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, 2023, our accumulated deficit
was $163 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. In addition, as a result of the Acquisition, our future business, prospects, financial
position and operating results could be significantly different than those in historical periods or projected by our management.
For the years ended December 31, 2023 and 2022,
we had losses from operations of $25.3 million and $27.2 million, respectively. We anticipate that the level of our expenses is expected
to increase as a result of the recent acquisition of APT, and will continue to be significant if and as we:
● maintain, expand and protect our intellectual property portfolio;
28
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, 2023, we had cash, cash equivalents
and restricted cash of $15.9 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 financing. In addition, on December 7, 2023, we entered into
an At the Market Offering Agreement, or the ATM Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, as manager, pursuant to
which we may issue and sell shares of our Common Stock having an aggregate offering price of up to $7.5 million from time to time through
Wainwright. We are not obligated to make any sales of Common Stock under the ATM Agreement. On May 4, 2023, subsequent to the approval
of the Company’s stockholders, the Company completed the second closing of the February 2023 PIPE for an additional $6 million in
gross proceeds. On December 7, 2023, we filed a shelf registration statement on Form S-3, which was declared effective by the SEC on January
2, 2024. Additionally, on March 15, 2024, concurrently with the consummation of the Acquisition, we consummated a private placement, or
the March 2024 PIPE, pursuant to an exemption from registration requirements under the Securities Act with certain investors pursuant
to which such investors purchased an aggregate of 216,417 shares of our Series X non-voting convertible preferred stock, par value $0.0001
per share, or the Convertible Preferred Stock, and warrants, or Private Placement Warrants, to purchase up to an aggregate of 108,208,500
shares of the Company’s Common Stock, for aggregate gross proceeds of approximately $50 million. Each share of Convertible Preferred
Stock is convertible into an aggregate of 1,000 shares of Common Stock.
Subject to restrictions pursuant to the March 2024
PIPE, we may continue to sell shares under the ATM Agreement and otherwise to use our shelf registration statement to raise additional
funds from time to time. We may also raise funds privately, as we did in February 2023 and the March 2024 PIPE. 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.
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, or the markets are negatively impacted by factors such as the Israel-Hamas
War, the Russian invasion of Ukraine and the resulting world sanctions on Russia, Belarus, and related parties or other sources of geopolitical
uncertainty and instability, 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.
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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.
Our financial statements contain an explanatory paragraph regarding
substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable
terms or at all.
Our financial statements contain
an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. We have concluded that there is
substantial doubt about our ability to continue as a going concern. We have accumulated a deficit of $163 million since our inception.
To date, we have not generated revenue from our operations and we do not expect to generate any significant revenues from sales of products
in the next twelve months. Our cash needs may increase in the foreseeable future. As of December 31, 2023, we had $15.9 million of cash
and cash equivalents.
We believe our cash and cash equivalents and short-term
deposits on hand will be sufficient to meet our working capital and capital expenditure requirements for at least 12 months. However,
since there is a risk of our stockholders not approving the conversion of the Convertible Preferred Stock that was issued in connection
with the March 2024 PIPE and the Acquisition, which could result in us being required to cash settle the Convertible Preferred Stock,
there is substantial doubt about our ability to continue as a going concern for at least 12 months from April 3, 2024. Our continuation
as a going concern is dependent upon many factors, including our ability to receive the approval of our shareholders to convert the Convertible
Preferred Stock within 5 months, raise additional funds, the success of our clinical trial for CF, our ability to successfully integrate
the business of APT and our ability to repay our obligations when due. We cannot be sure that we will be able to obtain any future funding,
and any such funding we may obtain may not be sufficient to finance our operations. If we are unable to obtain sufficient funds, we may
be unable to continue as a going concern.
There is no guarantee that our acquisition
of APT will increase stockholder value.
In March 2024, we acquired APT in the Acquisition.
We cannot guarantee that implementing the Acquisition and related transactions will not impair stockholder value or otherwise adversely
affect our business. The Acquisition could result in integration challenges between our businesses and management teams which could cause
management and business disruptions, any of which could impact our results of operation and business prospects and impair the value of
such acquisition to our stockholders.
We are required to use reasonable best efforts
to solicit stockholder approval for the conversion of shares of Convertible Preferred Stock and Warrants issued in the Acquisition and
the March 2024 PIPE. If we do not obtain such approval within 150 days of the initial issuance of the Convertible Preferred Stock, we
could be required to cash settle the Convertible Preferred Stock.
Pursuant to the Merger Agreement, we are required
to hold a meeting of stockholders (the “Stockholder Meeting”) for the purpose of obtaining stockholder approval of (i) the
conversion of the Convertible Preferred Stock and the exercise of the Warrants (as defined below) into shares of Common Stock in excess
of 19.9% of the outstanding shares of Common Stock for purposes of the NYSE American Stock Market Rules, (ii) adoption of a new stock
incentive plan or amendment of the Company’s current stock incentive plan (the “2024 Incentive Plan”), and (iii) if
necessary, the amendment of our certificate of incorporation to authorize sufficient additional shares of Common Stock to allow for conversion
of the Convertible Preferred Stock and exercise of the Warrants. If such stockholder approval is not received, we are required to convene
additional stockholder meetings at least every 90 days thereafter until such approval is obtained, which could result in substantial costs
and be a distraction to management. Furthermore, if our stockholders do not approve the conversion of the Convertible Preferred Stock
within 150 days of the initial issuance of the Convertible Preferred Stock, then upon written request by the holders of 70% of the Convertible
Preferred Stock, we will be required to pay to each holder of Convertible Preferred Stock an amount in cash equal to the fair value of
the shares of Convertible Preferred Stock held by such holder, as described in the Certificate of Designation for the Convertible Preferred
Stock. We do not expect that we would have sufficient liquidity to settle a significant amount of the Convertible Preferred Stock if required
to do so. The cash settlement is not in our control and raises substantial doubt about our ability to continue as a going concern.
30
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, as of the date of this Annual Report,
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 candidate 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. 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. 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.
Ongoing geopolitical instability have adversely affected
and may continue to adversely affect our business, including our clinical trials.
General economic, political, demographic and business
conditions worldwide, including geopolitical uncertainty and instability, such as the Israel- Hamas War and 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. We may further 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.
32
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.
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.
33
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 any product
candidate considered by the EMA to qualify as an advanced therapy medicinal product must be reviewed by the EMA’s, Committee for
Advanced Therapies, a group of experts in 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.
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;
34
● 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.
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.
35
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 BX004 and BX005, including studies in animal disease models 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, 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.
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.
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;
● 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, 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.
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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.
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.
37
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 BX004, 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.
38
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. In February 2021, APT consolidated its GMP manufacturing, testing and development
in its Gaithersburg facility. 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 these facilities do 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.
39
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 BX001, which we discontinued, and our BX005 product candidates
and CRC development efforts, which we have paused indefinitely.
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 continue to rely on our BOLT 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
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 typically 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 CF program. We have limited experience with our BOLT
platform 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.
40
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.
41
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.
Our
limited operating history may make it difficult to evaluate the success of our business to date and to assess our future viability.
Since
inception in 2015, BiomX Ltd. has devoted substantially all of its resources to developing product candidates with phage technology through
its preclinical programs, building its intellectual property portfolio, developing a supply chain, planning its business, raising capital
and providing general and administrative support for these operations. We have not yet demonstrated our ability to successfully complete
any clinical study or other pivotal clinical trials, obtain regulatory approvals, manufacture a commercial-scale product, or arrange
for a third-party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.
Consequently, any predictions made 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 an early-stage company, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown
circumstances. As we advance our product candidates, we will need to transition from a company with a research focus to a company capable
of supporting clinical development and, if successful, commercial activities. We may not be successful in such a transition.
We
may need to grow the size of our organization and may experience difficulties in managing this growth.
As
our research, development, manufacturing and commercialization plans and strategies, we may need additional managerial, operational,
sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management,
including:
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 our attention away from day-to-day
activities in order to devote a substantial amount of time to managing these growth activities.
If
we are not able to effectively expand our organization by hiring additional employees and expanding our groups of consultants and contractors,
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.
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Risks
Related to Government Regulation
Our
product candidates are subject to significant regulatory approval requirements, which could delay, prevent or limit our ability to market
or develop 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. 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.
Breakthrough
Therapy Designation or Fast Track Designation by the FDA, even if granted for any of our product candidates developed for therapeutic
indications, may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that
any of our product candidates will receive marketing approval in the United States.
In
the United States, we may seek a Breakthrough Therapy Designation for some of our product candidates, including BX004 or another product
candidate under development. A breakthrough therapy is defined as a therapy that is intended, alone or in combination with one or more
other therapies, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapy