ITEM 1A. RISK FACTORS
You should carefully consider the risks and
uncertainties described below and the other information in this Annual Report before making an investment in our securities. Our business,
financial condition, results of operations, or prospects could be materially and adversely affected if any of these risks occurs, and
as a result, the market price of our securities could decline and you could lose all or part of your investment. This Annual Report also
contains forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements.”
Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain
factors, including those set forth below.
Risks Related to Our Business, Technology and
Industry
We are a clinical-stage company with limited operating history
and have incurred losses since our inception. We anticipate that we will continue to incur significant expenses, and we will continue
to incur significant losses for the foreseeable future.
We are a clinical-stage biopharmaceutical company
with limited operating history. We have incurred losses in each year since BiomX Ltd.’s inception in 2015. As of December 31, 2021,
our accumulated deficit was $108.5 million, and we expect to incur increasingly significant losses for the foreseeable future. Preclinical
development and clinical trials and activities are costly. We have devoted, and will continue to devote for the foreseeable future, substantially
all of our resources to research and development and clinical trials for our product candidates. We do not expect to generate any revenue
from the commercial sales of our product candidates in the near term. For the years ended December 31, 2021 and 2020, we had losses from
operations of $35.5 million and $30.3 million, respectively. We anticipate that the level of our expenses will continue to be significant
if and as we:
● maintain, expand and protect our intellectual property portfolio;
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We will need to raise additional capital in the future to support
our operations which may not be available at terms that are favorable to us and might cause significant dilution to our stockholders or
increase our debt towards third parties.
As of December 31, 2021, we had cash, cash
equivalents and restricted cash of $63.1 million, and we have had recurring losses from operations and negative operating cash flows
since inception. We will need to raise additional capital in the future to support our operations and product development
activities. In the near term, we expect to continue to fund our operations and other development activities relating to additional
product candidates from the cash held by us, governmental and other grants and through future equity and debt financings. We have
agreements with respect to additional tranches of our loan with Hercules Capital, Inc., or Hercules, and an additional equity
investment by the CF Foundation, but each of these commitments is subject to us meeting future milestones, which may not occur. In
connection with our efforts to raise additional capital, we filed a shelf registration statement on Form S-3, which was declared
effective by the SEC on December 11, 2020. In addition, on December 4, 2020, we entered into an Open Market Sale
AgreementSM, or the Sale Agreement, with Jefferies LLC, or Jefferies, pursuant to which we may issue and sell shares of
our Common Stock having an aggregate offering price of up to $50,000,000 from time to time through Jefferies. Through March 25,
2022, we sold an aggregate of 780,151 shares of Common Stock pursuant to the Sale Agreement for aggregate gross proceeds of
$5,449,302. We may continue to sell shares under the Sale Agreement and otherwise to use our shelf registration statement to raise
additional funds from time to time, as we did in July 2021. We may also raise funds privately, as we did in October 2021 in our
agreements with a subsidiary of Maruho Co. Ltd., or Maruho, and in December 2021 with the CF Foundation. We may also seek funds
through arrangements with collaborators or others that may require us to relinquish rights to the product candidates that we might
otherwise seek to develop or commercialize independently. If we enter into a collaboration for one or more of our current or future
product candidates at an earlier development stage, the terms of such a collaboration will likely be less favorable than if we were
to enter the collaboration in later stages or if we commercialized the product independently. If we raise additional funds through
equity offerings, the terms of these securities may include liquidation or other preferences that adversely affect our
stockholders’ rights or cause significant dilution to our stockholders. If we raise additional capital through debt financing,
it would be subject to fixed payment obligations and may be subject to covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures, declaring dividends or acquiring or licensing
intellectual property rights.
If we do not meet the milestones in our agreements
with Hercules or the CF Foundation and/or additional capital is not available to us when needed or on acceptable terms, we may not be able
to continue to operate our business pursuant to our business plan and may be required to delay our clinical development. While we believe
that our existing cash and cash equivalents, together with our existing resources, will be sufficient to fund our planned operations until
at least the end of 2023, we cannot provide assurances that our estimates are accurate, that our plans will not change or that changed
circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate.
Developing drugs and conducting clinical trials
is expensive. Our future funding requirements will depend on many factors, including:
Domestic and international equity and debt markets
have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic conditions
and concerns. In the event these economic conditions and concerns continue or worsen and the markets continue to remain volatile, or a
bear market, or recession, ensues in the U.S. stock market, the Russian invasion of Ukraine and world sanctions on Russia, Belarus, and
related parties and the impact associated with the COVID-19 pandemic, as well as geopolitical uncertainty and instability, such as the
Russia-Ukraine conflict, our operating results and liquidity could be affected adversely by those factors in many ways, including making
it more difficult for us to raise funds if necessary and our stock price may decline.
There can be no assurance that sufficient funds
will be available to us when required or on acceptable terms, if at all. Our inability to obtain additional funds could have a material
adverse effect on our business, financial condition and results of operations. Moreover, if we are unable to obtain additional funds
on a timely basis, there will be substantial doubt about our ability to continue as a going concern and increased risk of insolvency
and up to a total loss of investment by our stockholders.
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The terms of our
term loan agreement with Hercules place restrictions on our operating and financial flexibility. If we raise additional capital through
debt financing, the terms of any new debt could further restrict our ability to operate our business.
In
August 2021, we entered into a term loan agreement, or the Hercules Loan Agreement, providing for a term loan in an aggregate principal
amount of up to $30.0 million, subject to funding in three tranches and subject to certain terms and conditions. We received the first
tranche of $15.0 million promptly after signing the agreement in August 2021. Two additional tranches in the amounts of $10 million and
$5 million may become available to us to borrow upon the occurrence of certain milestone events. Our obligations under the Hercules Loan
Agreement are secured by a lien on substantially all of our assets, other than intellectual property. We also agreed not to pledge or
secure our intellectual property to others.
The
Hercules Loan Agreement includes affirmative and negative covenants and events of default applicable to us. The affirmative covenants
include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports
and maintain insurance coverage. The negative covenants include, among others, restrictions on our transferring collateral, making changes
to the nature of our business, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other
distributions, making investments, engaging in transactions with affiliates. Events of default include, among other things and subject
to customary exceptions: (i) insolvency, liquidation, bankruptcy or similar events; (ii) failure to pay any debts due under the Hercules
Loan Agreement or other loan documents on a timely basis; (iii) failure to observe certain covenants under the loan and security agreement
with Hercules; (v) occurrence of a material adverse effect; (vi) material misrepresentation by us; (vii) occurrence of any default under
any other agreement involving material indebtedness; and (viii) certain material money judgments. If we default under the Hercules Loan
Agreement, Hercules may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us
to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lenders’
right to repayment would be senior to the rights of the holders of our Common Stock to receive any proceeds from the liquidation. Any
declaration by Hercules of an event of default could significantly harm our business and prospects and could cause the price of our Common
Stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and
financial flexibility.
We are seeking to develop product candidates using phage technology,
an approach for which it is difficult to predict the time and cost of development. To our knowledge, no bacteriophage has thus far been
approved as a drug in the United States or in the European Union.
We are developing our product candidates with
phage technology. We have not, nor to our knowledge has any other company, received regulatory approval from the FDA, or equivalent foreign
regulatory agencies for a product based on this approach. While in vitro and in vivo studies have characterized the behavior
of phage in cell cultures and animal models and there exists a body of literature regarding the use of phage therapy in humans, the safety
and efficacy of phage therapy in humans has not been extensively studied in well-controlled modern clinical trials. Most of the prior
research on phage-based therapy was conducted in the former Soviet Union prior to and immediately after World War II and lacked appropriate
control group design or lacked control groups at all. Furthermore, the standard of care has changed substantially during the ensuing
decades since those studies were performed, diminishing the relevance of prior claims of improved cure rates. Any product candidates
that we develop may not demonstrate in patients the therapeutic properties ascribed to them in laboratory and other preclinical studies,
and they may interact with human biological systems in unforeseen, ineffective or even harmful ways. We cannot be certain that our approach
will lead to the development of approvable or marketable products. Furthermore, the bacterial targets of phage may develop resistance
to our product candidates over time, which we may or may not be able to overcome with the development of new phage cocktails or we may
not be able to construct a cocktail with sufficient coverage of our target pathogen universe.
If our product candidates receive regulatory approval
but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients, we may not generate product revenue
sufficient to attain profitability. Our success will depend upon physicians who specialize in the treatment of diseases targeted by our
product candidates that we pursue as drugs, prescribing potential treatments that involve the use of our product candidates in lieu of,
or in addition to, existing treatments with which they are more familiar and for which greater clinical data may be available. Our success
will also depend on consumer acceptance and adoption of our products that we commercialize. Adverse events in preclinical studies and
clinical trials of our product candidates or in clinical trials of others developing similar products and the resulting publicity, as
well as any other adverse events in the field of phage therapeutics, could result in a decrease in demand for any product that we may
develop. The degree of market acceptance of any approved products will depend on a number of factors, including:
● the effectiveness of the product;
● the prevalence and severity of any side effects;
● potential advantages or disadvantages over alternative treatments;
● relative convenience and ease of administration;
● the strength of marketing and distribution support;
● sufficient third-party coverage or reimbursement.
Developing our product candidates on a commercial
scale will require substantial technical, financial and human resources. We and our third-party collaborators may experience delays in
developing manufacturing capabilities for our product candidates, and may not be able to do so at the scale required to efficiently conduct
the clinical trials required to obtain regulatory approval of those of our product candidates that require it, or to manufacture commercial
quantities of our products, if approved or otherwise permitted to be marketed.
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Our product candidates must undergo clinical testing which may
fail to demonstrate the requisite safety and efficacy for drug products, or safety, purity, and potency for biologics, and any of our
product candidates could cause adverse effects, which would substantially delay or prevent regulatory approval and/or commercialization.
Before we can obtain regulatory approval for a
product candidate or otherwise obtain evidence allowing us to market the product as a drug or biologic, we must undertake extensive preclinical
and clinical testing in humans to demonstrate safety and efficacy or in the case of biologics, safety, purity, and potency, to the satisfaction
of the FDA or other regulatory agencies. Clinical trials of product candidates sufficient to obtain regulatory marketing approval or otherwise
demonstrate safety prior to marketing, are expensive and take years to complete, especially for our product candidate designed to treat
CRC as the phage will be genetically modified, which could make the conduct of clinical trials more complex and subject such trials to
additional regulatory oversight. Furthermore, results from these clinical trials may not show safety or efficacy of our product candidates
sufficient to lead to approval, or to warrant further development. For example, in October 2021, we announced the results of a Phase 2
cosmetic clinical study of our BX001 product candidate that showed no meaningful difference for efficacy relative to the placebo arm of
the study, and therefore decided not to continue pursuing this program despite the time and expenses that had been incurred to date in
its development. Our approach is intended to design phage combinations, or cocktails, to target specific strains of pathogenic bacteria
in order to alter microbiome composition and confer potential therapeutic or cosmetic benefit to patients. However, there can be no assurance
that the eradication of the selected targets will result in a clinically meaningful effect on the underlying disease, such as in cases
where the pathology of the disease is not well-defined. In addition, the bacteria that we target may be associated with the disease, but
may not be causative or contributive to the pathology of the disease, or there may be other bacteria that our product candidates do not
target that are more meaningful drivers of the underlying disease. In addition, our product candidates require the use of effective delivery
vehicles to reach the target organ or tissue, and there can be no assurance that our intended delivery systems will allow our product
candidates to reach the desired locations in a patient. Safety must first be established through preclinical testing and early clinical
trials, before efficacy can be evaluated and established and thereby lead to FDA or other regulatory agencies marketing approval. Our
clinical trials may produce undesirable side effects or negative or inconclusive results, and we may decide, or regulators may require
us, to conduct additional clinical and/or preclinical testing or to abandon programs.
The ongoing COVID-19 pandemic
and other geopolitical instability have and may continue to adversely affect our business, including our clinical trials.
The COVID-19 pandemic has had and continues to
have a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have
been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and
supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we
temporarily had closed our executive offices with our administrative employees continuing their work outside of our offices and may need
to close them again in the future. In addition, general economic, political, demographic and business conditions worldwide, including
geopolitical uncertainty and instability, such as the Russia-Ukraine conflict, might adversely affect our business, through indirect
disruption to our supply chain, harming our ability to raise funds at terms acceptable to us among other affects. Also, due to the COVID-19
pandemic we have modified our business practices, including restricting employee travel, developing social distancing plans for our employees
and cancelling physical participation in meetings, events and conferences. As a result of the COVID-19 pandemic, we have experienced
and may continue to experience additional disruptions that could severely impact our business, preclinical studies and clinical trials,
including:
● delays or difficulties in enrolling patients in our clinical trials;
● interruptions or delays to our sourced discovery and clinical activities.
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The pandemic and the resulting government actions
have impacted and may continue to adversely impact our planned and ongoing clinical trials. Clinical site initiation, including difficulties
in recruiting clinical site investigators and clinical site staff, and patient enrollment may be delayed due to prioritization of hospital
resources toward the COVID-19 pandemic. Some patients have not been willing and/or able to comply with clinical trial protocols
due to the COVID-19 pandemic, particularly if quarantines or other restrictions impede patient movement or interrupt healthcare
services. Similarly, our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers,
may have heightened exposure to COVID-19 has been impeded and may continue to remain impeded, which would adversely impact
our clinical trial operations. The diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns,
including the attention of physicians serving as our clinical trial investigators and hospitals serving as our clinical trial sites,
may significantly disrupt our research activities. As a result, the expected timeline for data readouts of our clinical trials and certain
regulatory filings will likely be negatively impacted, which would adversely affect and delay our ability to obtain regulatory approvals
for our product candidates, increase our operating expenses and have a material adverse effect on our financial condition.
Furthermore, the response to the COVID-19 pandemic
may redirect resources with respect to regulatory matters and intellectual property matters in a way that would adversely impact our ability
to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and
approvals due to measures intended to limit in-person interactions. Comparable regulatory authorities in other jurisdictions
may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and provide guidance regarding
the conduct of clinical trials. If global health concerns continue to prevent the FDA or other regulatory authorities from conducting
their regular inspections, reviews or other regulatory activities, it could significantly impact the ability of the FDA to timely review
and process our regulatory submissions, which could have a material adverse effect on our business.
The COVID-19 pandemic continues to evolve.
The extent to which the outbreak impacts our business, preclinical studies and clinical trials will depend on future developments, which
are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of
the pandemic, travel restrictions and social distancing in the United States Canada, Europe, Israel and other countries, business closures
or business disruptions and the effectiveness of actions taken in the United States, Canada, Europe, Israel and other countries to contain
and treat the disease. As a result, the COVID-19 pandemic may have a material adverse effect on our business, results of operations,
financial condition and prospects and heighten many of our known risks described or referenced in this “Risk Factors” section.
If we are not able to obtain, or if there are delays in obtaining,
required regulatory approvals for our product candidates for therapeutic indications, we will not be able to commercialize, or will be
delayed in commercializing, our product candidates, and our future ability to generate revenue will be materially impaired.
Our product candidates and the activities associated
with their development and commercialization for therapeutic indications, including their design, testing, manufacture, safety, efficacy,
recordkeeping, labeling, storage, approval, advertising, promotion, sale, distribution, import and export are subject to regulation by
the FDA and other regulatory agencies in the United States and by equivalent foreign regulatory authorities. Before we can commercialize
any of our product candidates for therapeutic indications, we must obtain marketing approval. We have not received approval to market
any of our product candidates from regulatory authorities in any jurisdiction, and it is possible that none of our product candidates
or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
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The process of obtaining regulatory approvals for
therapeutic indications, both in the United States and in other countries, is expensive, may take many years if additional clinical trials
are required, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates
involved. Changes in marketing approval policies during the development period, changes in or the enactment of additional statutes or
regulations, or changes in regulatory review for each submitted IND, or equivalent application types, may cause delays in the approval
or rejection of an application. The FDA and equivalent foreign regulatory authorities have substantial discretion in the approval process
and may refuse to accept any application or may decide that our data is insufficient for approval and require additional preclinical,
clinical or other studies. Our product candidates could be delayed in receiving, or fail to receive, regulatory approval for many reasons,
including the following:
Of the large number of drugs in development, only
a small percentage successfully complete the FDA or equivalent foreign regulatory approval processes and are commercialized. The lengthy
approval process as well as the unpredictability of future clinical trial results may result in us failing to obtain regulatory approval
to market its product candidates, which would significantly harm our business, results of operations and prospects.
The FDA may also require a panel of experts, referred
to as an Advisory Committee, to deliberate on the adequacy of the safety and efficacy data to support approval for therapeutic indications.
The opinion of the Advisory Committee, although not binding, may have a significant impact on our ability to obtain approval of any product
candidates that we develop based on the completed clinical trials. In the European Union, the safety and efficacy data of our product
candidate for the treatment of CRC will be reviewed by the European Medicines Agency’s, or the EMA’s, Committee for Advanced
Therapies, or CAT, a group of experts in advanced therapy medicinal products. Our other product candidates would be reviewed by CAT as
well if the EMA were to consider that they also qualify as advanced therapy medicinal products.
Moreover, under PREA, in the United States, and
the Pediatric Regulation, in the European Union, the FDA or equivalent foreign regulatory authority could require mandatory testing in
the pediatric population. Applications for approval in the United States or in the European Union must contain data to assess the safety
and efficacy of the biologic for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration
for each pediatric subpopulation for which the product is safe and effective. The FDA or equivalent foreign regulatory authority may,
in its discretion, grant full or partial waivers, or deferrals, for submission of data in pediatric subjects. If the FDA requires data
in pediatric patients, significantly more capital will have to be invested in order to conduct the mandatory pediatric clinical trials
and studies, but the approval of the medicinal products for the adult population should normally not be affected. If the results of such
pediatric studies are not positive, our product candidates will not be approved for children.
In addition, even if we were to obtain approval,
regulatory authorities may approve any of our product candidates for fewer or more limited therapeutic indications than our requests,
may include limitations for use or contraindications that limit the suitable patient population, may not approve the price we intend
to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials or may approve
a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization
of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
If we experience delays in obtaining approval
or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our
future ability to generate revenues will be materially impaired.
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We have never generated any revenue from product sales and may
never be profitable or, if achieved, may not sustain profitability.
Our ability to generate meaningful revenue and
achieve profitability depends on our ability, and the ability of any third party with which we may partner, to successfully complete
the development of, and meet regulatory requirements, including (but not limited to) obtaining any necessary regulatory approvals, to
commercialize our product candidates. We do not currently meet regulatory requirements or have the required approvals to market our product
candidates and may never meet or receive them. We do not anticipate generating revenue from product sales for the foreseeable future,
if ever. If any of our product candidates fail in clinical trials or if any of our product candidates do not meet regulatory requirements,
including gaining regulatory approval when needed, or if any of our product candidates, if marketed, fail to achieve market acceptance,
we may never become profitable. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent
periods. Our ability to generate future revenue from product sales depends heavily on our success in:
● meeting regulatory requirements for marketing the products;
● obtaining market acceptance of any approved products;
● addressing any competing technological and market developments;
● implementing additional internal systems and infrastructure, as needed;
● identifying and validating new product candidates;
● attracting, hiring and retaining qualified personnel.
Even if one or more of the product candidates
that we develop is approved for commercial sale or otherwise permitted for marketing, we anticipate incurring significant costs associated
with commercializing any approved product. Our expenses could increase beyond expectations if we are required by the FDA, or the EMA,
or other equivalent foreign regulatory agencies to perform clinical trials and other studies in addition to those that we currently anticipate.
Even if we are able to generate revenue from the sale of any approved products, we may not become profitable and may need to obtain additional
funding to continue operations. If we fail to become profitable, or if we are unable to fund our continuing losses, our business, financial
condition and results of operations may be materially adversely impacted.
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We are seeking to develop product candidates to treat medical
conditions related to the presence of certain bacteria. Our success is largely dependent on a broad degree of market acceptance, and
in the case of drug products, physician adoption and use, which are necessary for commercial success.
Even if we obtain FDA or foreign regulatory approvals
for our drug product candidates, the commercial success of our product candidates will depend on consumer acceptance and adoption of
products that we commercialize. Adverse events in preclinical studies and clinical trials of our product candidates or in clinical trials
of others developing similar products and the resulting publicity could result in a decrease in demand for any product that we may develop.
In addition, the commercial success of our drug
product candidates will depend significantly on their broad adoption and use by pediatricians and other physicians for approved therapeutic
indications, as well as any other indications for which we may seek approval. We cannot be certain that our approach will lead to the
development of approvable or marketable products.
Obtaining high titers for specific phage cocktails necessary
for our preclinical and clinical testing may be difficult and time-consuming.
Our product candidates are phage cocktails that
we have designed to meet specific characteristics. We and our contract manufacturers produce a cocktail of multiple phage and it may
be difficult or time-consuming to achieve high titers, or levels, of phage sufficient for our preclinical and clinical testing. In some
cases, it may require multiple product runs in order for us to obtain the amounts necessary for its clinical testing. This may result
in delays in our clinical trial timelines, and it may increase production costs and associated expenses. Also, it may be difficult to
reproduce the manufacturing process to the extent that more significant quantities are required as our product candidates advance through
the clinical development process.
Results from preclinical studies of our product candidates may
not be predictive of the results of clinical trials or later stage clinical development.
Preclinical studies of our product candidates,
such as BX003, including studies in animal disease models in the case of BX003 and other studies, may not accurately predict the safety
of the product candidate such that further human clinical trials would be allowed to proceed. In particular, promising preclinical testing
suggesting the potential efficacy of prototype phage products may not predict the ability of these products to address conditions in the
human clinical settings. For example, while we have studied phage activity in vitro and in vivo, in the case of BX003, these
results may not be replicated when our phage cocktails are administered to human subjects. Despite promising data in any preclinical studies,
our phage technology may be found not to be efficacious when studied in clinical trials.
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To satisfy FDA or equivalent foreign regulatory
approval standards, we must demonstrate in adequate and well controlled clinical trials that our drug product candidates are safe and
effective for their intended use. Success in preclinical testing and early-stage clinical trials does not ensure that later clinical
trials will be successful. Our initial results from preclinical testing also may not be confirmed by later analysis or subsequent larger
clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials,
even after obtaining promising results in earlier clinical trials, and most product candidates that commence clinical trials are never
approved for commercial sale.
Our product candidates are subject to significant regulatory
approval requirements, which could delay, prevent or limit our ability to market our product candidates.
Our
research and development activities, preclinical studies, clinical trials and the anticipated manufacturing and marketing of our drug
product candidates are subject to extensive regulation by the FDA and other regulatory agencies in the United States and by comparable
authorities in Europe and elsewhere. To satisfy FDA or equivalent foreign regulatory approval standards, we must demonstrate in adequate
and well controlled clinical trials that our drug product candidates are safe and effective for their intended use. The regulatory approval
process is expensive and time-consuming, and the timing of receipt of regulatory approval is difficult to predict. Given the uncertainties
around phage therapy, our product candidates could require a significantly longer time to gain regulatory approval than expected or may
never gain approval. This is especially so for the product candidate designed to treat CRC as the phage will be genetically modified,
which adds potential complexity to the process, particularly in the European Union. We cannot be certain that, even after expending substantial
time and financial resources, we will obtain regulatory approval for any of our product candidates. A delay or denial of regulatory approval
could delay or prevent our ability to generate product revenue and to achieve profitability.
Regulatory requirements for development of our
product candidates are uncertain and evolving. Changes in these laws or the current interpretation or application of these laws would
have a significant adverse impact on our ability to develop and commercialize our product candidates. The legal and regulatory status
of phage therapy remains unclear in many countries, including the European Union. Changes in regulatory approval policies during the
development period of any of our product candidates, changes in, or the enactment of, additional regulations or statutes, or changes
in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection
of an application for regulatory approval.
Regulatory approval, if obtained, may be made
subject to limitations on the indicated uses for which we may market a product, as well as the approved labeling for the product. These
limitations could adversely affect our potential product revenue. Regulatory approval may also be conditioned on costly post-marketing
follow-up studies. In addition, the labeling, packaging, adverse event reporting, storage, advertising, promotion and recordkeeping related
to the product will be subject to extensive ongoing regulatory requirements. Furthermore, for any marketed product, our manufacturer
and our manufacturing facilities will be subject to registration and listing requirements and continual review and periodic inspections
by the FDA or other regulatory authorities. Failure to comply with applicable regulatory requirements may, among other things, result
in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and criminal prosecution.
If we encounter difficulties enrolling patients in our clinical
trials, our clinical development activities could be delayed or otherwise adversely affected.
Completion of clinical trials depends, among other
things, on our ability to enroll a sufficient number of patients, which is a function of many factors, including:
● the therapeutic endpoints chosen for evaluation;
● the eligibility criteria defined in the protocol;
● the perceived benefit of the product candidate under study;
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● our ability to obtain and maintain patient consents; and
● competition for patients from clinical trials for other treatments.
We have experienced and may continue to experience
difficulties in enrolling patients in our clinical trials, including due to the impacts of COVID-19, which could increase the costs or
affect the timing or outcome of these clinical trials. This is particularly true with respect to diseases with relatively small patient
populations. In addition, potential patients for our trials may not be adequately diagnosed or identified with the diseases that we are
targeting or may not meet the entry criteria for our studies.
We may not be able to initiate or continue clinical
trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA
or equivalent foreign regulatory agencies. In addition, the process of finding and diagnosing patients may prove costly. Our inability
to enroll a sufficient number of patients for any of our clinical trials would result in significant delays or may require us to abandon
one or more clinical trials.
Delays in our clinical trials could result in us not achieving
anticipated developmental milestones when expected, increased costs and delays in our ability to obtain regulatory approval for and commercialization
of our product candidates.
Delays in our clinical trials could result in
us not meeting anticipated clinical milestones and could materially impact our product development costs and delay regulatory approval
of our product candidates. Planned clinical trials may not be commenced or completed on schedule, or at all.
Clinical trials can be delayed for a variety of
reasons, including:
● delays in reaching a consensus with clinical investigators on study design;
● delays in obtaining clinical materials;
● slower than expected patient recruitment for participation in clinical trials;
● adverse safety events experienced during our clinical trials.
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If we do not successfully commence or complete
our clinical trials on schedule, the price of our securities may decline. Significant preclinical or clinical trial delays could shorten
any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products
to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business
and results of operations.
Our current or future product candidates may cause adverse effects
that could halt their clinical development, prevent their approval or marketing, limit their commercial potential or result in significant
negative consequences.
Adverse effects could occur and cause us or regulatory
authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of marketing
approval by the FDA or equivalent foreign regulatory agencies. Results of our trials could reveal a high and unacceptable severity and
prevalence of side effects or unexpected characteristics.
If adverse effects arise in the development of
our product candidates, we, the FDA or equivalent foreign regulatory agencies, the IRBs or independent ethics committees at the institutions
in which our studies are conducted, or the Data Safety Monitoring Board could suspend or terminate our clinical trials or the FDA or
equivalent foreign regulatory agencies could deny approval of our product candidates for any or all targeted indications.
We intend to continue to evaluate our product
candidates for safety and tolerability in the form of Phase 1 clinical trials. While our current and future product candidates will undergo
safety testing to the extent possible and, where applicable, under such conditions discussed with regulatory authorities, not all adverse
effects of drugs can be predicted or anticipated. Unforeseen adverse effects could arise either during clinical development or, if such
adverse effects are more rare, after our products have been approved by regulatory authorities and the approved product has been marketed,
resulting in the exposure of additional patients. For example, while we screen our phage in attempts to minimize safety issues, there
can be no assurance that we will eliminate the risk of the appearance of virulence genes, antibiotic resistance genes, lysogenic genes,
integrase genes, or other toxic genes in our phage, or of adverse reactions to our phage in a patient’s immune system. So far,
we have not demonstrated, and we cannot predict, if ongoing or future clinical trials will demonstrate that any of our product candidates
are safe in humans. Moreover, clinical trials of our product candidates are conducted in carefully defined sets of patients who have
agreed to enter into clinical trials. Consequently, it is possible that our clinical trials may indicate an apparent positive effect
of a product candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable adverse
effects.
Ultimately, some or all of our product candidates
may prove to be unsafe for human use. Moreover, we could be subject to significant liability if any volunteer or patient suffers, or
appears to suffer, adverse health effects as a result of participating in our clinical trials. Any of these events could prevent us from
achieving or maintaining market acceptance of our product candidates and could substantially increase commercialization costs.
We have not completed composition development of our product
candidates.
The development of our product candidates requires
that we isolate, select, optimize and combine a number of phage that target the desired bacteria for that product candidate. The selection
of phage for any of our product candidates is based on a variety of factors, including, without limitation, the ability of the selected
phage, in combination, to successfully kill the targeted bacteria, the degree of cross-reactivity of the individual phage with the same
part of the bacterial targets, the ability of the combined phage to satisfy regulatory requirements, our ability to manufacture sufficient
quantities of the phage, intellectual property rights of third parties, and other factors. While we have selected an initial formulation
of BX003, there can be no assurance that this initial formulation will be the final formulations of this product candidate for commercialization
if approved. If we are unable to complete formulation development of our product candidates in the time frame that we have anticipated,
then our product development timelines, and the regulatory approval of our product candidates, could be delayed.
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We must continue to develop manufacturing processes for our
product candidates, and any delay in doing so, or our inability to do so, would result in delays in our clinical trials.
The manufacturing processes for our product candidates,
and the scale-up of such processes for clinical trials, may present challenges, and there can be no assurance that we will be able to
complete this work in a timely manner, if at all. Any delay in the development or scale-up of these manufacturing processes could delay
the start of clinical trials and harm our business. In order to scale-up our manufacturing capacity, we need to either build additional
internal manufacturing capacity, contract with one or more partners, or both. Our technology and the production process for our equipment
and tools are complex and we may encounter unexpected difficulties in manufacturing our product candidates. For example, the manufacturing
hosts that we use to produce our phage may contain one or more integrated phage in their genomes that, if we are unable to remove, can
present challenges in manufacturing of the produced phage. There is no assurance that we will be able to continue to build manufacturing
capacity internally or find one or more suitable partners, or both, to meet the necessary volume and quality requirements. Manufacturing
and product quality issues may arise as we increase the scale of our production. Any delay or inability in establishing or expanding
our manufacturing capacity could diminish our ability to develop our product candidates.
In the third quarter of 2019, we established our
own manufacturing facility at our headquarters in Ness Ziona, Israel and we have executed cGMP manufacturing for our first in human clinical
study (IBD project). In March 2021, we moved into a new manufacturing facility at our headquarters in Ness Ziona, Israel. Our new facility
undergoes ongoing internal inspections to verify proper manufacturing for Phase I and II clinical studies in accordance with cGMP requirements.
In the event this facility does not comply with cGMP standards for the manufacture of our product candidates, we may need to fund
additional modifications to our manufacturing process, conduct additional validation studies or find alternative manufacturing facilities,
any of which would result in significant cost to us as well as a delay of up to several years in obtaining approval for such product candidate.
If we submit marketing applications for any of
our product candidates manufactured at this facility, this manufacturing facility will be subjected to ongoing periodic inspection for
compliance with European, FDA and cGMP regulations. Compliance with these regulations and standards is complex and costly, and there can
be no assurance that we will be able to comply. Any failure to comply with applicable regulations could result in sanctions being imposed
(including fines, injunctions and civil penalties), failure of regulatory authorities to grant marketing approval of our product candidates,
delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions
and criminal prosecution.
If our competitors are able to develop and market products that
are more effective, safer or more affordable than ours, or obtain marketing approval before we do, our commercial opportunities may be
limited.
Competition in the biotechnology and pharmaceutical
industries is intense and continues to increase. Some companies that are larger and have significantly more resources than us are aggressively
pursuing development programs for indications that we are pursuing, including traditional therapies and therapies with novel mechanisms
of action. In addition, other companies are developing phage-based products for therapeutic and non-therapeutic uses, and may elect to
use their expertise in phage development and manufacturing to try to develop products that would compete with our products.
We also face potential competition from academic
institutions, government agencies and private and public research institutions engaged in the discovery and development of drugs and
therapies. Many of our competitors have significantly greater financial resources and expertise in research and development, preclinical
testing, conducting clinical trials, obtaining regulatory approvals, manufacturing, sales and marketing than we do. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established pharmaceutical
companies.
In the European Union, potential competition also
comes from medicinal preparations made by hospitals or pharmacists and administered without marketing authorizations, generally referred
to as “compounding.” In some member states, national authorities generally promote compounding in order to reduce healthcare
expenses.
Our competitors may succeed in developing products
that are more effective, have fewer side effects and are safer or more affordable than our product candidates, which would render our
product candidates less competitive or noncompetitive and would prevent the granting or maintenance of an orphan designation. These competitors
also compete with us to recruit and retain qualified scientific and management personnel, establish clinical trial sites and patient
registration for clinical trials, as well as to acquire technology and technology licenses complementary to our programs or advantageous
to our business. Moreover, competitors that are able to achieve patent protection, obtain regulatory approvals and commence commercial
sales of their products before we do, and competitors that have already done so may enjoy a significant competitive advantage.
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We
may not be successful in our efforts to identify or discover additional product candidates.
Although we intend to utilize our technology to
evaluate other therapeutic opportunities in addition to the product candidates that we are currently developing, we may fail to identify
other product candidates for clinical development for a number of reasons. For example, our research methodology may not be successful
in identifying potential product candidates, or those we identify may be shown to have harmful side effects or other characteristics
that make them unmarketable or unlikely to receive regulatory approval. In addition, we may not be able to identify phage that eradicate
the target bacteria, including due to sourcing difficulties such as lack of diversity, inability to obtain samples in a timely manner
or at all, or contamination in the samples. We may also encounter difficulties in designing phage cocktails that meet the requirements
of an investigational therapy, including due to the build-up of resistances in bacteria to our phage, the range of host bacteria that
are affected by our phage, the variety of activity on different bacteria growth states, issues with toxicity in our phage, and the stability,
robustness and ease of manufacturing of our product candidates. In addition, the designing of synthetically engineered phage may fail
to result in the development of phage with the desired characteristics or behaviors that are suitable for use as viable therapies, or
may result in phage that contain undesired features such as immunogenicity, toxicity and other safety concerns.
A key part of our strategy is to utilize our screening
technology to identify product candidates to pursue in clinical development. If we fail to identify and develop additional potential
product candidates, we may be unable to grow our business and our results of operations could be materially harmed. Such product candidates
will require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials
and approval by the FDA and/or applicable foreign regulatory agencies. All product candidates are prone to the risks of failure that
are inherent in pharmaceutical product development.
Legal requirements as well as ethical and social concerns about
synthetic biology and genetic engineering could limit or prevent the use of our technologies and limit our revenues.
Our technology may include the use of synthetic
biology and genetic engineering. In some countries, drugs made using genetically modified organisms may be subject to a more stringent
legal regime, which could prove to be complex and very challenging, especially for a small life sciences company. For example, in the
European Union, the rules on genetically modified organisms would apply in addition to the general rules on medicinal products or cosmetic
products. The rules on advanced therapy medicinal products may also apply.
Additionally, public perception about the safety
and environmental hazards of, and ethical concerns over, synthetic biology and genetic engineering could influence public acceptance
of our technologies, product candidates and processes. If we and our collaborators are not able to overcome the legal challenges as well
as the ethical and social concerns relating to synthetic biology and genetic engineering, our technologies, product candidates and processes
may not be accepted. These challenges and concerns could result in increased expenses, regulatory scrutiny and increased regulation,
trade restrictions on imports of our product candidates, delays or other impediments to our programs or the public acceptance and commercialization
of our products. We design and produce product candidates with characteristics comparable or superior to those found in naturally occurring
organisms or enzymes in a controlled laboratory; however, the release of such organisms into uncontrolled environments could have unintended
consequences. Any adverse effect resulting from such a release could have a material adverse effect on our business, financial condition
or results of operations, and we may have exposure to liability for any resulting harm.
We may expend our limited resources to pursue a particular product
candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is
a greater likelihood of success.
Because we have limited financial and managerial
resources, we intend to focus on developing product candidates for specific indications that we identify as most likely to succeed, in
terms of both their potential for marketing approval and commercialization. As a result, we may forego or delay pursuit of opportunities
with other product candidates or for other indications that may prove to have greater commercial potential. For example, we spent significant
time and resources developing our BX001 product candidate, which we have now discontinued.
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 product candidates for specific indications may not yield any commercially viable product candidates. If we
do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights
to that product candidate 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 the product candidate.
We intend to rely on our new BOLT (BacteriOphage Lead to Treatment)
proprietary product platform to develop our phage therapies. Our competitive position could be materially harmed if our competitors develop
similar platforms and develop rival product candidates.
Our new BOLT platform enables us to rapidly develop,
manufacture and formulate phage therapy candidates targeting particular pathogenic bacteria and incorporates our experience over the past
six years with process refinement and implementation of technological advancements. For a given indication, the platform will allow for
the completion of a clinical proof of concept study in patients, meaning Phase 2 results, within approximately 12-18 months from project
initiation; however in certain indications the length of clinical proof of concept may be longer depending on the indication, identity
of target bacteria, recruitment rate, cohort size and other factors, and we may not achieve clinical proof of concept on that timeline,
or at all. We are initially aiming to complete a clinical proof of concept study in patients within approximately 12-18 months from project
initiation in our cystic fibrosis and atopic dermatitis programs. Our BOLT platform is new and may not achieve the benefits we anticipate.
To the extent we utilize our resources to further develop our BOLT platform, we may become more dependent on its success.
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There is a substantial risk of product liability claims in our
business. If we do not obtain sufficient liability insurance, a product liability claim could result in substantial liabilities to us.
Our business exposes us to significant potential
product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products. Regardless of
merit or eventual outcome, product liability claims may result in:
● delay or failure to complete our clinical trials;
● withdrawal of clinical trial participants;
● decreased demand for our product candidates;
● injury to our reputation;
● litigation costs;
● substantial monetary awards against us; and
● diversion of management or other resources from key aspects of our operations.
If we succeed in marketing products, product liability
claims could result in an FDA or equivalent foreign regulatory agency investigation of the safety or efficacy of our products, our manufacturing
processes and facilities or our marketing programs. Such investigation could also potentially lead to a recall of our products or more
serious enforcement actions, or limitations on the indications, for which they may be used, or suspension or withdrawal of approval.
We currently only have limited clinical trials
insurance policies that cover clinical trials in certain territories. We intend to expand our insurance coverage to include the sale
of commercial products if marketing approval is obtained for our product candidates or any other compound that we may develop. However,
insurance coverage is expensive, and we may not be able to maintain insurance coverage at a reasonable cost or at all, and the insurance
coverage that we have or obtain may not be adequate to cover potential claims or losses.
Our employees, independent contractors, consultants, commercial
partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of employee fraud or
other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct by these parties
could include intentional, reckless and/or negligent conduct that fails to comply with the laws of the FDA and other similar foreign
regulatory bodies, provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies, comply with
manufacturing standards we have established, comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent
misconduct laws or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval
of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws
will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact,
among other things, our current activities with principal investigators and research patients, as well as proposed and future sales,
marketing and education programs.
The FDA and other equivalent foreign regulatory agencies may
implement additional regulations or restrictions on the development and commercialization of products which act on the microbiome, which
may be difficult to predict.
The FDA and equivalent foreign regulatory agencies
in other countries have each expressed interest in further regulating biotechnology products and product candidates, such as those that
act on the human microbiome. Agencies at both the federal and state level in the United States, as well as the U.S. congressional committees
and other governments or governing agencies, have also expressed interest in further regulating the biotechnology industry. Such action
may delay or prevent commercialization of some or all of our product candidates. Adverse developments in non-IND human clinical studies
or clinical trials of microbiome products conducted by others may cause the FDA or other oversight bodies to change the requirements
for approval of any of our product candidates. These regulatory review agencies and committees and the new requirements or guidelines
they promulgate may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development
costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates
or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult
with these regulatory agencies and comply with applicable requirements and guidelines. If we fail to do so, we may be required to delay
or discontinue development of such product candidates. These additional processes may result in a review and approval process that is
longer than we otherwise would have expected. Delays as a result of an increased or lengthier regulatory approval process or further
restrictions on the development of our product candidates can be costly and could negatively impact our ability to complete clinical
trials and commercialize our current and future product candidates in a timely manner if at all.
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Exchange rate fluctuations between the U.S. Dollar, the New Israeli
Shekel, the Euro and other foreign currencies, may negatively affect our future expenses.
Our
proceeds from sales of our securities are generally received in U.S. Dollars. Our headquarters are located in Israel, where the majority
of our general and administrative expenses and research and development costs are incurred in the New Israeli Shekel, or NIS. Future
expenses may be incurred in foreign currencies such as the Euro or British Pound. As a result, our financial results may be affected
by fluctuations in the exchange rates of currencies in the countries. For example, during 2020, we witnessed a strengthening of the average
exchange rate of the NIS against the U.S. Dollar, which increased the U.S. Dollar value of Israeli expenses. If the NIS strengthens against
the U.S. Dollar, as it did in 2020 and 2021, the U.S. Dollar value of our Israeli expenses, mainly personnel and facility-related, will
increase. We use foreign exchange contracts (mainly option and forward contracts) to hedge balance sheet items from currency exposure.
However, these foreign exchange contracts are not designated as hedging instruments for accounting purposes and they may not be effective.