UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the Month of: August
Commission File Number:
(Translation of registrant’s name into English)
18 Hasivim Street
Petach Tikva 495376, Israel
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
☒ Form 20-F ☐ Form 40-F
CONTENTS
This Report of Foreign Private Issuer on Form 6-K consists of PolyPid Ltd.’s (the “Company”): (i) Unaudited Interim Condensed Consolidated Financial Statements as of June 30, 2024, which is attached hereto as Exhibit 99.1; and (ii) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024, which is attached hereto as Exhibit 99.2.
The contents of this Form 6-K are incorporated by reference into the Company’s registration statements on Form F-3 (File No. 333-276826 and File No. 333-280658) and Form S-8 (File No. 333-239517, File No. 333-271060, File No. 333-277703 and File No. 333-280662) filed with the Securities and Exchange Commission to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
1
EXHIBIT INDEX
| Exhibit No. | ||
| 99.1 | PolyPid Ltd.’s Unaudited Interim Condensed Financial Statements as of June 30, 2024. | |
| 99.2 | PolyPid Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operation for the Six Months Ended June 30, 2024. | |
| 101 | The following financial information from the Registrant’s Unaudited Interim Condensed Financial Statements as of June 30, 2024, formatted in XBRL (eXtensible Business Reporting Language): (i) Interim Condensed Consolidated Balance Sheets, (ii) Interim Condensed Consolidated Statements of Operations, (iii) Interim Condensed Consolidated Statements of Shareholders’ Equity (Deficit); (iv) Interim Condensed Consolidated Statements of Cash Flows, and (v) Notes to Interim Condensed Consolidated Financial Statements. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| POLYPID LTD. | |||
| Date: August 14, 2024 | By: | /s/ Dikla Czaczkes Akselbrad | |
| Name: | Dikla Czaczkes Akselbrad | ||
| Title: | Chief Executive Officer | ||
3
Exhibit 99.1
POLYPID LTD.
AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
- - - - - - - - - - - - - - - - - - - - - - -
- i -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted deposits | ||||||||
| Short-term deposits | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| LONG-TERM ASSETS: | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other long-term assets | ||||||||
| Total long-term assets | ||||||||
| Total assets | $ | $ | ||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 1 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
| June 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Unaudited | Audited | |||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturities of long-term debt | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Trade payables | ||||||||
| Current maturities of operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES: | ||||||||
| Long-term debt | ||||||||
| Deferred revenues | ||||||||
| Long-term operating lease liabilities | ||||||||
| Other liabilities | ||||||||
| Total long-term liabilities | ||||||||
| COMMITMENTS AND CONTINGENT LIABILITIES | ||||||||
| SHAREHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Ordinary shares with par value - Authorized: | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and shareholders’ equity | ||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 2 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| Six Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development, net | $ | $ | $ | $ | ||||||||||||
| Marketing and business development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Operating loss | ||||||||||||||||
| Financial expense, net | ||||||||||||||||
| Loss before income tax | ||||||||||||||||
| Income tax expenses | ||||||||||||||||
| Net loss | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
| *) | Prior period results have been retroactively adjusted to reflect the 1-for-30 reverse share split effected on September 18, 2023 (see Note 1b). |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 3 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
U.S. dollars in thousands (except share and per share data)
| Three Months Ended June 30, 2024 | Number
of ordinary shares | Additional
paid-in capital | Accumulated
deficit | Total
shareholders’ equity | ||||||||||||
| Balances as of March 31, 2024 | $ | $ | ( | ) | $ | |||||||||||
| Share-based compensation | - | - | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balances as of June 30, 2024 (unaudited) | $ | $ | ( | ) | $ | |||||||||||
| Three Months Ended June 30, 2023 | Number
of ordinary shares *) | Additional
paid-in capital | Accumulated deficit | Total shareholders’ equity | ||||||||||||
| Balances as of March 31, 2023 | $ | $ | ( | ) | $ | |||||||||||
| Share-based compensation | - | - | ||||||||||||||
| Modification of warrants | - | - | ||||||||||||||
| Reclassification of pre-funded warrants to Equity | - | |||||||||||||||
| Cashless exercise of pre-funded warrants | - | - | - | |||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balances as of June 30, 2023 (unaudited) | $ | $ | ( | ) | $ | |||||||||||
| *) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 4 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
U.S. dollars in thousands (except share and per share data)
| Six Months Ended June 30, 2024 | Number
of ordinary shares | Additional
paid-in capital | Accumulated
deficit | Total shareholders’ equity | ||||||||||||
| Balances as of January 1, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Share-based compensation | - | - | ||||||||||||||
| Issuance of Ordinary shares, warrants and pre-funded warrants, net (1) | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balances as of June 30, 2024 (unaudited) | $ | $ | ( | ) | $ | |||||||||||
| (1) |
| Six Months Ended June 30, 2023 | Number
of ordinary shares *) | Additional
paid-in capital | Accumulated
deficit | Total shareholders’ equity | ||||||||||||
| Balances as of January 1, 2023 | $ | $ | ( | ) | $ | |||||||||||
| Share-based compensation | - | - | ||||||||||||||
| Issuance of Ordinary shares, net (2) | ||||||||||||||||
| Issuance of pre-funded warrants, net (3) | ||||||||||||||||
| Modification of warrants | - | - | ||||||||||||||
| Reclassification of pre-funded warrants to Liabilities | - | ( | ) | ( | ) | |||||||||||
| Reclassification of pre-funded warrants to Equity | - | |||||||||||||||
| Cashless exercise of pre-funded warrants | - | - | - | |||||||||||||
| Exercise of options | ||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balances as of June 30, 2023 (unaudited) | $ | $ | ( | ) | $ | |||||||||||
| (2) |
| (3) |
| *) | Prior period results have been retroactively adjusted to reflect the 1-for-30 reverse share split effected on September 18, 2023 (see Note 1b). |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 5 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
U.S. dollars in thousands (except share and per share data)
| Year Ended December 31, 2023 | Number
of ordinary shares |
Additional
paid-in capital |
Accumulated
deficit |
Total
shareholders’ equity (deficit) |
||||||||||||
| Balances as of January 1, 2023 | $ | $ | ( |
) | $ | |||||||||||
| Share-based compensation | - | - | ||||||||||||||
| Issuance of Ordinary shares, net (1) | ||||||||||||||||
| Issuance of pre-funded warrants, net (2) | ||||||||||||||||
| Modification of warrants | - | - | ||||||||||||||
| Reclassification of pre-funded warrants into liabilities | - | ( |
) | ( |
) | |||||||||||
| Reclassification of pre-funded warrants into equity | - | |||||||||||||||
| Cashless exercise of pre-funded warrants | - | - | - | |||||||||||||
| Exercise of options | ||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||
| Balances as of December 31, 2023 | $ | $ | ( |
) | $ | ( |
) | |||||||||
| (1) |
| (2) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 6 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Six
Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Non-cash financial expenses, net | ||||||||
| Remeasurement of warrants classified as a liability | ( | ) | ||||||
| Share-based compensation expenses | ||||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ||||||||
| Operating lease right-of-use-assets | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Trade payables | ( | ) | ||||||
| Accrued expenses and other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Investment in bank deposits | ( | ) | ( | ) | ||||
| Proceeds from bank deposits | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of Ordinary shares, warrants and pre-funded warrants, net | ||||||||
| Payments due to long-term debt | ( | ) | ( | ) | ||||
| Payment of fees due to modification of debt | ( | ) | ||||||
| Proceeds from exercise of options | ||||||||
| Net cash provided by financing activities | ||||||||
| Decrease in cash, cash equivalents and restricted deposits | ( | ) | ( | ) | ||||
| Cash, cash equivalents and restricted deposits at the beginning of the period | ||||||||
| Cash, cash equivalents and restricted deposits at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 7 -
POLYPID LTD. AND ITS SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
| Six
Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| Non-cash activities: | ||||||||
| Modification of warrants | $ | $ | ||||||
| Credit line derivative | $ | $ | ||||||
| Issuance costs | $ | $ | ||||||
| Right-of-use asset recognized with corresponding lease liability | $ | $ | ||||||
| Supplemental disclosures of cash flows: | ||||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted deposits | ||||||||
| Restricted deposits included in other long-term assets | ||||||||
| Cash, cash equivalents and restricted deposits at the end of the period | $ | $ | ||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
- 8 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 1:- | GENERAL |
| a. | PolyPid Ltd. (the “Company”) was incorporated under the laws of Israel and commenced operations on February 28, 2008. The Company is a Phase 3 biopharmaceutical company focused on developing targeted, locally administered, and prolonged-release therapeutics using its proprietary PLEX (Polymer-Lipid Encapsulation matriX) technology. The Company’s product candidates are designed to address unmet medical needs by delivering active pharmaceutical ingredients, locally at predetermined release rates and durations over extended periods ranging from days to several months. The Company is initially focused on the development of its lead product candidate, D-PLEX100, which incorporates an antibiotic for the prevention of surgical site infections (“SSIs”) in bone and soft tissue. Through June 30, 2024, the Company has been primarily engaged in research and development. |
The Company’s wholly owned subsidiaries include a subsidiary in the United States (the “US Subsidiary”) and a subsidiary in Romania. The US Subsidiary’s operation focuses on marketing and business development of the Company’s operation in the United States.
| b. | On September 18, 2023, the Company’s board of directors approved 1-for-30 reverse share split. No fractional shares were issued, and no cash or other consideration was paid as a result of the reverse share split. Instead, the Company issued one additional whole share of the post-reverse share split Ordinary share to any shareholder who otherwise would have received a fractional share as a result of the reverse share split. The amount of authorized Ordinary shares was not affected. All issued and outstanding share and per share amounts included in the accompanying consolidated financial statements have been adjusted to reflect this reverse share split for all periods presented. |
| c. | The Company’s activities since inception have consisted of performing research and development activities. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things, its ability to secure financing; obtain marketing approval from regulatory authorities; access potential markets; build a sustainable customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. The Company’s operations are funded by its shareholders and research and development grants and the Company intends to seek further private or public financing as well as make applications for further research and development grants for continuing its operations. Although management believes that the Company will be able to successfully fund its operations, there can be no assurance that the Company will be able to do so or that the Company will ever operate profitably. |
In
September 2022,
- 9 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 1:- | GENERAL (CONT.) |
| d. | The Company expects to continue to incur substantial losses over the next several years during its clinical development phase. To fully execute its business plan, the Company will need to complete Phase 3 clinical studies and certain development activities as well as manufacture the required clinical and commercial production batches in the pilot manufacturing plant. Further, the Company’s product candidates will require regulatory approval prior to commercialization, and the Company will need to establish sales, marketing and logistic infrastructures. These activities may span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. |
As
of June 30, 2024, the Company’s cash, cash equivalents and short-term deposits amounted to a total of $
Management plans to seek additional equity financing through private and public offerings or strategic partnerships and, in the longer term, by generating revenues from product sales.
The Company’s future operations are highly dependent on a combination of factors, including (i) completion of all required clinical studies; (ii) the success of its research and development activities; (iii) manufacture of all required clinical and commercial production batches; (iv) marketing approval by the relevant regulatory authorities; and (v) market acceptance of the Company’s product candidates.
There can be no assurance that the Company will succeed in achieving the clinical, scientific and commercial milestones as detailed above.
Based on the abovementioned, as of the approval date of these interim consolidated financial statements, the Company has not raised the necessary funding in order to continue its activity for a period of at least one year. Therefore, these factors raise a substantial doubt about the Company’s ability to continue as a going concern. The interim condensed consolidated financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that might result should the Company be unable to continue as a going concern.
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
| a. | Basis of presentation and summary of significant accounting policies: |
The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States and are consistent in all material respects with those applied in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 6, 2024.
The preparation of interim condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect the amounts reported in the interim condensed consolidated financial statements and accompanying notes. Significant items subject to such estimates and assumptions, but are not limited to, the fair value of financial assets and liabilities, the useful lives of property and equipment and the determination of the fair value of the Company’s share-based compensation. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.
- 10 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| a. | Basis of presentation and summary of significant accounting policies: (Cont.) |
The interim financial information is unaudited, but reflects all normal recurring adjustments that are, in the opinion of management, necessary to fairly present the information set forth herein. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023 (the “2023 Consolidated Financial Statements”). Interim results are not necessarily indicative of the results for a full year.
There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023.
| b. | Basic and diluted loss per share: |
The Company’s basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted-average number of shares of ordinary shares outstanding for the period, without consideration of potentially dilutive securities. The diluted loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury share method or the if-converted method based on the nature of such securities. Diluted loss per share is the same as basic loss per share in periods when the effects of potentially dilutive shares of ordinary shares are anti-dilutive.
| c. | Fair value of financial instruments: |
Under U.S. GAAP, fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:
| Level 1 - | Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets and liabilities. | |
| Level 2 - | Include other inputs that are directly or indirectly observable in the marketplace. | |
| Level 3 - | Unobservable inputs which are supported by little or no market activity. |
The carrying amounts of cash and cash equivalents, restricted deposits, short-term deposits, long-term debt, other current assets, trade payables, accrued expenses and other current and non-current liabilities approximate their fair value due to the short-term maturity of such instruments.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.
| d. | Recently adopted accounting pronouncements: |
As an “Emerging Growth Company”, the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The Company has reviewed recent accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on the condensed consolidated financial statements as a result of their future adoption.
- 11 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (CONT.) |
| e. | Recently issued accounting pronouncements, not yet adopted: |
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in Accounting Standards Codification (“ASC”) 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.
| NOTE 3:- | LEASES |
The Company leases substantially all of its office space and vehicles under operating leases. The Company’s leases have original lease periods expiring between 2024 and 2027.
On January 14, 2024, the Company entered into a new lease agreement for one of its premises, with the lease term extending through July 2027.
The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain. Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments, payments for optional renewal periods, where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
| Weighted average remaining lease term (years) | ||||
| Weighted average discount rates | % |
| Operating lease cost | $ | |||
| Cash payments for operating leases | $ |
| The remainder of 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total undiscounted lease payments | ||||
| Less - imputed interest | ( | ) | ||
| Present value of lease liabilities | $ |
- 12 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 4:- | LINE OF CREDIT ARRANGEMENT |
Further to the discussion in Note 7 in the 2023 Consolidated Financial Statements regarding the secured line of credit agreement signed on April 5, 2022, with Kreos Capital VI (Expert Fund) LP (“Kreos”) (the “Credit Line” or “debt”), the Company entered into an amendment to the Credit Line on March 29, 2023 (the “Amendment”).
On
January 9, 2024, the Company repaid $
During
the six-month periods ended on June 30, 2024 and 2023, the Company recognized $
| NOTE 5:- | COMMITMENTS AND CONTINGENT LIABILITIES |
In
connection with its research and development programs, through June 30, 2024, the Company received participation payments from the Israel
Innovation Authority of the Ministry of Economy in Israel (“IIA”) in the aggregate amount of $
For the six-month period ended June 30, 2024, no new participation payments were received.
Through June 30, 2024, no royalties have been paid or accrued.
| NOTE 6:- | SHAREHOLDERS’ EQUITY (DEFICIT) |
| a. |
| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Unaudited | Audited | |||||||||||||||
| Authorized | Issued
and outstanding | Authorized | Issued
and outstanding | |||||||||||||
| Number of shares | ||||||||||||||||
| Ordinary shares | ||||||||||||||||
| b. | Financing rounds: |
On
March 29, 2023, the Company entered into a private placement of unregistered pre-funded warrants to purchase up to
On
March 31, 2023, the Company closed a public offering which was comprised of
Following
the Public Offering, the Company did not have a sufficient number of authorized Ordinary shares to cover
- 13 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- | SHAREHOLDERS’ EQUITY (DEFICIT) (CONT.) |
| b. | Financing rounds: (Cont.) |
On
May 5, 2023, the shareholders of the Company approved to increase the Company’s authorized share capital by
On
May 11, 2023, all of the PFWs were exercised into
On
January 4, 2024, the Company entered into a definitive securities purchase agreement for a private placement financing, led by leading
U.S. life sciences-focused investors and certain existing investors. Under the securities purchase agreement, the investors purchased
In
accordance with ASC 480 and ASC 815, the pre-funded warrants and the warrants were qualified for equity accounting. The fair value for
warrant to purchase an ordinary share is $
| Dividend yield (%) | ||||
| Expected volatility (%) | ||||
| Risk-free interest rate (%) | ||||
| Expected term (in years) |
| c. | Share option plan: |
The Company’s board of directors authorizes option grants through its 2012 Share Option Plan to officers, directors, advisors, management and other key employees. The options granted generally have a four-year vesting period and expire ten years after the date of grant. Options granted under the Company’s option plan that are canceled or forfeited before expiration become available for future grant.
On
May 6, 2024, the Company’s board of directors approved to increase the Company’s options pool by an additional
As
of June 30, 2024,
During
the first quarter of 2023, the Company decreased the exercise price of
- 14 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- | SHAREHOLDERS’ EQUITY (DEFICIT) (CONT.) |
| c. | Share option plan: (Cont.) |
On
May 5, 2023, the Company’s board of directors also approved a similar exercise price decrease of
Number of options | Weighted average exercise price | Aggregate intrinsic value | Weighted contractual | |||||||||||||
| Outstanding at beginning of period | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Forfeited and expired | ( | ) | $ | |||||||||||||
| Outstanding at end of period | $ | $ | ||||||||||||||
| Exercisable options | $ | $ | ||||||||||||||
| Vested and expected to vest | $ | $ | ||||||||||||||
| Dividend yield (%) | ||||
| Expected volatility (%) | ||||
| Risk-free interest rate (%) | ||||
| Expected term (in years) |
Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| Research and development | $ | $ | ||||||
| Marketing and business development | ||||||||
| General and administrative | ||||||||
| $ | $ | |||||||
As
of June 30, 2024, there were unrecognized compensation costs of $
- 15 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- | SHAREHOLDERS’ EQUITY (DEFICIT) (CONT.) |
| c. | Share option plan: (Cont.) |
On
May 6, 2024, the Board of directors granted a total of
The
average exercise price for Milestone-Based Options is $
As of June 30, 2024, the milestone condition is not probable of being achieved; therefore, no compensation costs were recognized.
| d. | Warrants and pre-funded warrants: |
| Grant date | Warrants outstanding as of June 30, 2024 | Average Exercise price per share ($) | Warrants exercisable as of June 30, 2024 | Exercisable through | ||||||||||
| September 2020 | $ | |||||||||||||
| April 2022 | $ | |||||||||||||
| July 2022 | $ | |||||||||||||
| January 2024 | $ | |||||||||||||
| January 2024 | $ | |||||||||||||
No Warrants were exercised during the six-month period ended June 30, 2024.
*)
| NOTE 7:- | BASIC AND DILUTED LOSS PER SHARE |
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Unaudited | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Allocation of loss attributable to ordinary shareholders | $ | $ | $ | $ | ||||||||||||
| Denominator: | ||||||||||||||||
| Weighted average Ordinary shares outstanding | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
- 16 -
POLYPID LTD. AND ITS SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
U.S. dollars in thousands (except share and per share data)
| NOTE 7:- | BASIC AND DILUTED LOSS PER SHARE (CONT.) |
| Three
and Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Unaudited | ||||||||
| Ordinary share options | ||||||||
| Warrants | ||||||||
| NOTE 8:- | SUBSEQUENT EVENTS |
| 1. | On July 2, 2024, the shareholders meeting approved a grant of |
| 2. | On August 1, 2024, the Company entered into a definitive securities purchase agreement for a private placement financing. Under the securities purchase agreement, the investors have agreed to purchase |
| 3. | Further to the discussed in Note 4, on August 1, 2024, the Company entered into a second amendment (the “Second Amendment”) to the Credit Line. Pursuant to the Second Amendment, |
As
part of the Second Amendment, the Company issued to Kreos a warrant to purchase
-----------------------------
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Exhibit 99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of June 30, 2024, and for the Six Months then Ended
Cautionary Statement Regarding Forward-Looking Statements
Certain information included herein may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:
| ● | our dependence on enrollment of patients in our clinical trials in order to continue development of our product candidates; |
| ● | the outcomes of our anticipated interim analysis in our SHIELD II clinical trial; |
| ● | our ability to raise capital through the issuance of securities; |
| ● | our ability to advance the development of our product candidates, including the anticipated starting and ending dates of our anticipated clinical trials; |
| ● | our assessment of the potential of our product candidates to treat certain indications; |
| ● | our ability to successfully receive approvals from the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or other applicable regulatory bodies, including approval to conduct clinical trials, the scope of those trials and the prospects for regulatory approval of, or other regulatory action with respect to our product candidates, including the regulatory pathway to be designated to our product candidates; |
| ● | the regulatory environment and changes in the health policies and regimes in the countries in which we operate, including the impact of any changes in regulation and legislation that could affect the pharmaceutical industry; |
| ● | our ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future potential product candidates; |
| ● | our ability to meet our expectations regarding the commercial supply of our product candidates; |
| ● | the overall global economic environment; |
| ● | the potential impact of the COVID-19 pandemic on the territories in which the Company operates; |
| ● | the impact of competition and new technologies; |
| ● | general market, political and economic conditions in the countries in which we operate; |
| ● | projected capital expenditures and liquidity; |
| ● | changes in our strategy; and |
| ● | litigation. |
The foregoing list is intended to identify only certain of the principal factors that could cause actual results to differ. For a more detailed description of the risks and uncertainties affecting our company, reference is made to our Annual Report on Form 20-F for the year ended December 31, 2023, or our Annual Report, which was filed with the Securities and Exchange Commission, or the SEC, on March 6, 2024, and the other risk factors discussed from time to time by our company in reports filed or furnished to the SEC.
Except as otherwise required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Unless otherwise indicated, all references to “Company,” “we,” “our” and “PolyPid” refer to PolyPid Ltd., its wholly owned subsidiaries, PolyPid Inc., a Delaware corporation, and PolyPid Pharma SRL, a company organized and existing under the laws of Romania. References to “U.S. dollars” and “$” are to currency of the United States of America, and references to “shekel,” “Israeli shekel” and “NIS” are to New Israeli Shekels. References to “Ordinary Shares” are to our Ordinary Shares, no par value. We report our financial statements in accordance with generally accepted accounting principles in the United States.
Operating Results
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included in our Annual Report, as well as our unaudited condensed consolidated financial statements and the related notes thereto for the six months ended June 30, 2024, included elsewhere in this Report on Form 6-K. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties.
Overview
Since our inception in 2008, we have incurred significant operating losses. Our operating losses for the six months ended June 30, 2023 and 2024 were $11.6 million and $12.4 million, respectively. As of June 30, 2024, we had an accumulated deficit of $251.1 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future, and our losses may fluctuate significantly from year to year. We anticipate we will continue to incur expenses in connection with our ongoing activities, as we:
| ● | continue clinical development of D-PLEX100, including our SHIELD II Phase 3 clinical trial for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions; | |
| ● | file New Drug Applications, or NDAs, seeking regulatory approval for D-PLEX100 pursuant to the FDA’s Section 505(b)(2) regulatory pathway in the United States and the hybrid application pathway in the European Union; | |
| ● | continue to invest in the preclinical research and development of OncoPLEX and any other future product candidates; | |
| ● | continue to invest in our manufacturing facility and complete commercial process validation for the facility; | |
| ● | establish commercial infrastructure to support the marketing, sale and distribution of D-PLEX100 if it receives regulatory approval; | |
| ● | hire field and office-based employees to prepare for and launch any approved product; |
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| ● | hire additional research and development and general and administrative personnel to support our operations; | |
| ● | maintain, expand and protect our intellectual property portfolio; and | |
| ● | incur additional costs associated with operating as a public company. |
We do not have any product candidates approved for sale and have not generated any revenue from product sales.
Results of Operations
Comparison of the Six months Ended June 30, 2023 and 2024
The following table summarizes our results of operations for the six months ended June 30, 2023 and 2024:
| Six
months Ended June 30, | ||||||||
| 2023 | 2024 | |||||||
| (in thousands) | ||||||||
| Research and development, net | $ | 7,754 | $ | 9,810 | ||||
| Marketing and business development | 742 | 501 | ||||||
| General and administrative | 3,112 | 2,111 | ||||||
| Operating loss | 11,608 | 12,422 | ||||||
| Financial expense, net | 262 | 311 | ||||||
| Loss before income tax | $ | 11,870 | $ | 12,733 | ||||
| Income tax expense | 35 | 9 | ||||||
| Net loss | $ | 11,905 | $ | 12,742 | ||||
Research and Development, Net
Research and development, net increased by $2.1 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This increase was primarily related to an increase of $2.7 million in costs related to the ongoing SHIELD II trial and an increase of $0.1 million in our manufacturing facility expenses. These increases were offset by a decrease of $0.4 million in research and development costs related to D-PLEX100 and OncoPLEX, a decrease of $0.1 million in personnel costs and a decrease of $0.2 million in non-cash share-based compensation.
Marketing and business development
Marketing and business development decreased by $0.2 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This decrease was primarily related to a decrease of $0.1 million in pre-commercialization activities for the product candidate D-PLEX100, and a decrease of $0.1 million in personnel costs and non-cash share-based compensation.
General and Administrative
General and administrative decreased by $1.0 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This decrease was primarily related to a decrease of $0.2 million in directors’ and officers’ insurance premiums, a decrease of $0.3 million in personnel costs and a decrease of $0.3 million in non-cash share-based compensation and a decrease of $0.2 million in professional services costs.
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Financial Expense, Net
Financial expense, net generally remained unchanged for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Net loss
Net loss increased by $0.8 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. This increase was primarily related to the increase in research and development, net of $2.1 million, offset by a decrease in general and administrative of $1.0 million and a decrease in marketing and business development costs of $0.2 million.
Qualitative and Quantitative Disclosures about Market Risk
Foreign Currency Exchange Risk
We operate primarily in Israel, and approximately 50% of our expenses are denominated in NIS. We are therefore exposed to market risk, which represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We are subject to fluctuations in foreign currency rates in connection with these arrangements. Changes of 5% and 10% in the U.S. dollar/NIS exchange rate would have increased/decreased operating expenses by approximately 1.2% and 2.4%, respectively, during the six months ended June 30, 2024.
We currently partially hedge our foreign currency exchange rate risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
Interest Rate Risk
At present, our investments consist primarily of cash and cash equivalents and short-term deposits. We may invest in investment-grade marketable securities with maturities of up to three years, including commercial paper, money market funds, and government/non-government debt securities. The primary objective of our investment activities is to preserve principal while maximizing the income that we receive from our investments without significantly increasing risk and loss. Our investments may be exposed to market risk due to fluctuation in interest rates, which may affect our interest income and the fair market value of our investments, if any.
Inflation-Related Risks
Inflation generally affects us by increasing our NIS-denominated expenses, including salaries and benefits, as well as facility rental costs and payment to local suppliers. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the six months ended June 30, 2024, but we continue to monitor these closely.
JOBS Act Transition Period
Section 107 of the Jumpstart Our Business Startups Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.
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Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue and have incurred operating losses and negative cash flows from our operations.
On April 5, 2022, we entered into a loan agreement, or the Loan Agreement, for up to $15 million with Kreos Capital VI (Expert Fund) LP, or Kreos. The Loan Agreement is comprised of three tranches in the amount of $10 million, $2.5 million, and $2.5 million, respectively. Drawdown of the first tranche was available upon the execution of the Loan Agreement. The second tranche of $2.5 million was available after we met the second tranche milestone in May 2022. The first tranche in the amount of $10 million was drawn on April 26, 2022. The issuance costs due to the Loan Agreement amounted to $0.2 million and the second tranche in the amount of $2.5 million was drawn on July 19, 2022. The third and final tranche of $2.5 million will not be drawn since the third tranche milestone has not been met.
The Loan Agreement provides for interest-only repayments of the first tranche until December 31, 2022, followed by 36 equal monthly repayments of principal and interest. For the second tranche, we will make repayments of interest only until August 31, 2023, followed by 33 equal monthly repayments of principal and interest. The senior secured loan initially bears interest at a rate of 9.25%. The loan is prepayable in full, at any time at our option. The loan is secured by our owned equipment, intellectual property and all shares we hold in PolyPid Inc. and PolyPid Pharma SRL. Additionally, PolyPid Inc. entered into a guaranty agreement with Kreos, all as security for monies borrowed by us under the Loan Agreement.
On March 29, 2023 and August 1, 2024, we entered into amendments to the Loan Agreement. Pursuant to the most recent amendment, 60% of the remaining principal and interest repayments will be delayed and repaid on a monthly equal basis from April 2025. The amended secured loan now bears interest at a rate of 12.00%, and we will pay a restructuring fee to Kreos of $125,000. In return for this additional deferral of repayment, Kreos has the right to receive a potential claw back payment on account of the then outstanding principal amount. This claw back mechanism will be triggered by additional incoming funds from future partnership agreement or additional financing. The claw back will not exceed $4.5 million. As of June 30, 2024, the Company has paid $1.5 million of the claw back.
As part of the recent amendment, we issued to Kreos a warrant to purchase 40,000 ordinary shares of the Company at an exercise price of $3.61 per share. Following the execution of the recent amendment, Kreos holds warrants to purchase a total of 46,491 ordinary shares of the Company, as follows: (i) 6,491 shares at an exercise price of $12.60 per share; and (ii) 40,000 shares at an exercise price of $3.61 per share. The expiration date for each warrant issued is seven years from the respective issuance date.
In March 2023, we completed an offering, or the March 2023 Offering, pursuant to which we sold 488,667 Ordinary Shares at a public offering price of $12.60 per share, for total gross proceeds of $6.2 million. In addition, we granted to the underwriter a 30-day option to purchase up to an additional 15% of the Ordinary Shares offered in the Offering at the public offering price, less underwriting discounts and commissions. The underwriter exercised its option in full at the closing of the Offering. The securities were offered by us pursuant to a “shelf” under the F-3. Concurrently with the March 2023 Offering, we entered into a private placement with some of our existing shareholders, pursuant to which we issued pre-funded warrants, or the Pre-Funded Warrants, to acquire an aggregate of up to 345,238 Ordinary Shares for total gross proceeds of $4.4 million. The exercise price per Pre-Funded Warrant is $0.003 per Ordinary Share. Exercise of the Pre-Funded Warrants was subject to an increase in our authorized share capital. We held an annual and extraordinary general meeting of shareholders on May 5, 2023 under which we obtained shareholders’ approval to increase the number of our authorized share capital. On May 11, 2023, all of the Pre-Funded Warrants were exercised into 345,151 Ordinary shares on a cashless basis.
On January 4, 2024, we entered into a definitive securities purchase agreement, or the January Securities Purchase Agreement, for a private placement financing. Pursuant to the January Securities Purchase Agreement, on January 9, 2024, certain investors purchased 3,143,693 of our Ordinary Shares at a purchase price of $4.81 per share, pre-funded warrants to purchase up to 227,619 Ordinary Shares at an exercise price of $0.0001 and warrants to purchase up to 3,371,312 Ordinary Shares at an exercise price of $5.50 per share. The pre-funded warrants do not expire and the warrants expire upon the earlier of two years from the date of issuance and 10 trading days following the Company’s announcement of the positive recommendation by Data Safety Monitoring Board regarding the Company’s unblinded interim analysis in the SHIELD II Phase 3 trial of D-PLEX100 resulting in the stopping of the trial due to positive efficacy. The offering resulted in net proceeds of approximately $15.0 million. Exercise of the warrants in full would result in an additional $18.5 million in gross proceeds. We intend to use the net proceeds from the sale of the securities for our ongoing SHIELD II phase 3 clinical trial for the prevention of SSIs in patients undergoing abdominal colorectal surgery with large incisions, working capital and general corporate purposes.
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On August 1, 2024, we entered into a definitive securities purchase agreement, or the August Securities Purchase Agreement, for a private placement financing, or the August 2024 Private Placement. Pursuant to the August Securities Purchase Agreement, on August 6, 2024, certain investors purchased 2,006,226 of our Ordinary Shares at a purchase price of $3.61 per share, pre-funded warrants to purchase up to 229,231 Ordinary Shares at an exercise price of $0.0001 and warrants to purchase up to 1,676,588 Ordinary Shares at an exercise price of $3.61 per share. The pre-funded warrants do not expire and the warrants expire upon the earlier of two years from the date of issuance and 10 trading days following our announcement of the recommendation by Data Safety Monitoring Board regarding our unblinded interim analysis in its SHIELD II Phase 3 trial of D-PLEX100 resulting in either the stopping of the trial due to positive efficacy, or continuation to planned patient recruitment (up to 630 subjects). The offering resulted in net proceeds of approximately $7.5 million. Exercise of the warrants in full would result in an additional $6.1 million in gross proceeds. We intend to use the net proceeds from the sale of the securities for our ongoing SHIELD II phase 3 clinical trial for the prevention of surgical site infections in patients undergoing abdominal colorectal surgery, working capital and general corporate purposes.
As of June 30, 2024, we had $9.3 million in cash and cash equivalents and short-term deposits.
Cash Flows
The following table provides information regarding our cash flows for the periods indicated:
| Six
Months Ended June 30, | ||||||||
| 2023 | 2024 | |||||||
| (in thousands) | ||||||||
| Net cash used in operating activities | $ | (8,281 | ) | $ | (8,494 | ) | ||
| Net cash provided by (used in) investing activities | (7,863 | ) | (6,210 | ) | ||||
| Net cash provided by financing activities | 10,976 | 12,502 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | (5,168 | ) | $ | (2,202 | ) | ||
Operating Activities
Net cash used in operating activities related primarily to our net losses adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net loss for non-cash items mainly included depreciation, remeasurement of pre-funded warrants and share-based compensation.
Net cash used in operating activities was $8.5 million for the six months ended June 30, 2024, as compared to $8.3 million for the six months ended June 30, 2023. This increase was primarily related to the ongoing SHIELD II Phase 3 clinical trials in abdominal colorectal surgery with large incisions.
Investing Activities
Net cash used in investing activities related primarily to the purchase and release of short-term deposits and the acquisition of laboratory equipment, office equipment and furniture and leasehold improvements.
Net cash used in investing activities was $6.2 million for the six months ended June 30, 2024, as compared to net cash used in investing activities of $7.9 million for the six months ended June 30, 2023. This change in net cash used in investing activities primarily related to change in short-term deposits, net.
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Financing Activities
Net cash provided by financing activities was $12.5 million for the six months ended June 30, 2024, as compared to $11.0 million for the six months ended June 30, 2023. The increase in net cash provided by financing activities is primarily related to the net proceeds from the January 2024 Private Placement offset by the repayments of the loan provided by Kreos.
Current Outlook
To date, we have not generated any revenues from the commercial sale of our product candidates, and we do not expect to generate revenue for at least the next few years. We expect to continue to incur expenses in connection with our ongoing activities, particularly as we continue to conduct clinical trials and seek marketing approval for our product candidates, and as we continue the research and development of our other existing and future product candidates. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.
We expect that our existing cash and cash equivalents and short-term deposits will enable us to fund our operating expenses and capital expenditure requirements into first quarter of 2025. We anticipate that we will need to raise additional capital in order to complete our clinical and regulatory program for D-PLEX100 towards potential NDA submission, including the SHIELD II clinical trial, as well as continue to invest in the research and development of OncoPLEX and any other future product candidates. If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely affected, and there is substantial doubt about our ability to continue as a going concern. We had a shareholders’ equity of $1.6 million as of June 30, 2024, and negative operating cash flows in recent years. As of August 11, 2024, however, our shareholders’ equity is approximately $7 million following the completion of the August 2024 Private Placement. We expect to continue incurring losses and negative cash flows from operations until our products reach commercial profitability. Our plans to reduce the going concern risk include the continued commercialization of our products, maintaining cost efficiency and raising capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships.
Our future capital requirements will depend on many factors, including:
| ● | the scope, progress, results and costs of our ongoing clinical trial; | |
| ● | the costs, timing and outcome of regulatory review of D-PLEX100 and any future product candidates; | |
| ● | the costs and timing of establishing and validating manufacturing processes and facilities for development and commercialization of D-PLEX100 and any future product candidates, if approved, including our manufacturing facility; |
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| ● | the number and development requirements of any future product candidates that we may pursue; | |
| ● | the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; | |
| ● | the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval, which may be affected by market conditions, including obtaining coverage and adequate reimbursement of our product candidates from third-party payors, including government programs and managed care organizations, and competition; | |
| ● | our ability to establish and maintain collaborations with biopharmaceutical companies on favorable terms, if at all; | |
| ● | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and | |
| ● | the extent to which we acquire or in-license other product candidates and technologies. |
Identifying potential product candidates and conducting clinical trials and preclinical studies is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for few years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants, collaborations, strategic alliances and licensing arrangements. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Research and development, patents and licenses, etc.
A comprehensive discussion of our research and development, patents and licenses, etc., is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report.
Trend Information
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales for at least the next few years. From inception through June 30, 2024, we incurred $161.4 million in research and development expenses, net to advance the development of our clinical-stage product candidates, as well as other preclinical research and development programs. We expect to continue to incur expenses in connection with our ongoing activities, particularly as we continue to conduct clinical trials and seek marketing approval for our product candidates, and as we continue the research and development of our other existing and future product candidates. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing, manufacturing and distribution are not the responsibility of potential collaborators. For a description of additional factors that may affect our future performance, please see “Item 5. Operating and Financial Review and Prospects— B. Liquidity and Capital Resources— Current Outlook.”
Critical Accounting Estimates
The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, obligations, income and expenses during the reporting periods. In addition to our accounting estimate used in line of credit discussed below, for a comprehensive discussion of our critical accounting estimates please see “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations – E. Critical Accounting Estimates” section in our Annual Report.
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