are not a party to any license agreements with third parties that enable us to utilize third-party technology,. Because our Alpha DaRT
technology, including the use in connection with other therapies, may require the use of proprietary rights held by third parties in the
future, the growth of our business will likely depend in part on our ability to acquire, in-license or use such third-party proprietary
rights.
The licensing and acquisition of third-party intellectual
property rights is a competitive practice, and companies that may be more established, or have greater resources than we do, may also
be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive for
commercializing our product candidates. More established companies may have a competitive advantage over us due to their larger size and
cash resources or greater clinical development and commercialization capabilities. There can be no assurance that we will be able to successfully
complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the additional product candidates
that we may seek to acquire. We may be unable to acquire or in-license methods of use, processes or other intellectual property rights
from third parties that we identify as necessary or important to our business operations. If we fail to obtain any of these licenses at
a reasonable cost or on reasonable terms, if at all, it would harm our business. We may need to cease use of the compositions or methods
covered by such third-party intellectual property rights, and/or may need to seek to develop alternative approaches that do not infringe
on such intellectual property rights which may entail additional costs and development delays, even if it is possible and we were able
to develop such alternatives.
Even if we are able to obtain a license, it may
be non-exclusive, thereby giving our competitors access to the same technologies that we have licensed. In that event, we may be required
to expend significant time and resources to develop or license replacement technologies. Moreover, we may need to rely on our future licensors
to obtain, maintain and enforce patent rights for the licensed intellectual property; however, they may not successfully prosecute, maintain
or enforce such licensed intellectual property. We may have limited control over the manner in which our future licensors initiate an
infringement proceeding against a third-party infringer of the intellectual property rights, or defend certain of the intellectual property
that is licensed to us. It is possible that the future licensors’ infringement proceeding or defense activities may be less vigorous
than had we conducted them ourselves. Further, our future licensors may retain certain rights under their agreements with us, including
the right to use the underlying technology for noncommercial academic and research use, to publish general scientific findings from research
related to the technology, and to make customary scientific and scholarly disclosures of information relating to the technology. It would
be difficult to monitor whether our future licensors limit their use of the technology to these uses, and we could incur substantial expenses
to enforce our rights to our licensed technology in the event of misuse. Also, the United States federal government retains certain rights
in inventions produced with its financial assistance under the Patent and Trademark Law Amendments Act, or the Bayh-Dole Act. The federal
government retains a “nonexclusive, nontransferable, irrevocable, paid-up license” for its own benefit. The Bayh-Dole Act
also provides federal agencies with “march-in rights.” March-in rights allow the government, in specified circumstances, to
require the contractor or successors in title to the patent to grant a “nonexclusive, partially exclusive, or exclusive license”
to a “responsible applicant or applicants.” If the patent owner refuses to do so, the government may grant the license itself.
We sometimes collaborate with academic institutions to accelerate our preclinical research or development. While it is generally our policy
to avoid engaging our university partners in projects in which there is a risk that federal funds may be commingled, we cannot be sure
that any co-developed intellectual property will be free from government rights pursuant to the Bayh-Dole Act. If, in the future, we co-own
or license in technology which is critical to our business that is developed in whole or in part with federal funds subject to the Bayh-Dole
Act, our ability to enforce or otherwise exploit patents covering such technology may be adversely affected.
Additionally, we have and may continue to collaborate
with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In
certain cases, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology
resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or
under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others,
potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual
property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our
business and financial condition could suffer.
Further, our future intellectual property license
agreements may impose on us various development, regulatory and/or commercial diligence obligations, payment of milestones, royalties
or other amounts and other obligations. If we fail to comply with our obligations under these agreements, we use the licensed intellectual
property in an unauthorized manner or we are subject to bankruptcy-related proceedings, the terms of the licenses may be materially modified,
such as by rendering currently exclusive licenses non-exclusive, or it may give our future licensors the right to terminate their respective
agreement with us, which could limit our ability to implement our current business plan and materially adversely affect our business,
financial condition, results of operations and prospects. In addition, disputes may arise between us and our future licensors regarding
intellectual property subject to a license agreement, including: (i) the scope of rights granted under the license agreement and
other interpretation-related issues; (ii) whether and the extent to which our technology and processes infringe on intellectual property
of the licensor that is not subject to the license agreement; (iii) our right to sublicense patents and other rights to third parties;
(iv) our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization
of our product candidates, and what activities satisfy those diligence obligations; (v) our right to transfer or assign the license;
and (vi) the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our future
licensors and us and our partners. If disputes over intellectual property that we license in the future prevent or impair our ability
to maintain our licensing arrangements on acceptable terms, we may not be able to successfully develop and commercialize the affected
product candidates, which would have a material adverse effect on our business.
In addition, certain of our future agreements
with third parties may limit or delay our ability to consummate certain transactions, may impact the value of those transactions, or may
limit our ability to pursue certain activities. For example, we may in the future enter into license agreements that are not assignable
or transferable, or that require the licensor’s express consent in order for an assignment or transfer to take place.
We may be involved in lawsuits or litigation to protect or enforce
our patents or other intellectual property, which could result in substantial costs and liability and prevent us from commercializing
our potential products.
Competitors may infringe our patents, trademarks
or other intellectual property. To counter infringement or unauthorized use, we may be required to take legal action to enforce our patents
against such infringing activity. Such enforcement proceedings against infringers can be expensive and time-consuming. Any such claims
could provoke these parties to assert counterclaims against us, including claims alleging that we infringe their patents or other intellectual
property rights. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable,
or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology.
Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable
or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In such a case, we
could ultimately be forced to cease use of such marks. In any intellectual property litigation, even if we are successful, any award of
monetary damages or other remedy we receive may not be commercially valuable. An adverse result in any litigation or defense proceedings
could put one or more of our patents at risk of being invalidated, held unenforceable, or interpreted narrowly and could put our patent
applications at risk of not issuing. Defense against these assertions, non-infringement, invalidity or unenforceability regardless of
their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’
fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which
may be impossible or require substantial time and monetary expenditure.
We may be required to protect our patents through
procedures created to attack the validity of a patent at the USPTO. The USPTO hears post-grant proceedings, including post-grant review,
inter partes review and derivation proceedings. Post-grant proceedings may be provoked by third parties or brought by the USPTO
to determine the validity or priority of inventions with respect to our patents or patent applications. An adverse determination in any
such submission or proceeding could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect
our competitive position. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United
States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient
for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in
a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would
not have been invalidated if first challenged by the third party as a defendant in a district court action. An unfavorable outcome could
result in a loss of our current patent rights and could require us to cease using the related technology or to attempt to license rights
to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable
terms.
Even if resolved in our favor, litigation or other
legal proceedings relating to our intellectual property rights may cause us to incur significant expenses, and could distract our technical
and management personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating
losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may
not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources.
Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could compromise our ability to
compete in the marketplace. Furthermore, because of the substantial amount of discovery required in connection with intellectual property
litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If
securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
common shares.
In addition, if our product candidates are found
to infringe the intellectual property rights of third parties, these third parties may assert infringement claims against our licensees
and other parties with whom we have business relationships, and we may be required to indemnify those parties for any damages they suffer
as a result of these claims. The claims may require us to initiate or defend protracted and costly litigation on behalf of licensees and
other parties regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of those
parties or may be required to obtain licenses for the products they use.
Obtaining and maintaining our patent protection depends on compliance
with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent
protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees on any issued patent
are due to be paid to the USPTO and foreign countries may require the payment of maintenance fees or patent annuities during the lifetime
of a patent application and/or any subsequent patent that issues from the application. The USPTO and various foreign governmental patent
agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application
process and following the issuance of a patent. While an inadvertent lapse, including due to the effect of the COVID-19 pandemic on us
or our patent maintenance vendors, can in many cases be cured by payment of a late fee or by other means in accordance with the applicable
rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application. Such noncompliance
can result in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment
or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time
limits, non-payment of fees and failure to properly legalize and submit formal documents. Such an event could have a material adverse
effect on our business.
Any issued patents we own covering our product candidates could
be narrowed or found invalid or unenforceable if challenged in court or before the administrative bodies in the United States or abroad,
including the USPTO.
Any of our intellectual property rights could
be challenged or invalidated despite measures we take to obtain patent and other intellectual property protection with respect to our
product candidates and proprietary technology. For example, if we initiate legal proceedings against a third party to enforce a patent
covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate, as applicable,
is invalid and/or unenforceable. In patent litigation in the United States and in some other jurisdictions, defendant counterclaims alleging
invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability
of a patent. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example,
lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected
with prosecution of the patent withheld material information from the USPTO or the applicable foreign counterpart, or made a misleading
statement, during prosecution. A litigant or the USPTO itself could challenge our patents on this basis even if we believe that we have
conducted our patent prosecution in accordance with the duty of candor and in good faith. The outcome following such a challenge is unpredictable.
Third parties may also raise similar claims before
administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination,
inter partes review, post-grant review and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such
proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates.
The outcome following legal assertions of invalidity
and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating
prior art, of which we, our patent counsel and the patent examiner were unaware during prosecution. If a defendant were to prevail on
a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose
at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material
adverse impact on our business and our ability to commercialize or license our technology and product candidates. Even if a defendant
does not prevail on a legal assertion of invalidity and/or unenforceability, our patent claims may be construed in a manner that would
limit our ability to enforce such claims against the defendant and others. The cost of defending such a challenge, particularly in a foreign
jurisdiction, and any resulting loss of patent protection could have a material adverse impact on one or more of our product candidates
and our business. Any efforts to enforce our intellectual property rights are also likely to be costly and may divert the efforts of our
scientific and management personnel.
Changes to patent law in the United States and in foreign jurisdictions
could diminish the value of patents in general, thereby impairing our ability to protect our products.
Changes in either the patent laws or interpretation
of the patent laws in the United States could increase the uncertainties and costs, and may diminish our ability to protect our inventions,
obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property
or narrow the scope of our owned and licensed patents. Patent reform legislation in the United States and other countries, including the
Leahy-Smith America Invents Act (the Leahy-Smith Act), signed into law on September 16, 2011, could increase those uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. The Leahy-Smith
Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are
prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents.
These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack
the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review, and derivation
proceedings. Further, because of a lower evidentiary standard in these USPTO post-grant proceedings compared to the evidentiary standard
in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding
sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first
presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims
that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith
Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement
or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations
and prospects.
After March 2013, under the Leahy-Smith
Act, the United States transitioned to a first inventor to file system in which, assuming that the other statutory requirements are met,
the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third-party was
the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before
we file an application covering the same invention, could therefore be awarded a patent covering an invention of ours even if we had made
the invention before it was made by such third party. This will require us to be cognizant going forward of the time from invention to
filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period
of time after filing or until issuance, we cannot be certain that we were the first to either (i) file any patent application related
to our product candidates and other proprietary technologies we may develop or (ii) invent any of the inventions claimed in our or
our licensor’s patents or patent applications. Even where we have a valid and enforceable patent, we may not be able to exclude
others from practicing the claimed invention where the other party can show that they used the invention in commerce before our filing
date or the other party benefits from a compulsory license. However, the Leahy-Smith Act and its implementation could increase the uncertainties
and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could
have a material adverse effect on our business, financial condition, results of operations and prospects.
Moreover, recent U.S. Supreme Court rulings have
narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created
uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and
the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents
or to enforce our existing patents and patents that we might obtain in the future. We cannot predict how future decisions by the courts,
Congress or the USPTO may impact the value of our patents. Changes in the laws and regulations governing patents in other jurisdictions
could similarly have an adverse effect on our ability to obtain and effectively enforce our patent rights.
We may not be able to protect our intellectual property rights
throughout the world, and different jurisdictions may grant patent rights of differing scope.
Certain of our key patent families have been filed
in the United States; however, we have less robust intellectual property rights outside the United States, and, in particular, we may
not be able to pursue patent coverage of our product candidates in certain countries outside of the United States. Filing, prosecuting
and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual
property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws
of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or
from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use
our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise
infringing products to certain territories where we have patent protection, but enforcement is not as strong as that in the United States.
These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient
to prevent them from competing. Much of our patent portfolio is at the very early stage. We will need to decide whether and in which jurisdictions
to pursue protection for the various inventions in our portfolio prior to applicable deadlines. We may decide to abandon national and
regional patent applications before they are granted. The examination of each national or regional patent application is an independent
proceeding. As a result, patent applications in the same family may issue as patents in some jurisdictions, such as in the United States,
but may issue as patents with claims of different scope or may be refused in other jurisdictions. It is also quite common that depending
on the country, the scope of patent protection may vary for the same product or technology. For example, certain jurisdictions do not
allow for patent protection with respect to method of treatment.
Many companies have encountered significant problems
in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly
certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protections, particularly
those relating to biopharmaceutical products. This difficulty with enforcing patents could make it difficult for us to stop the infringement
of our patents or marketing of competing products otherwise generally in violation of our proprietary rights. Proceedings to enforce our
patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our
business, could put our patents at risk of being invalidated or interpreted narrowly, put our patent applications at risk of not issuing
and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around
the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Further, many countries have compulsory licensing
laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability
of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which
could materially diminish the value of its patents. If we are forced to grant a license to third parties with respect to any patents relevant
to our business, our competitive position in the relevant jurisdiction may be impaired and our business prospects may be materially adversely
affected.
We may be subject to claims challenging the inventorship or ownership
of our patents and other intellectual property.
We may be subject to claims that former employees,
collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor. The
failure to name the proper inventors on a patent application can result in the patents issuing thereon being unenforceable. Inventorship
disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign
laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties
involved in developing our product candidates or as a result of questions regarding co-ownership of potential joint inventions. Litigation
may be necessary to resolve these and other claims challenging inventorship and/or ownership. Alternatively, or additionally, we may enter
into agreements to clarify the scope of our rights in such intellectual property. If we fail in defending any such claims, in addition
to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable
intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Our future licensors may have relied on third-party
consultants or collaborators or on funds from third parties, such as the U.S. government, such that our future licensors are not the sole
and exclusive owners of the patents we in-licensed. If other third parties have ownership rights or other rights to our future in-licensed
patents, they may be able to license such patents to our competitors, and our competitors could market competing products and technology.
This could have a material adverse effect on our competitive position, business, financial conditions, results of operations, and prospects.
While it is our policy to require our employees
and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual
property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual
property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements
may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine
the ownership of what we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial
condition, results of operations, and prospects.
We may be subject to claims that our employees, consultants or
independent contractors have wrongfully used or disclosed confidential information or alleged trade secrets of third parties or competitors
or are in breach of non-competition or non-solicitation agreements with our competitors or their former employers.
We have received confidential and proprietary
information from third parties. In addition, as is common in the biotechnology, medical device and pharmaceutical industries, we employ
individuals and engage the services of consultants who were previously employed or engaged at other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that
we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information
of these third parties or our employees’ former employers or our consultants’ or contractors’ current or former clients
or customers. In addition, we may in the future be subject to claims that we caused an employee to breach the terms of his or her non-competition
or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against
these claims, litigation could result in substantial cost and be a distraction to our management and employees. If we are not successful,
in addition to paying monetary damages, we could lose access or exclusive access to valuable intellectual property rights or lose valuable
personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees. A loss of key personnel or their work
product could hamper or prevent our ability to commercialize product candidates, which could have an adverse effect on our business, financial
condition and results of operations.
If our trademarks and trade names are not adequately protected,
then we may not be able to build name recognition in our marks of interest and our business may be adversely affected.
We use and will continue to use registered and/or
unregistered trademarks or trade names to brand and market ourselves and our products. Our trademarks or trade names may be challenged,
infringed, circumvented or declared generic or determined to be infringing on other marks. We rely on both registration and common law
protection for our trademarks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using
these names, which we need for name recognition by potential partners or customers in our markets of interest. During the trademark registration
process, we may receive office actions from the USPTO objecting to the registration of our trademark. Although we would be given an opportunity
to respond to those objections, we may be unable to overcome such rejections. In addition, in the USPTO and in comparable agencies in
many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and/or to seek the cancellation
of registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive
such proceedings. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete
effectively and our business may be adversely affected. Additionally, we may license our trademarks and trade names to third parties,
such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach
of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill
associated with our trademarks and trade names.
Moreover, any name we have proposed to use with
our product candidate in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register
it, as a trademark. Similar requirements exist in Europe. The FDA typically conducts a review of proposed product names, including an
evaluation of potential for confusion with other product names. If the FDA (or an equivalent administrative body in a foreign jurisdiction)
objects to any of our proposed proprietary product names, it may be required to expend significant additional resources in an effort to
identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties
and be acceptable to the FDA (or the relevant administrative body in a foreign jurisdiction). Furthermore, in many countries, owning and
maintaining a trademark registration may not provide an adequate defense against a subsequent infringement claim asserted by the owner
of a senior trademark.
Numerous factors may limit any potential competitive advantage
provided by our intellectual property rights.
The degree of future protection afforded by our
intellectual property rights, whether owned or in-licensed, is uncertain because intellectual property rights have limitations, and may
not adequately protect our business, provide a barrier to entry against our competitors or potential competitors, or permit us to maintain
our competitive advantage. Moreover, if a third party has intellectual property rights that cover the practice of our technology, we may
not be able to fully exercise or extract value from our intellectual property rights. The following examples are illustrative:
| ● | pending
patent applications that we own or license in the future may not lead to issued patents; |
| ● | patents,
should they issue, that we own or license in the future, may not provide us with any competitive
advantages, or may be challenged and held invalid or unenforceable; |
| ● | others
may be able to develop and/or practice technology that is similar to our technology or aspects
of our technology but that is not covered by the claims of any of our owned or future in-licensed
patents, should any such patents issue; |
| ● | third
parties may compete with us in jurisdictions where we do not pursue and obtain patent protection; |
| ● | we
(or our future licensors) might not have been the first to make the inventions covered by
a pending patent application that we own or license in the future; |
| ● | we
(or our future licensors) might not have been the first to file patent applications covering
a particular invention; |
| ● | others
may independently develop similar or alternative technologies without infringing our intellectual
property rights; |
| ● | we
may not be able to obtain and/or maintain necessary licenses on reasonable terms or at all; |
| ● | third
parties may assert an ownership interest in our intellectual property and, if successful,
such disputes may preclude us from exercising exclusive rights, or any rights at all, over
that intellectual property; |
| ● | we
may not be able to maintain the confidentiality of our trade secrets or other proprietary
information; |
| ● | we
may not develop or in-license additional proprietary technologies that are patentable; and |
| ● | the
patents of others may have an adverse effect on our business. |
Should any of these events occur, they could materially
harm our business and the results of our operation.
Risks Related to Our Operations, Employee Matters and Managing Growth
We are highly dependent on our key personnel, and if we are not
successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive
biotechnology, medical device and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial,
scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel, including Uzi Sofer, our
Chief Executive Officer. The loss of the services of any of our executive officers, other key employees and other scientific and medical
advisors, and an inability to find suitable replacements, could result in delays in product development and harm our business.
We conduct the majority of our operations at our
facility in Israel. The region is headquarters to many other biopharmaceutical and medical device companies and many academic and research
institutions. Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified
personnel on acceptable terms or at all. Changes to Israeli or similar immigration and work authorization laws and regulations, including
those that restrain the flow of scientific and professional talent, can be significantly affected by political forces and levels of economic
activity. Our business may be materially adversely affected if legislative or administrative changes to Israeli or similar foreign immigration
or visa laws and regulations, including as a result of the restrictions on international travel due to the global COVID-19 pandemic, impair
our hiring processes and goals or projects involving personnel who are not Israeli citizens.
To encourage valuable employees to remain at our
company, in addition to salary and cash incentives, we have provided stock options that vest over time. The value to employees of stock
options that vest over time may be significantly affected by movements in our share price that are beyond our control, and may at any
time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members
of our management, scientific and development teams may terminate their employment with us on short notice. Although we have employment
agreements with our key employees, these employment agreements provide for at-will employment, which means that, except with regards to
compliance with relevant notice periods contained therein, any of our employees could leave our employment at any time,. Our success also
depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior,
mid-level and senior scientific and medical personnel.
We will need to grow the size of our organization, and we may
experience difficulties in managing this growth.
As our development and commercialization plans
and strategies develop, and as we transition into operating as a public company, we expect to need additional managerial, operational,
sales, marketing, financial and other personnel, as well as additional facilities to expand our operations. Future growth would impose
significant added responsibilities on members of management, including:
| ● | identifying,
recruiting, integrating, maintaining and motivating additional employees; |
| ● | managing
our internal development efforts effectively, including the clinical and FDA review process
for our product candidate and the manufacturing infrastructure required to produce our product
candidate, while complying with our contractual obligations to contractors and other third
parties; and |
| ● | improving
our operational, financial and management controls, reporting systems and procedures. |
Our future financial performance and our ability
to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management
may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount
of time to managing these growth activities.
We currently rely, and for the foreseeable future
will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services,
including certain aspects of regulatory approval, clinical trial management and construction of manufacturing facilities. There can be
no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a timely
basis when needed, or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities
or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended,
delayed or terminated, and we may not be able to obtain regulatory approval or certification of our Alpha DaRT technology or other future
products or product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing
consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all. If we are not able
to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, or we are not
able to effectively build out new facilities to accommodate this expansion, we may not be able to successfully implement the tasks necessary
to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization
goals.
Expectations relating to environmental, social and governance
(ESG) programs may impose additional costs and expose us to new risks.
There is an increasing focus from certain investors,
clients and other key stakeholders concerning corporate responsibility, specifically related to environmental, social and governance,
or ESG, factors. As a result, there is an increased emphasis on corporate responsibility ratings and a number of third parties provide
reports on companies in order to measure and assess corporate responsibility performance. In addition, the ESG factors by which companies’
corporate responsibility practices are assessed may change, which could result in greater expectations of us and cause us to undertake
costly initiatives to satisfy such new criteria. Alternatively, if we are unable to satisfy such new criteria, investors may conclude
that our policies with respect to corporate responsibility are inadequate. We risk damage to our brand and reputation if our corporate
responsibility procedures or standards do not meet the standards set by various constituencies. We may be required to make investments
in matters related to ESG, which could be significant and adversely impact our results of operations. Furthermore, if our competitors’
corporate responsibility performance is perceived to be greater than ours, potential or current investors may elect to invest with our
competitors instead. In addition, if we communicate certain initiatives and goals regarding ESG matters, we could fail, or be perceived
to fail, in our achievement of such initiatives or goals, or we could be criticized for the scope of such initiatives or goals. If we
fail to satisfy the expectations of investors and other key stakeholders or our initiatives are not executed as planned, our reputation
and financial results could be materially and adversely affected.
We may explore strategic collaborations that may never materialize
or we may be required to relinquish important rights to and control over the development and commercialization of our product candidates
to any future collaborators.
Our business strategy includes broadening our
platform by potentially exploring strategic partnerships that maximize the potential of our Alpha DaRT technology. As a result, we intend
to periodically explore a variety of possible strategic partnerships in an effort to gain access to additional resources, indications
or combination therapy opportunities, or development of supportive or complementary products. These strategic partnerships may include
partnerships with large strategic partners. At the current time however, we cannot predict what form such a strategic collaboration might
take. We are likely to face significant competition in seeking appropriate strategic collaborators, and strategic collaborations can be
complicated and time consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms,
if at all. If and when we collaborate with a third party for development and commercialization of a product candidate, we can expect to
relinquish some or all of the control over the future success of our Alpha DaRT technology to the third party. We are unable to predict
when, if ever, we will enter into any strategic partnerships because of the numerous risks and uncertainties associated with establishing
them, including:
| ● | expenditure
of substantial operational, financial and management resources; |
| ● | dilutive
issuances of our securities; |
| ● | substantial
actual or contingent liabilities; and |
| ● | termination
or expiration of the arrangement, which would delay the development and may increase the
cost of developing our Alpha DaRT technology. |
Strategic partners may also delay clinical trials,
experience financial difficulties, provide insufficient funding, terminate a clinical trial or abandon an indication or combination therapy,
which could negatively impact our development efforts. Additionally, strategic partners may not properly maintain, enforce or defend our
intellectual property rights or may use our proprietary information in a manner that could jeopardize or invalidate our proprietary information
or expose us to potential litigation, any of which could adversely affect our business, financial position and operations.
Our information technology systems, or those of any of our existing
or potential future collaborators, trial sites, CROs or other contractors or consultants, may fail or suffer system failures and security
breaches, which could result in a material disruption of our product development programs.
We collect and maintain information in digital
form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure
to operate our business. In the ordinary course of our business, we collect, store and transmit large amounts of confidential information,
including intellectual property, proprietary business information and personal information of our customers, employees and other related
third parties. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
Despite the implementation of security measures,
our information technology systems and those of our current and any future trial sites, CROs and other contractors, consultants and collaborators
are vulnerable to damage from cyberattacks, “phishing” attacks and other social engineering schemes, hacking, computer viruses
and malware (e.g. ransomware), unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures, employee
theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors,
or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization. Attacks upon
information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted
by sophisticated and organized groups and individuals with a wide range of motives and expertise. Furthermore, because the techniques
used to obtain unauthorized access to, or to sabotage systems change frequently and often are not recognized until launched against a
target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches
that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents
or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and
to remove or obfuscate forensic evidence.
We and certain of our service providers are from
time to time subject to cyberattacks and security incidents. While we do not believe that we have experienced any significant system failure,
accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material
disruption of our development programs, whether due to a loss of our trade secrets or other similar disruptions. For example, the loss
of clinical trial data from completed or future clinical trials could result in delays in our efforts to obtain marketing authorization
or certification and significantly increase our costs to recover or reproduce the data. In addition, such a breach may require notification
to governmental agencies, the media or individuals pursuant to applicable data privacy and security law and regulations. We would also
be exposed to a risk of loss, including financial assets or litigation and potential liability, which could materially adversely affect
our business, financial condition, results of operations and prospects. We also rely on third parties to manufacture our product candidates,
and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any
disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential
or proprietary information, we could incur liability and the further development and commercialization of our product candidates could
be delayed. We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business
or reputational losses that may result from an interruption or breach of our systems.
If our security measures are breached or unauthorized access
to individually identifiable health information or other personally identifiable information is otherwise obtained, our reputation may
be harmed, and we may incur significant liabilities.
Unauthorized access to, or security breaches of,
our systems and databases could result in unauthorized access to data and information and loss, compromise or corruption of such data
and information. Present and future trial sites, CROs, contractors and consultants also could experience breaches of security leading
to the exposure of confidential and sensitive information. Such breaches of security could be caused by computer hacking, phishing attacks,
ransomware, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks, and other
malicious activity, which may be heretofore unknown. The number and complexity of these threats continue to increase over time.
Most healthcare providers, including research
institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA,
as amended by the HITECH. We are not currently classified as a covered entity or business associate under HIPAA and thus are not directly
subject to its requirements or penalties. However, any person may be prosecuted under HIPAA’s criminal provisions either directly
or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial
criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research
institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information. In addition,
we may in the future maintain sensitive personally identifiable information, including health information, that we receive throughout
the clinical trial process, in the course of our research collaborations, and directly from individuals (or their healthcare providers)
who enroll in our patient assistance programs. As such, we may be subject to state laws requiring notification of affected individuals
and state regulators in the event of a breach of personal information, which is a broader class of information than the health information
protected by HIPAA.
Furthermore, certain health privacy laws, data
breach notification laws, consumer protection laws and genetic testing laws may apply directly to our operations and/or those of our collaborators
and may impose restrictions on our collection, use and dissemination of individuals’ health information. Patients about whom we
or our collaborators obtain health information, as well as the providers who share this information with us, may have statutory or contractual
rights that limit our ability to use and disclose the information. We may be required to expend significant capital and other resources
to ensure ongoing compliance with applicable privacy and data security laws. Claims that we have violated individuals’ privacy rights
or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result
in adverse publicity that could harm our business.
In the event of a security breach, our company
could suffer loss of business, severe reputational damage adversely affecting investor confidence, regulatory investigations and orders,
litigation, indemnity obligations, damages for contract breach, penalties for violation of applicable laws or regulations, significant
costs for remediation and other liabilities. For example, the loss of preclinical study or clinical trial data from completed or future
preclinical studies or clinical trials could result in delays in our efforts to obtain marketing authorization or certification and significantly
increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of,
or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability
and the further development and commercialization of our product candidates could be delayed.
We have incurred and expect to incur significant
expenses to prevent security breaches, including costs related to deploying additional personnel and protection technologies, training
employees, and engaging third- party solution providers and consultants. Although we expend significant resources to create security protections
that shield our data against potential theft and security breaches, such measures cannot provide absolute security. Moreover, given that
we have outsourced our information systems to vendors and rely on cloud-based information systems, we face related security risks which
require us to expend resources to protect our technology and information systems.
Business disruptions could seriously harm our future revenue
and financial condition and increase our costs and expenses.
Our operations, and those of our CROs, CMOs and
other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods,
hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions,
for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and
financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our product candidates could be disrupted
if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.
We are an international business, and we are exposed to various
global risks that could have a material adverse effect on our financial condition and results of operations.
As an international business, which operates in
multiple jurisdictions, we are exposed to trends and financial risks of international markets, and are also required to comply with varying
legal and regulatory requirements in such multiple jurisdictions. Profitability from international operations may be limited by risks
and uncertainties related to regional and global economic conditions, regulatory clearances, approvals or certifications and reimbursement
approvals, and our ability to implement our overall business strategy in various jurisdictions. We expect these risks will increase as
we pursue our strategy to expand operations into new geographic markets. We may not succeed in developing and implementing effective policies
and strategies in each location where we conduct business. Any failure to do so may harm our business, results of operations and financial
condition.
International sales and operations are subject
to a variety of risks, including:
| ● | foreign
currency exchange rate fluctuations; |
| ● | potential
adverse changes in laws and regulatory practices, including export license requirements,
trade barriers, tariffs and tax laws; |
| ● | burdens
and costs of compliance with a variety of foreign laws; |
| ● | foreign
tax laws and potential increased costs associated with overlapping tax structures; |
| ● | greater
difficulty in staffing and managing foreign operations; |
| ● | greater
risk of uncollectible accounts; |
| ● | longer
collection cycles; |
| ● | logistical
and communications challenges; |
| ● | changes
in labor conditions; |
| ● | political
and economic instability, including, without limitation, due to natural disasters or other
catastrophic events, such as the Russian invasion of Ukraine and world sanctions on Russia,
Belarus, and related parties, terrorist attacks, pandemic diseases, such as the ongoing COVID-19
pandemic, hurricanes, fire, floods, pollution and earthquakes; |
| ● | greater
difficulty in protecting intellectual property; |
| ● | the
risk of third-party disputes over ownership of intellectual property and infringement of
third-party intellectual property by Our Products; and |
| ● | general
economic and political conditions in these foreign markets. |
International markets are also affected by economic
pressure to contain reimbursement levels and healthcare costs. Profitability from international operations may be limited by risks and
uncertainties related to regional economic conditions, regulatory clearances and approvals and reimbursement approvals, competing products,
infrastructure development, intellectual property rights protection and our ability to implement our overall business strategy. We expect
these risks will increase as we pursue our strategy to expand operations into new geographic markets. We may not succeed in developing
and implementing effective policies and strategies in each location where we conduct business. Any failure to do so may harm our business,
results of operations and financial condition.
Further, as a result of escalating tensions and
the subsequent invasion of Ukraine by Russia, the United States and other countries have imposed sanctions on Russia, including its major
financial institutions and certain other businesses and individuals. Russia may respond in kind, and the continuation of the conflict
may result in additional sanctions being enacted by the United States, other North Atlantic Treaty Organization member states, or other
countries. We cannot predict the impact of Russian activities in Ukraine and any heightened military conflict or geopolitical instability
that may follow, including heightened operating risks and production disruptions in Russia and Europe, additional sanctions or counter-sanctions,
heightened inflation, cyber disruptions or attacks, higher energy costs, higher manufacturing costs, disruptions in raw materials supplies,
increased raw material costs and higher supply chain costs. Although we do not presently foresee direct material adverse effects upon
our business, financial condition, or results of operations as a result of developments in Ukraine and the consequent controls
and sanctions, these factors may affect companies in many sectors and could lead to increased market volatility and uncertainty, which
could affect us in turn.
The increasing use of social media platforms presents new risks
and challenges.
Social media is increasingly being used to communicate
about our clinical development programs for our Alpha DaRT technology and the diseases our technology is being developed to treat, and
we intend to utilize appropriate social media in connection with our commercialization efforts following marketing authorization or certification
of our Alpha DaRT technology or other future products or product candidates, if any. Social media practices in the medical device, biotechnology
and biopharmaceutical industries continue to evolve and regulations and regulatory guidance relating to such use are evolving and not
always clear. This evolution creates uncertainty and risk of noncompliance with regulations applicable to our business, resulting in potential
regulatory actions against us, along with the potential for litigation related to off-label marketing or other prohibited activities and
heightened scrutiny by the FDA, the SEC and other regulators. For example, patients may use social media channels to comment on their
experience in a future blinded clinical trial or to report an alleged adverse event. If such disclosures occur, there is a risk that trial
enrollment may be adversely impacted, that we may fail to monitor and comply with applicable adverse event reporting obligations or that
we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures
generated by social media due to restrictions on what we may say about our Alpha DaRT technology or other future products or product candidates.
There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any
social networking website. In addition, we may encounter attacks on social media regarding our company, management, our Alpha DaRT technology
or other future products or product candidates. If any of these events were to occur or we otherwise fail to comply with applicable regulations,
we could incur liability, face regulatory actions or incur other harm to our business.
Our business could be disrupted by catastrophic events.
Occurrence of any catastrophic event, including
a global pandemic like the ongoing COVID-19 pandemic, earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications
failure, software or hardware malfunction, cyber-attack, war or terrorist attack, explosion or pandemic could impact our business. Our
insurance coverage may not compensate us for losses that may occur in the event of an earthquake or other significant natural disaster.
If any disaster were to occur, our ability to operate our business at our facilities could be impaired and we could incur significant
losses, require substantial recovery time and experience significant expenditures in order to resume operations. If we are unable to develop
adequate plans to ensure that our business functions continue to operate during and after a disaster and to execute successfully on those
plans in the event of a disaster or emergency, our business would be harmed.
Risks Related to Being a Public Company
We are incurring increased costs as a result of operating as
a newly public company, and our management will devote substantial time to new compliance initiatives.
As a newly public company subject to reporting
requirements in the United States, we are incurring significant legal, accounting and other expenses that we did not incur as a private
company, and these expenses may increase even more after we are no longer an emerging growth company, as defined in Section 2(a) of
the Securities Act. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the
Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules adopted, and to be adopted, by the SEC and Nasdaq. Our
management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
regulations have substantially increased our legal and financial compliance costs and to make some activities more time-consuming and
costly. The increased costs will increase our net loss. For example, we expect these rules and regulations to make it more difficult
and more expensive for us to obtain director and officer liability insurance and we may be forced to accept reduced policy limits or incur
substantially higher costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional
costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract
and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
A market for our securities may not develop or be sustained,
which would adversely affect the liquidity and price of our securities.
The price of our securities may fluctuate significantly
due to general market and economic conditions. An active trading market for our securities may never develop or, if developed, it may
not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business
condition and the release of our financial reports. Additionally, if our securities become delisted from Nasdaq and are quoted on the
OTC Bulletin Board (an inter-dealer automated quotation system for equity securities that is not a national securities exchange) or the
combined company’s securities are not listed on Nasdaq and are quoted on the OTC Bulletin Board, the liquidity and price of our
securities may be more limited than if we were quoted or listed on the NYSE, Nasdaq or another national securities exchange. You may be
unable to sell your securities unless a market can be established or sustained.
Our internal controls over financial reporting may not be effective
and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant
and adverse effect on our business and reputation.
We are subject to the reporting requirements of
the Securities Act, the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of Nasdaq. We expect that the requirements
of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities
more difficult, time-consuming and costly, and place significant strain on our personnel, systems and resources.
The applicable provisions of the Sarbanes-Oxley
Act require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.
We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are
designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in
reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
Our current controls and any new controls that
we develop may become inadequate because of changes in conditions of our business. Further, weaknesses in our internal controls may be
discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation
or improvement, could adversely affect our operating results or cause us to fail to meet reporting obligations and may result in a restatement
of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely
affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding
the effectiveness of our internal control over financial reporting that is required to include in the periodic reports we will file with
the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial
reporting could also cause investors to lose confidence in our reported financial and other information.
In order to maintain and improve the effectiveness
of our disclosure controls and procedures and internal control over financial reporting, we have expended and anticipate that we will
continue to expend significant resources, including accounting-related costs, and provide significant management oversight. Any failure
to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis,
could increase our operating costs and could materially and adversely affect our ability to operate our business. In the event that our
internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may
lose confidence in our operating results and the share price of the combined company could decline. In addition, if we are unable to continue
to meet these requirements, we may not be able to maintain listing on Nasdaq.
Our independent registered public accounting firm
is not required to formally attest to the effectiveness of its internal control over financial reporting until after we are no longer
an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the
event it is not satisfied with the level at which our controls are documented, designed or operating. Any failure to maintain effective
disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating
results.
As a result of our business combination
with a special purpose acquisition company, regulatory obligations may impact us differently than other publicly traded companies.
On March 7, 2022, we completed a business combination
with HCCC, a special purpose acquisition company, or SPAC, pursuant to which we became a publicly traded company. As a result of this
transaction, regulatory obligations have, and may continue, to impact us differently than other publicly traded companies. For instance,
the SEC and other regulatory agencies may issue additional guidance or apply further regulatory scrutiny to companies like us that have
completed a business combination with a SPAC. Managing this regulatory environment, which has and may continue to evolve, could divert
management’s attention from the operation of our business, negatively impact our ability to raise additional capital when needed
or have an adverse effect on the price of our ordinary shares.
Risks Related to Ownership of Our Ordinary Shares
Our Articles and Israeli law could prevent a takeover that shareholders
consider favorable and could also reduce the market price of our ordinary shares.
Certain provisions of Israeli law and our Articles
could have the effect of delaying or preventing a change in control and may make it more difficult for a third party to acquire us or
for our shareholders to elect different individuals to its board of directors, even if doing so would be beneficial to its shareholders,
and may limit the price that investors may be willing to pay in the future for our ordinary shares. Among other things:
| ● | Israeli
corporate law regulates mergers and requires that a tender offer be effected when more than
a specified percentage of shares in a company are purchased; |
| ● | Israeli
corporate law requires special approvals for certain transactions involving directors, officers
or significant shareholders and regulates other matters that may be relevant to these types
of transactions; |
| ● | Israeli
corporate law does not provide for shareholder action by written consent for public companies,
thereby requiring all shareholder actions to be taken at a general meeting of shareholders; |
| ● | our
Articles divide our directors into three classes, each of which is elected once every three years; |
| ● | our
Articles generally require a vote of the holders of a majority of our outstanding ordinary
shares entitled to vote present and voting on the matter at a general meeting of shareholders
(referred to as simple majority), and the amendment of a limited number of provisions, such
as the provision empowering our board of directors to determine the size of the board, the
provision dividing our directors into three classes, the provision that sets forth the procedures
and the requirements that must be met in order for a shareholder to require the Company to
include a matter on the agenda for a general meeting of the shareholders and the provisions
relating to the election and removal of members of our board of directors and empowering
our board of directors to fill vacancies on the board, require a vote of the holders of 65%
of our outstanding ordinary shares entitled to vote at a general meeting; |
| ● | our
Articles do not permit a director to be removed except by a vote of the holders of at least
65% of our outstanding shares entitled to vote at a general meeting of shareholders; and |
| ● | our
Articles provide that director vacancies may be filled by our board of directors. |
Furthermore, under the Encouragement of Research,
Development and Technological Innovation in the Industry Law 5744-1984 (formerly known as the Law for the Encouragement of Research and
Development in Industry 5744-1984), and the regulations and guidelines promulgated thereunder, or the Innovation Law, to which we are
subject due to our receipt of grants from the Israel Innovation Authority, or IIA (formerly known as the Office of the Chief Scientist
of the Ministry of Economy and Industry, or the OCS), a recipient of IIA grants such as us must report to the IIA regarding any change
of control of the company or regarding any change in the holding of the means of control of the company which results in any non-Israeli
citizen or entity becoming an “interested party”, as defined in the Innovation Law, in the company, and in the latter event,
the non-Israeli citizen or entity will be required to execute an undertaking in favor of IIA, in a form prescribed by IIA, acknowledging
the restrictions imposed by such law and agreeing to abide by its terms.
Further, Israeli tax considerations may make potential
transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting
tax relief to such shareholders from Israeli tax. See the section titled “Certain Material Israeli Tax Considerations—Taxation
of Our shareholders.”
We do not intend to pay dividends for the foreseeable future.
Accordingly, you may not receive any return on investment unless you sell your ordinary shares for a price greater than the price you
paid for such shares.
We have never declared or paid any cash dividends
on our shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and
do not anticipate paying any dividends on our ordinary shares in the foreseeable future. Consequently, you may be unable to realize a
gain on your investment except by selling such shares after price appreciation, which may never occur.
Our
board of directors has sole discretion whether to pay dividends. If our board of directors decides to pay dividends, the form, frequency,
and amount will depend upon its future, operations and earnings, capital requirements and surplus, general financial condition, contractual
restrictions and other factors that its directors may deem relevant. The Israeli Companies Law, 1999 (the “Companies Law”)
imposes restrictions on our ability to declare and pay dividends. See the section titled “Dividend and Liquidation Rights”
in Exhibit 2.1 to this Annual Report. Payment of dividends may also be subject to Israeli withholding taxes. See the section titled “Certain
Material Israeli Tax Considerations” for additional information.
The market price and trading volume of our ordinary shares may
be volatile and could decline significantly.
The stock markets, including Nasdaq on which we
have listed our ordinary shares and our warrants under the symbol “DRTS,” and “DRTSW,” respectively, have from
time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and
is sustained for our ordinary shares and our warrants, the market price of our ordinary shares and our warrants may be volatile and could
decline significantly. In addition, the trading volume in our ordinary shares and our warrants may fluctuate and cause significant price
variations to occur. If the market price of our ordinary shares and our warrants declines significantly, you may be unable to resell your
shares or warrants at or above the market price of the ordinary shares and warrants as of the date immediately following the date of this
Annual Report. We cannot assure you that the market price of our ordinary shares and our warrants will not fluctuate widely or decline
significantly in the future in response to a number of factors, including, among others, the following:
| ● | the
realization of any of the risk factors presented in this Annual Report; |
| ● | additions
and departures of key personnel; |
| ● | failure
to comply with the requirements of Nasdaq; |
| ● | failure
to comply with the Sarbanes-Oxley Act or other laws or regulations; |
| ● | publication
of research reports about us; |
| ● | the
performance and market valuations of other similar companies; |
| ● | new
laws, regulations, subsidies, or credits or new interpretations of existing laws applicable
to us; |
| ● | commencement
of, or involvement in, litigation involving us; |
| ● | broad
disruptions in the financial markets, including sudden disruptions in the credit markets; |
| ● | speculation
in the press or investment community; |
| ● | actual,
potential or perceived control, accounting or reporting problems; |
| ● | changes
in accounting principles, policies and guidelines; and |
| ● | other
events or factors, including those resulting from infectious diseases, health epidemics and
pandemics (including the ongoing COVID-19 public health emergency), natural disasters, war,
acts of terrorism or responses to these events. |
In the past, securities class-action litigation
has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation
could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect
on us.
Our quarterly operating results may fluctuate significantly and
could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond
our control, resulting in a decline in its stock price.
Our quarterly operating results may fluctuate
significantly because of several factors, including:
| ● | labor
availability and costs for hourly and management personnel; |
| ● | profitability
of our products, especially in new markets and due to seasonal fluctuations; |
| ● | changes
in interest rates; |
| ● | impairment
of long-lived assets; |
| ● | macroeconomic
conditions, both internationally and locally; |
| ● | changes
in competitive conditions; |
| ● | expansion
to new markets; and |
| ● | fluctuations
in commodity prices. |
If securities or industry analysts do not publish or cease publishing
research or reports about us, our business, or our market, or if they change their recommendations regarding our ordinary shares adversely,
then the price and trading volume of our ordinary shares could decline.
The trading market for the ordinary shares will
be influenced by the research and reports that industry or financial analysts publish about its business. We do not control these analysts,
or the content and opinions included in their reports. As a new public company, the analysts who publish information about our ordinary
shares have had relatively little experience with us, which could affect their ability to accurately forecast our results and make it
more likely that we fail to meet their estimates. In the event we obtain industry or financial analyst coverage, if any of the analysts
who cover us issues an inaccurate or unfavorable opinion regarding it, our share price would likely decline. If one or more of these analysts
cease coverage of us or fail to publish reports on us regularly, our visibility in the financial markets could decrease, which in turn
could cause our share price or trading volume to decline.
Our failure to meet the continued listing requirements of Nasdaq
could result in a delisting of our securities.
If we fail to continue to satisfy the continued
listing requirements of Nasdaq such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may
take steps to delist our securities. Such a delisting would likely have a negative effect on the price of the securities and would impair
your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, we can provide no assurance that
any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the
market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum bid price requirement
or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if our securities are not listed on, or become
delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity
securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted
or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established
or sustained.
We are eligible to be treated as an emerging growth company,
as defined in the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies
will make our ordinary shares less attractive to investors because we may rely on these reduced disclosure requirements.
We qualify as an emerging growth company within
the meaning of the Securities Act, and we take advantage of certain exemptions from disclosure requirements available to emerging growth
companies, which could make our securities less attractive to investors and may make it more difficult to compare our performance with
other public companies.
We are eligible to be treated as an emerging growth
company, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. Under the JOBS Act, emerging growth
companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies.
We intend to take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards.
For as long as we continue to be an emerging growth
company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies
that are not emerging growth companies, including presenting only limited selected financial data and not being required to comply with
the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, its shareholders may not have access
to certain information that they may deem important. We could be an emerging growth company for up to five years, although circumstances
could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion, if we issue more than $1.0
billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer”
under U.S. securities laws.
We cannot predict if investors will find our ordinary
shares less attractive because we may rely on these exemptions. If some investors find our ordinary shares less attractive as a result,
there may be a less active trading market for our ordinary shares and our share price may be more volatile. Further, there is no guarantee
that the exemptions available to us under the JOBS Act will result in significant savings. To the extent that we choose not to use exemptions
from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact our financial condition.
We are a foreign private issuer and, as a result, we will not
be subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to some extent, are more lenient and
less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S.
company with foreign private issuer status. We qualify as a foreign private issuer under the Exchange Act, we are exempt from certain
provisions of the Exchange Act that are applicable to U.S. domestic public companies, including (1) the sections of the Exchange
Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (2) the
sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for
insiders who profit from trades made in a short period of time and (3) the rules under the Exchange Act requiring the filing
with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, although it is subject
to Israeli laws and regulations with regard to certain of these matters and intend to furnish comparable quarterly information on Form 6-K.
In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end
of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K
within 75 days after the end of each fiscal year and U.S. domestic issuers that are large accelerated filers are required to
file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also
exempt from Regulation FD, which is intended to prevent issuers from making selective disclosures of material information. As a result
of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.
We may lose our foreign private issuer status in the future,
which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer,
and therefore are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The
determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed
second fiscal quarter, and, accordingly, our next determination will be made on June 30, 2023. In the future, we would lose its foreign
private issuer status if (1) more than 50% of its outstanding voting securities are owned by U.S. residents and (2) a majority
of its directors or executive officers are U.S. citizens or residents, or it fails to meet additional requirements necessary to avoid
loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic
reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a
foreign private issuer. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors and
principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange
Act. In addition, we would lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of
Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting
and other expenses that we will not incur as a foreign private issuer.
As we are a “foreign private issuer” and follow certain
home country corporate governance practices, our shareholders may not have the same protections afforded to shareholders of companies
that are subject to all Nasdaq corporate governance requirements.
As a foreign private issuer we have the option
to follow certain home country corporate governance practices rather than those of Nasdaq, provided that we disclose the requirements
we are not following and describes the home country practices we are following. We intend to rely on this “foreign private issuer
exemption” with respect to the Nasdaq rules for shareholder meeting quorums and Nasdaq rules requiring shareholder approval.
We may in the future elect to follow home country practices with regard to other matters. As a result, our shareholders may not have the
same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.
Our
Amended and Restated Articles of Association provide that unless we consent to an alternate forum, the federal district
courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act.
Our
Amended and Restated Articles of Association (the “Articles”) provide that, unless we consent in writing to the selection
of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for any claim asserting
a cause of action arising under the Securities Act (for the avoidance of any doubt, such provision does not apply to any claim asserting
a cause of action arising under the Exchange Act). Section 22 of the Securities Act creates concurrent jurisdiction for federal and
state courts over all such Securities Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to entertain such
claims. This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable
for disputes with us or our directors, officers or other employees and may increase the costs associated with such lawsuits, which may
discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions
of the Articles inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may
incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial
condition. Any person or entity purchasing or otherwise acquiring any interest in our share capital shall be deemed to have notice of
and to have consented to the choice of forum provisions of the Articles described above. This provision would not apply to suits brought
to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.
The listing of our securities on Nasdaq did not benefit from
the process undertaken in connection with an underwritten initial public offering, which could result in diminished investor demand, inefficiencies
in pricing and a more volatile public price for our securities.
Our ordinary shares and warrants are listed on
Nasdaq under the symbols “DRTS” and “DRTSW,” respectively. Unlike an underwritten initial public offering of our
securities, the initial listing of our securities as a result of the Business Combination did not benefit from the following:
| ● | the
book-building process undertaken by underwriters that helps to inform efficient price discovery
with respect to opening trades of newly listed securities; |
| ● | underwriter
support to help stabilize, maintain or affect the public price of the new issue immediately
after listing; and |
| ● | underwriter
due diligence review of the offering and potential liability for material misstatements or
omissions of fact in a prospectus used in connection with the securities being offered or
for statements made by its securities analysts or other personnel. |
Underwriters have liability under the U.S. securities
laws for material misstatements or omissions in a registration statement pursuant to which an issuer sells securities. Section 11
of the Securities Act (“Section 11”) imposes liability on parties, including underwriters, involved in a securities offering
if the registration statement contains a materially false statement or material omission. To effectively establish a due diligence defense
against a cause of action brought pursuant to Section 11, a defendant, including an underwriter, carries the burden of proof to demonstrate
that he or she, after reasonable investigation, believed that the statements in the registration statement were true and free of material
omissions. In order to meet this burden of proof, underwriters in a registered offering typically conduct extensive due diligence of the
registrant and vet the registrant’s disclosure. Due diligence entails engaging legal, financial and/or other experts to perform
an investigation as to the accuracy of an issuer’s disclosure regarding, among other things, its business, prospects and financial
results. In making their investment decision, investors have the benefit of such diligence in underwritten public offerings. HCCC’s
investors must rely on the information in this Annual Report and will not have the benefit of an independent review and investigation
of the type normally performed by an independent underwriter in a public securities offering. While sponsors, private investors and management
in a business combination undertake a certain level of due diligence, it is not necessarily the same level of due diligence undertaken
by an underwriter in a public securities offering and, therefore, there could be a heightened risk of an incorrect valuation of our business
or material misstatements or omissions in this Annual Report.
In addition, because there were no underwriters
engaged in connection with the Transactions, prior to the opening of trading on the trading day immediately following the Closing Date,
there was no traditional “roadshow” or book building process, and no price at which underwriters initially sold shares to
the public to help inform efficient and sufficient price discovery with respect to the initial post-closing trades. Therefore, buy and
sell orders submitted prior to and at the opening of initial post-closing trading of our securities did not have the benefit of being
informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in
an underwritten initial public offering. There were no underwriters assuming risk in connection with an initial resale of our securities
or helping to stabilize, maintain or affect the public price of our securities following the closing. No assurance can be given that brokerage
firms will, in the future, want to conduct any offerings on our behalf. All of these differences from an underwritten public offering
of our securities could result in a more volatile price for our securities.
Such differences from an underwritten public
offering may present material risks to unaffiliated investors that would not exist if we became a publicly listed company through an underwritten
initial public offering instead of upon completion of the merger. Further, the lack of such processes in connection with the listing of
our securities could result in diminished investor demand, inefficiencies in pricing and a more volatile public price for our securities
during the period immediately following the listing than in connection with an underwritten initial public offering.
We may issue additional ordinary shares or other equity securities
without seeking approval of our shareholders, which would dilute your ownership interests and may depress the market price of the ordinary
shares.
As of March 1, 2023, we had warrants outstanding to purchase up to
an aggregate of 18,139,418 ordinary shares, as well as outstanding ESOP grants to our employees, directors and service providers, of options
to purchase a total of 8,350,451 ordinary shares and 952,404 RSUs. Further, we may choose to seek third party financing to provide
additional working capital for our business, in which event we may issue additional equity securities. We may also issue additional ordinary
shares or other equity securities of equal or senior rank in the future for any reason or in connection
If we or any of our subsidiaries are characterized as a Passive
Foreign Investment Company (“PFIC”) for U.S. federal income tax purposes, U.S. Holders may suffer adverse tax consequences.
A non-U.S. corporation generally will be treated
as a PFIC for U.S. federal income tax purposes, in any taxable year if either (1) at least 75% of its gross income for such year
is passive income or (2) at least 50% of the value of its assets (generally based on an average of the quarterly values of the assets)
during such year is attributable to assets that produce or are held for the production of passive income. We believe we were not
a PFIC in 2022. Based on the current and anticipated composition of our and our subsidiaries’ income, assets and operations, there
is a risk that we may be treated as a PFIC for future taxable years. Moreover, the application of the PFIC rules is subject
to uncertainty in several respects, and we cannot assure you that the IRS will not take a contrary position or that a court will not sustain
such a challenge by the IRS.
Whether we or any of our subsidiaries are a PFIC
for any taxable year is a factual determination that depends on, among other things, the composition of our and our subsidiaries’
income and assets, and the market value of our and our subsidiaries’ shares and assets. Changes in the composition of our and our
subsidiaries’ income, composition or composition of assets may cause us to be or become a PFIC for the current or subsequent taxable
years. Whether we are treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at
the close of each taxable year and, thus, is subject to significant uncertainty.
If we are a PFIC for any taxable year, a
U.S. Holder of our ordinary shares may be subject to adverse tax consequences and may incur certain information reporting obligations.
For a further discussion, see “Certain Material U.S. Federal Income Tax Considerations—U.S. Holders—Passive Foreign
Investment Company Rules.” U.S. Holders of our ordinary shares and our warrants are strongly encouraged to consult their own
advisors regarding the potential application of these rules to us and the ownership of our ordinary shares and/or warrants.
If
a U.S. Holder is treated as owning at least 10% of our stock, such U.S. Holder may be subject to adverse U.S. federal
income tax consequences.
For U.S. federal income tax purposes, if a U.S.
Holder is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of our stock, such person
may be treated as a “United States shareholder” with respect to us, or any of our subsidiaries, if we or such subsidiary is
a “controlled foreign corporation.” If we have one or more U.S. subsidiaries, certain of our non-U.S. subsidiaries could be
treated as a controlled foreign corporation regardless of whether we are treated as a controlled foreign corporation (although there are
recently promulgated final and currently proposed Treasury regulations that may limit the application of these rules in certain circumstances).
Certain United States shareholders of a controlled
foreign corporation may be required to report annually and include in their U.S. federal taxable income their pro rata share of the controlled
foreign corporation’s “Subpart F income” and, in computing their “global intangible low-taxed income,” “tested
income” and a pro rata share of the amount of certain U.S. property (including certain stock in U.S. corporations and certain tangible
assets located in the United States) held by the controlled foreign corporation regardless of whether such controlled foreign corporation
makes any distributions. The amount includable by a United States shareholder under these rules is based on a number of factors,
including potentially, but not limited to, the controlled foreign corporation’s current earnings and profits (if any), tax basis
in the controlled foreign corporation’s assets, and foreign taxes paid by the controlled foreign corporation on its underlying income.
Failure to comply with these reporting obligations (or related tax payment obligations) may subject such United States shareholder to
significant monetary penalties and may extend the statute of limitations with respect to such United States shareholder’s U.S. federal
income tax return for the year for which reporting (or payment of tax) was due. We cannot provide any assurances that it will assist
U.S. Holders in determining whether we or any of our subsidiaries are treated as a controlled foreign corporation for U.S. federal income
tax purposes or whether any U.S. Holder is treated as a United States shareholder with respect to any of such controlled foreign corporations
or furnish to any holder information that may be necessary to comply with reporting and tax paying obligations if we, or any of our subsidiaries,
is treated as a controlled foreign corporation for U.S. federal income tax purposes.
As a result of the Business Combination, the IRS may not agree
that we should be treated as a non-U.S. corporation for U.S. federal income tax purposes.
Under current U.S. federal income tax law, a corporation
generally will be considered to be a U.S. corporation for U.S. federal income tax purposes if it is created or organized in the United
States or under the law of the United States or of any State. Accordingly, under generally applicable U.S. federal income tax rules, we,
given our incorporation and tax residency in Israel, would generally be classified as a non-U.S. corporation for U.S. federal income tax
purposes. Section 7874 of the Code and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause
a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that we are treated
as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder,
we would be liable for U.S. federal income tax on its income in the same manner as any other U.S. corporation and certain distributions
made by us to Non-U.S. Holders (as defined in “Certain Material U.S. Federal Income Tax Considerations”) of our ordinary shares
may be subject to U.S. withholding tax.
Based
on the terms of the Business Combination and certain factual assumptions, we do not currently expect to be treated as a U.S. corporation
for U.S. federal income tax purposes under Section 7874 of the Code after the Business Combination. However, the application of Section
7874 of the Code is complex, subject to detailed regulations (the application of which is uncertain in various respects and would be
impacted by changes in such U.S. Treasury regulations with possible retroactive effect) and subject to certain factual uncertainties.
Accordingly, there can be no assurance that the IRS will not challenge our status as a non-U.S. corporation for U.S. federal income tax
purposes under Section 7874 of the Code or that such challenge would not be sustained by a court.
If
the IRS were to successfully challenge under Section 7874 of the Code our status as a non-U.S. corporation for U.S. federal income tax
purposes, we and certain of our shareholders may be subject to significant adverse tax consequences, including a higher effective corporate
income tax rate and future withholding taxes on certain of our shareholders, depending on the application of any applicable income tax
treaty that may apply to reduce such withholding taxes.
You
should consult your own advisors regarding the application of Section 7874 of the Code to the Business Combination and the tax consequences
if our classification as a non-U.S. corporation is not respected.
Risks
Related to Our Incorporation and Location in Israel
Conditions
in Israel could materially and adversely affect our business.
Many
of our employees, including certain management members operate from its offices that are located in Jerusalem, Israel. In addition, a
number of our officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and
the surrounding region may directly affect our business and operations. On the military front, in recent years, Israel has been
engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist
terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran
has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired
from the Gaza Strip, Lebanon and Syria against civilian targets in various parts of Israel, including areas in which our employees are
located, which negatively affected business conditions in Israel. Any hostilities involving Israel, regional political instability or
the interruption or curtailment of trade between Israel and its trading partners could materially and adversely affect our operations
and results of operations.
Our
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli
government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot
assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages
incurred by us could have a material adverse effect on its business. Any armed conflicts or political instability in the region would
likely negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business
with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our results of
operations, financial condition or the expansion of its business. A campaign of boycotts, divestment, and sanctions has been undertaken
against Israel, which could also adversely affect our business. Actual or perceived political instability in Israel or any negative changes
in the political environment, may individually or in the aggregate adversely affect the Israeli economy and, in turn, our business, financial
condition, results of operations, and prospects.
In
addition, many Israeli citizens are obligated to perform several weeks of annual military reserve duty each year until they reach
the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict,
may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military
reservists. It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such
call-ups, which may include the call-up of members of its management. Such disruption could materially adversely affect its business,
prospects, financial condition, and results of operations.
We
may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result
in litigation and adversely affect our business.
A
significant portion of our intellectual property has been developed by its employees in the course of their employment by us. Under the
Israeli Patents Law, 5727-1967 (the “Patents Law”), inventions conceived by an employee during and as a result of his or
her employment with a company are regarded as “service inventions,” which belong to the employer, absent an agreement between
the employee and employer providing otherwise. The Patents Law also provides that if there is no agreement between an employer and an
employee determining whether the employee is entitled to receive consideration for service inventions and on what terms, this will be
determined by the Israeli Compensation and Royalties Committee (the “Committee”), a body constituted under the Patents Law.
Case law clarifies that the right to receive consideration for “service inventions” can be waived by the employee and that
in certain circumstances, such waiver does not necessarily have to be explicit. The Committee will examine, on a case-by-case basis,
the general contractual framework between the parties, using interpretation rules of the general Israeli contract laws. Further,
the Committee has not yet determined one specific formula for calculating this remuneration, but rather uses the criteria specified in
the Patents Law. Although we generally enter into agreements with our employees pursuant to which such individuals assign to us all rights
to any inventions created during and as a result of their employment with us, we may face claims demanding remuneration in consideration
for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to its current
and/or former employees, or be forced to litigate such monetary claims (which will not affect our proprietary rights), which could negatively
affect its business.
Certain
tax benefits that may be available to us, if obtained, would require us to continue to meet various conditions and such benefits may
be terminated or reduced in the future, which could increase our costs and taxes.
We may be eligible for certain tax benefits provided to “Preferred
Technological Enterprises” under the Israeli Law for the Encouragement of Capital Investments, 5719-1959, referred to as the “Investment
Law”. If we obtain tax benefits under the “Preferred Technological Enterprises” regime then, in order to remain eligible
for such tax benefits, we will need to continue to meet certain conditions stipulated in the Investment Law and its regulations, as amended.
If these tax benefits are reduced, cancelled or discontinued, our Israeli taxable income may be subject to Israeli corporate tax rates
of 23% in 2018 and thereafter. Additionally, if we increase our activities outside of Israel through acquisitions, for example, our activities
might not be eligible for inclusion in future Israeli tax benefit programs. See “Certain Material Israeli Tax Considerations.”
It
may be difficult to enforce a U.S. judgment against us, our officers and directors and the Israeli experts named in this Annual Report
in Israel or the United States, or to assert U.S. securities laws claims in Israel or serve process on our officers and directors and
these experts.
Most
of our directors or officers are not residents of the United States and most of their and our assets are located outside the United States.
Service of process upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States
against us or our non-U.S. directors and executive officers may be difficult to obtain within the United States. We have been informed
by our legal counsel in Israel that it may be difficult to assert claims under U.S. securities laws in original actions instituted in
Israel or obtain a judgment based on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear
a claim based on a violation of U.S. securities laws against us or our non-U.S. officers and directors because Israel may not be the
most appropriate forum to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli
law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved
as a fact, which can be a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There
is little binding case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside
Israel, which may make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover,
an Israeli court will not enforce a non-Israeli judgment if (among other things) it was given in a state whose laws do not provide for
the enforcement of judgments of Israeli courts (subject to exceptional cases), or if its enforcement is likely to prejudice the sovereignty
or security of the State of Israel, or if it was obtained by fraud or in absence of due process, or if it is at variance with another
valid judgment that was given in the same matter between the same parties, or if a suit in the same matter between the same parties was
pending before a court or tribunal in Israel, at the time the foreign action was brought.
Your
rights and responsibilities as a shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities
of shareholders of U.S. corporations.
We
are incorporated under Israeli law. The rights and responsibilities of holders of the ordinary shares are governed by the Articles and
the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders in
typical U.S. corporations. In particular, pursuant to the Companies Law each shareholder of an Israeli company has to act in good faith
and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the company and other shareholders
and to refrain from abusing his or her power in the company, including, among other things, in voting at the general meeting of shareholders
and class meetings, on amendments to a company’s articles of association, increases in a company’s authorized share capital,
mergers, and transactions requiring shareholders’ approval under the Companies Law. In addition, a controlling shareholder of an
Israeli company or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the
power to appoint or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty
of fairness toward the Company. However, Israeli law does not define the substance of this duty of fairness. There is limited case law
available to assist in understanding the implications of these provisions that govern shareholder behavior.
The
Articles provide that unless we consent otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for
substantially all disputes between us and our shareholders under the Companies Law and the Israeli Securities Law.
The
competent courts of Tel Aviv, Israel shall, unless we consent otherwise in writing, be the exclusive forum for (i) any derivative
action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of fiduciary duty owed by any director,
officer or other employee of ours to us or our shareholders, or (iii) any action asserting a claim arising pursuant to any provision
of the Companies Law or the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”). This exclusive forum provision
is intended to apply to claims arising under Israeli law and would not apply to claims brought pursuant to the Securities Act or the
Exchange Act or any other claim for which federal courts would have exclusive jurisdiction. Such exclusive forum provision in the Articles
will not relieve us of our duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders
will not be deemed to have waived our compliance with these laws, rules and regulations. This exclusive forum provision may limit
a shareholders ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors or other employees
which may discourage lawsuits against us, our directors, officers and employees.
Item
4. Information on the Company.
A. History
and Development of the Company
We
were founded in November 2015 by Uzi Sofer, our Chief Executive Officer and Chairman, along with the inventors of the Alpha DaRT
technology including Professor Itzhak Kelson and Professor Yona Keisari of Tel Aviv University, our Chief Physics Officer and Chief Scientific
Officer, respectively. Together, they founded Alpha Tau with the goal of bringing this innovative technology out of the laboratory and
into patients, in order to bring hope to cancer patients around the world. We are registered with the Israeli Registrar of Companies.
Our registration number is 51-534453-9. Our website address is www.alphatau.com. Information contained on, or
that can be accessed through, our website does not constitute a part of this Annual Report and is not incorporated by reference herein.
We have included our website address in this Annual Report solely for informational purposes. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information regarding issuers, such as we, that file electronically, with
the SEC at www.sec.gov.
The
main address of our principal executive offices is Kiryat HaMada St. 5, Jerusalem, Israel 9777605 and its telephone number is +972 (3) 577-4115.
Our agent for service of process in the United States is Alpha Tau Medical, Inc., 1 Union Street 3rd Floor, Lawrence,
MA 01840. For a description of our principal capital expenditures and divestitures for the two years ended December 31, 2022
and for those currently in progress, see Item 5. “Operating and Financial Review and Prospects.”
On
July 7, 2021, we entered into the Merger Agreement with HCCC and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged
with and into HCCC, with HCCC surviving the merger. Upon consummation of the Business Combination and the other transactions contemplated
by the Merger Agreement on March 7, 2022, HCCC became a wholly owned subsidiary of Alpha Tau. In July 2022, we took the necessary
actions to dissolve HCCC.
B. Business
Overview
We are a clinical-stage oncology therapeutics
company focused on harnessing the innate relative biological effectiveness and short range of alpha particles for use as a localized radiation
therapy for solid tumors. Our proprietary Alpha DaRT technology is designed to utilize the specific therapeutic properties of alpha particles
while aiming to overcome, and even harness for potential benefit, the traditional shortcomings of alpha radiation’s limited range.
We believe that our Alpha DaRT technology has the potential to be broadly applicable across multiple targets and tumor types. We have
evaluated and continue to evaluate the feasibility, safety and efficacy of the Alpha DaRT technology for the treatment of superficial
lesions, i.e., tumors of the skin, head or neck, in multiple clinical trials conducted in clinical sites around the world. In a first-in-human
study of locally advanced and recurrent squamous cell carcinoma, or SCC, cancers of the skin and head and neck, efficacy was evaluated
in 28 tumors, and results showed that Alpha DaRT achieved 100% overall response rate and over 78% complete response rate. The Alpha DaRT
was generally well-tolerated, with limited local toxicity and no systemic toxicity. On the basis of this clinical trial as well as some
of our further clinical trials, we received marketing approval in Israel in August 2020 for the treatment of SCC of the skin or oral
cavity using the Alpha DaRT, and that marketing approval is currently in a renewal process. In June 2021, the FDA granted the Alpha
DaRT Breakthrough Device Designation for the treatment of patients with SCC of the skin or oral cavity without curative standard of care.
In October 2021, the FDA granted the Alpha DaRT a second Breakthrough Device Designation, in treating recurrent Glioblastoma Multiforme,
or GBM, as an adjunct to standard medical therapies or as a standalone therapy after standard medical therapies have been exhausted. In
the second half of 2021, we treated ten patients in the U.S. in a multi-center pilot feasibility trial conducted at Memorial Sloan Kettering
Cancer Center and four other U.S. clinical sites, to explore the feasibility of delivering radiotherapy for malignant skin and superficial
soft tissue tumors using Alpha DaRT. The study met its primary feasibility endpoint, as all patients had successful delivery of radiation
by Alpha DaRT. At approximately 12 weeks and 24 weeks after treatment, all ten lesions treated demonstrated a complete response to treatment,
with no product-related serious adverse events observed. If approved, we expect to commercialize our Alpha DaRT technology first in the
United States before other markets, including Israel, notwithstanding our existing marketing authorization in Israel (under which we have
not yet commercialized the product). We hold exclusive rights to our proprietary Alpha DaRT technology in our core markets, including
the United States and Europe.
While
local radiation therapy has been a mainstay of cancer therapy for years, it has been mostly limited to modalities utilizing beta
or gamma emissions, which primarily destroy cells through an indirect mechanism relying on oxygen and the generation of free radicals
to cause single-strand DNA breaks. By contrast, alpha radiation has hundreds of times the linear energy transfer rate of beta-emitters.
Additionally, alpha particles’ heavier mass and far shorter particle paths (less than 100 μm) relative to beta’s lighter
mass and lengthier (up to 12 mm) path, have been shown to destroy radioresistant cells in clinical studies – causing multiple,
irreparable, double-strand DNA breaks and other cellular damage upon direct impact – within a very short distance. Accordingly,
we believe that alpha radiation has several significant potential advantages for use in cancer radiotherapy, including a high relative
biological efficiency (potentially enabling it to destroy tumor cells with administration of lower levels of radiation), imperviousness
to factors such as hypoxia, and a very well-defined range of travel with limited collateral damage. Nonetheless, its use has also been
limited precisely due to alpha’s extremely short particle range in living tissue, as the range of less than 100 μm is insufficient
to provide meaningful clinical utility.
The
Alpha DaRT technology employs a series of radioactive sources that are embedded with Radium-224 to enable a controlled, intratumoral
release of alpha-emitting atoms which diffuse and decay throughout the tumor, seeking to kill cancerous cells with localized precision,
while penetrating deeper into the tumor than can otherwise be reached by the limited ranges of the alpha particles themselves. Due to
the inherent limited range of the alpha particles, we believe that the Alpha DaRT technology has the potential to deliver powerful and
localized precise killing impact to the tumor without damage to surrounding healthy tissue. By combining the innate relative biological
effectiveness and short range of alpha particles in a single-use disposable form, we believe that the Alpha DaRT could address tumors
that have otherwise demonstrated poor response to radiation therapy or other standards of care, with the potential to apply to a wide
range of tumors and clinical settings.
We
evaluated the feasibility, safety and efficacy of the Alpha DaRT technology in a first-in-human study of locally advanced and recurrent
SCC cancers of the skin and head and neck, the results of which were subsequently published in the International Journal for Radiation
Oncology, Biology, Physics and which elicited a positive editorial reaction in the same journal. Efficacy was evaluated in 28 tumors
of the skin and head and neck, and results showed that Alpha DaRT achieved a >78% complete response rate. The trial was conducted
in an elderly (median age = 80.5 years) and largely pre-treated patient population, with 42% of the target lesions, including non-evaluated
lesions, having already received radiation therapy. The Alpha DaRT was generally well-tolerated, with limited local toxicity and no systemic
toxicity. Following these initial positive results, we substantially expanded our clinical evaluations in later trials to a much wider
patient population. Specifically, we initiated follow-on studies at multiple clinical sites in Israel and around the world, to evaluate
Alpha DaRT in cancers of the skin, superficial soft tissue, or oral cavity, regardless of cell type, which includes SCC as well as basal
cell carcinoma, melanoma, skin metastases, and others. In the second half of 2021, we treated ten patients in the U.S. in a multi-center
pilot feasibility trial conducted at Memorial Sloan Kettering Cancer Center and four other U.S. clinical sites, to explore the feasibility
of delivering radiotherapy for malignant skin and superficial soft tissue tumors using Alpha DaRT. The study met its primary feasibility
endpoint, as all patients had successful delivery of radiation by Alpha DaRT. At approximately 12 weeks and 24 weeks after treatment,
all ten lesions treated demonstrated a complete response to the treatment, with no product-related serious adverse events observed. As
of February 28, 2023, across our clinical trials involving superficial lesions, i.e. tumors of the skin, head or neck, Alpha DaRTs
have been administered to over 145 lesions, and in a pooled analysis evaluating those lesions that reached the evaluation endpoint per
the treatment protocol of the applicable clinical trial, we have observed an overall response rate of 97%, including a complete response
rate of 78%. The supportive
data from these first trials also led to the U.S. Food and Drug Administration, or FDA, granting Breakthrough Device Designation to the
Alpha DaRT for the treatment of patients with SCC of the skin or oral cavity without curative standard of care.
In
parallel, we are pursuing a similar approach towards seeking FDA marketing authorization for other uses for the Alpha DaRT technology
in other indications by conducting feasibility studies and then generating potentially registrational data in other indications, such
as breast, pancreas and prostate cancers, or applications such as combinations with immunotherapies.
We
have engaged with a number of prestigious medical and educational institutions and, as of March 1, 2023, have ten clinical
studies ongoing worldwide across
these two parallel strategies, of generating data in superficial tumors as well as conducting studies in other indications.
Additionally,
in our pre-clinical studies, we evaluated the Alpha DaRT on 19 tumor models (both human and mouse). Alpha DaRT sources were observed
to have killed multiple types of mouse and human tumors in vivo. The intensity of the killing activity varied between tumor types,
and was dependent on the ability of the radioactive atoms to diffuse inside the tumor and on the intrinsic sensitivity of the tissue
to DNA damage induced by the radiation, but all tumor types showed responsiveness to Alpha DaRT, i.e., there was no observed resistance.
We therefore believe that our technology may potentially be relevant for treatment across a broad range of tumors. We are currently focused
on developing the Alpha DaRT for use in a number of potential applications, particularly in refractory or unresectable localized tumors
which are not being adequately addressed by standard of care, tumor types with a high unmet need (such as pancreatic adenocarcinoma or
glioblastoma multiforme), and metastatic tumors in combination with systemic therapies such as checkpoint inhibitors. We are also investigating
the potential of the Alpha DaRT to elicit an immune response as observed in previous pre-clinical data, as well as anecdotal evidence
of response from untreated tumors, or abscopal effects, which may have the potential to inhibit or even reduce metastases.
The
Company was founded in November 2015 by Uzi Sofer, our Chief Executive Officer and Chairman, along with the inventors of the Alpha
DaRT technology including Professor Itzhak Kelson and Professor Yona Keisari of Tel Aviv University, our Chief Physics Officer and Chief
Scientific Officer, respectively. Together, they founded Alpha Tau with the goal of bringing this innovative technology out of the laboratory
and into patients, in order to bring hope to cancer patients around the world.
We
have also devoted a significant amount of time and resources establishing a robust patent portfolio so as to gain a strong scientific
and commercial foothold worldwide. As of December 31, 2022, our patent portfolio included 88 issued patents, and 122 pending patent
applications including two allowed patent applications, in the United States, Europe, Canada, Japan, Australia, China, South Korea, Russia,
Mexico, India, Hong Kong, Singapore, South Africa and ARIPO.
Our Therapeutic
Focus
While
we believe the Alpha DaRT has the potential to revolutionize the treatment of nearly all solid tumors, we have identified three initial
areas of therapeutic focus for the development of our Alpha DaRT technology:
| 1. | Localized
and Unresectable - Localized tumors of a type where either current treatment options
are inadequate or unavailable for the patient, e.g., refractory or recurring tumors following
surgery and/or radiation, unresectable tumors, or tumors in patients who are unable to withstand
surgery. Some of these tumor types include SCC, head and neck SCC, and prostate tumors. |
| 2. | High
Unmet Need. Tumor types with high unmet need, limited treatment options and generally
poor prognosis, such as pancreatic adenocarcinoma and glioblastoma. |
| 3. | Metastatic.
By combining our Alpha DaRT technology with systemic therapies, such as checkpoint inhibitors,
we seek to boost the Alpha DaRT’s potentially immunogenic activity and trigger an immune
response to detect and destroy metastatic cancers throughout the body. |
Development
Pipeline
We
have a number of active clinical programs targeting a range of different tumor types. Our global clinical trial strategy involves progressing
our lead program in superficial tumors, particularly in the United States, while conducting feasibility studies in order to evaluate
the potential of the Alpha DaRT in other tumor areas of high unmet need or metastatic disease. As of February 28, 2023, we have
administered Alpha DaRT treatment to over 150 tumors across nine clinical trials. The following table summarizes our development pipeline:
Potential
Advantages of the Alpha DaRT Technology
We
believe the Alpha DaRT technology may offer the following potential advantages:
| ● | Potential
to destroy solid tumors and preserve health tissue. Proprietary technology designed to
harness alpha radiation in an effort to destroy solid tumors irreparably with localized precision,
while sparing surrounding healthy tissue and limiting systemic side effects. |
| ● | Broad
potential utility across multiple tumors types supported by compelling safety data. Anti-tumor
activity in clinical trials and pre-clinical studies has been observed across multiple tumor
types, regardless of the size or location of the tumor or prior treatments, and the Alpha
DaRT was generally well-tolerated in these studies and trials. We have also not observed
any tumor types that demonstrated resistance to treatment with the Alpha DaRT technology.
Taken together, we believe these results suggest the potential to treat patients with high
unmet need. |
| ● | Promising
preliminary efficacy results. In a first-in-human study of 28 tumors of locally
advanced and recurrent SCC cancers of the skin and head and neck, results showed that Alpha
DaRT achieved 100% overall response rate with over 78% complete response rate. Furthermore,
in a U.S. multi-center pilot feasibility trial in ten patients with malignant skin or superficial
soft tissue tumors, results showed that the Alpha DaRT achieved 100% complete response rate. |
| ● | Potential
to treat patients with limited treatment options. Our Alpha DaRT technology is
designed to deliver a powerful but conformal dose of radiation to a very targeted area, which
we believe has the potential to address patients who have radio-resistant or recurring tumors,
who are ineligible for surgery or for whom surgery would not have a meaningful impact on
quality of life, or who otherwise would have limited treatment options. |
| ● | Potential
ease of use for patients and physician. Potential to be convenient and efficient for
both physician and patient alike: The Alpha DaRT technology is designed to be administered
through a quick, minimally invasive, generally outpatient procedure, with minimal radioactive
exposure, and to yield rapid results without the need for hospitalization or protective gear.
We believe that, if approved and commercialized, physicians could easily adapt the customizable
treatment to a wide patient profile range without the need to purchase special equipment. |
| ● | Potential
stimulatory immune effect. Pre-clinical studies have demonstrated encouraging anti-tumor
immune responses, cancer resistance and prolonged survival, with early results suggesting
potential systemic cancer immune response when tested in combination with immunotherapies
or other systemic therapies. |
Our Strategy
Our
mission is to use our proprietary Alpha DaRT technology to transform the treatment of solid tumors and broaden the potential scope of
local radiotherapy delivery across multiple clinical settings. Key elements of our strategy include:
|
● |
Complete our ongoing U.S. clinical trial evaluating the efficacy and safety of Alpha DaRT in treating recurrent cutaneous squamous cell carcinoma tumors. We are conducting a multi-center pivotal trial, which we refer to as the ReSTART trial, to explore the delivery of radiotherapy for up to 86 patients with recurrent cutaneous squamous cell carcinoma tumors using Alpha DaRT at up to 20 clinical sites around the United States and selected other clinical sites outside the U.S. We anticipate completing recruitment of this trial in 2023 and receiving results of the trial in 2024 for potential submission to the FDA. |
|
● |
Advance
our global development pipeline by conducting feasibility studies in other tumors of high unmet need or metastatic diseases. We
are seeking to develop the Alpha DaRT technology by conducting feasibility studies in other indications and then generating potentially
registrational data in other such indications, such as breast, pancreas and prostate cancers, as well as in patients with metastatic
cancer. As of March 1, 2023, we have ten clinical trials ongoing worldwide. We are also planning to investigate
additional indications in pre-clinical studies, including hepatic cell carcinoma, glioblastoma multiforme, lung cancer and others. |
|
● |
Continue to evaluate the potential systemic immune response generated by the Alpha DaRT, particularly in combination with immunotherapies. We have conducted extensive pre-clinical studies focused on the combination of Alpha DaRT with immunomodulators, which have demonstrated encouraging anti-tumor immune responses. By combining our Alpha DaRT technology with systemic therapies, we seek to harness the Alpha DaRT’s potential immunogenic activity and trigger an immune response to detect and destroy metastatic cancers. In November 2021 we enrolled the first patient in our feasibility combination study of Alpha DaRT and pembrolizumab (Keytruda) for the treatment of SCC of the head and neck, or HNSCC, in Israel. We have completed construction of our own radioactive pre-clinical laboratory at our headquarters in Jerusalem, Israel, which has received the necessary certifications to initiate pre-clinical studies, to further enhance our capabilities of exploring potential combination therapies with Alpha DaRT. |
| ● | Expand
our independent manufacturing capabilities across strategic geographical regions. We
are establishing production sites in key regions around the world to supply sufficient radioactive
sources with fast, reliable and cost-efficient delivery to our global clinical trials and
core markets where we may seek additional marketing authorizations (which, for the avoidance
of doubt, includes ‘certifications’ as used in this Annual Report with respect
to applicable jurisdictions). We currently operate two manufacturing plants: one facility
located in Jerusalem, Israel, where we manufacture our Alpha DaRTs, and a second facility
located in the United States, in Lawrence, Massachusetts, which is currently focused on acquiring
Thorium-228 and preparing generators for use in Jerusalem in preparing Alpha DaRT treatments,
but which has received an expanded radioactive license and is being prepared for on-site
manufacturing of Alpha DaRT treatments. We are in the design phase for a facility in Togane,
Japan. |
| ● | Pursue
marketing authorization and, if authorized, third-party payor coverage in multiple geographies,
with a focus on the United States. We anticipate pursuing marketing authorization, third-party
payor coverage and reimbursement for the use of our Alpha DaRT technology in multiple geographies,
with a focus on the United States. If approved, we expect to commercialize our Alpha DaRT
technology first in the United States before other markets, including Israel, notwithstanding
our existing marketing authorization in Israel, which is currently in a renewal process. |
Background
of Radiation-Based Cancer Treatment
Solid
tumors
Tumors
develop as an accumulation of mutated cells that are unable to regulate their growth, moving through the cell cycle uncontrollably and
dividing excessively with properties that enable them to invade and destroy surrounding tissue. Cancer cells are able to co-opt the microenvironment,
which enables the tumors to bypass the immune system and promote further growth and spread. Cancer cells can break away from the original
tumor via the blood stream or the lymphatic system to form new cells elsewhere, called metastasis, and cause the growth of new
blood vessels, a process called angiogenesis, which gives tumor cells a source of oxygen, nutrients and a mechanism to release
waste products. In 2020 alone, there were over 19 million new cancer diagnoses and 10 million cancer-related deaths worldwide, of which
over 90% related to solid tumors, according to the World Health Organization’s International Agency for Research on Cancer.
Radioactive
decay
Radioactive
decay, the process by which a source emits energy that can penetrate certain materials, is well known for its extreme potency and capacity
to destroy living cells when the radiation generated is at a sufficiently high intensity. Such sources include elements that possess
an excess or imbalance of energy and consequently lack internal stability. As a result, such elements, termed radionuclides or radioisotopes,
will naturally and spontaneously emit, or radiate, the excess energy in order to stabilize, in a random process which cannot be
predicted. However, it is possible to define certain parameters such as the nature of the decay and its likelihood over a specified period
of time. Amid the process of radioactive decay, the original element, with the excess energy stripped, will spin off into a new element,
or a daughter atom. If this daughter atom is itself unstable, it, too, will shed its excess energy and generate its own daughter atom,
setting into motion a decay chain until full stability is ultimately reached. While it remains unknown how long it will take an individual
atom to fully stabilize, we can quantify how long it will take, on average, for half of a given quantity of an element to decay: known
as a half-life, which can range among different radioisotopes from as little as infinitesimal fractions of a second, to billions
of years.
Alpha,
beta, and gamma radiation
Specific
radioactive elements will consistently undergo one or more types of radioactive decay with their own, fixed characteristics, and can
result in the release of particles or photons. For example, the element Radium-224 will undergo decay by shedding two protons and two
neutrons (alpha particle), generating the element Radon-220, and in so doing, emit energy during the release of the alpha particle. This
process is known as alpha radiation or alpha decay, and the alpha particle, bearing the mass-heavy, sloughed-off protons
and neutrons, will itself be heavy (with an atomic mass of 4). By comparison, one form of beta decay occurs when an element emits
an electron, with a negative charge and a relatively low mass. Alpha particles are far bulkier and slower than beta particle electrons:
over 7,000 times heavier with approximately 200 times the linear energy transfer rate.
Alpha
and beta particles, being charged, interact with the charges of every atom they encounter and continually slow down as they travel. Because
alpha particles have such a high mass and linear energy transfer rate, they dissipate their energy quickly and are unable to penetrate
most surfaces, even as thin as a piece of paper. Alpha particles therefore have no clinical impact when delivered externally, since they
cannot penetrate the skin. On the other hand, beta particles are more nimble than their alpha counterparts and can penetrate further
into matter; however, because they have equally low mass as the electrons they encounter, beta particles transfer their energy and also
fade quickly when encountering a surface of some thickness, such as being stopped by a sheet of aluminum.
Gamma
decay, by contrast, does not involve any transfer of charge but rather
a reconfiguration of the existing subatomic particles, triggering the emission of high-energy photons in the form of gamma rays that
can pass longer distances and are attenuated over lengths, depending on the medium being traversed.
Radioactivity
involves spontaneity, with high radioactivity corresponding to high likelihood of sporadic emissions towards stabilization. Clinical
application of the emitted energy – the alpha particles, beta particles and gamma rays – from a radioactive source
therefore demands the controlled harnessing of a spontaneous phenomenon, but with some predictable, key parameters, towards a specific
desired outcome.
Mechanisms
of alpha, beta, and gamma radiotherapy
Radiation,
when aimed towards the destruction of cancerous or other damaged cells in the body, is known as radiotherapy. Depending on the
patient’s particular condition, radiotherapy can be either an alternative or a complement to surgery or systemic therapies for
the treatment of cancer.
Cell
death induced by radiotherapy can occur either through direct or indirect DNA damage. Alpha particles generate direct DNA damage, while
beta particles and gamma rays destroy cancer cells primarily when they encounter oxygen: specifically, they rely on the presence of oxygen
which, upon impact from the beta or gamma radiation, forcefully ejects electrons in a process known as ionization, wherein these
atoms, now excited with unpaired electrons, become free radicals which are highly reactive. While the beta or gamma radiation will have
little direct impact on the cells, the highly reactive free radicals will react with cellular machinery, including a strand of DNA should
they encounter one, generating a single-strand break in the DNA. This is often a short- lived success, however, as the cancer cell may
be able to reconstitute or repair the DNA damage after single- strand breaks, depending on its current position in the cell cycle. By
contrast, alpha-emitters, with hundreds of times the linear energy transfer rate of beta-emitters, and alpha particles’ heavier
mass and far shorter particle paths (less than 100 μm) relative to beta particles’ lighter mass and lengthier (up to 12 mm)
path, have destroyed radioresistant cells more effectively than other forms of radiation such as photons (e.g. X-rays) in pre-clinical
studies – causing multiple, irreparable, DNA double-strand breaks and other cellular damage upon direct impact –
within a very short distance. Alpha radiotherapy has approximately 500x more concentrated cytotoxic potency than beta particles, with
radioactive potency that attenuates as they travel. Beta and gamma radiation are inherently limited in their use in radiotherapy, as
their weaker potency and their reliance on multiple interactions demand significantly higher levels of radiation to destroy cancer cells,
and these modalities have shown limited efficacy in hypoxic tumor tissue due to the lack of oxygen to generate free radicals. In addition,
the relatively long range of beta and gamma increases the risk of greater imprecision, dissipation of potency, and potential collateral
tissue damage. By contrast, we believe that alpha radiotherapy, owing to the nature of its high strength and very tightly controlled
range, as well as the direct cellular impact not reliant on oxygen, has the potential to overcome treatment resistance to beta
and gamma radiotherapy, and to offer a highly conformal and effective source of radiotherapy with very limited damage to surrounding
tissues.
We
believe that alpha radiation may also have the potential to generate an immune-modulated systemic effect in the body when being used
for localized treatment, given that it possesses several unique properties: (a)
its high linear energy transfer, (b) rapid tumor cell destruction while sparing the surrounding lymphatic tissue, nearby tissues
and blood vessels, and (c) the potential to release large amounts of tumor antigens and attract inflammatory and immune cells into
the tumor vicinity.
Systemic
vs. local radiotherapies
Radiotherapy
can be deployed as both a systemic agent and as a localized therapy. Systemic therapies are those which treat the entire body,
and in the context of cancer therapies generally utilize pharmaceutical products, such as chemotherapy or immunotherapy drugs, injected
into the body to damage (or stimulate the body to damage) cancer cells throughout the body preferentially over other cells. Local
therapies, such as surgical excision, are those which address a disease or injury at a specific point, and in the context of cancer
therapies will generally target a specific tumor or set of tumors to be treated.
Localized
radiotherapy is commonly performed by External Beam Radiotherapy, or EBRT, directing external beams of gamma radiation powerful
enough to penetrate the body and damage or destroy cancer cells’ DNA if such cells are in the process of division. EBRT remains
a widely used form of radiotherapy, but due to the high doses required for tumor control, results in normal tissue toxicity. While toxicity
has been reduced due to technologic improvements such as Intensity-modulated radiation therapy, or IMRT, which allow for a more conformal
treatment, significant side effects have continued to be observed in the clinic.
Developments
in the field of nuclear medicine have introduced the use of radiopharmaceuticals or radio- labeled antibodies, drugs containing
a radiation-emitting radionuclide that is naturally absorbed into specific organs or binds to specific molecules to target specific organs,
tissues or cells within the body. Systemic radiotherapy involves the use of isotopes such as beta emitting Iodine-131, Strontium-89,
Samarium-153, and Radium-223, alone or attached to targeting molecules and injected in liquid form into the body intravenously to travel
through the bloodstream to kill cancerous cells, and are then ejected from the body via urine, sweat, and saliva.
Limitations
of systemic radiotherapy
Systemic
radiotherapy is beset by certain significant limitations. Although the radiopharmaceuticals or radio-labeled antibodies are armed with
targeting mechanisms, certain amounts of radionuclide may still damage healthy tissue. Additionally, certain tumors may be beyond the
reach of intravenously administered radiopharmaceuticals. Given the need for sufficient concentration of radiation at the tumor site
to have an effect, systemic therapy has the potential to generate systemic toxicity and collateral damage to healthy tissue, critical
organs and blood vessels, without sufficiently addressing the targeted tumor if the local concentration of radiation on site is insufficient.
Limitations
of local radiotherapy
In
contrast to systemic radiotherapies, local radiotherapies are targeted directly to the cancer and therefore may avoid the shortcomings
of systemic treatment. By focusing on the tumor and sparing the healthy cells, there may be fewer debilitating side effects, and the
cancerous cells may be destroyed while allowing healthy cells to utilize their superior repair mechanisms to recover from the impact
of localized radiation.
Local
radiotherapy can be performed either externally, by directing one or more beams of EBRT, such as high-energy X-rays or gamma rays, towards
the primary tumor and its immediate surroundings, or internally, through the insertion into the body of radiation in solid form, a procedure
known as brachytherapy. EBRT and related therapies can be an effective method of destroying the tumor by irradiation but are prone to
causing spillover damage in the surrounding healthy tissue and are therefore not practicable in every situation, as certain tumors may
be unable to receive a sufficient therapeutic dose due to the surrounding normal tissue tolerance. Recent innovations in the field, such
as IMRT, stereotactic radiosurgery and stereotactic body radiation therapy, have focused on improving the precision of gamma rays to
concentrate more radiation in a tighter area, but ultimately face similar limitations from the innate characteristics of gamma rays.
In
brachytherapy, small capsules containing a therapeutic dose of radiation, or seeds, are placed in or as close as possible to the tumor.
By hewing closely to the tumor and utilizing the sharp dose falloff beyond the seed, physicians may more ably navigate around the healthy
surrounding tissue. Brachytherapy, in being based on beta or gamma radiation, has similar concerns with respect to spillover damage in
the surrounding healthy tissue.
A
less common form of internal radiotherapy is radioembolization, or selective internal radiation therapy, via tiny radioactive beads.
The ability of these radioactive beads to adhere to small blood vessels has led to their use in the treatment of liver cancer. Given
the unique differential blood supply of the liver, irradiating the tumor and concurrently blocking the blood supply may deprive the tumor
of vital oxygen and nutrients.
In
any instance of radiotherapy, the total exposure must be carefully calibrated, as the human body has a fixed, maximum level of radiation
tolerance before the onset of irreversible toxicity and debilitating side effects, such as impaired brain, spinal cord, kidney and bone
marrow function and immune deficiency. With its higher relative biological efficiency enabling lower dose levels for anti-tumor activity,
and very limited range, we believe alpha radiotherapy may offer an attractive treatment modality against this backdrop.
Uses of
alpha radiation in radiotherapy
We
believe alpha radiation has several significant advantages for use in cancer radiotherapy, including having a high relative biological
efficiency (potentially enabling it to destroy tumor cells with administration of lower levels of radiation); it is impervious to factors
such as hypoxia, and it has a very well-defined range of travel with limited collateral damage. Nonetheless, its use has also been limited
precisely due to alpha’s extremely short particle range of less than 100 μm in living tissue, well below the threshold of clinical
utility. For this reason, traditional attempts to deliver alpha radiation locally have failed to generate a clinically useful killing
effect.
The
limited use to date of alpha radiation in radiotherapy has been in systemic therapies using radiopharmaceuticals. For example, Xofigo,
a salt of radium that naturally localizes to regions where cancer cells are infiltrating bone, has been approved by the FDA for the treatment
of bone metastases associated with prostate cancer. Other experimental systemic alpha applications often rely on the conjugation of an
alpha-emitting radioisotope with a targeting mechanism such as an antibody (creating an antibody-radionuclide conjugate), with the aim
of preferential attachment to cancer cells throughout the body before the radionuclide decays. No solution has been approved that delivers
local alpha particles able to penetrate into the depth of tumors, which we believe has hindered the local radiotherapeutic utility of
alpha emitters.
Our Solution:
Alpha DaRT Technology
Mechanism
of Action of the Alpha DaRT Technology
The
Alpha DaRT technology is designed to act through the controlled release of alpha-emitting atoms directly into a tumor, relying on the
innate decay chain of Radium-224 to release and propel multiple alpha emitters deeper into the tumor than can be achieved by the limited
(less than 100 μm) ranges of the alpha particles themselves. Radium-224, with a decay chain releasing four alpha particles, has a
half-life of approximately 3.7 days, while the remaining decay chain has a total half-life of approximately 12 hours, before eventually
stabilizing in inert form.
The
Alpha DaRT utilizes stainless steel sources that are embedded with Radium-224. The Alpha DaRT source is designed to be injected into
the tumor using one of the proprietary applicators we have developed. Once injected, the radium remains attached to the source, while
its daughter atoms detach, spontaneously decay and recoil in succession, with the goal of emitting potentially cytotoxic alpha particle
payloads as they move deeper into the tumor until eventually stabilizing. The sources are designed to be placed a few millimeters apart
from each other in the tumor to fully utilize the range of each source, and the Alpha DaRT’s localized action is designed to kill
the cancer cells while sparing the neighboring healthy cells.
The
illustration below depicts the decay chain process of Radium-224, which is affixed to the Alpha DaRT source while its daughter atoms
are designed to diffuse inside a tumor.
The
graphics below illustrate the radioactivity seen in a cross-section of a tumor grown in a mouse with a single Alpha DaRT source through
the center, as well as the impact on the tumor from an adjacent slice under a histological stain. As illustrated, the Alpha DaRT delivered
a high dose of radiation in a very conformal form, with near zero radiation detected outside of the 5mm range surrounding the source.
This result is also seen clearly under histological stain, where the corresponding section of the tumor was destroyed while the surrounding
environs continued to be unaffected by radiation.
The
radioisotopes are designed to disperse in the cancerous medium by diffusion and convection due to the tumor chaotic vascularity, as well
as from ongoing recoil during the repeated alpha decays. Moreover, the blood vessels formed in tumors tend to have leaky walls, which
we believe increases the chance of the radioactive isotopes staying in the tumor and potentially prolonging killing activity. The net
result is that the potential range of cell killing in the tumor is up to five millimeters, which is up to 100 times the range of the
alpha particles themselves. By contrast, healthy tissue has a highly organized vascular structure, with numerous, well-ordered blood
vessels through which a radioisotope can be easily washed out.
In
our animal studies, the range of the Alpha DaRT was meaningfully more extensive in tumor tissue than it was in healthy tissue, as shown
in the two images below comparing radioactivity visible on a radiograph when inserting the Alpha DaRT into SCC tissue and healthy tissue.
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Diffusion
in SCC |
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Diffusion
in Healthy Tissue |
Our Programs
Clinical
Development Plan
Our
development strategy is focused on evaluating the safety and efficacy of the Alpha DaRT technology across multiple solid tumor types
through broad-ranging pre-clinical studies and into clinical trials. We have successfully completed a first-in-human trial of Alpha DaRT
in patients with superficial and skin tumors, as well as a U.S. multi-center pilot feasibility trial in patients with malignant skin
and superficial soft tissue tumors, and are focused on further developing Alpha DaRT for purposes of seeking FDA marketing authorization
for use of the Alpha DaRT in these tumors, beginning with recurrent cutaneous squamous cell carcinoma. We are also generating additional
clinical evidence regarding the Alpha DaRT technology in superficial and skin tumors from clinical sites around the world, to provide
further support for a potential FDA marketing authorization and third-party payor coverage and reimbursement in the United States and
around the world. We are also examining longer term data from patients treated with the Alpha DaRT for skin, superficial or head and
neck tumors, for patients for whom we have post-trial data, which we may submit for publication in a scientific journal when fully compiled.
In parallel, we are pursuing a similar approach towards developing the Alpha DaRT technology for other uses by conducting feasibility
studies and then generating potentially registrational data in other indications, such as breast, pancreas and prostate cancers, or applications
such as combinations with immunotherapies. We have engaged with a number of prestigious medical and educational institutions and, as
of March 1, 2023, we have ten clinical studies ongoing worldwide.
Squamous
Cell Carcinoma of the Skin, Head and Neck
SCCs
are cancers which grow out of squamous epithelial cells, commonly found on the skin or in the lining of bodily organs or respiratory
and upper digestive tracts. According to the American Cancer Society and the Skin Cancer Foundation, more than one million cases of SCC
of the skin are diagnosed every year in the United States. Over 50,000 cases of SCC of the head and neck are diagnosed every year
in the United States, with SCC making up approximately 90% of head and neck cancers. In the more difficult cutaneous SCC cases, we estimate
that approximately 10% are treated by radiotherapy, and nearly 20% of cutaneous SCC will recur within five years after treatment
by superficial radiotherapy. We selected SCC of the skin, head and neck as an initial target for the Alpha DaRT because of the relative
simplicity of delineation and delivery to superficial solid tumors, as well as the ability to easily assess the Alpha DaRT’s effects
on the tumors and the surrounding tissue on an ongoing basis and to monitor for any potential serious adverse events.
Rabin
Medical Center, Israel, and ISRT, Italy (completed; 2017 – 2019)
We
evaluated the feasibility, safety and efficacy of the Alpha DaRT technology in a first-in-human study of locally advanced and recurrent
squamous cell carcinoma cancers of the skin and head and neck, the results of which were subsequently published in the International
Journal for Radiation Oncology, Biology, Physics and which elected a positive editorial reaction in the same journal. The trial was conducted
in an elderly (median age = 80.5 years) and largely pre-treated patient population, with 42% of the treated lesions having already
received radiation therapy. Efficacy was evaluated in 28 tumors of the skin and head and neck, and results showed that Alpha DaRT achieved
a >78% complete response rate. The Alpha DaRT was generally well-tolerated, with limited local toxicity and no systemic toxicity.
Study
design
This
prospective, first-in-human, multi-center clinical study initially included 31 lesions across 27 patients. Four patients were enrolled
at first to evaluate feasibility, which was defined as the ability to implant Alpha DaRT into a tumor without generating Grade 3 toxicity
after three months on treatment. Once feasibility was established, an additional 23 patients were enrolled to further evaluate toxicity
and preliminary efficacy, namely, the tumor response and local progression-free survival, or PFS. Eligibility criteria included patients
with biopsy- proven squamous cancers of the skin and head and neck with either primary tumors or recurrent/previously treated disease
by either surgery or prior external beam radiation therapy; 13 of 31 lesions (42%) received prior radiation therapy. Safety was evaluated
according to the Common Terminology Criteria for Adverse Events, or CTCAE, version 4.03. Tumor response was assessed at 30 to 45 days
at a follow-up visit using the Response Evaluation Criteria in Solid Tumors, version 1.1, or RECIST. Median follow-up time was 6.7 months
when the trial ended in March 2019.
The
Eastern Cooperative Oncology Group, or ECOG, Performance Status scale was also evaluated at baseline. Lesions were photographed and measured
physically. Additional baseline (pre-insertion) examinations included complete blood test, liver and kidney function tests, urinalysis,
and radioactivity measurements in blood and urine. After enrollment, eligible patients underwent a computed tomography, or CT, scan to
obtain pretreatment tumor volume. These values were used to determine the appropriate number of Alpha DaRT sources required to encompass
tumor volume. Before treatment, an experienced head and neck surgeon evaluated all patients to assess feasibility for further salvage
surgery.
Thirty-one
lesions in 27 patients were evaluated in this study, including 22 patients from Rabin Medical Center, Israel, and five from Instituto
Scientifico Romagnolo per Lo Studio e la Cura dei Tumori, Italy. Of the 31 lesions, efficacy evaluations were conducted on 28 lesions
from patients who met the study eligibility criteria, received the protocol-specified Alpha DaRT treatment, and completed the minimum
follow-up at 6 weeks after treatment. The average number of Ra-224 DaRT sources inserted into these 31 tumors was 27.7 sources (range,
3-169 sources) of two μCi each, with an average treatment duration of 16.3 days. The average radioactivity of the sources on
the day of insertion was 55.4 μCi.
Biosafety
evaluation
Radioactivity
measurements (at insertion site, at different body areas, and in blood and urine samples), vital signs, and general assessments of the
patients’ medical condition were recorded at baseline and during follow-up visits. There was no measurable radioactivity from the
treatment in the blood and urine in patients 30 days after treatment. The values of alpha doses were well within the maximum tolerable
doses of radiation for the lungs, kidneys, and bone marrow at 1500, 500, and 100 centiGy (a unit of measuring absorbed radiation dose),
respectively.
Study
follow-up examinations included repeat blood tests and urinalysis, additional blood and urine radiation measurements, and assessment
of ECOG Performance Status scale at four, nine, and 30 days post- Alpha DaRT insertion. Tumor size was measured again at 30 to 45 days
following Alpha DaRT insertion. Change in tumor size was assessed by physical examination when possible, or in most cases, by radiological
imaging, including PET-CT or CT scans. Tumor response was assessed during a 30-to-45 day follow-up visit using RECIST. Only the irradiated
tumor was considered a target lesion for response assessment. Response criteria were defined as follows: complete response, disappearance
of the irradiated tumor, or CR; partial response, at least a 30% decrease in the longest dimension of the irradiated tumor, or PR; progressive
disease, at least a 20% increase in the longest dimension of the irradiated tumor, taking as reference the smallest longest dimension
recorded in radiotherapy, or PD; stable disease, neither sufficient shrinkage to qualify for PR nor sufficient increase to qualify for
PD, taking as reference the smallest sum since the treatment started. Four to six weeks following Alpha DaRT insertion, a biopsy was
obtained if there was clinical suspicion of residual disease. Patients were subsequently evaluated every two months.
Efficacy
results
Twenty-eight
target lesions were evaluable to determine tumor response. All evaluable target lesions responded to treatment, with CRs observed in
22 lesions (78.6%), and a PR (tumor reduction between 30% and 100%) was observed in the other six lesions (21.4%). An example of a CR
observed in a patient with a newly diagnosed scalp tumor is shown in the figure below.
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Pre-Treatment |
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Alpha DaRT
Insertion |
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30 Days
Post Alpha DaRT Insertion |
Fifteen
of the 16 evaluable lesions (94%) that did not receive prior radiotherapy demonstrated a CR and, among the lesions that were previously
treated with radiotherapy, 7 of 12 (58%) had a CR. Among the 22 lesions that achieved a CR, 5 developed a local relapse at the site of
DaRT implantation at a median of 4.9 months (range, 2.43-5.52 months) after treatment. The Kaplan-Meier estimated local PFS
rate for all patients at one year was 44% (CI, 20.3-64.3%). Among patients with an initial CR to treatment, the Kaplan-Meier estimated
local PFS rate at one year was 60%. Only 32% of the patients had a full year of follow-up. Patients who achieved an initial
CR had significantly higher local PFS and overall survival rates at one year compared with those who achieved a PR (60.1% and 93%
compared with 0% and 0%, respectively) (Fig).
Local
Progression-Free Survival Stratified by Response Status
Overall
survival, or OS, rates to 12 months post-DaRT implantation were 75% (95% CI, 46.14-89.99%) among all patients and 93% (95% CI, 59.08-98.96%)
among complete responders. The median follow-up was 6.7 months (range, 1.45-23.36 months).
One
patient who was treated twice for skin SCC exhibited a unique response, as each time a lesion was treated, a second, non-target lesion
responded as well, manifesting as CR to the treatment. The details of this patient’s unique response were published in a 2019 case
report in the Journal of Contemporary Brachytherapy. The publication concluded that DaRT treatment may play a very important role
because it could stimulate an anti-tumor immune reactivity with more ease than low-LET radiation that is used with conventional EBRT.
Furthermore,
the destruction of the tumor by DaRT maintains an intact vasculature around the tumor, enabling an influx of immune cells to recognize
and destroy tumor cells.
There
was no statistically significant difference in local PFS between primary (newly diagnosed) and recurrent lesions at one year. Median
local PFS among patients with recurrent tumors was 5.5 months and was 5.09 months for those with primary tumors. There was
also no statistically significant difference in local PFS between recurrent or primary lesions. There was no significant difference in
initial response rates and toxicity outcomes between patients who received prior radiotherapy and those who did not. Median local PFS
among patients with prior radiation was 5.2 months and was 5.1 months for those without previous radiation.
Following these initial positive results, we expanded
our clinical evaluations to a wider patient population and initiated follow-on trials at multiple clinical sites in Israel and around
the world. These trials are designed to evaluate Alpha DaRT in cancers of the skin, superficial soft tissue, or oral cavity, regardless
of cell type, which includes SCC as well as basal cell carcinoma, melanoma, skin metastases, and others. We also initiated a trial to
evaluate the retreatment of patients who previously were treated with the Alpha DaRT. As of February 28, 2023, across our clinical
trials involving superficial lesions, i.e., tumors of the skin, head or neck, Alpha DaRTs have been administered to over 145 lesions,
and in a pooled analysis of patients who were treated per the applicable trial protocol, we identified an overall response rate of 97%
observed among those lesions that reached the evaluation endpoint, including a complete response rate of 78%. The data from these first
trials led to the FDA granting Breakthrough Device Designation to the Alpha DaRT for the treatment of patients with SCC of the skin or
oral cavity without curative standard of care.
Safety
results
Treatment-related
adverse events generally included local pain and erythema at the implant site, followed by swelling and mild skin ulceration, and were
limited to Grade 1 (mild) or Grade 2 (moderate) adverse events. For pain and Grade 2 skin ulcerations, 90% of patients showed resolution
of these adverse events within three to five weeks. In general, these acute toxicities were resolved within a median time of 15 days.
In eight patients, the Alpha DaRT sources were inserted adjacent (less than 5 mm) to bone and teeth, and none developed osteoradionecrosis.
Two serious adverse events, or SAEs, were reported, both of which were determined to be unrelated to the study treatment. No device-related
SAEs were observed during the course of treatment or at follow-up. The incidence rate of device-related SAEs was 0% over time (95% confidence
interval, or CI, 0-12.06%) and the incidence rate of unrelated SAEs was 7.14% (95% CI, 1.98-22.65%). Two SAEs were reported, both of
which were determined to be unrelated to the protocol therapy. One patient developed pneumonia after therapy and subsequently expired
owing to their underlying poor performance status and multiple comorbidities. In a second patient treated with the Alpha DaRT for a SCC
confined to the nose, cerebral edema was attributed to a prior course of radiation therapy to the base of skull and posterior orbit.
No device- related SAEs were observed during the course of treatment or follow-up. No subsequent toxicities were observed during follow-up
visits.
Memorial
Sloan Kettering Cancer Center, NY / Multi-Center (completed; 2021)
Following
receipt of an investigational device exemption, or IDE, from the FDA, we conducted a U.S. pilot clinical study to evaluate the feasibility
of Alpha DaRT in treating malignant skin and superficial soft tissue tumors, at Memorial Sloan Kettering Cancer Center, New York and
four other clinical sites around the U.S. All ten patients in this trial were treated in the second half of 2021. The study met its primary
feasibility endpoint, as all patients had successful delivery of radiation by Alpha DaRT. At approximately 12 and 24 weeks, all ten lesions
treated demonstrated a complete response to treatment, with no treatment-related serious adverse events observed.
Study
design
The
initial IDE study was a pilot feasibility trial in which 10 subjects were enrolled. The primary objectives were to explore the feasibility
of delivering radiotherapy for malignant skin and superficial soft tissue tumors using Alpha DaRT, with a goal of achieving successful
delivery in at least 7 of the 10 patients, as well as to determine the frequency and severity of acute adverse events. Secondary objectives
included assessments of radiotherapy-related adverse events, tumor response, radiation safety, stability of device placement, and quality
of life measures. Eligible patients had a malignant skin or superficial soft tissue tumor 1-5 cm in size that is suitable for percutaneous
interstitial brachytherapy, a form of radiotherapy, with a minimum longest dimension for the tumor of 1 cm and a minimum tumor thickness
of 4 mm.
After
enrolling in the trial, eligible subjects underwent a volumetric assessment of the tumor by a CT planning scan. Volumetric images were
used to generate the plan for delivering Alpha DaRT by defining the optimal number, size and location for Alpha DaRT source placement.
After radiation planning is completed, the Alpha DaRT sources were inserted using pre-planned radiotherapy parameters (with a specified
number and size of Alpha DaRT sources). Immediately after placement of the Alpha DaRT sources, a standard planning CT was performed to
assess source positions within the tumor. A physical dose of 10 Gy was prescribed, which is equivalent to a weighted radiation dose of
200 CGyE.
Approximately
two to three weeks after placement of the Alpha DaRT sources, the placement of the sources was reassessed by volumetric imaging, and
then they were removed. Tumor response was assessed periodically three months after removal of the Alpha DaRT source.
ReSTART - U.S. multi-center pivotal study in
recurrent cutaneous SCC (ongoing)
Following
receipt of a conditional IDE from the FDA, whose conditions were subsequently satisfied, we initiated a trial to evaluate the efficacy
and safety of Alpha DaRT in the treatment of certain patients with recurrent cutaneous squamous cell carcinoma, an indication supported
by a Breakthrough Device Designation from the FDA. We refer to this trial as the ReSTART trial, for Recurrent SCC Treatment with Alpha
DaRT Radiation Therapy. The IDE permits us to treat up to 86 patients in up to 20 clinical sites around the U.S., in addition to clinical
sites that may be added outside the U.S. Our first patient in this trial was treated in March 2023. Following
completion of this trial, and pending further discussion with the FDA, we expect to submit the data collected during this clinical trial
in a future potential application for marketing authorization from the FDA.
Study
design
The
pivotal study is a prospective, multi-center, single-arm, open label trial enrolling up to 86 patients with recurrent cutaneous squamous
cell carcinoma. The primary objectives are to determine the objective response rate, or ORR, established by the confirmed best overall
response, or BOR, following treatment with the Alpha DaRT, as well as to assess the duration of response, or DOR, at 6 months from initial
response. Secondary objectives are to assess the safety of Alpha DaRT, and to assess the PFS, OS, overall duration of response, local
control, and quality of life, or QOL, for patients treated with Alpha DaRT.
We
are also discussing with the FDA the potential to add a supplemental arm to this trial to evaluate the use of Alpha DaRT in immunosuppressed
patients, in light of the poor prognosis and limited available treatment options for these patients. We expect to seek to utilize the
same clinical sites which are set up and participating in the main pivotal study for purposes of this supplemental arm as well.
Combination
study: DaRT + checkpoint inhibitor (recruiting)
As
part of our clinical development program for the Alpha DaRT in SCC, in November 2021 we initiated a combination study of the Alpha
DaRT and pembrolizumab (Keytruda) for the treatment of HNSCC, in Israel. We chose to evaluate the Alpha DaRT in combination with pembrolizumab
for the treatment of HNSCC because in our pre-clinical studies (discussed below), the combined use of Alpha DaRT with immunomodulators
resulted in decreased metastatic burden and improved survival in treated animals. Further, the results indicated that this activity was
modulated by activation of the immune system. Both pembrolizumab, a humanized antibody targeting the PD-1 receptor of lymphocytes, and
Alpha DaRT have shown positive results in clinical studies in the treatment of HNSCC. Consequently we are aiming to explore the combination
of these interventions as a potential treatment for metastatic or recurrent HNSCC.
Study
objectives and design
The
primary objectives of this study are to evaluate efficacy of Alpha DaRT in combination with pembrolizumab via the Confirmed BOR as defined
by RECIST. Secondary objectives include assessments of the frequency, severity and causality of acute adverse events related to the Alpha
DaRT treatment in combination with pembrolizumab. Patients enrolled in the trial will receive pembrolizumab cycles every three weeks
both before and after receiving Alpha DaRT treatment. The study uses a two-stage adaptive design and can recruit up to 48 patients, with
a planned interim analysis after the first 18 patients have been treated. Adverse events will be assessed and graded according to CTCAE
version 5.0. PFS will be defined as the time from pembrolizumab treatment start date to progressive disease according to RECIST or death
due to any cause, whichever occurs first. OS is defined as the time from pembrolizumab treatment start date to death due to any cause
or lost to follow up. DOR is defined as the interval from the time measurement criteria are first met for CR, PR, or stable disease (whichever
is first recorded) until the first date recurrent or progressive disease is objectively documented. Exploratory objectives include the
assessment of immunological parameters as a result of Alpha DaRT administration in combination with pembrolizumab. The image below illustrates
the trial design for this combination study:
France
multi-center– skin cancer (open)
We
have initiated a multi-center study at up to six cancer centers in France to investigate the safety and efficacy of Alpha DaRT for the
treatment of malignant cutaneous tumors. The target population will consist of two cohorts: newly diagnosed patients (up to 49 subjects),
and patients with recurrent disease or aggressive pathology (i.e., melanoma) (36 subjects). The primary effectiveness endpoint is the
assessment of the ORR using RECIST criteria, 9 to 11 weeks after Alpha DaRT source insertion. The secondary effectiveness endpoints include
assessment of the reduction in tumor volume based on CT / ultrasound / physical examination- measured tumor volume at 9 to 11 weeks,
assessment of Alpha DaRT source placement using CT imaging on the day of Alpha DaRT insertion, patient-reported health-related QoL outcomes,
and Disease- Free Survival at 12- and 24-months post-Alpha DaRT source insertion. Safety objectives include assessment of acute AEs both
related and unrelated to Alpha DaRT administration, according to CTCAE version 5.0, all vital signs, blood and urine tests, and subject
external radiation levels, and assessment of chronic AEs related to Alpha DaRT at 12- and 24-months post-source insertion.
Pancreatic
Cancer
Pancreatic
cancer is the fourth leading cause of cancer-related mortality, responsible for 7% of all cancer-related deaths in both men and women.
It is associated with an extremely poor prognosis, reflected by a median survival of five to eight months and a five-year survival
probability of less than 5% when all stages are combined. Pancreatic cancer is particularly deadly due to the fact that there are no
unique symptoms in its early stages, and, since the pancreas is obscured by other organs in the abdomen and is difficult to visualize
clearly on imaging tests, it is therefore typically not detected before having already metastasized to regional lymph nodes, the liver,
the lungs or other visceral organs such as the stomach or colon. We selected pancreatic cancer as a target for the Alpha DaRT technology
in light of the poor prognosis associated with this particular cancer, as well as our pre-clinical research in which the Alpha DaRT showed
activity against pancreatic adenocarcinoma cells.
Montréal,
Canada (recruiting)
We
have initiated a multi-center clinical study at Centre Hospitalier de l’Université de Montréal, or CHUM, and Jewish
General Hospital, both in Montréal, Canada, to investigate the feasibility, safety and preliminary efficacy of Alpha DaRT for
the treatment of advanced pancreatic cancer. We expect to treat our first patient in this trial in the first half of 2023.
Recruitment is open for 30 patients with locally advanced (Stage II or Stage
III) or metastatic (Stage IV) pancreatic adenocarcinoma which has been histologically and/or cytologically proven and which is not amenable
to surgery, with a tumor lesion of less than four cm.
There
are two short-term objectives of this study: to evaluate the feasibility and safety of Alpha DaRT as assessed by the incidence of device-related
AEs and SAEs, and to evaluate the preliminary efficacy of Alpha DaRT for pancreatic cancer patients, as measured by ORR following the
insertion of the sources, and any observable change in CA19-9 as a marker of tissue damage. The long-term objectives include evaluating
overall survival following Alpha DaRT sources insertion, stent durability after Alpha DaRT source insertion, and change in quality of
life as measured by patient questionnaires.
The
primary endpoints of the study are: feasibility, as measured by the successful placement of the Alpha DaRT sources within the tumor or
less than 5 mm from the tumor, to be determined based on CT scan performed immediately following the insertion procedure; and safety,
by assessing the frequency, severity and causality of acute AEs and SAEs related to Alpha DaRT sources insertion. AEs and SAEs will be
assessed and graded according to CTCAE version 5.0. Other safety endpoints include all AEs and SAEs related and unrelated to the study
treatment, vital signs, blood and urine tests, and subject and personnel radiation levels. For the first five patients, only one patient
will be recruited on a four-week basis to allow for assessment of AEs and SAEs before the next patient is recruited, and an interim analysis
will be conducted after five patients have been enrolled. Secondary endpoints include: preliminary efficacy, measured by assessing the
ORR four to six weeks after Alpha DaRT sources insertion as assessed by CT scan, changes in CA19-9, which serves as a marker of tissue
damage (elevation during treatment, and reduction as a result of tumor ablation), and assessments of overall survival, local control,
regional control, distal metastases following DaRT sources insertion for 24 months, or until patients are lost to follow-up or disease
progression, stent durability (assessed by the time elapsed from DaRT insertion to the need for follow up referral for endoscopic retrograde
cholangiopancreatograph, or ERCP, for stent change due to tumor ingrowth), and change in patient-reported quality of life measures 35
and 60 days after Alpha DaRT source insertion.
We
are also in advanced stages of drafting a protocol for another trial evaluating the Alpha DaRT technology in the treatment of pancreatic
adenocarcinoma, which we expect to open in Israel by mid-2023 .
Prostate
Cancer
Prostate
cancer is the second most frequently diagnosed cancer in men worldwide, with approximately 1.4 million new cases diagnosed each year.
We believe there are several potential benefits to delivering neoadjuvant radiation therapy specifically with Alpha DaRT in patients
with prostate cancer. First, we believe that Alpha DaRT may be able to elicit an immune response, as suggested by previous pre-clinical
data that showed immune activity, as well as data from our clinical studies that showed anecdotal evidence of a potential abscopal effect,
which we believe would have the potential to inhibit the development of future metastases. Second, while prostate cancer is a heterogeneous
disease, it appears that local recurrences emanate from the dominant lesion. Therefore, we believe treating these lesions with Alpha
DaRT could decrease the risk of recurrence. Third, these dominant lesions can create hypoxic microenvironments which is associated with
worse outcomes for traditional radiation therapy. Alpha radiation cytotoxic activity has been observed to be independent of oxygen levels
and therefore we believe may be better suited to treating these lesions. While our first planned study will focus on evaluating neoadjuvant
use of Alpha DaRT in treating prostate cancer, we plan to evaluate Alpha DaRT in the future for focal treatment of radiation recurrent
tumors or in combination with external beam radiation therapy.
Rambam
Health Care Campus / Carmel Medical Center, Israel (recruiting)
We
have initiated a clinical study at the Rambam Health Care Campus and Carmel Medical Center in Israel, to investigate the feasibility
and safety of evaluating neoadjuvant use of Alpha DaRT in treating prostate cancer. The trial will recruit up to 10 patients with previously
untreated, non-metastatic, resectable prostate adenocarcinoma, who will receive the Alpha DaRT treatment and then under prostate removal
surgery 50 days later.
The
primary objective of the study is to evaluate the feasibility and the safety of intratumoral insertion of Alpha DaRT sources into prostate
adenocarcinoma in the neoadjuvant setting. The secondary objectives are to evaluate the pathological ORR at 35 days (+/-7) following
Alpha DaRT source insertion through the examination of the pathology of the tumor after prostatectomy, the radiological ORR based on
imaging (change in standard uptake value and T2 weighting) within one week before surgery and the change in disease-related QoL. The
exploratory objectives are to assess DNA damage and repair and immune infiltration (biomarker analysis: CD34, TILs) from baseline to
surgery and within one week of surgery, and the biochemical response evaluation based on PSA levels. The first patient in this trial
was treated in June 2022 and demonstrated a partial response to treatment, and we are currently analyzing the response of this first
patient to assess any further improvements to the delivery procedure.
Liver
Metastasis
The
liver is the most common site for metastatic disease from the gastrointestinal tract. It is also one of the most commons sites for metastases
of other malignancies such as breast cancer, lung cancer, and melanoma. In colorectal cancer, about two thirds of 600,000 annual deaths
are related to liver metastases. Liver metastases are diagnosed in more than 50% of colorectal cancer patients during the course of their
disease. During the last two decades, treatment paradigms of metastatic disease have changed dramatically. While surgical resection of
metastases was once considered futile, today surgical resection of liver metastases is a well-established therapeutic strategy and offers
the best chance for long term survival for suitable patients. Colorectal liver metastases are the most common indication for liver resection,
but selected patients with neuroendocrine, breast, lung and melanoma also benefit from resection of liver metastases. Other common indications
for liver resection include primary liver tumors such as hepatocellular carcinoma and intra-hepatic cholangiocarcinoma.
Montréal, Canada (planning)
We are currently planning, in collaboration with
McGill University Health Center in Montréal, Canada, a clinical study to evaluate the feasibility and safety of intratumoral
Alpha DaRT for the treatment of liver metastases in approximately 10 patients. We plan to test the effect of the Alpha DaRT technology
on liver metastases during a two-staged hepatectomy. This unique clinical scenario is designed to allow us to implant Alpha DaRT sources
in right-sided liver metastases during the first operation and resect the right liver containing the sources during the second operation.
Thus, we believe a complete histopathological evaluation of liver metastases following Alpha DaRT administration can be performed, after
which we will be able to evaluate the effect of Alpha DaRT sources on liver metastases with different histopathological growth patterns.
In March 2023, Health Canada authorized us to proceed with this trial, subject to final approval by an institutional Research Ethics Board.
The
rationale for evaluating Alpha DaRT with this approach is multi-fold. First, we believe Alpha DaRT may elicit an immunological response,
thus through treatment of a single liver metastasis, we believe there could be reduction in metastases throughout the remaining liver.
We believe a reduction in metastases may also reduce the risk of future metastases from arising. Secondly, during the time between the
two stages of the hepatectomy, patients are normally not receiving metastasis-directed therapy, but in this study their remaining lesions
will be receiving Alpha DaRT during the period between surgical procedures. Third, we believe there may be synergy between Alpha DaRT
and chemotherapy, which could further improve outcomes.
We
expect that this study’s primary objectives will be to evaluate the safety and feasibility of Alpha DaRT implanted in liver metastases.
We expect the secondary objectives will be to evaluate the pathological and radiological response of liver metastases to DaRT and to
stratify the differences in response to Alpha DaRT by histopathological growth patterns. We expect that the exploratory objective will
be to evaluate the immunological effects of Alpha DaRT treatment.
SCC of
the vulva – Cambridge University Addenbrooke’s Hospital (planning)
We
are currently planning, in collaboration with the Addenbrooke’s Hospital of the Cambridge University Hospitals NHS Trust, a study
to evaluate the safety and efficacy of the Alpha DaRT technology for the treatment of primary and recurrent SCC of the vulva. The Medicines
and Healthcare products Regulatory Agency of the United Kingdom has approved our request to initiate this study. We expect that ten patients
will be evaluated in this study, with the primary objective being the safety, feasibility and tolerability, and the secondary objective
being the effectiveness of the treatment. We also plan to measure the immunological response. We are targeting recruitment of our first
patient in the first half of 2023.
Additional
Pipeline Indications
In
addition to the trials and clinical pathways described above, we are currently planning a number of other clinical studies, both to generate
additional data from the tumor types we are already exploring in humans, as well as to test the use of Alpha DaRT in additional tumor
types, including breast cancer, glioblastoma multiforme, and lung cancer.
Summary
of Our Pre-Clinical Findings
We consider pre-clinical research as a source
of strong and ongoing support for our core thesis and for potential expansion into a wide range of proposed indications. To that end,
we continue to invest, both internally and with leading universities and academic centers around the world, in conducting robust pre-clinical
research with particular focus on potential supra-additive combinations of Alpha DaRT with other therapies such as immunotherapies and
chemotherapies. Among other things, we have completed construction of our own pre-clinical laboratory at our headquarters in Jerusalem,
Israel, which has received the necessary certifications to initiate pre-clinical studies, to facilitate our own examination of such combinations.
The
extensive pre-clinical research conducted on Alpha DaRT has generally focused on three core areas: (1) evaluating the potency of
Alpha DaRT in destroying tumors, measured across a broad range of cell lines, (2) evaluating combinational treatments with standard
of care / FDA approved therapies such as chemotherapy and antiangiogenic agents, and (3) evaluating the immunostimulatory potential
of the Alpha DaRT and optimizing the combination of Alpha DaRT and immunotherapy. Pre-clinical research, including both in vitro and
in vivo experiments as well as physical, biological and computational modeling of the diffusion or biokinetic properties of Alpha
DaRT, have led to the publication of 21 articles in peer-reviewed journals.
DaRT is
Designed to Efficiently Destroy a Tumor
Pre-clinical
studies were performed in vitro and in vivo with mouse tumor models and human derived tumors, to evaluate the diffusion
properties and potential therapeutic activity of Alpha DaRT:
Summary
of Pre-Clinical Studies |
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Histology |
|
Murine
Cells in Mice or in Vitro |
|
Human
Cells in Athymic Mice or in Vitro |
Skin
SCC |
|
X |
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X |
Lung
SCC |
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X |
HNSCC |
|
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X |
Lung
Adenocarcinoma |
|
X |
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X |
Pancreas
Adenocarcinoma |
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X |
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X |
Prostate
Adenocarcinoma |
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X |
|
X |
Breast
Carcinoma |
|
X |
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X |
Glioblastoma
Multiforme |
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X |
Cervical
Carcinoma |
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X |
Melanoma |
|
X |
|
X |
Colon
Carcinoma |
|
X |
|
X |
Sarcoma |
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X |
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In
vitro studies were performed to evaluate the impact of alpha particles
on tumor cell viability. Cell lines investigated in vitro included squamous cell, lung, colon, prostate, breast, pancreatic and
cervical carcinomas, glioblastoma and melanoma. All cell lines were sensitive to alpha particles (typically dying within days after
exposure), with a mean lethal dose in the range 0.7-1.5 Gy. In vivo studies using various tumor types were consistent with the
in vitro findings and showed that Alpha DaRT sources destroyed tumors and achieved a high degree of local control.
As
shown in the figure below regarding observed tumor growth in mice, in a pre-clinical study using a sealed Alpha DaRT source designed
to prevent radon recoil, no ablative effect was observed, suggesting that the ablation was caused primarily by alpha radiation from the
recoiling alpha emitters, rather than the low level of gamma/beta radiation emitted from the source, which had a minor effect.
Alpha
DaRT sources were observed to have killed multiple types of mouse and human tumors in vivo. The extent of the tumor killing varied
between tumor types and was dependent on the ability of the radioactive atoms to diffuse inside the tumor and on the intrinsic sensitivity
of the cancer cells to DNA damage induced by the radiation, but all tumor types showed responsiveness to Alpha DaRT, i.e., there was
no observed resistance. The figure below compares the growth of tumors in groups of mice who received a Radium-224-loaded Alpha DaRT
vs. an inert wire (control), in athymic mice bearing colonic HCT15 (A), prostatic PC3 (B) or glioblastoma U87 (C) tumors, as
well as representative mice in the HCT15 group treated with a Radium-224-loaded Alpha DaRT (D) and an inert source (E).
The
complex DNA damage induced by alpha radiation, namely clustered double-strand breaks, is nearly impossible to repair and is largely unaffected
by the presence of oxygen or by cell cycle phase, which may indicate the potential for alpha particles to kill hypoxic cells which might
otherwise be resistant to conventional radiation treatments based on photons or electrons. Consistent with this understanding, mouse
and human cells showed lower survival following treatment with alpha radiation compared to x-ray in the same dose. The figure below
demonstrates in vitro survival curves for Panc1 (A) and FaDu (B) cancer cell lines after exposure to X-rays or
to alpha particles generated from Thorium-228.
Alpha
DaRT was evaluated in combination with chemotherapy (e.g., cisplatin), locally and systemically, which extended host survival. The figure
below shows the development of tumor growth (A) and survival curve (B) for BALB/c mice bearing SQ2 tumors who were each treated
with two sources that were either loaded with Radium-224 or inert, where some received Cisplatin and others did not.
The
figure below demonstrates the metastatic lung burden using hematoxylin-eosin-stained lung cross- sections from this experiment, comparing
representative mice from the Inert group (A) and Radium-224 + Cisplatin group (B), as well as a graph (C) of the ratio of total
average gray pixel value for each group vs. normal healthy lungs from mice without tumors, when images were analyzed with Image J software.
In
human xenografts in nude mice of Glioblastoma Multiforme, or GBM, Alpha DaRT was combined with the chemotherapy drug Temozolomide. As
seen in Figure A below, the combination led to significantly increased tumor growth retardation compared to each of the treatments alone.
Moreover, as seen in Figure B below, the rate of animals that reached the maximal allowed tumor size before sacrifice was significantly
decreased in Alpha DaRT-treated mice and in the combination-treated mice, which may indicate a potential of Alpha DaRT to extend lifespan.
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Notably,
in our combination pre-clinical experiments only a single Alpha DaRT source was used for the treatment of a tumor, despite that the alpha-emitting
atoms released from this single source would not be expected to cover the whole tumor. The purpose of using a single source is to avoid
a complete response of the tumor only by virtue of the direct impact of the alpha radiation. Deliberately under-dosing Alpha DaRT enables
the investigation of the combination and potential synergy between Alpha DaRT and the drug.
GBM-bearing
mice were also treated with Alpha DART in combination with the anti-angiogenic agent Avastin (bevacizumab), where Avastin was injected
3 times per week for 3 weeks from day 5 after insertion of the Alpha DaRT. The combination treatment prevented tumor regrowth following
treatment, and tumor size was stable for a longer period than in either of the treatments alone. Additionally, in the mice treated with
the combination or with Alpha DaRT, 4 of 14 or 3 of 13 mice, respectively, saw their tumors disappear completely without late relapse,
potentially indicating an ability to prevent GBM recurrence. We are investigating a hypothesis that this effect may be mediated by the
Avastin-induced changes in the tumor vasculature that may affect alpha particle dispersion in the tumor or leakage rate.
Alpha
DaRT as a Potential Immunostimulator
Radiation
is traditionally considered to produce damage-associated molecular patterns, or DAMPs, that activate dendritic cells; in the presence
of an antigen this may lead to specific T cell responses. During the escape phase, melanoma cells acquire deficient antigen presentation
machinery, masking them from the immune system.
A
published third-party study recently reported that, apart from the potential to efficiently kill tumor cells relative to other radiation
types, alpha-emitting radium significantly enhanced T cell-mediated tumor lysis that was accompanied by augmented protein expression
of MHC-I and calreticulin, molecules that are essential for efficient antigen presentation and immune activation.
The
figure below illustrates the potential effect of irradiation to release antigens from the tumor, which, in turn, may be able to harness
the dendritic cells to generate T cell response to detect and target the specific tumor cells for destruction. Tumor antigens released
by irradiated tumor cells can be taken up by antigen-presenting cells, or APCs, such as dendritic cells and phagocytic cells. The APCs
may then interact with tumor antigens and then migrate to the lymph nodes where they present antigens to T cells, a process that is mediated
by the MHC pathway and other co-stimulatory signals, such as CD80 and CD28. After activation by multiple signals, T cells, especially
the CD8+ T cells, may be activated and begin to propagate. As a result, activated effector T cells may exit the lymph nodes and home
to tumors, including primary tumors and non-irradiated tumor metastases, to exert their effect of killing tumor cells. However, cytotoxic
T lymphocyte-associated antigen 4 (CTLA-4) competitively combines with CD80/86 and inhibits the activation of T cells. Following T cell
activation, programmed cell death 1 (PD-1) receptors that are expressed on the T cell surface bind primarily to PD-L1 and inhibit immune
responses. Hence, we believe the administration of immune checkpoint blockades of CTLA-4, PD-1, and PD-L1 may be able to enhance the
anti-tumor immunity induced by radiotherapy.
Source:
Journal of Hematology & Oncology available at: https://pubmed.ncbi.nlm.nih.gov/30115069/
Previously
reported studies have demonstrated that ablation treatments, such as radiotherapy, have the potential to expose the body to large amounts
of tumor antigens and danger signals and thus may trigger anti- tumor immunity. Consistent with this thesis, we observed that Alpha DaRT
rendered studied animals resistant to a second tumor challenge in two tumor models, colon carcinoma and breast carcinoma. In the immunogenic
colon carcinoma tumor model CT26, mice that were treated with Alpha DaRT developed resistance to tumor re-challenge in the opposite lateral
side of the back or to experimental metastases in the lungs, suggesting that a systemic immune memory was induced following treatment.
The figure below demonstrates the tumor development (A) and survival (B) of mice who were challenged with CT26 cancer cells,
where those mice were previously treated for CT26 tumors with Alpha DaRT or with inert sources, compared to naïve mice that did
not previously have tumors.
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Inhibition
of regulatory T cells by low-dose cyclophosphamide, inhibition of Myeloid-derived Suppressor Cells, or MDSCs, by sildenafil, or immuno-stimulation
by CpG further enhanced the tumor retardation induced by Alpha DaRT, providing further evidence of immune response.
As
seen in the figure below, mice bearing breast DA3 tumors demonstrated the least tumor development when treated with the Alpha DaRT together
with CpG (as compared to phosphate-buffered saline, or PBS).
In
addition, as seen in the figures below, the combination of sildenafil (A) or cyclophosphamide (B) with Alpha DaRT, led to greater
tumor growth inhibition compared to any of the monotherapy groups.
As
can be seen in the figure below showing survival curves for the different groups, the combination of cyclophosphamide, sildenafil, CpG
and Alpha DaRT led to 51% long-term tumor rejection of the CT26 bearing mice, while the combination of cyclophosphamide, sildenafil,
CpG and an inert source in lieu of Alpha DaRT mostly led to tumor recurrence.
In
addition, as shown in the figure below, when repeating the previously described challenge tests four months after a previous treatment,
the previous treatment that included Alpha DART and immunomodulation (CpG, cyclophosphamide and sildenafil) led to the most meaningful
tumor inhibition.
It
was observed that the anti-tumor immune memory evidenced following combination treatment (Alpha DaRT and immunomodulators) was specific
to CT26 tumor cells and did not provide any protection against other tumor cell lines. In addition, this specific anti-tumor immune memory
was transferable to naïve mice, as splenocytes isolated from treated mice were able to protect naïve mice from the CT26 tumor
cells, yet not from other tumor cells.
In
a range of tumors, including triple negative breast cancer, pancreatic and squamous cell carcinoma, a synergy in tumor/metastases development
was observed between Alpha DaRT and the delivery of viral dsRNA into the cytoplasm of tumor cells by intratumoral injection of polyIC
complexed with polyethylenimine, or PEI.
As
shown in the figure below, under neoadjuvant settings and following long-term follow-up in mice with 4T1 breast tumors, it was observed
that metastases were not formed in the lungs of 75% of studied mice which underwent the combined before surgery treatment, while metastases-related
death was observed in the other animals.
In
light of the observed potential of Alpha DART to induce antigen-specific immune memory and to demonstrate synergy with immunomodulation,
we have investigated the use of the Alpha DART in combination with an inhibitor of programmed cell death protein 1, or PD1. As there
are many patients who do not demonstrate a response to such therapies, we wish to understand whether the Alpha DaRT may demonstrate immunostimulatory
traits that can potentially enhance response rates or efficacy of response to anti-PD1 therapies, thereby offering a potential mechanism
for reducing recurrence rates or enhancing systemic effects in addition to the local therapeutic effect.
Recent
data supports this hypothesis, shown in the figure below, in mice bearing SCC tumors which were treated with the Alpha DaRT, and then
a PD1 inhibitor was injected 4 times from day 2 to day 12 after Alpha DaRT treatment. Alpha DaRT demonstrated the potential to increase
the response of tumors otherwise unresponsive to a PD-1 inhibitor, where the tumor growth of SCC tumors in mice was meaningfully inhibited
in mice that received both the Alpha DaRT as well as a PD-1 inhibitor, as compared to mice that received either the Alpha DaRT or the
PD-1 inhibitor alone. Whereas anti-PD-1 therapy did not affect tumor progression on its own, adding anti-PD-1 therapy to Alpha DART further
increased the growth retardation induced by Alpha DaRT, suggesting that Alpha DART may induce responsiveness to anti-PD-1 therapy.
Furthermore,
as shown below both graphically and in representative immunohistochemistry cryo-sections, it was observed that the density of tumor-infiltrating
lymphocytes (CD3+ TILs) in the tumor, which is often used to define a “hot tumor” and as a predictor for treatment response,
is higher in the combination treatment relative to anti-PD-1 alone, further suggesting that Alpha DART may activate T-cell function when
used with anti-PD-1 therapy.
|
|
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Alpha DaRT + anti PD-1 |
|
DaRT + anti PD-1 |
Similar
effects were seen with respect to the density of the lymphocyte effector sub population (CD8+ TILs) and Granzyme B, a serine protease
most commonly found in the granules of natural killer cells and cytotoxic T cells, as seen in the figures below.
In
the pancreatic tumor model, as seen below in the figure of average tumor volume measured at day 14 after treatment, a similar trend was
observed in response to the combination of Alpha DaRT with anti-PD1, which led to better tumor control than either therapy alone or the
standard of care chemotherapy gemcitabine.
Components
of the Alpha DaRT Technology
Alpha
DaRT technology is delivered in a kit comprising radioactive 316LVM stainless steel hollow wires or tubes of 5-10 mm length and <1mm
diameter, known as “sources,” and applicators to administer the sources. Each source is impregnated with Radium-224, which
generates the decay chain of alpha emitters that are designed to recoil into the tumor. These proprietary applicators have been specially
designed and developed by us for dispensing the sources based upon the tumor’s location in the body in order to facilitate clinicians’
access to hard-to-reach tumors or tumors which are extremely close to major organs or blood vessels. We believe the applicators are a
key component to maximizing the potential advantages of localized alpha radiotherapy.
Our
Alpha DaRT kit comprises three main components: the radioactive source, specialized applicators, and accessories. We have developed the
applicators and accessories with input from clinicians across a variety of specialties in an effort to optimize the Alpha DaRT technology
for clinical use.
Our Alpha
DaRT Sources
Our
Alpha DaRT sources utilize a 316LVM stainless steel hollow tube or rod to which Radium-224 is affixed. Our Alpha DaRT sources are designed
to be customized to multiple sizes (depending on their intended use) and designed as temporary implants (for use in and removal from
superficial tumors) or permanent implants (for use in internal organs). Our R&D department is constantly examining enhancements to
future versions of the Alpha DaRT sources, including the use of additional materials that we believe could offer advantages in flexibility,
biocompatibility or biodegradability, more advanced anchoring and fixation, or enhanced properties of desorption of the alpha-emitting
decay chain.
Our Applicators
and Accessories
Our applicators
The
Alpha DaRT applicator is composed of a needle or tube (with an attached hub) with the Alpha DaRT sources placed inside for deployment
into a tumor, and a stylet (with an attached hub) which functions like a plunger in the needle or tube to eject the source(s) towards
the appropriate location within the tumor. A protective cap is attached to the needle to prevent inadvertent damage or loss of a source,
and a safety screw is used to fasten the needle and the stylet firmly together. Additionally, the sources are encapsulated with glycerin,
a biocompatible material which is designed to act as a sealant to trap the decay product Radon-220 gas from release until it is ejected
into the tumor by the applicator. Each applicator can hold up to six sources for deployment in a single injection.
We
have developed seven applicators designed to cover a range of potential applications, including the treatment delivery method, the duration
of the sources’ implantation, and on the location of the tumor.
For
the temporary implantation of sources into superficial tumors, we have developed the following three categories of applicators:
| ● | Alpha
DaRT Needle Applicator – a rigid, hypodermic needle designed in various lengths.
In this applicator, the sources are affixed to a biocompatible suture and loaded inside the
needle; |
| ● | Alpha
DaRT Flex Applicator – designed for difficult geometry insertions. This applicator
is in the form of a flexible (Kapton) tube, wherein the sources are strung upon a biocompatible
suture and loaded inside the tube. The Flex Applicator is designed to be used in conjunction
with a rigid hypodermic needle, which may be straight or curved, depending upon the specific
geometry of the patient’s tumor and the physician’s preference; and |
| ● | Alpha
DaRT Template Applicator – designed to be used together with a custom-fitted
3D-printed template molded to the patient’s tumor. The template is used as a guiding
channel for rigid hypodermic needles. The sources are attached to a stainless-steel wire
and loaded inside the needle. This applicator is designated for deeper tumors. |
All
of the foregoing applicators are designed to be supplied preloaded, sealed and ready for immediate use in the procedure room.
We
have also developed a number of applicators for implantation of sources into tumors inside the body:
| ● | Alpha
DaRT Plant Applicator – designed for percutaneous delivery (delivery through
the skin) to tumors located in organs such prostate and liver. This applicator is designed
to be preloaded with the radioactive sources in accordance with a specific treatment plan. |
| ● | Alpha
DaRT Scope Applicator – designed to be attached to an existing endoscope or
bronchoscope for endoscopic delivery to tumors located in the upper and peripheral lungs.
This applicator is also preloaded with the radioactive sources. |
| ● | Loading
Device – designed to be fitted to existing needles such as standard FNA needles,
for the administration of Alpha DaRT to GI organs such as the pancreas. While our other applicators
come preloaded and ready for deployment, the Loading Device is designed to allow the clinician
to load the radioactive sources into the delivery device, such as the FNA needle, in the
procedure room in the course of treatment, to select how many sources to deliver into the
treatment area. |
| ● | Radial
Applicator – designed to be fitted to existing stereotactic biopsy needles, for
the administration of Alpha DaRT to the brain and potentially for other organs as well. This
applicator is designed to be adapted to specific constraints in the brain, including minimizing
movement in the brain when deploying Alpha DaRT sources in a circular pattern. Our goal is
to ensure that such adaptor is appropriately sterilized and does not release any undesired
radioactivity into the brain. |
Below
are images of several applicators within our range:
The
Alpha DaRT Needle Applicator and components (18 gauge needle, 140 mm in length)
The
Alpha DaRT Flex Applicator
The
Alpha DaRT Template Applicator
Loading
Device
Our
Accessories
In
addition to our sources and applicators, we have also developed a number of ancillary accessories specially designed for use with our
Alpha DaRT sources, including grids for guiding deployment, surgical buttons and clips. We have also developed and printed personalized
bolus templates for use in specific clinical cases, designed to allow the clinician to execute the treatment plan accurately and seamlessly
in conjunction with the Alpha DaRT Template Applicator.
Under
a collaboration agreement signed in August 2022 with MIM Software Inc. (“MIM”) we collaborate with MIM on the use of MIM’s
radiation treatment planning software suite, including MIM Symphony and MIMcloud®, for development of new features and
support for the Alpha DaRT across multiple potential indications, integration into all clinical trials involving the Alpha DaRT, and
bundling the MIM software with the Alpha DaRT for future commercial sales in territories where the Alpha DaRT and MIM’s software
are both approved. The agreement contemplates certain payments to be made by us to MIM in the future upon further development of MIM’s
software and integration with the Alpha DaRT in new geographies or sites or with additional features, and upon commercial sales of the
Alpha DaRT bundled with MIM software.
Our
Manufacturing and Supply Infrastructure
The
Alpha DaRT technology utilizes sources enriched with Radium-224, a radioactive material with a half-life of only 3.7 days. As each
treatment requires a different number of sources and applicators tailored for the specific patient, a reliable and timely delivery of
the personalized Alpha DaRT kit to the hospital is required. We therefore plan to develop production sites in key regions around the
world. We have already built two sites in the United States and Israel, have started the planning process for a site in Japan, and anticipate
that we may build another facility in Europe. Our global manufacturing plan is designed to ensure a sufficient supply of radioactive
sources with fast and cost-efficient delivery to our core markets.
Our
key input for production of the Alpha DaRT is Thorium-228, a readily available radioisotope that can be purchased from licensed vendors
around the world. The Thorium-228 naturally decays into the Radium-224 that is collected onto the sources. We have entered into a multi-year
supply contract with Eckert & Ziegler AG in Germany, and also acquire Thorium-228 from the Oak Ridge National Laboratory of
the United States Department of Energy. We are also aware of or have spoken with other potential suppliers of Thorium-228, such that
we anticipate a steady, unrestricted supply of thorium for the production of the Alpha DaRT.
We
currently operate two manufacturing plants. One, located in Jerusalem, Israel, is currently operational while capacity is continuously
being added, and we estimate it will contain sufficient capacity for approximately 400,000 sources when at full capacity. Our second
facility, in Lawrence, Massachusetts, was completed in 2020 and began producing Thorium-228 generators at the start of 2021, and is currently
being expanded to support on-site Alpha DaRT production as well. We estimate that the facility will have sufficient capacity for production
of approximately 125,000 sources per year when operating near full capacity. We have also entered into a lease for a building in
Togane, Japan where we hope to construct a facility of a similar size as our Jerusalem facility at scale. The modular nature of our manufacturing
capacity allows us to initiate manufacturing more swiftly and then scale up to full capacity over time. We believe these facilities will
enable us to maintain sufficient quantities of Thorium-228 securely, to safely produce and capture radium from thorium’s alpha
decay, to affix the radium onto the sources, and to ship the sources with their suitable applicator(s) to various destinations efficiently.
In
our manufacturing facilities, we employ different methods to produce extractable radium for scalable use. One such method, in a dry setup,
utilizes an electrostatic field to attract and isolate radium atoms. Specifically, we use the thorium as a flux-generating surface source
to create a collecting unit in which we place the Alpha DaRT sources for charging. The thorium decays into ionized radium atoms, which
recoil from the thorium generator and can be attracted or repelled using their inherent charge. The source is placed at a precise distance
from the thorium generator and an electrostatic field is placed across it to attract the radium to adhere to the source.
After
the radium is collected, each source is thermally treated or coated with a polymer to embed the radium securely on the outermost layers
of the metallic matrix of the source, while allowing the Radon-220 and subsequent daughter atoms to desorb, or detach from the source
and enter the tumor. Each Alpha DaRT source is individually measured to determine the overall Radium-224 activity on it and the desorption
probability of Radon-220, to calculate how much Radon-220 will diffuse into the tumor. It is then placed in an applicator to fit the
prescribed treatment profile.
We
have also recently devised a new method of radium production, which entails the collection of Radium-224 via a liquid solution of Thorium-228,
allowing for more efficient production with a higher output by significantly increasing the percentage yield of Radium-224 which
is collected, as well as shortening the time to collect Radium-224 onto each source. This method has the potential of increasing our
existing capacity by a factor of 2 to 3.
Alpha
DaRT sources are prepared upon receiving an order from the clinician and are designed specifically for the treatment of an individual
patient; specifically, the number of active sources in each applicator is made to order to match the prescribed treatment plan. Supply
of the Alpha DaRT sources is carefully coordinated to account for a usable window up to 24 hours after receipt of the Alpha DaRT sources
by the hospital, accounting for the natural decay of the Radium-224 during shipment and intake. Pursuant to the United Nations guidance
regarding the transport of radioactive materials, the Alpha DaRT sources do not require special handling or protective gear in transit
and can be shipped in Excepted Packages, which are used to transport material with extremely low levels of radioactivity, by standard
courier. Prior to shipment, our clinical operations team ensures that all relevant clinicians undergo sufficient training as to proper
handling, storage, and disposal of the Alpha DaRT sources.
Our
Commercialization Strategies
We
have yet to commercialize in any geographical market, even though we presently have received marketing approval in Israel for the treatment
of squamous cell carcinoma of the skin or oral cavity using the Alpha DaRT, and expect that our existing clinical trials, if completed
successfully, may be sufficient to satisfy the regulatory requirements for marketing authorization in the United States, Europe and Japan.
As we believe that the Alpha DaRT technology has the potential address the majority of solid tumors, including in potential combination
with immunotherapies, we are focused on evaluating that potential in these various tumors by conducting clinical trials across multiple
indications, to be incorporated into a future plan of commercial launch, sequencing and pricing if we obtain marketing authorization(s) in
the future. We aim to generate clinical and healthcare economic data to support marketing authorization and third-party payor coverage
and reimbursement in the United States, which we see as our primary market, and we anticipate seeking to commercialize initially in the
United States before other markets, including Israel, notwithstanding our existing marketing approval in Israel.
We
also believe that our clinical trials being conducted in leading sites around the world will ultimately serve our commercial purposes
as well, as we believe those clinical sites may ultimately become lead commercial end-users or centers of excellence in the commercial
setting.
While
we ultimately envision leading much of the commercialization of the Alpha DaRT in core markets such as the United States, we may choose
to enter into distribution agreements in other geographies with parties who have exemplary local sales and marketing capabilities. To
that end, we have entered into binding term sheets with Medison Pharma Ltd., one of the largest commercial partners of leading global
biotech companies in international markets, and its affiliates, to lead the potential commercialization of the Alpha DaRT in Canada and
Israel. We intend to enter into definitive commercial agreements covering the commercialization, distribution and sales of the Company’s
future products in Canada and Israel. Under these term sheets, effective for a 15-year term following the approval to sell our products,
Medison will be responsible for performing regulatory submissions, marketing and distribution directly to clinicians.
We
remain focused on performing investigational studies to evaluate the potential efficacy of the Alpha DaRT as a monotherapy and an immuno-stimulating
combination therapy, and on supplementing our robust patent portfolio across a broad range of tumor applications, as we continue to navigate
the regulatory pathways towards commercialization. We believe that these studies will also allow us to better explore the question of
which clinicians are ultimately our end customer for commercial purposes, given the involvement of multiple practitioners including the
radiation oncologist, medical physicist, and the clinician delivering the Alpha DaRT such as the oncology surgeon or interventional radiologist.
Competition
The
biotechnology, medical device and pharmaceutical industries are characterized by the rapid evolution of technologies and understanding
of disease etiology, intense competition and a strong emphasis on intellectual property. We face potential competition from many different
sources, including major pharmaceutical, medical device, specialty pharmaceutical and biotechnology companies, academic research institutions,
governmental agencies and public and private research institutions.
In
the field of local therapy for solid tumors, we face competition from new or continually improving surgical techniques, as well as a
number of radiation therapies – EBRT, stereotactic body radiation therapy, intensity-modulated radiation therapy, brachytherapy,
and others, as well as particle therapies such as proton therapy, neutron therapy and carbon ion therapy. There are several companies
developing improved or new forms of local radiation therapy, including Varian Medical Systems, Inc. (a subsidiary of Siemens Healthineers),
Elekta AB, BTG plc (a subsidiary of Boston Scientific Corporation), ViewRay, Inc., Accuray, Inc., RefleXion Medical, Inc.
In
addition, in the field of systemic therapy for cancer, commercial and academic clinical trials are being pursued by a number of parties
in the field of radiopharmaceuticals, some of which involve the use of alpha radiation as well. Early results from these trials have
fueled continued interest in radiopharmaceuticals, which is being pursued by several biotechnology companies as well as by large pharmaceutical
companies.
There
are several companies developing targeted alpha-based radiopharmaceuticals for the treatment of cancer, including Bayer AG, or Bayer,
Novartis AG, Fusion Pharmaceuticals Inc., RayzeBio, Inc., Actinium Pharmaceuticals, Inc., RadioMedix, Inc., Orano SA and
Telix Pharmaceuticals Limited. These companies are targeting a wide range of solid and hematologic malignancies using various alpha emitting
isotopes, including Radium-223, Actinium-225 and Thorium-227. The first and only approved alpha particle-based therapy is Bayer’s
Xofigo, a salt of Radium-223 that cannot easily and robustly be attached to a targeting molecule, but naturally localizes to regions
where cancer cells are infiltrating bone. Xofigo was approved in 2013 for the treatment of bone metastases associated with prostate cancer.
Many
of our current or potential competitors, either alone or with their collaboration partners, have significantly greater financial resources
and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals
and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, medical device and biotechnology industries
may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early-stage companies may
also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical
trial sites and patient enrollment in clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
We
could see a reduction or elimination in our commercial opportunity if our competitors develop and commercialize treatments that are safer,
more effective, have fewer or less severe side effects, are more convenient to administer, are less expensive or have a more favorable
label than our Alpha DaRT technology. Our competitors also may obtain FDA or other regulatory approval for their treatments more rapidly
than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able
to enter the market. The key competitive factors affecting the success of all of our product candidates, if approved, are likely to be
their efficacy, safety, convenience and ease of use, price, the effectiveness of imaging diagnostics, the level of generic competition
and the availability of reimbursement from government and other third-party payors.
Our Intellectual
Property
As
of December 31, 2022, our patent portfolio included 88 issued patents, and 122 pending patent applications including two allowed
patent applications.
Pursuant
to an Intellectual Property Purchase Agreement dated February 2, 2016, we acquired from Althera Medical Ltd. a patent portfolio
which now totals 80 patents, including some patent applications whose prosecution was completed following our acquisition. These patents
were all assigned to us and are recorded in our name. The patents relate primarily to a device, method of treatment, or method of production
of the Alpha DaRT product itself, specifically, to intratumoral diffusing alpha-emitter radiation therapy wherein a probe is loaded with
radioisotopes which undergo a process of alpha-emitting radioactive decay solely in proximity to and/or within a tumor. These patents
include three U.S. patents, one Canadian patent, three Japanese patents, one Chinese patent, one Hong Kong patent, two European patents
each validated in 30 European countries, two Korean patents, three U.K. patents, three French patents, and three German patents. The
three issued patents in the United States are expected to expire between 2025 and 2029, without accounting for any potential patent term
adjustments or extensions or other forms of exclusivity.
We
have four issued patents and 11 pending patent applications, relating to the use of a polymer allowing daughter atoms to escape the source
and penetrate the tumor where they emit alpha particles by diffusion. This increases the percentage of daughter radionuclides that
reach the tumor. Four patents have been issued in the U.S., Australia, South Africa, and Russia. The foregoing patent applications are
pending in the U.S., Europe, Japan, Canada, China, Korea, African Regional Intellectual Property Organization (ARIPO), Mexico, India,
Hong Kong, and Singapore. These patents or patents issuing from the pending applications will begin to expire in 2038, exclusive of possible
patent term adjustments or extensions or other forms of exclusivity.
We
have two issued patents and 12 pending patent applications, relating to the potential controlled release of a certain amount of Radium-224
from the Alpha DaRT source into the tumor. Two patents have been issued in Australia and South Africa. 12 of these patent applications
are pending in the U.S., Europe, Japan, Canada, China, Korea, Russia, ARIPO, Mexico, India, Hong Kong, and Singapore. Patents issuing
from these pending applications will begin to expire in 2039, exclusive of possible patent term adjustments or extensions or other forms
of exclusivity.
We
have two issued patents and 15 pending patent applications, relating to a number of our applicators and other accessories that are used
in the Alpha DaRT source itself or in its delivery. Two patents have been issued in Australia and South Africa. Two of these patent applications
have been allowed in Australia, and 13 of these patent applications are pending in the U.S., Europe, Japan, Canada, China, Korea, Russia,
ARIPO, Mexico, India, Hong Kong, Singapore, South Africa and Australia. Patents issuing from these pending applications will begin to
expire in 2039, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
We
have 10 pending patent applications relating to a therapeutic substance administered to a tumor as a medicant, which triggers cytoplasmatic
sensors to the presence of an intracellular pathogen, followed by intratumoral Alpha DaRT thereafter. The foregoing patent applications
are pending in the U.S., Europe, Japan, China, Canada, Australia, Korea, Singapore, Russia, and Hong Kong. Patents issuing from these
patent applications begin to expire in 2038, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
We
have a total of 17 PCT applications, 17 U.S. applications, including two provisional applications, and 37 applications in other countries,
which relate to other potential approaches for our products, including other potential approaches for our product candidates. Patents
issuing from these applications will begin to expire in 2040, exclusive of possible patent term adjustments or extensions or other forms
of exclusivity.
Grants
Under the Innovation Law
Under
the Encouragement of Research, Development and Technological Innovation in the Industry Law 5744-1984, and the provisions of the applicable
regulations, rules, IIA directives and benefit tracks, (collectively, the “Innovation Law”), research and development
programs that meet specified criteria and are approved by a committee of the IIA are eligible for grants. The grants awarded are typically
up to 50% of the project’s expenditures, as determined by the research committee and subject to the benefit track under which the
grant was awarded. A company that receives a grant from the IIA, or a grant recipient, is typically required to pay royalties to the
IIA on income generated from products incorporating know-how developed using such grants (including income derived from services associated
with such products), until 100% of the U.S. dollars-linked grant plus annual LIBOR interest is repaid. The rate of royalties under the
regular benefits tracks varies between 3% to 5% of the income generated from the IIA-supported products. The obligation to pay royalties
is contingent on actual income generated from such products and services. In the absence of such income, no payment of such royalties
is required.
The
terms of the grants under the Innovation Law also generally require that the products developed as part of the programs under which the
grants were given be manufactured in Israel and that the know-how developed thereunder may not be transferred outside of Israel, unless
a prior written approval is received from the IIA (such approval is not required for the transfer of a portion of the manufacturing capacity
which does not exceed, in the aggregate, 10% of the portion declared to be manufactured outside of Israel in the applications for funding,
in which case only notification is required) and additional payments are required to be made to the IIA. It should be noted, that this
does not restrict the export of products that incorporate the funded know-how. With respect to transfer of know how out of Israel, when
an approval is received from the IIA, a redemption fee must be paid to the IIA. The Innovation Law provides a formula for the calculation
of such redemption fee, based on the value of the transferred know-how, multiplied by the amount of grants received from the IIA (including
the accrued interest), and divided by the total amounts expended by the grant recipient on R&D. To the extent any royalties were
paid to the IIA on account of the grants, such royalties will be deducted from the calculation. The redemption fee is subject to a cap
of six times the total amount of the IIA grants, plus interest accrued thereon, and a floor of equal to the total amounts of the IIA
grants, plus the interest accrued. Upon payment of the redemption fee, the know-how and manufacturing rights developed under the IIA
funding cease to be subject to the Innovation Law. See “Risk Factors—Risks Related to Israeli Law and Our Operations in Israel”
for additional information.
Since our incorporation, we have received grants from the IIA relating
to various projects, of both royalty-bearing and non-royalty-bearing varieties. No royalties have been paid to the IIA in respect of
any grant. Our total outstanding obligation to the IIA at December 31, 2022, including grants received by the Company, grants assumed
from Althera Medical Ltd. and the associated interest accrued on all such grants, including the interest accrued through, amounts
to approximately $5.79 million, of royalty-bearing grants. In addition, through December 31, 2022, we received IIA participation
payments in the aggregate amount of $1,576 thousand under non-royalty-bearing programs from the IIA.
Government
Regulation
Our
products and operations are subject to extensive regulation by the U.S. Food and Drug Administration, or FDA, and other federal and state
authorities in the United States, as well as comparable authorities in foreign jurisdictions. Our product candidates are subject to regulation
as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or FDCA, as implemented and enforced by the FDA.
United
States Regulation of Medical Devices
The
FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage,
installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and
distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective
for their intended uses and otherwise meet the requirements of the FDCA.
FDA premarket
clearance and approval requirements
Unless
an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket
notification, or approval of a premarket approval, or PMA, application. Under the FDCA, medical devices are classified into one of three
classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device
and the extent of manufacturer and regulatory control needed to ensure its safety and effectiveness. Class I includes devices with
the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General
Controls for medical devices, which include compliance with the applicable portions of the Quality System Regulation, or QSR, facility
registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising, and promotional
materials. Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA
to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance,
patient registries and FDA guidance documents.
While
most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices
are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially
distribute the device. The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification
is generally known as 510(k) clearance. Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting
or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent
to that of a legally marketed device, are placed in Class III, requiring approval of a PMA. Some pre-amendment devices are unclassified,
but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed.
510(k) Clearance
marketing pathway
To
obtain 510(k) clearance, a manufacturer must submit to the FDA a premarket notification demonstrating that the proposed device is
“substantially equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that
is not subject to premarket approval, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and
for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was
found substantially equivalent through the 510(k) process. The FDA’s 510(k) clearance process usually takes from three
to twelve months, but may take longer. The FDA may require additional information, including clinical data, to make a determination
regarding substantial equivalence. In addition, FDA collects user fees for certain medical device submissions and annual fees and for
medical device establishments. For fiscal year 2023, the standard user fee for a 510(k) premarket notification application
is $19,870.
If
the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance
to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously
cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous
PMA requirements, or can request a risk-based classification determination for the device in accordance with the “de novo”
process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a
predicate device.
After
a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would
constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification,
PMA approval or de novo reclassification. The FDA requires each manufacturer to determine whether the proposed change requires
submission of a 510(k), de novo request or a PMA in the first instance, but the FDA can review any such decision and disagree
with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer
to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained
or a de novo request is granted. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines
or penalties.
Over
the last several years, the FDA has proposed reforms to its 510(k) clearance process, and such proposals could include increased
requirements for clinical data and a longer review period, or could make it more difficult for manufacturers to utilize the 510(k) clearance
process for their products. For example, in September 2019, the FDA issued revised final guidance describing an optional “safety
and performance based” premarket review pathway for manufacturers of “certain, well-understood device types” to demonstrate
substantial equivalence under the 510(k) clearance pathway by showing that such device meets objective safety and performance criteria
established by the FDA, thereby obviating the need for manufacturers to compare the safety and performance of their medical devices to
specific predicate devices in the clearance process. The FDA has developed and maintains a list device types appropriate for the “safety
and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria
for each such device type, as well as recommended testing methods, where feasible.
PMA approval
pathway
Class III
devices require PMA approval before they can be marketed, although some pre-amendment Class III devices for which FDA has not yet
required a PMA are cleared through the 510(k) process. The PMA process is more demanding than the 510(k) premarket notification
process. In a PMA, the manufacturer must demonstrate that the device is safe and effective, and the PMA must be supported by extensive
data, including data from pre-clinical studies and human clinical trials. The PMA must also contain a full description of the device
and its components, a full description of the methods, facilities, and controls used for manufacturing, and proposed labeling. Following
receipt of a PMA, the FDA determines whether the application is sufficiently complete to permit a substantive review. If FDA accepts
the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA’s
review often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA may
be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The
FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of
the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with
the QSR. PMA applications are also subject to the payment of user fees, which for fiscal year 2022 includes a standard application
fee of $441,547.
The
FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid
scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA may
approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things,
restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical
study that supported PMA approval or requirements to conduct additional clinical studies post-approval. The FDA may condition PMA approval
on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy
data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow
certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure
to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.
Certain
changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the
design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement. PMA
supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed
to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of
an advisory panel. Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes
a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new
generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change
in demonstrating a reasonable assurance of safety and effectiveness.
De
novo classification process
Medical
device types that the FDA has not previously classified as Class I, II, or III are automatically classified into Class III
regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a route to market for
low-to-moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called
the “Request for Evaluation of Automatic Class III Designation,” or the de novo classification procedure. This
procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of
its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring
the submission and approval of a PMA application. Prior to the enactment of the Food and Drug Administration Safety and Innovation Act,
or FDASIA, in July 2012, a medical device could only be eligible for de novo classification if the manufacturer first submitted
a 510(k) pre-market notification and received a determination from the FDA that the device was not substantially equivalent. FDASIA
streamlined the de novo classification pathway by permitting manufacturers to request de novo classification directly without
first submitting a 510(k) pre-market notification to the FDA and receiving a not-substantially-equivalent determination. De novo
classification requests are subject to the payment of user fees, which for fiscal year 2021, includes a standard fee of $132,464.
Under
FDASIA, FDA is required to classify the device within 120 days following receipt of the de novo request, although the process
may take significantly longer. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal
for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. If FDA
grants the de novo request, the device may be legally marketed in the United States. However, the FDA may reject the request if
the FDA identifies a legally marketed predicate device that would be appropriate for a 510(k) notification, determines that the
device is not low-to-moderate risk, or determines that general controls would be inadequate to control the risks and/or special controls
cannot be developed. After a device receives de novo classification, any modification that could significantly affect its safety
or efficacy, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or,
depending on the modification, another de novo request or even PMA approval.
Clinical
trials
Clinical
trials are almost always required to support a PMA or a de novo request, and are sometimes required to support 510(k) submissions.
All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational
device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion of the investigational device,
and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device
presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE
application to the FDA, which must become effective prior to commencing human clinical trials. If the device under evaluation does not
present a significant risk to human health, then the device sponsor is not required to submit an IDE application to the FDA before initiating
human clinical trials, but must still comply with abbreviated IDE requirements when conducting such trials. A significant risk device
is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting
or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment
of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate
data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol
is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the
company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which
it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval.
Regardless
of the degree of risk presented by the medical device, clinical studies must be approved by, and conducted under the oversight of, an
Institutional Review Board, or IRB, for each clinical site. The IRB is responsible for the initial and continuing review of the IDE,
and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs,
human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the
FDA. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after obtaining approval for
the trial by one or more IRBs without separate approval from the FDA, but must still follow abbreviated IDE requirements, such as monitoring
the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. Acceptance
of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective,
the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant
the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator
may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of
human subjects.
During
a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting
clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping
and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators
in the clinical study are also subject to FDA’s regulations and must obtain patient informed consent, rigorously follow the investigational
plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements.
Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons,
including a belief that the risks to study subjects outweigh the anticipated benefits.
Expedited
development and review programs
Following
passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices Program, which is a voluntary program offered to
manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis
of life-threatening or irreversibly debilitating diseases or conditions. The goal of the program is to provide patients and health care
providers with more timely access to qualifying devices by expediting their development, assessment and review, while preserving the
statutory standards for PMA approval, 510(k) clearance and de novo classification. The program is available to medical devices
that meet certain eligibility criteria, including that the device provides more effective treatment or diagnosis of life-threatening
or irreversibly debilitating diseases or conditions, and that the device meets one of the following criteria: (i) the device represents
a breakthrough technology, (ii) no approved or cleared alternatives exist, (iii) the device offers significant advantages over
existing approved or cleared alternatives, or (iv) the availability of the device is in the best interest of patients. Breakthrough
Device Designation provides certain benefits to device developers, including more interactive and timely communications with FDA staff,
use of post-market data collection, when scientifically appropriate, to facilitate expedited and efficient development and review of
the device, opportunities for efficient and flexible clinical study design, and prioritized review of premarket submissions.
Post-market
regulation
After
a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:
| ● | establishment
registration and device listing with the FDA; |
| ● | QSR
requirements, which require manufacturers, including third-party manufacturers, to follow
stringent design, testing, control, documentation and other quality assurance procedures
during all aspects of the design and manufacturing process; |
| ● | labeling
regulations and FDA prohibitions against the promotion of investigational products, or the
promotion of “off-label” uses of cleared or approved products; |
| ● | requirements
related to promotional activities; |
| ● | clearance
or approval of product modifications to cleared devices or devices authorized through the
de novo classification process that could significantly affect safety or effectiveness,
or that would constitute a major change in intended use of such devices, or approval of certain
modifications to PMA-approved devices; |
| ● | medical
device reporting regulations, which require that a manufacturer report to the FDA if a device
it markets may have caused or contributed to a death or serious injury, or has malfunctioned
and the device or a similar device that it markets would be likely to cause or contribute
to a death or serious injury, if the malfunction were to recur; |
| ● | correction,
removal and recall reporting regulations, which require that manufacturers report to the
FDA field corrections and product recalls or removals if undertaken to reduce a risk to health
posed by the device or to remedy a violation of the FDCA that may present a risk to health; |
| ● | the
FDA’s recall authority, whereby the agency can order device manufacturers to recall
from the market a product that is in violation of governing laws and regulations; and |
| ● | post-market
surveillance activities and regulations, which apply when deemed by the FDA to be necessary
to protect the public health or to provide additional safety and effectiveness data for the
device. |
Manufacturing
processes for medical devices are required to comply with the applicable portions of the QSR, which cover the methods and the facilities
and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution,
installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device
master file, device history file, and complaint files. As a manufacturer, we are subject to periodic scheduled or unscheduled inspections
by the FDA. Failure to maintain compliance with the QSR requirements could result in the shutdown of, or restrictions on, manufacturing
operations and the recall or seizure of marketed products. The discovery of previously unknown problems with marketed medical devices,
including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device
within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device,
including the removal of the product from the market or voluntary or mandatory device recalls.
The
FDA has broad regulatory compliance and enforcement powers. If the FDA determines that a manufacturer has failed to comply with applicable
regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:
| ● | warning
letters, untitled letters, fines, injunctions, consent decrees and civil penalties; |
| ● | recalls,
withdrawals, or administrative detention or product seizures; |
| ● | operating
restrictions or partial suspension or total shutdown of production; |
| ● | refusing
or delaying requests for 510(k) marketing clearance or PMA approvals of new products
or modified products; |
| ● | withdrawing
510(k) clearances or PMA approvals that have already been granted; |
| ● | refusal
to grant export approvals for; or |
Regulation
of Medical Devices in the European Union
In
the European Union, or EU, until May 25, 2021, medical devices were regulated by the Council Directive 93/42/EEC, or the EU Medical Devices
Directive, which has been repealed and replaced by Regulation (EU) No 2017/745, or the EU Medical Devices Regulation. Unlike directives,
regulations are directly applicable in all EU member states without the need for member states to implement into national law.
In
the EU, there is currently no premarket government review of medical devices. However, all medical devices placed on the EU market must
meet general safety and performance requirements, including the requirement that a medical device must be designed and manufactured in
such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective
and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable
– other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against
the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally
acknowledged state of the art.
Compliance
with the general safety and performance requirements is a prerequisite for European conformity marking, or CE mark, without which medical
devices cannot be marketed or sold in the EU. To demonstrate compliance with the general safety and performance requirements medical
device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk)
classification. Except for low-risk medical devices (Class I), where the manufacturer can self-assess the conformity of its products
with the general safety and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a
conformity assessment procedure requires the intervention of a notified body. Notified bodies are independent organizations designated
by EU member states to assess the conformity of devices before being placed on the market. A notified body would typically audit and
examine a product’s technical dossiers and the manufacturers’ quality system. If satisfied that the relevant product conforms
to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer
uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device
to be placed on the market throughout the EU.
Throughout
the term of the certificate of conformity, the manufacturer will be subject to periodic surveillance audits to verify continued compliance
with the applicable requirements. In particular, there will be a new audit by the notified body before it will renew the relevant certificate(s).
All
manufacturers placing medical devices into the market in the EU must comply with the EU medical device vigilance system. Under this system,
serious incidents and Field Safety Corrective Actions, or FSCAs, must be reported to the relevant authorities of the EU member states.
Manufacturers are required to take FSCAs defined as any corrective action for technical or medical reasons to prevent or reduce a risk
of a serious incident associated with the use of a medical device that is made available on the market. An FSCA may include the recall,
modification, exchange, destruction or retrofitting of the device.
The
aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus
Norway, Liechtenstein and Iceland.
Brexit
Since
January 1, 2021, the MHRA has become the sovereign regulatory authority responsible for Great Britain (i.e. England, Wales and Scotland)
medical device market according to the requirements provided in the Medical Devices Regulations 2002 (SI 2002 No 618, as
amended) that sought to give effect to the three pre-existing EU directives governing active implantable medical devices, general medical
devices and in vitro diagnostic medical devices whereas Northern Ireland continues to be governed by EU rules according to the Northern
Ireland Protocol. Following the end of the United Kingdom’s, or UK’s, withdrawal from the EU, or Brexit, transitional period on January
1, 2021, new regulations require all medical devices to be registered with the MHRA before being placed on the Great Britain market.
From January 1, 2022, manufacturers based outside the UK need to appoint a UK responsible person that has a registered place of business
in the UK to register devices with the MHRA.
On
June 26, 2022, the MHRA published its response to a 10-week consultation on the post-Brexit regulatory framework for medical devices
and diagnostics. MHRA seeks to amend the UK Medical Devices Regulations 2002 (which are based on EU legislation, primarily the EU Medical
Devices Directive and the EU In Vitro Diagnostic Medical Devices Directive), in particular to create a new access pathway to support
innovation, create an innovative framework for regulating software and artificial intelligence as medical devices, reform IVD regulation
and foster sustainability through the reuse and remanufacture of medical devices. Regulations implementing the new regime were originally
scheduled to come into force in July 2023, but have recently been postponed to July 2024. Devices bearing CE marks issued by EU notified
bodies under the EU Medical Devices Regulation or EU Medical Devices
Directive are now subject to transitional arrangements. In its consultation response, the MHRA indicated that the future UK regulations
will allow devices certified under the EU Medical Devices Regulation to be placed on the market in Great Britain under the CE mark until
either the certificate expires or for five years after the new regulations take effect, whichever is sooner. Devices certified under
the EU Medical Devices Directive could continue to be placed on the market until either the certificate expires or for three years after
the new regulations take effect, whichever is sooner.
Following
these transitional periods, all medical devices will required a UK Conformity Assessed, or UKCA, mark in order to be placed on the market
in Great Britain. Manufacturers may choose to use the UKCA mark on a voluntary basis prior to entry of the new regulations on July 1,
2024. However, from July 2024, products which do not have existing and valid certification under the EU
Medical Devices Directive or EU Medical Devices Regulation and are therefore not subject to the transitional arrangements will be required
to carry the UKCA mark if they are to be sold into the market in Great Britain. UKCA marking will not be recognized in the EU.
In
addition, the trade deal between the UK and the EU generally provides for cooperation and exchange of information between the parties
in the areas of product safety and compliance, including market surveillance, enforcement activities and measures, standardization-related
activities, exchanges of officials, and coordinated product recalls. As such, processes for compliance and reporting should reflect requirements
from regulatory authorities.
Under
the terms of the Northern Ireland Protocol, Northern Ireland follows EU rules on medical devices and devices marketed in Northern Ireland
require assessment according to the EU regulatory regime. Such assessment may be conducted by an EU notified body, in which case a CE
mark is required before placing the device on the market in the EU or Northern Ireland. Alternatively, if a UK notified body conducts
such assessment, a ‘UKNI’ mark is applied and the device may only be placed on the market in Northern Ireland and not the EU.
Israel’s
Regulations of our Products
Our
product candidates require approval by the Israeli Ministry of Health for sale and distribution in Israel. Our manufacturing activities
in Israel are also subject to regulation by the Israeli Ministry of Health, in addition to the radioactive aspect of our manufacturing
which is subject to regulation by the Israeli Ministry of Environmental Protection. In addition to approvals related to marketing and
selling our products, once approved, we or our clinical trial partner sites also must obtain pertinent approvals or permits to perform
our clinical trials in the countries in which we perform such trials, such as in compliance with an international guideline for the ethical
conduct of clinical research known as the Declaration of Helsinki. In Israel, our clinical trials require a permit for a research plan
(protocol) by the Helsinki Committee, operating under the Israeli Public Health Regulations (Clinical Trials in Human Subject Research),
1980.
Japan’s
Regulations of Medical Devices
Medical
devices are defined as “appliances or instruments, etc. which are intended for use in the diagnosis, treatment or prevention of
disease…,” which are classified into 85 broad product categories under the implementing Cabinet Order, such as “physical
diagnostic and treatment devices” or “radioactive material treatment devices”, based on product features and functionalities.
If a product falls under any of these categories, it will be regulated as a medical device For
the regulatory purposes, the medical devices are given classification of Class I through IV, in light of their potential safety
concerns and health risks. For example, a simple device such as blood pressure meter is Class I, whereas products with potential
health risks but for which technology is well established in the form of ISO specifications are Class II (e.g., a pulse oximeter).
More advanced products with significant safety concerns are Class III (e.g., a heart pacemaker). Finally, the Ministry of Health,
Labor and Welfare (“MHLW”) designates part of Class III devices as Class IV which covers those invasive items with
significant safety concerns which may impair human lives (e.g., a balloon cardiovascular catheter). These classifications are compiled
in a classification table describing thousands of product subcategories, which is updated from time to time by the MHLW, reflecting introduction
of new medical device.
For
introduction to the Japanese market, new Class I medical devices do not require any pre market regulatory action. In contrast, it
is mandatory, for both Class III and Class IV devices, to obtain pre marketing product approval which the MHLW grants on the
basis of safety testing information, as well as clinical trial information, when required. Class II devices (and part of Class III
devices) are subject to the certification requirement for compliance with the applicable product specifications, which are often developed
under the ISO, before introduction into Japan. Certification of these Class II devices is granted by private sector laboratories
accredited in Japan.
At
present, no mutual recognition agreement is in force with either the United States or the European Union for medical device registration.
Foreign registration of a medical device, therefore, does not exempt products registered in these regions from the Japanese registration
requirement. However, the MHLW will accept foreign electric or other safety data as well as foreign clinical trial data for the purpose
of Japanese registration.
Approval
and clinical trial
For
approval of a new Class III/IV medical device product, the applicant (which can be either a foreign manufacturer or its distributor in
Japan) is required to submit a package of information required by the Japanese regulations which are largely consistent with the Global
Harmonization Task Force (“GHTF”)’s regulatory recommendations. For example, the manufacturer is required to prepare
documentation and test results demonstrating compliance with the Essential Principles of Safety and Performance, which are largely identical
to the general safety and performance requirements of the European Union, such as a risk management program and safety and efficacy documentation.
Unlike
the case of pharmaceuticals, not all new medical devices are required to submit clinical trial data to prove safety and efficacy. In
particular, new products without “evident” improvement from existing products may be approved with clinical information of
a limited size, if they do not pose a new, material clinical risk. On the other hand, truly innovative medical devices have to be tested
through a clinical trial, but the domestic clinical trial can be limited or waived if the foreign/international pivotal clinical trial
data is available. Importantly, the authorities’ guidance document provides that “clinical significance”, or operability
by Japanese healthcare providers (“HCPs”) in the Japanese clinical environment is a most important point of reference for
a new medical device. For this reason, even when domestic clinical trial data is required, the scope of the trial is limited to applicability
of the new technology to the Japanese clinical environment, the number of subjects is limited, and comparative data is not essential.
Separately,
in order to expedite introduction of new medical devices from overseas, the authorities accept, in lieu of clinical trial results, a
“clinical evaluation report” which proves the risks and benefits of the new medical device based on published professional
information on the mechanism and operation of the device.
Quality
management systems
In
addition to the approval requirements, manufacturers of Class III/IV medical devices, either domestic or foreign, are required to
observe the Japanese quality management systems (QMS) requirements and obtain certification of compliance from the authorities. The QMS
requirements are largely identical to those under ISO 13485, and cover matters including adequate documentation of manufacturing processes
in the form of SOPs, adequate staffing and the PDCA cycle procedure.
Post-marketing
surveillance and “data exclusivity”
In
contrast to new pharmaceuticals, which are typically given a post marketing surveillance period for certain years to assess the
safety and efficacy of the new product upon approval, not all newly approved medical devices are subject to the post marketing surveillance
requirement. Since 2014, the MHLW requires post marketing surveillance only for “evidently” new medical devices in terms
of its mechanical structure, usage, operative procedures, or efficacy, and which have not been used either in Japan or abroad. The post
marketing surveillance period is, in principle, 3 years, and generally 5 years for embedded products or orphan products which
require a long term observation or a larger number of clinical cases to fully assess the product profile. These determinations are made
by the MHLW on a case by case basis, and the Ministry may set the period up to 7 years if it finds necessary.
Notably,
when a new product is assigned a post marketing surveillance period, it is the policy of the MHLW to require similar follow on products
to submit the equivalent set of date (in particular clinical trial data) to obtain approval, as the right of reference is not automatically
granted to competitors. This operation of the post marketing surveillance to block follow on applications is known as the “data
exclusivity.” However, the data exclusivity is less important for medical devices than in the case of the pharmaceuticals which
are given a much longer post marketing surveillance period (8 years for a new API). Indeed, unlike chemical compounds or biological
preparations, medical device manufacturers frequently improve and update device models and software to compete in the market, rather
than relying on the patents or data exclusivity.
Safety
reports
After
approval, incidents impacting on safety and efficacy of the medical device products marketed in Japan must be reported within 15 days
or 30 days of the date when the Japanese distributor becomes aware of the incident. These periods begin counting on the date the
relevant information is received by the Japanese distributor, and not the date when the foreign manufacturer has found the incident.
In the past, quite a few Japanese distributors sometimes failed to collect overseas information and file a timely report, resulting in
regulatory penalties.
In
addition, the distributor is also required to file a periodic safety report to the authorities collecting information on serious incidents
as well as unexpected incidents.
Reimbursement
Reimbursement
for medical devices in Japan is centralized, as it is covered by the Japanese National Health Insurance (NHI). Institutions who purchased
the reimbursable medical devices receive monetary compensation either in the form of price reimbursement (for consumable medical devices),
or through their professional/ technical fees (for non-consumables such as CT scanners, automated surgical robotics).
When
a new Class III/IV non consumable device product is granted approval, the manufacturer who wishes to obtain the reimbursement status
under the NHI must submit a reimbursement proposal to the MHLW. Upon receipt of the proposal, the Ministry will task the advisory body
to evaluate if the new medical device would require a new technical fee for reimbursement, or would be reimbursable under the existing
technical fee. If the product is entirely new, a new technical fee will be created, under which the fee will be payable to the institution
when the device is used for treatment. On the other hand, the authorities may determine that the existing (generic) technical fee covers
the new technology, and simply add the new medical device as being eligible for NHI reimbursement under the technical fee. In the latter
case, the new product will have to compete with the existing products for compensation from the same technical fee payable to the institution.
Compliance,
promotion and advertisement
The
law was amended in 2020 to strengthen the compliance mechanism inside the corporate structure of the holder of the product approval.
Specifically, the approval holder is required to nominate an officer in charge of the medical device matters who shall bear overall responsibilities
for compliance, as well as a qualified individual who supervises the operational issues of safety and efficacy of the medical device
it distributes. The law also requires the approval holder to organize the compliance structure and allocate and document necessary responsibilities
among its staff.
Another
major change from the previous law is the introduction of a regulatory surcharge designed to strip the companies of the profits they
gain from “false or excessive” advertisement or promotion. The amount of the surcharge will be 4.5 percent of the sales
volume of the particular product it unlawfully promoted.
Promotional
incentives to the HCPs are governed by the industry association in the form of a fair competition code. For example, the prices of meals
offered to the HCPs may not exceed the ceiling under the code.
Advertisement
is subject to detailed regulatory guidance of the MHLW. Notably, it is not permitted to distribute academic publication articles to the
HCPs when the product is yet to be approved in Japan.
Other
U.S. Regulatory Requirements
Medical
device and pharmaceutical companies are subject to additional healthcare regulation and enforcement by the federal government and by
authorities in the states in which they conduct their business and may constrain the financial arrangements and relationships through
which we research, as well as sell, market and distribute any products for which we obtain marketing authorization. Such laws include,
without limitation, state and federal anti-kickback, fraud and abuse, false claims, data privacy and security, and transparency laws
and regulations related to drug pricing and payments and other transfers of value made to physicians and other healthcare providers.
If their operations are found to be in violation of any of such laws or any other governmental regulations that apply, they may be subject
to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment
or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare
programs and imprisonment.
Coverage
and Reimbursement
In
the United States, our commercial success will depend in part on the extent to which governmental authorities, private health insurers
and other third-party payors provide coverage for and establish adequate reimbursement levels for our product candidates, if cleared
or approved by the FDA. Failure by physicians, hospitals, ambulatory surgery centers and other users of our products to obtain coverage
and adequate reimbursement from third-party payors for our product candidates, or adverse changes in government and private third-party
payors’ coverage and reimbursement policies, may adversely impact demand for our product candidates if cleared or approved.
A
substantial portion of our revenue will depend on the extent to which the costs of our products purchased by our customers (or services
provided with our products) will be reimbursed by third-party payors, including Medicare, Medicaid, other U.S. government sponsored programs
and private payors. These third-party payors exercise significant control over patient access and increasingly use their enhanced bargaining
power to secure discounted rates and impose other requirements that may reduce demand for our product candidates, if cleared or approved.
Our potential customers’ ability to obtain adequate reimbursement for products and services from these third-party payors affects
the selection of products they purchase and the prices they are willing to pay. In addition, demand for new products may be limited unless
we obtain favorable reimbursement (including coverage, coding and payment) from governmental and private third-party payors at the time
of the product’s introduction, which will depend, in part, on our ability to demonstrate that our products have a positive impact
on clinical outcomes. Third-party payors continually review their coverage policies for existing and new products and procedures and
can deny coverage for our products or revise payment policies such that payments do not adequately cover the cost of our products. Even
if third-party payors make coverage and reimbursement available, that reimbursement may not be adequate, which may have an adverse effect
on our business, results of operations, financial condition and cash flows.
No
uniform policy of coverage and reimbursement among payors in the United States exists and coverage and reimbursement for procedures can
differ significantly from payor to payor. Some third-party payors must approve coverage for new or innovative devices or procedures before
they will reimburse healthcare providers who use the products or therapies. Even though a new product may have been cleared for commercial
distribution by the FDA, we may find limited demand for the product unless and until reimbursement approval has been obtained from governmental
and private third-party payors. We can provide no assurances that we will be successful in obtaining coverage from Medicare or any other
governmental or commercial third-party payor. Moreover, we may be required to seek new billing codes for the components of the Alpha
DaRT, and regulatory authorities may not approve the creation of separate codes. Additionally, even if we are successful, these billing
codes or the payment amounts associated with such codes may change in the future.
In
addition to uncertainties surrounding coverage policies, there are periodic changes to reimbursement levels. Third-party payors regularly
update reimbursement amounts and also from time to time revise the methodologies used to determine reimbursement amounts. This includes
routine updates to payments to physicians, hospitals and ambulatory surgery centers for procedures during which our products are used.
These updates could directly impact the demand for our products. See “Risk Factors — Risks Related to Government Regulation —
Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, could harm our business, financial
condition and results of operations.”
We
believe the overall escalating cost of medical products and services being paid for by the government and private health insurance has
led to, and will continue to lead to, increased pressures on the healthcare and medical device industry to reduce the costs of products
and services. Third-party payors are developing increasingly sophisticated methods of controlling healthcare costs through prospective
reimbursement and capitation programs, group purchasing, redesign of benefits, and exploration of more cost-effective methods of delivering
healthcare. In the United States, some insured individuals enroll in managed care programs, which monitor and often require pre-approval
of the services that a member will receive. Some managed-care programs pay their providers on a per capita (patient) basis, which puts
the providers at financial risk for the services provided to their patients by paying these providers a predetermined payment per member
per month and, consequently, may limit the willingness of these providers to use our products. It is possible that third-party payor
coding, coverage and reimbursement policies will affect the need or prices for our products in the future, which could significantly
affect our financial performance and our ability to conduct our business.
In
international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted
price ceilings on specific product lines and procedures. EU member states and UK impose controls on whether products are reimbursable
by national or regional health service providers and on the prices at which devices are reimbursed under state-run healthcare schemes.
More and more, local, product specific reimbursement law is applied as an overlay to medical device regulation, which has provided an
additional layer of clearance requirement.
Healthcare
Reform
The
United States government has enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could
affect our ability to sell our products profitably. Among policy makers and payors in the United States and elsewhere, there is significant
interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding
access. Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower
reimbursement for our product candidates, if cleared or approved, and the procedures associated with the use of such products. The cost
containment measures that payors and providers are instituting and the effect of any healthcare reform initiative implemented in the
future could impact our revenue from the sale of our products.
The
implementation of the Affordable Care Act, or ACA, in the United States, for example, has changed healthcare financing and delivery by
both governmental and private insurers substantially, and affected medical device manufacturers significantly. The ACA, among other things,
provided incentives to programs that increase the federal government’s comparative effectiveness research and implemented payment
system reforms including national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve
the coordination, quality and efficiency of certain healthcare services through bundled payment models. Additionally, the ACA expanded
eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities
in, and conduct comparative clinical effectiveness research, along with funding for such research.
Since
its enactment, there have been judicial, executive and political challenges to certain aspects of the ACA. On June 17, 2021, the
U.S. Supreme Court dismissed the most recent judicial challenge to the ACA without specifically ruling on the constitutionality of the
ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from
February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.
The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that
limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work
requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the
ACA.
In
addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, the Budget Control Act of
2011, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative
amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through
March 31, 2022, unless additional Congressional action is taken. Additionally, the American Taxpayer Relief Act of 2012, among other
things, further reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period
for the government to recover overpayments to providers from three to five years.
We
expect additional state, federal and foreign healthcare reform measures to be adopted in the future, any of which could limit the amounts
that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products
or additional pricing pressure.
For
instance, on December 13, 2021, the EU Regulation No 2021/2282 on Health Technology Assessment, or HTA, amending Directive 2011/24/EU,
was adopted. While the Regulation entered into force in January 2022, it will only begin to apply from January 2025 onwards, with preparatory
and implementation-related steps to take place in the interim. Once the Regulation becomes applicable, it will have a phased implementation
depending on the concerned products. This regulation intends to boost
cooperation among EU member states in assessing health technologies, including some medical devices, and providing the basis for cooperation
at the EU level for joint clinical assessments in these areas. The regulation will permit EU member states to use common HTA tools, methodologies,
and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies
with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities,
identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other
areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects
of health technologies, and making decisions on pricing and reimbursement.
Data Privacy
and Security Laws
Numerous
state, federal and foreign laws, regulations and standards govern the collection, use, access to, confidentiality and security of health-related
and other personal information, and could apply now or in the future to our operations or the operations of our partners. In the United
States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security
laws and consumer protection laws and regulations govern the collection, use, disclosure, and protection of health-related and other
personal information. In addition, certain foreign laws govern the privacy and security of personal data, including health-related data.
Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance
efforts, and can result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions
on data processing.
| C. | Organizational
Structure |
Alpha
Tau Medical Ltd. was incorporated in 2015 under the Israel Companies Law of the State of Israel and commenced operations on that
date.
We
have three wholly-owned subsidiaries: Alpha Tau Medical, Inc., which is incorporated in the United States, Alpha Tau Medical Canada,
which is incorporated under the laws of Canada, and Alpha Tau Medical KK, which is incorporated under the laws of Japan.
| D. | Property,
Plants and Equipment |
Our
principal facilities are located in Jerusalem, Israel and consist of approximately 2,600 square meters (approximately 28,000 square feet)
of leased office space and a manufacturing facility. These facilities currently accommodate our principal executive offices, research
and development, account management, marketing, design, business development, finance, and other administrative activities. Of our total
100 employees as of December 31, 2022, 90 are located in Israel. The lease for these facilities expires in May 2035.
As of December 31, 2022, we also lease offices in Lawrence, MA,
USA and Togane, Japan. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should it be
needed, suitable additional space will be available to accommodate any such expansion of our operations. We have also constructed our
own radioactive pre-clinical laboratory at our headquarters in Jerusalem, Israel, which has received the necessary certifications to initiate
pre-clinical studies, to further enhance our capabilities of exploring potential combination therapies with Alpha DaRT.
Item 4A. Unresolved
Staff Comments
None.
Item 5.
Operating and Financial Review and Prospects
You should read the following discussion together
with the consolidated financial statements and related notes included elsewhere in this Annual Report. The statements in this discussion
regarding industry outlook, our expectations regarding our future performance, planned investments in our expansion into additional geographies,
research and development, sales and marketing and general and administrative functions as well as other non-historical statements in this
discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including,
but not limited to, the risks and uncertainties described in Item 3.D entitled “Risk Factors” and “Cautionary Statement
Regarding Forward-Looking Statements” included elsewhere in this Annual Report. Our actual results may differ materially from those
contained in or implied by any forward-looking statements.
Overview
We are a clinical-stage oncology therapeutics company focused on harnessing
the innate relative biological effectiveness and short range of alpha particles for use as a localized radiation therapy for solid tumors.
Our proprietary Alpha DaRT technology is designed to utilize the specific therapeutic properties of alpha particles while aiming to overcome,
and even harness for potential benefit, the traditional shortcomings of alpha radiation’s limited range. We believe that our Alpha
DaRT technology has the potential to be broadly applicable across multiple targets and tumor types. We have evaluated and continue to
evaluate the feasibility, safety and efficacy of the Alpha DaRT technology for the treatment of superficial lesions, i.e., tumors of the
skin, head or neck, in multiple clinical trials conducted in clinical sites around the world. In a first-in-human study of locally advanced
and recurrent squamous cell carcinoma, or SCC, cancers of the skin and head and neck, efficacy was evaluated in 28 tumors, and results
showed that Alpha DaRT achieved 100% overall response rate and over 78% complete response rate. The Alpha DaRT was generally well-tolerated,
with limited local toxicity and no systemic toxicity. On the basis of this clinical trial as well as some of our further clinical trials,
we received marketing approval in Israel in August 2020 for the treatment of SCC of the skin or oral cavity using the Alpha DaRT,
and that marketing approval is currently in a renewal process. In June 2021, the FDA granted the Alpha DaRT Breakthrough Device Designation
for the treatment of patients with SCC of the skin or oral cavity without curative standard of care. In October 2021, the FDA granted
the Alpha DaRT a second Breakthrough Device Designation, in treating recurrent Glioblastoma Multiforme, or GBM, as an adjunct to standard
medical therapies or as a standalone therapy after standard medical therapies have been exhausted. In the second half of 2021, we treated
ten patients in the U.S. in a multi-center pilot feasibility trial conducted at Memorial Sloan Kettering Cancer Center and four other
U.S. clinical sites, to explore the feasibility of delivering radiotherapy for malignant skin and superficial soft tissue tumors using
Alpha DaRT. The study met its primary feasibility endpoint, as all patients had successful delivery of radiation by Alpha DaRT. At approximately
12 weeks and 24 weeks after treatment, all ten lesions treated demonstrated a complete response to treatment, with no product-related
serious adverse events observed. If approved, we expect to commercialize our Alpha DaRT technology first in the United States before other
markets, including Israel, notwithstanding our existing marketing authorization in Israel (under which we have not yet commercialized
the product). We hold exclusive rights to our proprietary Alpha DaRT technology in our core markets, including the United States and Europe.
While local radiation therapy has been a mainstay
of cancer therapy for years, it has been mostly limited to modalities utilizing beta or gamma emissions, which primarily destroy
cells through an indirect mechanism relying on oxygen and the generation of free radicals to cause single-strand DNA breaks. By contrast,
alpha radiation has hundreds of times the linear energy transfer rate of beta-emitters. Additionally, alpha particles’ heavier mass
and far shorter particle paths (less than 100 μm) relative to beta’s lighter mass and lengthier (up to 12 mm) path, have been
shown to destroy radioresistant cells in clinical studies – causing multiple, irreparable, double-strand DNA breaks and other
cellular damage upon direct impact – within a very short distance. Accordingly, we believe that alpha radiation has several
significant potential advantages for use in cancer radiotherapy, including a high relative biological efficiency (potentially enabling
it to destroy tumor cells with administration of lower levels of radiation), imperviousness to factors such as hypoxia, and a very well-defined
range of travel with limited collateral damage. Nonetheless, its use has also been limited precisely due to alpha’s extremely short
particle range in living tissue, as the range of less than 100 μm is insufficient to provide meaningful clinical utility.
The Alpha DaRT technology employs a series of
radioactive sources that are embedded with Radium-224 to enable a controlled, intratumoral release of alpha-emitting atoms which diffuse
and decay throughout the tumor, seeking to kill cancerous cells with localized precision, while penetrating deeper into the tumor than
can otherwise be reached by the limited ranges of the alpha particles themselves. Due to the inherent limited range of the alpha particles,
we believe that the Alpha DaRT technology has the potential to deliver powerful and localized precise killing impact to the tumor without
damage to surrounding healthy tissue. By combining the innate relative biological effectiveness and short range of alpha particles in
a single-use disposable form, we believe that the Alpha DaRT could address tumors that have otherwise demonstrated poor response to radiation
therapy or other standards of care, with the potential to apply to a wide range of tumors and clinical settings.
We were incorporated in Israel in 2015 and our
headquarters is located in Jerusalem, Israel. Our operations to date have been limited to organizing and staffing our company, business
planning, raising capital, developing our technology, acquiring and building our intellectual property portfolio and conducting research
and development activities, including pre-clinical studies and clinical trials, for our Alpha DaRT technology. We do not have any products
approved for sale in the United States and have not generated any revenue from product sales. To date, we have funded our operations primarily
through private placements of ordinary and convertible preferred shares and funding from government contracts. From inception through
December 31, 2022, we have raised an aggregate of $185,650 to fund our operations, of which $57,911 were gross proceeds from sales of
our convertible preferred shares, $121,483 were gross proceeds from the issuance of ordinary shares and $6,256 were gross proceeds from
government grants.
We have incurred significant net operating losses in every year
since our inception and expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our
net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial. Our net losses were
$27,271 and 33,762 for the years ended December 31, 2021 and December 31, 2022, respectively. As of December 31, 2022,
we had an accumulated deficit of $86,602. We anticipate that our expenses will increase significantly as we:
|
● |
conduct additional clinical trials of our Alpha DaRT technology; |
|
|
|
|
● |
continue to discover and develop additional product candidates; |
|
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|
● |
construct manufacturing facilities and supply chain capabilities in multiple geographies of sufficient capacity to provide commercial quantities of our Alpha DaRT products and any other product candidates for which we may obtain marketing approval; |
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|
● |
seek regulatory and marketing approvals for our Alpha DaRT technology and any other product candidates that successfully complete clinical trials, if any; |
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|
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develop and execute launch strategies, and establish a sales, marketing and distribution infrastructure to commercialize our Alpha DaRT technology and any other products for which we may obtain regulatory approval in geographies in which we plan to commercialize our products ourselves; |
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|
● |
maintain, expand and protect our intellectual property portfolio; |
|
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|
● |
hire additional staff, including clinical, scientific, technical, regulatory operational, and financial personnel, to execute our business plan; and |
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|
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add clinical, scientific, operational, financial and management information systems and personnel to support our product development and potential future commercialization efforts, and to enable us to operate as a public company. |
We do not expect to generate revenue from product
sales unless and until we successfully complete clinical development and obtain further regulatory approvals for our Alpha DaRT technology.
If we obtain regulatory approval for our Alpha DaRT technology or any other product candidates, we expect to incur significant commercialization
expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to continue to incur additional costs
associated with operating as a public company. As a result, we will need substantial additional funding to support our continuing operations
and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to fund
our operations through public or private equity or debt financings or other sources, including strategic collaborations. We may, however,
be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise
capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability
to develop our current product candidates, or any additional product candidates, if developed.
Because of the numerous risks and uncertainties
associated with therapeutics product development, we are unable to accurately predict the timing or amount of increased expenses or when
or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become
profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue
our operations at planned levels and be forced to reduce or terminate our operations.
As of December 31, 2022, we had cash and
cash equivalents, restricted cash and short-term deposits totaling $105,380. We believe that our existing cash and cash equivalents will
enable us to fund our operating expenses and capital expenditure requirements for at least two years. We have based these estimates
on assumptions that may prove to be imprecise, and we may use our available capital resources sooner than we currently expect. See “Liquidity
and Capital Resources.” Because of the numerous risks and uncertainties associated with the development of our Alpha DaRT technology
and any future product candidates, and because the extent to which we may enter into collaborations with third parties for product development
is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research
and development of our Alpha DaRT technology or any future potential product candidates.
If we raise additional funds through collaborations,
strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future
revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable
to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our
product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we
would otherwise prefer to develop and market ourselves.
Business Combination
On July 7, 2021, we entered into the Merger
Agreement with HCCC and Merger Sub. Pursuant to the Merger Agreement, Merger Sub merged with and into HCCC, with HCCC surviving the merger.
Upon consummation of the Business Combination and the other transactions contemplated by the Merger Agreement on March 7, 2022 (the
“Closing Date”), HCCC became our wholly owned subsidiary. In July 2022, we took the necessary actions to dissolve HCCC.
Business effects of COVID-19
The current COVID-19 pandemic has presented
a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business
operations, as well as the U.S. economy and financial markets. To date, our financial conditions and own operations have not been significantly
impacted by the COVID-19 outbreak; however, the full extent to which the COVID-19 pandemic will directly or indirectly
impact our business, results of operations, liquidity and financial condition will depend on future developments, which are highly uncertain
and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain
it or treat its impact and the economic impact on local, regional, national and international markets.
To date, our vendors have been able to continue
to provide services and supply materials and products, and currently do not anticipate any disruption in services or interruptions in
supply. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including
our expenses, and our ability to hire and retain employees.
For additional information on the various risks
posed by the COVID-19 pandemic, please read the section entitled “Risk Factors” in this Annual Report.
Basis of presentation
Our financial statements are prepared in accordance
with accounting principles generally accepted in the United States, or U.S. GAAP. Unless otherwise indicated, all dollar amounts are presented
in thousands.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from
product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts
for our Alpha DaRT technology or other product candidates are successful and result in further regulatory approvals and successful commercialization
efforts, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue
from the commercialization and sale of our Alpha DaRT technology or any other product candidates. We may never succeed in obtaining further
regulatory approvals for our Alpha DaRT technology or any of our other product candidates that we may develop in the future.
Operating Expenses
Our operating expenses since inception have consisted
solely of research and development costs, marketing expenses and general and administrative costs.
Research and development, net
Research and development, net consist primarily
of costs incurred for our research activities, including the development of and pursuit of further regulatory approvals of our Alpha DaRT
technology, which include:
| ● | employee-related expenses, including salaries, benefits and share-based compensation expense for personnel
engaged in research and development functions; |
| ● | expenses incurred in connection with the preclinical and clinical development of our product candidates,
including under agreements with CROs, investigative sites and consultants; |
| ● | costs of manufacturing our product candidates or other material costs for use in our preclinical studies
and clinical trials, including costs of raw materials, components, and other laboratory materials; |
| ● | consulting and professional fees related to research and development activities; |
| ● | facility costs and other allocated expenses, which include expenses for rent and maintenance of our facility,
utilities, depreciation, overhead expenses and other supplies; and |
| ● | registration and maintenance of our intellectual property portfolio. |
We expense research and development costs as incurred.
Our external research and development expenses
consist primarily of costs such as fees paid to consultants, clinical sites, contractors and CROs in connection with our preclinical and
clinical development activities.
Because the bulk of our research and development
expenses are for internal personnel or for manufacture of our Alpha DaRT for use across our clinical trials and pre-clinical studies,
and the majority of our clinical trials and pre-clinical studies are led internally rather than using external CROs, we are
unable to allocate our research and development expenses on a program-by-program basis.
Grants from the IIA are offset against research
and development costs at the later of when grant receipt is assured or the expenses are incurred.
Research and development activities are central
to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in
earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that
our research and development expenses will continue to increase for the foreseeable future as we initiate additional clinical trials of
our Alpha DaRT technology, scale our manufacturing processes, continue to discover and develop additional components to the Alpha DaRT
platform or other product candidates, and hire additional clinical and scientific personnel.
The successful development of our Alpha DaRT technology
and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the
nature, timing and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable
to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product
candidates for which we have obtained or may obtain marketing approval. We may never succeed in achieving further regulatory approvals
for any of our product candidates. The duration, costs and timing of preclinical studies, clinical trials and development of our product
candidates will depend on a variety of factors, including:
| ● | successful completion of clinical trials with safety, tolerability and efficacy profiles for our Alpha
DaRT technology and any potential future product candidates that are satisfactory to the FDA or any comparable foreign regulatory authority; |
| ● | approval of IDEs or comparable applications for Alpha DaRT technology and any potential future product
candidate to commence planned or future clinical trials in the United States or foreign countries; |
| ● | significant and changing government regulation and regulatory guidance; |
| ● | timing and receipt of marketing approvals from applicable regulatory authorities; |
| ● | successful construction of additional manufacturing facilities, or establishing arrangements with contract
manufacturing organizations, or CMOs, for third-party clinical and commercial manufacturing, to obtain sufficient supply of our product
candidates; |
| ● | obtaining and maintaining patent and other intellectual property protection and regulatory exclusivity
for our product candidates; |
| ● | commercializing our Alpha DaRT technology and any potential future product candidate, if and when further
approved, whether alone or in collaboration with others; |
| ● | acceptance of the product, if and when approved, by patients, the medical community and third-party payors; |
| ● | competition with other therapies; and |
| ● | maintenance of a continued acceptable safety profile of Alpha DaRT technology and any potential future
product candidate following approval. |
A change in the outcome of any of these variables
with respect to the development, manufacture or commercialization enabling activities of any of our product candidates would significantly
change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory
authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical
development of our Alpha DaRT technology and any potential future product candidate, or if we experience significant delays in our clinical
trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time
on the completion of clinical development.
Marketing expenses
Marketing expenses consist primarily of salaries
and other related costs, including share-based compensation, for personnel in marketing functions. Marketing expenses also include direct
and allocated facility-related costs as well as costs of participation in conferences and exhibitions, licenses for marketing software,
production of videos and marketing materials, and external consulting on product marketing or reimbursement.
We expect that our marketing expenses will increase
in the future to support continued marketing activities and potential commercialization of our Alpha DaRT technology and any potential
future product candidate. These increases will likely include increased costs related to the hiring of additional personnel and fees to
outside consultants, particularly if and when we initiate the hiring of a commercial team or increase our pre-launch commercial
activities.
General and administrative expenses
General and administrative expenses consist primarily
of salaries and other related costs, including share-based compensation, for personnel in executive, finance and administrative functions.
General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, consulting,
investor and public relations, accounting, auditing, tax services and insurance costs.
We expect that our general and administrative
expenses will increase in the future to support continued research and development activities and potential commercialization of our Alpha
DaRT technology and any potential future product candidate. These increases will likely include increased costs related to the hiring
of additional personnel and fees to outside consultants, attorneys and accountants, among other expenses.
Additionally, we expect to continue to incur increased
expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory and tax-related services
associated with maintaining compliance with exchange listing and Securities and Exchange Commission (“SEC”) requirements,
director and officer insurance costs, and investor and public relations costs.
Financial (income) expenses, net
Financial (income) expenses, net, primarily consists of non-cash interest
expense incurred on remeasurement of warrants, foreign currency translation, bank charges and interest, and interest income earned on
our cash and cash equivalents.
Results of Operations
The following table summarizes our results of
operations for the years ended December 31, 2021 and 2022:
| |
Year
Ended December 31, | | |
| | |
| |
| |
2021 | | |
2022 | | |
Change | | |
% Change | |
Operating expenses: | |
| | |
| | |
| | |
| |
Research and development, net | |
$ | 11,447 | | |
$ | 20,890 | | |
$ | 9,443 | | |
| 82.5 | % |
Marketing | |
| 482 | | |
| 974 | | |
| 492 | | |
| 102.1 | |
General and administrative | |
| 1,861 | | |
| 10,272 | | |
| 8,411 | | |
| 452.0 | |
Total operating expenses | |
$ | 13,790 | | |
$ | 32,136 | | |
$ | 18,346 | | |
| 133.0 | % |
Loss from operations: | |
| | | |
| | | |
| | | |
| | |
Financial expense, net | |
| 13,474 | | |
| 1,606 | | |
| (11,868 | ) | |
| (88.1 | ) |
Loss before taxes on income | |
| 27,264 | | |
| 33,742 | | |
| 6,478 | | |
| 23.8 | |
Tax on income | |
| 7 | | |
| 20 | | |
| 13 | | |
| 185.7 | |
Net loss | |
$ | 27,271 | | |
$ | 33,762 | | |
$ | 6,491 | | |
| 23.8 | % |
Comparison of the Year Ended December 31, 2021 and
2022
Research and development, net
Research and development, net increased by $9,443
from $11,447 for the year ended December 31, 2021 to $20,890 for the year ended December 31, 2022. The increase in
research and development expense was primarily attributable to increased employee compensation and benefits, including share-based compensation,
increased operating costs, and increased pre-clinical study and clinical trial expenses particularly in preparation for our U.S. multi-center
pivotal trial, with a smaller offset through government grants from the Israel Innovation Authority.
Marketing expenses
Marketing expense increased by $492 from $482
for the year ended December 31, 2021 to $974 for the year ended December 31, 2022. The increase in marketing expenses
was primarily attributable to increased employee compensation and benefits, including share-based compensation and the hiring of our chief
commercial officer.
General and administrative
General and administrative increased by $8,411
from $1,861 for the year ended December 31, 2021 to $10,272 for the year ended December 31, 2022. The increase in
general and administrative expenses was primarily due to increased professional fees (including D&O insurance), increased employee
compensation and benefits, including share-based compensation, and costs associated with our financing transaction in the first quarter
of 2022.
Financial expense, net
Financial expense, net decreased $11,868 from
$13,474 for the year ended December 31, 2021 to $1,606 for the year ended December 31, 2022. The decrease was primarily
attributable to revaluation of warrants, an increase in interest from bank deposits, finance income from lease liabilities and changes
in foreign exchange rates.
| B. | Liquidity and Capital Resources |
Sources of Liquidity
We have funded our operations from inception through
December 31, 2022 primarily through gross proceeds of $57,911 from sales of our convertible preferred shares, $121,483 from the issuance
of ordinary shares and $6,256 from government grants. The following table provides information regarding our total cash and cash equivalents,
restricted cash and short-term deposits for the periods presented:
| |
As of December 31, | |
| |
2021 | | |
2022 | |
Cash and cash equivalents | |
$ | 23,236 | | |
$ | 5,836 | |
Restricted cash | |
| 618 | | |
| 850 | |
Short-term deposits | |
| 8,080 | | |
| 98,694 | |
| |
$ | 31,934 | | |
$ | 105,380 | |
Cash Flows
The following table provides information regarding
our cash flows for the periods presented:
| |
Years Ended December 31, | |
| |
2021 | | |
2022 | |
Net cash used in operating activities | |
$ | (11,812 | ) | |
$ | (23,878 | ) |
Net cash provided by (used in) investing activities | |
| 19,273 | | |
| (89,936 | ) |
Net cash provided by financing activities | |
| 111 | | |
| 96,904 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | |
| 108 | | |
| (258 | ) |
Increase (decrease) in cash, cash equivalents and restricted cash | |
$ | 7,680 | | |
$ | (17,168 | ) |
Net cash used in operating activities
The cash used in operating activities resulted primarily
from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities
was $11,812 for the year ended December 31, 2021, compared to $23,878 for the year ended December 31, 2022. The increase
of $12,067 was primarily attributable to an increase in net loss of $6,491 and a decrease of $9,469 in the add-back of the change in fair
value of Warrants liabilities, offset by a $5,936 increase in the add-back of share based compensation.
Net cash provided from/ used in investing activities
Net cash provided by investing activities was
$19,273 for the year ended December 31, 2021 compared to net cash used by investing activities of $89,936 for the year
ended December 31, 2022. The increase in cash used by investing activities of $109,209 was primarily attributable to a $113,055 increase
in investments into bank deposits.
Net cash provided by financing activities
Net cash provided by financing activities was $111
for the year ended December 31, 2021 compared to $96,904 for the year ended December 31, 2022. The increase of $96,794
was primarily attributable to the $93,543 net proceeds of the SPAC merger and concurrent PIPE financing in March 2022.
Effect
of exchange rate changes on cash, cash equivalents and restricted cash
The effect of exchange rate changes on cash, cash
equivalents and restricted cash was an increase of $108 for the year ended December 31, 2021 compared to a decrease of $258
for the year ended December 31, 2022. The decrease of $366 was primarily attributable to changes in the exchange rate between
the U.S. Dollar and the Israeli NIS.
Funding Requirements
We expect our expenses to increase in connection
with our ongoing activities, particularly as we continue the research and development for, initiate later stage clinical trials for, and
seek further marketing approvals for, our Alpha DaRT technology and other potential future product candidates. In addition, if we obtain
further marketing approvals for our Alpha DaRT technology and other potential future product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to continue to
incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding
in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced
to delay, reduce or eliminate our research and development programs or future commercialization efforts.
We expect that our existing cash and cash equivalents
will enable us to fund our operating expenses and capital expenditure requirements for at least two years. We have based this estimate
on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future
capital requirements will depend on many factors, including:
|
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the costs of conducting future clinical trials of our Alpha DaRT technology; |
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|
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the costs of manufacturing additional supply for one or more clinical trials of our Alpha DaRT technology and potential future clinical studies we might conduct for other future product candidates; |
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|
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the costs of scaling up our manufacturing process and supply chain capacity to provide sufficient quantities of Alpha DaRT for the potential commercialization of Alpha DaRT if our clinical development program is successful and we obtain further marketing approvals; |
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|
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the scope, progress, results and costs of discovery, preclinical development, laboratory testing and clinical trials for other potential product candidates we may develop, if any; |
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|
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the costs, timing and outcome of regulatory review of our Alpha DaRT technology and other potential future product candidates; |
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our ability to establish and maintain collaborations on favorable terms, if at all; |
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the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time; |
|
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|
● |
the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
|
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|
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the amount of revenue, if any, received from commercial sales of our Alpha DaRT technology and other potential future product candidates, should any of our product candidates receive further marketing approvals; |
|
|
|
|
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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
|
|
|
|
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our headcount growth and associated costs as we expand our business operations and our research and development activities; and |
|
|
|
|
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the costs of operating as a public company. |
Identifying potential product candidates and conducting
preclinical testing and clinical trials is a time- consuming, expensive and uncertain process that takes years to complete, and we
may never generate the necessary data or results required to obtain further marketing approvals and achieve product sales. In addition,
our Alpha DaRT technology and other potential future product candidates, if further approved, may not achieve commercial success. Our
commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years,
if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional
financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial
product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic
alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities
may include liquidation or other preferences that could adversely affect your rights as a shareholder. Any debt financing, if available,
may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through collaborations, strategic
alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue
streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise
additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop
and market ourselves.
Contractual Obligations and Commitments
The following table summarizes our significant
and non-cancellable contractual obligations as of payment due date by period at December 31, 2022:
| |
Payments Due by Period Ended December 31, | |
| |
Total | | |
2023 | | |
2024 | | |
2025 | | |
2026 | | |
Thereafter | |
Operating leases (facilities and motor vehicles) | |
$ | 6,973 | | |
$ | 688 | | |
$ | 613 | | |
$ | 568 | | |
$ | 571 | | |
$ | 4,533 | |
Total | |
$ | 6,973 | | |
$ | 688 | | |
$ | 613 | | |
$ | 568 | | |
$ | 571 | | |
$ | 4,533 | |
We have received royalty-bearing grants from the
IIA to finance our research and development programs in Israel, through which we received IIA participation payments in the aggregate
amount of $5,155 through December 31, 2022. In return, we are committed to pay IIA royalties at a rate of 3-3.5% of future sales of the
developed products, up to 100% of the amount of grants received plus interest at LIBOR rate. Through December 31, 2022, no royalties have
been paid or accrued. In addition, under the intellectual property purchase agreement with Althera, we assumed all of Althera’s
liabilities towards the IIA totaling $474 of royalty-bearing grants received by Althera (plus accrued interest at LIBOR rate). Our liability
to the IIA at December 31, 2022, including royalty-bearing grants we received, grants assumed from Althera and the associated LIBOR interest
accrued on all such grants, totaled $5,794.
Under the February 2, 2016 intellectual property
purchase agreement with Althera, we are obligated to pay Althera a fixed rate of 2% (plus VAT) of our future gross revenues (as defined
in the agreement) that are derived from the purchased intellectual property, up to a maximum amount of $1,500 (plus VAT), in the aggregate,
with the potential to set off against certain payments made by us to the IIA.
We also entered into intellectual property agreements
with Ramot at Tel Aviv University Ltd., the technology transfer company of Tel Aviv University (“Ramot”) on April 21, 2016
and July 14, 2016, all as amended on May 5, 2019, pursuant to which we are obligated to pay Ramot a fixed royalty of 2.5% on net sales
of all of our products (as defined in the agreement) by us and our affiliates, with no set maximum. The royalty will be payable as of
the first commercial sale (as defined in the agreement), until the later of: 15 years; or until the last to expire of the patents or patent
applications from research developed at Tel Aviv University and assigned to us, on a country-by-country, product-by-product basis. We
are also obligated to pay a 7% royalty (and in no event less than 0.65% of the net sales of our products sold by our licensees in a given
year) on any royalties or revenues received by us from our licensees.
Under an Operations Partner Agreement between
us and services provider HekaBio K.K. of May 21, 2019, we make certain payments to HekaBio K.K. in exchange for consulting and administrative
services in Japan, as well as payments upon the achievement of certain clinical and regulatory milestones. In addition, if HekaBio K.K.
successfully assists us in obtaining regulatory marketing approval of our products in Japan, then we are to grant to HekaBio K.K. options
to acquire 271,588 of our Ordinary shares at a price of $4.42 each, and to pay HekaBio K.K. a royalty of 3.5% of the reimbursement price
(as defined in the agreement) of such products in Japan and 10% of revenues received by us from distribution receipts (as defined in the
agreement) for such products in Japan.
On November 18, 2018 and July 29, 2019, we entered
into research and license agreements with BGN Technologies, the technology transfer company of Ben Gurion University (“BGN”),
further amended on May 12, 2021, wherein we will wholly own any intellectual property that is developed jointly by Ben Gurion University
and others (including us), and BGN will receive 0.75% royalties on all sales of our alpha radiation products, net of certain deductions
and irrespective of the intellectual property underlying such sales, or 1.5% royalties on sales of products that contain intellectual
property owned by Ben Gurion University, net of certain deductions. BGN will receive 4% of license revenues (as defined in the agreements)
that relate to jointly developed intellectual property, and 8% of license revenues that relate to intellectual property developed solely
by Ben Gurion University. The parties also agreed that we will continue to conduct research at Ben Gurion University for as long as the
researchers wish to, and the parties have agreed on a research budget in good faith.
On December 1, 2020, we entered into a clinical
trial agreement with Cambridge University Hospitals NHS Trust, wherein Cambridge will receive 5% of any marginal increase in our net sales
(all as defined in the agreement) generated on account of any patent or patent claim granted from the research performed in such trial,
and 2% of our net sales (minus the aforementioned marginal increase payment) received for the treatment of Squamous Cell Carcinoma of
the vulva, for three years from the date of first sale, world-wide.
On August 16, 2022, we entered into a collaboration
agreement with MIM Software, Inc. (“MIM”) to provide treatment planning software for clinical sites using the Alpha DaRT therapy.
Under the terms of the agreement, the parties will collaborate on the use of MIM’s software suite, including MIM Symphony® and
MIMcloud®, for development of new features and support for the Alpha DaRT across multiple potential indications, integration into
all clinical trials involving the Alpha DaRT, and bundling the MIM software with the Alpha DaRT for future commercial sales in territories
where the Alpha DaRT and MIM’s software are both approved. The agreement contemplates certain payments to MIM to be agreed between
the parties upon initiating certain workstreams, as well as payments to MIM upon commercial sale of the Alpha DaRT bundled with MIM’s
software products.
Off-Balance Sheet Arrangements
We did not have during the periods presented,
and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk related to changes
in interest rates. As of December 31, 2021 and 2022, our cash equivalents consisted of interest-bearing checking accounts and deposits.
Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates.
Due to the short-term nature and the low risk profile of our interest-bearing accounts, an immediate 10% change in interest rates would
not have a material effect on the fair market value of our cash and cash equivalents or on our financial position or results of operations.
We operate primarily in Israel and the majority
of our expenses are denominated in NIS. We are subject to fluctuations in foreign currency rates in connection with these arrangements.
With respect to our foreign currency exposures for the years ended December 31, 2021 and 2022, a 10% unfavorable movement in
foreign currency exchange rates would have increased our operating expenses by approximately 7.4% and 6.4%, respectively.
We do not currently hedge our foreign currency
exchange rate risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from
fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from
the material adverse effects of such fluctuations.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012,
or the JOBS Act, permits an “emerging growth company” such as us to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.
We are in the process of evaluating the benefits
of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth
company we intend to rely on certain of these exemptions, including exemptions from the requirement to provide an auditor’s attestation
report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and
from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a
supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor
discussion and analysis. We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year in which
we have total annual gross revenues of $1.235 billion or more; (ii) the date on which we have issued more than $1 billion in
nonconvertible debt during the previous three years; (iii) the date on which we are deemed to be a large accelerated filer under
the rules of the SEC; or (iv) December 31, 2027.
| C. | Research and Development, Patents and Licenses, Etc. |
For a discussion of our research and development
policies, see “Item 4.B” above and the “Key Information —Risk Factors —Risks Related To Our Incorporation
and Location In Israel” in Item 3.D above.
For a description of our intellectual property,
please see “Item 4.B” above under “—Intellectual Property.
Other than as described in Item 3.D. “Key
Information —Risk Factors” and in Item 5.A. “Operating and Financial Review” of this Annual Report,
we are not aware of any trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on
our results of operations or financial condition, liquidity or capital resources, or that caused the disclosed financial information to
be not necessarily indicative of future operating results or financial condition.
| E. | Critical Accounting Estimates |
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements
that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our audited consolidated
financial statements included elsewhere in this Annual Report.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis
of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance
with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during
the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these
estimates could occur in the future. We base our estimates on historical experience, known trends and events, 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. Changes in estimates are reflected in reported results for
the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.
While our significant accounting policies are
described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the
following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments
and estimates.
Share-Based Compensation
We account for share based compensation in accordance
with ASC No. 718, “Compensation - Stock Compensation” that requires companies to estimate the fair value of equity-based payment
awards on the date of grant using an option-pricing model. We recognize compensation expenses for the value of our awards granted based
on the straight-line attribution method over the requisite service period of each of the awards. We recognize forfeitures of awards as
they occur.
For graded vesting awards with no market or performance
conditions, we recognize the related share-based compensation expense on a straight-line basis over the requisite service period of the
awards. For awards with performance conditions the share-based compensation expense is recognized if and when we conclude that it is probable
that the performance condition will be achieved and where the performance condition awards include graded vesting, the share-based compensation
expense is recognized based on the accelerated method. We reassess the probability of vesting at each reporting period for awards with
performance conditions and adjust compensation cost based on our probability assessment.
We selected the Black-Scholes option-pricing model
as the most appropriate fair value method for our option awards. The option-pricing model requires a number of assumptions, of which the
most significant are the share price, volatility and the expected option term.
These assumptions and estimates were determined
as follows:
| 1) | Expected term - The expected term of options granted is based on historical experience and represents the period of time that options
granted are expected to be outstanding. There is not sufficient historical share exercise data to calculate the expected term of the share
options. We determine the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting
and the contractual life of the options. |
| 2) | Expected volatility - Since we have a limited trading history of our Ordinary shares, there is not sufficient historical volatility
for the expected term of the share options. The expected volatility is derived from a mix of the implied volatility of our publicly traded
warrants as well as the average historical share volatilities of several unrelated public companies within our industry that we consider
to be comparable to our own business over a period equivalent to the option’s expected term. |
| 3) | Risk-free interest rate - We determined the risk-free interest rate by using a weighted-average equivalent to the expected term based
on the U.S. Treasury yield curve in effect as of the date of grant. |
| 4) | Expected dividend yield – We do not anticipate paying any dividends in the foreseeable future. Thus, we used 0% as our expected
dividend yield. |
| 5) | Fair value of Ordinary shares – Our Ordinary shares have a limited history of being publicly traded. Prior to the consummation
of the Merger, the fair value was determined by management, with input from valuation reports prepared by third-party valuation specialists.
In determining the fair value of ordinary shares subsequent to the consummation of the Merger Agreement, the board of directors considered
the grant date fair value for share-based awards as of the closing price of our ordinary shares on NASDAQ on the date of grant. |
Warrants to Purchase Convertible Preferred Shares
Our Warrants to purchase our Convertible Preferred
shares were considered a “freestanding financial instrument” pursuant to ASC 480. The Warrants were classified as a liability
on the balance sheet, initially and subsequently measured at fair value through earnings, as the underlying shares are contingently redeemable
(upon a deemed liquidation event, which is not under our control) and, therefore, embody an obligation that is indexed to an obligation
to repurchase our shares by transferring assets. The change in fair value of the Warrants was recognized as a component of financial expenses,
net, in the statements of operation.
Item 6.
Directors, Senior Management and Employees
| A. | Directors
and Senior Management |
Management
and Board of Directors
The
following table sets forth the name, age and position of each of our executive officers and directors as of March 1, 2023:
Name |
|
Age |
|
Position |
Executive Officers |
|
|
|
|
Uzi Sofer |
|
53 |
|
Chief Executive Officer and Chairman |
Raphi Levy |
|
38 |
|
Chief Financial Officer |
Prof. Itzhak Kelson |
|
83 |
|
Chief Physics Officer |
Prof. Yona Keisari |
|
76 |
|
Chief Scientific Officer |
Robert Den, M.D |
|
44 |
|
Chief Medical Officer |
Amnon Gat |
|
48 |
|
Chief Operations Officer |
Ronen Segal |
|
51 |
|
Chief Technology Officer |
Peter Melnyk |
|
61 |
|
Chief Commercial Officer |
Directors |
|
|
|
|
Michael Avruch |
|
53 |
|
Director |
Ruth Alon(1)(4) |
|
71 |
|
Director |
S. Morry Blumenfeld, Ph.D(2)(3)(4) |
|
85 |
|
Director |
Meir Jakobsohn(2)(3)(4) |
|
54 |
|
Director |
Alan Adler(1)(4) |
|
82 |
|
Director |
David M. Milch, M.D(1)(2)(3)(4) |
|
68 |
|
Director |
| (1) | Member
of our audit committee |
| (2) | Member
of our compensation committee |
| (3) | Member
of our nominating and governance committee |
| (4) | Independent
director under the rules of Nasdaq |
Executive
Officers
Uzi
Sofer has served as our Chief Executive Officer and as chairman of
our board of directors since our founding in 2015. Prior to that, Mr. Sofer was the co-founder, Chief Executive Officer and director
of Brainsway Ltd. (NASDAQ: BWAY), an Israeli medical device company, from 2003 until his retirement in 2014, and also served as
its acting Chief Financial Officer from its inception until 2010. Mr. Sofer has served as Chief Executive Officer, Chief Financial
Officer, and chairman of various private and public companies for the past two decades. From 2001 until 2010, Mr. Sofer served as
both chairman of the board and Chief Financial Officer of Hofit Kibbutz Kinneret Ltd. (TASE:HOFI). From 2000 through 2002, he served
as director and Chief Financial Officer of Magen David Taasiot Ltd. Mr. Sofer has a B.Sc. in Accounting and Information Systems
from the Lev Institute (Jerusalem College of Technology). We believe that Mr. Sofer’s public company and industry experience
qualify him to serve on our board of directors.
Raphi
Levy has served as our Chief Financial Officer since 2019. Prior
to joining us, Mr. Levy served in the Investment Banking Division at Goldman Sachs from 2006 until 2019 in New York and Tel Aviv,
most recently serving as Executive Director in charge of healthcare banking in Israel. Mr. Levy holds a BS in Economics from the
Wharton School of Business, University of Pennsylvania, and a BSE and MSE in Electrical Engineering from the School of Engineering and
Applied Science, University of Pennsylvania.
Professor
Itzhak Kelson has served as our Chief Physics Officer since 2016,
and, together with Prof. Yona Keisari, co-invented the Alpha DaRT™ technology in 2003. In addition to his position with
the Company, Prof. Kelson is Professor Emeritus and retired chairman of the Tel Aviv University School of Physics and Astronomy. In addition
to his career as a tenured professor at Tel Aviv University, between 1963 and 1999, Prof. Kelson held research and teaching positions
at multiple universities and institutions, including the Weizmann Institute, Yale University, University of California, Berkeley, University
of Wisconsin, Brookhaven National Laboratory, Goethe University Frankfurt, Michigan State University, the Soreq Nuclear Research Center,
University of Rochester, Rutgers University, University of Paris XI at Orsay, Saclay Nuclear Research Centre, the European Organization
for Nuclear Research (CERN) and the University of British Columbia. Prof. Kelson holds an M.Sc. in Physics, Mathematics and Applied Mathematics
and a Ph.D. in Physics (Nuclear Theory) from the Hebrew University of Jerusalem.
Professor
Yona Keisari co-founded Alpha Tau and, together with Prof. Itzhak
Kelson, invented the Alpha DaRTTM technology in 2003. Prof. Keisari served as our Chief Biological
Officer from 2016 until 2019 and has served as Chief Scientific Officer since 2019. Prof. Keisari was a faculty member at the Department
of Clinical Microbiology and Immunology, Faculty of Medicine, Tel Aviv University, Israel from 1979 until 2015, and served as Full Professor
from 2002 until 2015, at which time he became Professor Emeritus. Prof. Keisari’s studies focus on the activation of systemic anti-tumor
immune reactivity through in-situ destruction of solid cancers with Alpha DaRT™, and developing means to improved eradication
of metastases. Prof. Keisari has co-authored 107 peer-reviewed scientific papers and is an editorial board member of nine journals. He
co-founded and served as president of the Israeli Society for Cancer Research from 2013 until 2015 and has served as treasurer of The
International Cancer Microenvironment Society since 2015. Prof. Keisari holds an M.Sc. in Microbiology and Immunology and a Ph.D. in
Immunology from Tel Aviv University, and was a postdoctoral fellow at the National Cancer Institute of the NIH in Bethesda, MD.
Robert
Den, MD has served as our Chief Medical Officer since 2019. Dr. Den
specializes in radiation oncology and conducts innovative research across a broad variety of malignancies. From 2011 to 2015 and from
2015 to the present, Dr. Den has served as an assistant professor and an associate professor, respectively, at Jefferson University,
where he has also served as a clinical practitioner since 2007. Dr. Den holds a B.S. in Chemistry from Yale University and an M.D.
from Harvard Medical School.
Amnon
Gat has served as our Chief Operations Officer since 2018, after
having served as our VP of Marketing and Business Development and then VP of Operations between 2016 and 2018. Mr. Gat also served
as a director of Alpha Tau Medical Canada from 2019 until 2021. Mr. Gat leads our operations in the United States and has over 20 years
of experience in the medical device and healthcare industries. Prior to joining us, Mr. Gat held managerial positions in public
and private companies, such as Brainsway Ltd. (NASDAQ: BWAY) from 2011 until 2015, OSG Optimal Strategix Group, Inc. from 2010
until 2011, and Truphatek International Ltd. from 2007 until 2009, and served as a senior paramedic in the Israeli national emergency
services. Mr. Gat holds a BA from The Open University of Israel and an MBA in International Management and Marketing from the Interdisciplinary
Center, Herzliya.
Ronen
Segal has served as our Chief Technology Officer since 2019. Mr. Segal
has served in a variety of senior managerial and technological development positions, including at Brainsway Ltd (NASDAQ: BWAY), where
he served as Chief Technology Officer, Deputy CEO and Head of Business Development from 2010 until 2018, and co-founder and Vice President
at WiTech Communications Ltd. from 2004 until 2010. Mr. Segal completed studies in 1994 toward a BSc in Electro-Optical Engineering
and Applied Physics at the Jerusalem College of Technology.
Peter
Melnyk has served as our Chief Commercial Officer since 2022, and
previously served as a member of our board of directors from 2020 until 2022. From 2019 until 2021, Mr. Melnyk served as the chief
executive officer of Fortovia Therapeutics, Inc., a commercial stage, pharmaceutical company focused on oncology supportive care
products. From 2011 until 2017, Mr. Melnyk was chief commercial officer at NovoCure Limited (NASDAQ: NVCR), a cancer medical device
company, where he built a global commercial platform and infrastructure to launch a new modality of anticancer technology. Mr. Melnyk
was previously senior vice president for global sales and marketing at OSI Pharmaceuticals, Inc., a U.S. pharmaceutical company,
where he led the global commercialization efforts for Tarceva, a chemotherapy drug, from 2003 to 2011. Prior to that, Mr. Melnyk
was the executive director of oncology at Pharmacia Oncology from 2001 until 2003, until its acquisition by Pfizer, Inc. Mr. Melnyk
also served in various capacities at Bristol-Myers Squibb Company from 1991 until 2001. Mr. Melnyk holds a B.Sc in Animal Science
and M.Sc in reproductive endocrinology from McGill University.
Directors
Michael
Avruch has served as a member of our board of directors since 2016.
Mr. Avruch has served as chief executive officer, chief financial officer, and as a member of the board of directors of Sabor LTD
(The Sabor Group Europe) since 1998 and Sabor Venture Capital Investments (VCI) LTD since 2017. Mr. Avruch has also served as chief
executive officer and chief financial officer of Sabor Group USA since 2015. Mr. Avruch has experience in the real estate, services,
and trade sectors in multiple countries in Europe and the USA. Mr. Avruch holds a B.A. in Management Accounting and Information
Systems from the Jerusalem College of Technology and an MBA from Bar Ilan University. We believe Mr. Avruch’s financial and
cross-border experience qualify him to serve on our board of directors.
Ruth Alon has served
on our Board since March 2022. Ms. Alon is currently the founder and CEO of Medstrada. From 1997 and until September 24,
2016, Ms. Alon served as a general partner in Pitango Venture Capital. Prior to her tenure at Pitango, Ms. Alon held senior
positions with Montgomery Securities from 1981 to 1987, Genesis Securities, LLC from 1993 to 1996, and Kidder Peabody & Co.
from 1987 to 1993, and managed her own independent consulting business in San Francisco in the medical devices industry from 1995 to
1996. Ms. Alon was the founder and Chairperson of Israel Life Science Industry, a not-for-profit organization representing the mutual
goals of the then-approximately 1,000 Israeli life science companies. She was also the co-founder of the Israeli Advanced Technology
Industries (IATI), an umbrella organization of the hi-tech and life sciences industries in Israel, which includes venture capital funds,
R&D centers of multinational corporations and others. She currently serves on the boards of Vascular Biogenics Ltd (Nasdaq:VBLT),
Moringa Acquisition Corp (NASDAQ:MACA), Treos Bio (privately held), Phoska BioPharma (privately held), Fibronostics (privately held),
and Brainsgate (privately held) (as Chairperson). Ms. Alon has a B.A. in Economics from the Hebrew University of Jerusalem, Israel,
an M.B.A. from Boston University, and an M.S. from the Columbia University School of Physicians and Surgeons. We believe Ms. Alon’s
financial and capital markets experience with healthcare companies qualify her to serve on our board of directors.
S.
Morry Blumenfeld, Ph.D. has served as a member of our board of directors
since 2016. Dr. Blumenfeld is President and CEO of Quescon Consultants Ltd, a medical device consulting company, as position
he has held since 2012. Dr. Blumenfeld is also a Venture Partner for MedTech Investments at OurCrowd and is the Founding Partner
of Meditech Advisors LLC, a private equity fund specializing in investments in healthcare and medical device companies. In April 2002,
Dr. Blumenfeld retired as Managing Director of GE Medical Systems in Israel after 34 years with the company, where he helped
initiate both GE’s CT and MRI business lines as well as the initial use of MR guided Focused Ultrasound, now being used by Insightec.
Currently, Dr. Blumenfeld serves on the board of directors of a number of private medical device and technology companies. Dr. Blumenfeld
holds a B.A.Sc in Engineering Physics, an M.A. in Molecular Physics and a Ph.D. in Molecular Physics from the University of Toronto.
We believe that Dr. Blumenfeld’s industry experience qualify him to serve on our board of directors.
Meir
Jakobsohn has served as a member of our board of directors since
2016. In 1996, Mr. Jakobsohn founded Medison Pharma Limited, a global pharma company and one of the largest commercialization partners
of biopharma companies, and he currently serves as its Chief Executive Officer and chairman of the board of directors. Mr. Jakobsohn
has served on the board of directors of various public and private healthcare and technology companies. Mr. Jakobsohn holds a BA
in Economics from Bar-Ilan University and an Executive MBA from Bradford University in the UK. We believe that Mr. Jakobsohn’s
financial and industry experience qualify him to serve on our board of directors.
Alan
Adler has served as a member of our board of directors since 2018.
Mr. Adler served as a chairman of the board of directors and chief executive officer of Israeli-based Oridion Systems Ltd, from
2004 until the company was acquired by Medtronic plc, f/k/a Covidien (NYSE: MDT), in 2012. Prior to that, he gained over 14 years
of experience as a principal at McKinsey & Company and, afterwards, as a senior partner at Evergreen Venture Partners, an Israeli
venture capital group. Mr. Adler currently serves as a member of the board of directors of a number of private technology and life
science companies. Mr. Adler holds a B.Sc. in Mathematics from Rensselaer Polytechnic Institute and an MBA with honors from Stanford
University. We believe that Mr. Adler’s financial and industry experience qualify him to serve on our board of directors.
David
M. Milch, M.D. has served as a member of our board of directors since
March 2022. Dr. Milch has been a self-employed independent investor in the life sciences and technology areas for the past
30 years. Recently, Dr. Milch pursued a number of media opportunities, as the lead investor, including Mila-Media, BeTerrific!
and others. In 2014, Dr. Milch invested in the first biopharma spinout from well-known genomics research leader Jackson Laboratories,
Cyteir Therapeutics, with co-investors Celgene Corporation, Venrock, Silverlake and others. In 2010, Dr. Milch established the Dr. David
M. Milch Foundation to serve “Tikkun Olam” (healing the world) in two primary areas: Arts for Social Impact which focuses
on film, theater, and other modes of creativity, and Youth Mentoring, which helps foster leadership development and civic responsibility.
In 2008, Dr. Milch was part of the small angel group which capitalized Games24X7 in India, currently named RummyCircle. Dr. Milch
received his B.S. in Biology at Stanford University and his M.D. from Harvard Medical School. We believe that Dr. Milch’s
financial and industry experience qualify him to serve on our board of directors.
Directors
Under
the Companies Law, the compensation of a public company’s directors requires the approval of (i) its compensation committee,
(ii) its board of directors and, unless exempted under regulations promulgated under the Companies Law, (iii) the approval
of its shareholders at a general meeting. In addition, if the compensation of a public company’s directors is inconsistent with
the company’s compensation policy, then those inconsistent provisions must be separately considered by the compensation committee
and board of directors, and approved by the shareholders by a special vote in one of the following two ways:
| ● | 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, vote
in favor of the inconsistent provisions 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 inconsistent provisions of the compensation
package does not exceed two percent (2%) of the aggregate voting rights in the Company. |
Executive
officers other than the chief executive officer
The
Companies Law requires the compensation of a public company’s executive officers (other than the chief executive officer and who
do not also serve as a director) be approved in the following order: (i) the compensation committee, (ii) the company’s
board of directors, and (iii) if such compensation arrangement is inconsistent with the company’s stated compensation policy,
the company’s shareholders (by a special vote as discussed above with respect to the approval of director compensation that is
inconsistent with the compensation policy).
However,
there are exceptions to the foregoing approval requirements with respect to such non-director executive officers. If the shareholders
of the company do not approve the compensation of such a non-director executive officer, the compensation committee and board of directors
may override the shareholders’ disapproval for such non-director executive officer provided that the compensation committee and
the board of directors each document the basis for their decision to override the disapproval of the shareholders and approve the compensation.
An
amendment to an existing compensation arrangement with a non-director executive officer requires only the approval of the compensation
committee, if the compensation committee determines that the amendment is immaterial. However, if such non-director executive officer
is subordinate to the chief executive officer, an immaterial amendment to an existing compensation arrangement shall not require the
approval of the compensation committee if (i) such amendment is approved by the chief executive officer, (ii) the company’s
compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii) the engagement
terms are consistent with the company’s compensation policy.
Chief executive officer
Under the Companies Law, the compensation of a
public company’s chief executive officer is required to be approved by: (i) the company’s compensation committee, (ii) the
company’s board of directors and (iii) the company’s shareholders (by a special vote as discussed above with respect
to the approval of director compensation that is inconsistent with the compensation policy). However, if the shareholders of the company
do not approve the compensation arrangement with a chief executive officer who does not serve as a director, the compensation committee
and board of directors may override the shareholders’ decision provided that they each document the basis for their decision and
the compensation is in accordance with the company’s compensation policy. The approval of each of the compensation committee and
board of directors should be in accordance with the company’s compensation policy; however, in special circumstances, they may approve
compensation terms of a chief executive officer that are inconsistent with such policy provided that they have considered those provisions
that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained (by a special
majority vote as discussed above with respect to the approval of director compensation that is inconsistent with the compensation policy).
In the case of a new chief executive officer,
the compensation committee may waive the shareholder approval requirement with regard to the compensation of a candidate for the chief
executive officer position if the compensation committee determines that: (i) the compensation arrangement is consistent with the
company’s compensation policy, (ii) the chief executive officer candidate did not have, on the date of his appointment or during
the two-year period preceding his appointment, an “affiliation” (including an employment relationship, a business or professional
relationship or control) with the company or a controlling shareholder of the company or a relative thereof and (iii) subjecting
the approval of the engagement to a shareholder vote would impede the company’s ability to employ the chief executive officer candidate.
However, if the chief executive officer candidate will serve as a member of the board of directors, such candidate’s compensation
terms as chief executive officer must be approved in accordance with the rules applicable to approval of compensation of directors.