|
SOL-GEL TECHNOLOGIES LTD.
|
||
|
|||
Date: August 13, 2019
|
By:
|
/s/ Gilad Mamlok
|
|
|
|
Gilad Mamlok
|
|
|
|
Chief Financial Officer
|
• |
Top-line generic product revenue of $7.8 million
|
• |
TWIN Phase 3 trials are fully enrolled and remain on track to report results in 4Q19
|
- |
In the second quarter, Sol-Gel generated revenue of $7.8 million from its collaborative arrangement with Perrigo.
|
- |
In July 2019, Sol-Gel received Notice of Allowance from the United States Patent and Trademark Office for a patent covering TWIN for the treatment of acne vulgaris. The newly granted patent will extend protection to July 2038, which
Sol-Gel believes will prevent the launch of AB-related generic of TWIN during the life of the patent.
|
- |
Epsolay met all primary and secondary endpoints in both Epsolay Phase 3 trials, with statistically significant improvement seen as early as Week 2 compared with vehicle.
|
- |
Enrollment in the two pivotal Phase 3 TWIN trials in acne vulgaris has been completed with top-line results expected in the fourth quarter of 2019, as previously announced.
|
- |
Results from a bioequivalence study for generic 5-fluorouracil cream, 5%, for actinic keratosis, continue to be expected in 2019 followed by a filing in the U.S. of an abbreviated new drug application expected in 2020. This study is
part of a collaboration with Douglas Pharmaceuticals.
|
- |
During an investor event held on July 25th, Sol-Gel announced an expansion to its development pipeline to include SGT-210, a topical epidermal growth
factor receptor inhibitor, for the potential treatment of palmoplantar keratoderma (PPK) and non-melanoma skin cancer. A proof of concept study of SGT-210 in PPK is expected to begin in the first quarter of 2020.
|
December 31,
|
June 30,
|
|||||||
2018
|
2019
|
|||||||
A s s e t s
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
5,325
|
$
|
14,388
|
||||
Bank deposit
|
1,000
|
-
|
||||||
Marketable securities
|
56,662
|
35,519
|
||||||
Accounts receivable
|
-
|
7,826
|
||||||
Prepaid expenses and other current assets
|
2,987
|
1,097
|
||||||
TOTAL CURRENT ASSETS
|
65,974
|
58,830
|
||||||
NON-CURRENT ASSETS:
|
||||||||
Restricted long-term deposits
|
462
|
467
|
||||||
Property and equipment, net
|
2,604
|
2,454
|
||||||
Operating lease right-of-use assets
|
-
|
952
|
||||||
Funds in respect of employee rights upon retirement
|
642
|
675
|
||||||
TOTAL NON-CURRENT ASSETS
|
3,708
|
4,548
|
||||||
TOTAL ASSETS
|
$
|
69,682
|
$
|
63,378
|
||||
Liabilities and shareholders' equity
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
2,924
|
$
|
2,767
|
||||
Other account payable
|
1,971
|
4,063
|
||||||
Current maturities of operating leases
|
-
|
526
|
||||||
TOTAL CURRENT LIABILITIES
|
4,895
|
7,356
|
||||||
LONG-TERM LIABILITIES -
|
||||||||
Operating leases liabilities
|
-
|
323
|
||||||
Liability for employee rights upon retirement
|
878
|
957
|
||||||
TOTAL LONG-TERM LIABILITIES
|
878
|
1,280
|
||||||
COMMITMENTS
|
||||||||
TOTAL LIABILITIES
|
5,773
|
8,636
|
||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Ordinary Shares, NIS 0.1 par value – authorized: 50,000,000 as of December 31, 2018 and March 31, 2019;
issued and outstanding: 18,949,968 as of December 31, 2018 and March 31, 2019
|
520
|
520
|
||||||
Additional paid-in capital
|
190,853
|
192,340
|
||||||
Accumulated deficit
|
(127,464
|
)
|
(138,118
|
)
|
||||
TOTAL SHAREHOLDERS' EQUITY
|
63,909
|
54,742
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
69,682
|
$
|
63,378
|
Six months ended
June 30
|
Three months ended
June 30
|
|||||||||||||||
2018
|
2019
|
2018
|
2019
|
|||||||||||||
COLLABORATION REVENUES
|
$
|
93
|
$
|
14,151
|
$
|
49
|
$
|
7,793
|
||||||||
RESEARCH AND DEVELOPMENT EXPENSES
|
10,462
|
22,233
|
5,817
|
11,440
|
||||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES
|
2,660
|
3,332
|
1,518
|
1,638
|
||||||||||||
TOTAL OPERATING LOSS
|
13,029
|
11,414
|
7,286
|
5,285
|
||||||||||||
FINANCIAL INCOME, NET
|
(409
|
)
|
(760
|
)
|
(379
|
)
|
(359
|
)
|
||||||||
LOSS FOR THE PERIOD
|
$
|
12,620
|
$
|
10,654
|
$
|
6,907
|
$
|
4,926
|
||||||||
BASIC AND DILUTED LOSS PER ORDINARY SHARE
|
$
|
0.75
|
$
|
0.56
|
$
|
0.36
|
$
|
0.26
|
||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION
OF BASIC AND DILUTED LOSS PER SHARE
|
16,761,158
|
18,949,968
|
18,949,968
|
18,949,968
|
Page
|
|
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6 - F-13
|
December 31,
|
June 30,
|
|||||||
2018
|
2019
|
|||||||
Assets
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$
|
5,325
|
$
|
14,388
|
||||
Bank deposit
|
1,000
|
-
|
||||||
Marketable securities
|
56,662
|
35,519
|
||||||
Receivables from collaborative arrangements
|
-
|
7,826
|
||||||
Prepaid expenses and other current assets
|
2,987
|
1,097
|
||||||
TOTAL CURRENT ASSETS
|
65,974
|
58,830
|
||||||
NON-CURRENT ASSETS:
|
||||||||
Restricted long-term deposits
|
462
|
467
|
||||||
Property and equipment, net
|
2,604
|
2,454
|
||||||
Operating lease right-of-use assets
|
-
|
952
|
||||||
Funds in respect of employee rights upon retirement
|
642
|
675
|
||||||
TOTAL NON-CURRENT ASSETS
|
3,708
|
4,548
|
||||||
TOTAL ASSETS
|
$
|
69,682
|
$
|
63,378
|
||||
Liabilities and shareholders' equity
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$
|
2,924
|
$
|
2,767
|
||||
Other account payable
|
1,971
|
4,063
|
||||||
Current maturities of operating leases
|
-
|
526
|
||||||
TOTAL CURRENT LIABILITIES
|
4,895
|
7,356
|
||||||
LONG-TERM LIABILITIES -
|
||||||||
Operating leases liabilities
|
-
|
323
|
||||||
Liability for employee rights upon retirement
|
878
|
957
|
||||||
TOTAL LONG-TERM LIABILITIES
|
878
|
1,280
|
||||||
COMMITMENTS
|
||||||||
TOTAL LIABILITIES
|
5,773
|
8,636
|
||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Ordinary Shares, NIS 0.1 par value – authorized: 50,000,000 as of December 31, 2018 and June 30, 2019; issued and outstanding: 18,949,968 as of
December 31, 2018 and June 30, 2019
|
520
|
520
|
||||||
Additional paid-in capital
|
190,853
|
192,340
|
||||||
Accumulated deficit
|
(127,464
|
)
|
(138,118
|
)
|
||||
TOTAL SHAREHOLDERS' EQUITY
|
63,909
|
54,742
|
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
69,682
|
$
|
63,378
|
Six months ended
June 30
|
Three months ended
June 30
|
|||||||||||||||
2018
|
2019
|
2018
|
2019
|
|||||||||||||
COLLABORATION REVENUES
|
$
|
93
|
$
|
14,151
|
$
|
49
|
$
|
7,793
|
||||||||
RESEARCH AND DEVELOPMENT EXPENSES
|
$
|
10,462
|
22,233
|
5,817
|
11,440
|
|||||||||||
GENERAL AND ADMINISTRATIVE EXPENSES
|
2,660
|
3,332
|
1,518
|
1,638
|
||||||||||||
TOTAL OPERATING LOSS
|
13,029
|
11,414
|
7,286
|
5,285
|
||||||||||||
FINANCIAL INCOME, net
|
(409
|
)
|
(760
|
)
|
(379
|
)
|
(359
|
)
|
||||||||
LOSS FOR THE PERIOD
|
$
|
12,620
|
$
|
10,654
|
$
|
6,907
|
$
|
4,926
|
||||||||
BASIC AND DILUTED LOSS PER ORDINARY SHARE
|
$
|
0.75
|
$
|
0.56
|
$
|
0.36
|
$
|
0.26
|
||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE
|
16,761,158
|
18,949,968
|
18,949,968
|
18,949,968
|
Ordinary shares
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Total
|
|||||||||||||||||
Number of shares
|
Amounts
|
Amounts
|
||||||||||||||||||
BALANCE AS OF JANUARY 1, 2018
|
6,290,244
|
$
|
82
|
$
|
42,480
|
$
|
(95,261
|
)
|
$
|
(52,699
|
)
|
|||||||||
CHANGES DURING THE SIX MONTHS ENDED JUNE 30, 2018:
|
||||||||||||||||||||
Loss for the period
|
(12,620
|
)
|
(12,620
|
)
|
||||||||||||||||
Issuance of bonus shares
|
*
|
66
|
(66
|
)
|
-
|
|||||||||||||||
Conversion of loans from the controlling shareholder
|
5,444,825
|
160
|
65,178
|
65,338
|
||||||||||||||||
Issuance of shares throught an initial public offering, net of issuance costs
|
7,187,500
|
211
|
78,564
|
78,775
|
||||||||||||||||
Exercise of options granted to an employee
|
27,399
|
1
|
43
|
44
|
||||||||||||||||
Share-based compensation
|
2,708
|
2,708
|
||||||||||||||||||
BALANCE AT JUNE 30, 2018
|
18,949,968
|
$
|
520
|
$
|
188,907
|
$
|
(107,881
|
)
|
$
|
81,546
|
||||||||||
BALANCE AS OF JANUARY 1, 2019
|
18,949,968
|
$
|
520
|
$
|
190,853
|
$
|
(127,464
|
)
|
$
|
63,909
|
||||||||||
CHANGES DURING THE SIX MONTHS ENDED JUNE 30, 2019:
|
||||||||||||||||||||
Loss for the period
|
(10,654
|
)
|
(10,654
|
)
|
||||||||||||||||
Share-based compensation
|
1,487
|
1,487
|
||||||||||||||||||
BALANCE AT JUNE 30, 2019
|
18,949,968
|
$
|
520
|
$
|
192,340
|
$
|
(138,118
|
)
|
$
|
54,742
|
Six months ended
June 30
|
||||||||
2018
|
2019
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Loss
|
$
|
(12,620
|
)
|
$
|
(10,654
|
)
|
||
Adjustments required to reconcile loss to net cash used in operating activities:
|
||||||||
Depreciation
|
361
|
432
|
||||||
Changes in accrued liability for employee rights upon retirement, net
|
125
|
46
|
||||||
Share-based compensation
|
2,708
|
1,487
|
||||||
Financial expenses (income), net
|
(27
|
)
|
43
|
|||||
Net changes in operating leases
|
-
|
(103
|
)
|
|||||
Changes in fair value of marketable securities
|
(436
|
)
|
(79
|
)
|
||||
Changes in operating asset and liabilities:
|
||||||||
Accounts receivable
|
-
|
(7,826
|
)
|
|||||
Prepaid expenses and other current assets
|
(556
|
)
|
1,890
|
|||||
Accounts payable and other
|
2,105
|
1,935
|
||||||
Long-term receivables
|
49
|
-
|
||||||
Net cash used in operating activities
|
(8,291
|
)
|
(12,829
|
)
|
||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of property and equipment
|
(587
|
)
|
(282
|
)
|
||||
Investment in marketable securities
|
(59,407
|
)
|
(2,551
|
)
|
||||
Proceeds from sale of marketable securities
|
-
|
23,773
|
||||||
Short-term deposits
|
3,000
|
1,000
|
||||||
Long-term deposits
|
5
|
(5
|
)
|
|||||
Net cash provided by (used in) investing activities
|
(56,989
|
)
|
21,935
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceed from exercise of options granted to an employee
|
44
|
-
|
||||||
Proceeds from issuance of shares throught an initial public offering, net of issuance costs
|
78,775
|
-
|
||||||
Net cash provided by financing activities
|
78,819
|
-
|
||||||
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS
|
27
|
(43
|
)
|
|||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
13,566
|
9,063
|
||||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF THE PERIOD
|
5,024
|
5,675
|
||||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF THE PERIODs
|
$
|
18,590
|
$
|
14,738
|
||||
Cash and Cash equivalents
|
18,240
|
14,388
|
||||||
Restricted cash
|
350
|
350
|
||||||
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH SHOWN IN STATEMENT OF CASH FLOWS
|
18,590
|
14,738
|
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS -
|
||||||||
Purchase of property and equipment
|
$
|
62
|
-
|
|||||
Conversion of loans received from the controlling shareholder
|
$
|
65,338
|
-
|
a. |
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial statements. Accordingly, they do not include all of the information and notes required by U.S. GAAP for annual financial statements. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s consolidated financial position as of June 30, 2019, the consolidated results of operations for the six and three month periods anded June 30 2018 and 2019 and statements of changes in shareholders' equity and cash flows for the six month period ended June 30, 2018 and 2019. |
b. |
Loss per share
Basic loss per share is computed on the basis of the net loss for the period divided by the weighted average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options, which are included under the treasury stock method when dilutive. The calculation of diluted loss per share does not include 1,251,378 and 1,263,852 options and restricted shares for the six and the three months ended June 30, 2019, respectively and 1,090,213 and 1,188,067 options and restricted shares for the six and the three months ended June 30, 2018, respectively, because the effect would be anti-dilutive. |
c. |
Revenue Recognition
Effective January 1, 2018, the Company adopted Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, an entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. |
d. |
Leases
|
December 31,
|
June 30,
|
|||||||
2018
|
2019
|
|||||||
Level 2 securities:
|
||||||||
U.S government and agency bonds
|
$
|
7,933
|
$
|
3,996
|
||||
Canada government bonds
|
1,009
|
1,007
|
||||||
Other foreign government bonds
|
5,259
|
2,977
|
||||||
Corporate bonds*
|
42,461
|
27,539
|
||||||
Total
|
$
|
56,662
|
$
|
35,519
|
Marketable securities
|
||||||||
For the year ended
|
For the Six Months ended
|
|||||||
December 31, 2018
|
June 30, 2019
|
|||||||
Balance at beginning of the period
|
$
|
-
|
$
|
56,662
|
||||
Additions
|
71,783
|
2,551
|
||||||
Sale or maturity
|
(15,092
|
)
|
(23,773
|
)
|
||||
Changes in fair value during the period
|
(29
|
)
|
79
|
|||||
Balance at end of the period
|
$
|
56,662
|
$
|
35,519
|
Market value
|
||||
June 30,
|
||||
2019
|
||||
Due within one year
|
34,014
|
|||
Between 1-2 years
|
1,505
|
a. |
In 2007, the Company granted rights to a third party for use and commercialization of a product for skin protection. Under this agreement, the Company is entitled to royalties during the years 2016 to
2024. Based on current sales, royalties are not material.
|
b. |
In 2016 through 2019, the Company entered into several collaboration agreements with two third parties for the development, manufacturing and commercialization of several product candidates. Under the
agreements, the third parties are obligated to conduct regulatory, scientific, clinical and technical activities necessary to develop the product and prepare and file ANDA, with the FDA and gain regulatory approval. The Company
participates in the development of the product candidates, including participation in joint steering committees and is obligated for sourcing the active pharmaceutical ingredient (API) during the development phase.
Upon FDA approval, the third parties has exclusive rights and is required to use diligent efforts to commercialize these products in territories defined under the agreements, including all required
sales, marketing and distributing activities associated with the agreements. The Company is entitled to 50% of the third parties’ gross profits related to the sale of these products, as such term is defined in the agreements.
In February 2019, the Company announced that a third party has received final approval from the FDA for the first generic version of a drug product. During the six months ended June 30, 2019 the Company recognized revenues from royalties related to sales of products in the U.S. under this agreement in the amount of $14,083. |
As of
June 30, 2019 |
||||
Assets
|
||||
Operating Leases
|
||||
Operating lease right-of-use assets
|
$
|
952
|
||
Liabilities
|
||||
Current liabilities
|
||||
Current maturities of operating leases
|
$
|
526
|
||
Long-term liabilities
|
||||
Non-current operating leases
|
$
|
323
|
||
Weighted Average Remaining Lease Term
|
||||
Operating leases
|
0.66
|
|||
Weighted Average Discount Rate
|
||||
Operating leases
|
9.79
|
%
|
Six-Months
Ended
June 30, 2019
|
Three-Months
Ended
June 30, 2019
|
|||||||
Operating lease cost:
|
$
|
325
|
$
|
156
|
Six Months
Ended
June 30, 2019
|
Three-Months
Ended
June 30, 2019
|
|||||||
Cash paid for amounts included in the measurement of leases liabilities:
|
||||||||
Operating cash flows from operating leases
|
$
|
475
|
$
|
306
|
Operating
Leases
|
||||
Six months ended June 30,
|
||||
Remaining months 2019
|
$
|
216
|
||
2020
|
651
|
|||
2021
|
45
|
|||
Total minimum lease payments
|
912 | |||
Less: amount of lease payments representing interest
|
(63
|
)
|
||
Present value of future minimum lease payments
|
849
|
|||
Less: Current leases obligations
|
526
|
|||
Long-term leases obligations
|
$
|
323
|
2019
|
$
|
662
|
||
2020
|
613
|
|||
2021
|
28
|
|||
Total
|
$
|
1,303
|
i. |
In January 2019, the Company granted a total of 80,000 options to an executive officer to purchase ordinary shares at an exercise price of $5.95 per share.
|
ii. |
In May 2019, the Company granted a total of 9,000 options to several employees to purchase ordinary shares at an exercise price of $7.32 per share.
|
2019
|
||
Value of one ordinary share
|
$6.08-$7.95
|
|
Dividend yield
|
0%
|
|
Expected volatility
|
74.87%-77.83 %
|
|
Risk-free interest rate
|
2.33%-2.75%
|
|
Expected term
|
7 years
|
a. |
Related parties include the controlling shareholder and companies under his control, the board of directors and the executive officers of the Company.
|
b. |
As to options granted to an executive officer, see note 6.
|