Sol-Gel Technologies Reports Second Quarter 2019
Financial Results and Corporate Update

 

 

 

NESS ZIONA, Israel, August 13, 2019 (GLOBE NEWSWIRE) – Sol-Gel Technologies, Ltd. (NASDAQ: SLGL), a clinical-stage dermatology company focused on identifying, developing and commercializing branded and generic topical drug products for the treatment of skin diseases, today announced financial results for the second quarter ended June 30, 2019 and provided an update on its clinical development programs.

 

“With the positive results reported from our Epsolay® Phase 3 trials in papulopustular rosacea and top-line results expected later this year from the now fully enrolled pivotal TWIN program in acne, we remain confident of our ability to lead these programs through both the clinical and regulatory pathways to successful commercial launches,” commented Dr. Alon Seri-Levy, Chief Executive Officer of Sol-Gel. “Additionally, we continue to generate meaningful revenue from our generic collaborations, which support the funding of our ongoing plans for TWIN and Epsolay as well as our proof-of-concept study for SGT-210 which we expect to initiate in the first quarter of 2020.”

 

Corporate Highlights and Recent Developments

 

 

 

Clinical Program Update

 

 

 

 

 

Financial Results for the Three Months Ended June 30, 2019

 

Revenue in the second quarter of 2019 was $7.8 million.  The revenue was due to sales of a generic product from a collaborative arrangement with Perrigo.

 

Research and development expenses were $11.4 million in the second quarter of 2019 compared to $5.8 million during the same period in 2018.  The increase was primarily due to an increase of $6.2 million in clinical trial expenses related to Epsolay and TWIN partially offset by a decrease of $0.2 million in manufacturing expenses for TWIN and a decrease of $0.4 million in share-based compensation expenses.

 

General and administrative expenses were $1.6 million in the second quarter of 2019 compared to $1.5 million during the same period in 2018.  The increase was primarily due to an increase of $0.2 million in legal expenses and an increase of $0.2 million in payroll expenses, partially offset by a decrease of $0.3 million in share-based compensation expenses.

 

Sol-Gel reported a loss of $4.9 million for the second quarter of 2019 compared to loss of $6.9 million for the same period in 2018.

 

As of June 30, 2019, Sol-Gel had $14.4 million in cash, cash equivalents and deposits and $35.5 million in marketable securities for a total balance of $49.9 million.  Based on current assumptions, inclusive of the recent offering, Sol-Gel expects its existing cash resources will enable funding of operational and capital expenditure requirements into the first quarter of 2021.

 

About Sol-Gel Technologies

 

Sol-Gel is a clinical-stage dermatology company focused on identifying, developing and commercializing branded and generic topical drug products for the treatment of skin diseases. Sol-Gel’s current product candidate pipeline consists of late-stage branded product candidates that leverage our proprietary, silica-based microencapsulation technology platform, and several generic product candidates across multiple indications. For additional information, please visit www.sol-gel.com.

 

Forward-Looking Statements

 

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to, the clinical progress of our product candidates, plans and timing for the release of clinical data, our expectations surrounding the progress of our generic product pipeline, and the sufficiency of our cash resources to meet our operational and capital expenditure requirements. These forward-looking statements include information about possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “potential,” or the negative of these terms or other similar expressions. Forward-looking statements are based on information we have when those statements are made or our management’s current expectation, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: (i) the adequacy of our financial and other resources, particularly in light of our history of recurring losses and the uncertainty regarding the adequacy of our liquidity to pursue our complete business objectives; (ii) our ability to complete the development of our product candidates; (iii) our ability to find suitable co-development partners; (iv) our ability to obtain and maintain regulatory approvals for our product candidates in our target markets and the possibility of adverse regulatory or legal actions relating to our product candidates even if regulatory approval is obtained; (v) our ability to commercialize our pharmaceutical product candidates; (vi) our ability to obtain and maintain adequate protection of our intellectual property; (vii) our ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost; (viii) our ability to establish adequate sales, marketing and distribution channels; (ix) acceptance of our product candidates by healthcare professionals and patients; (x) the possibility that we may face third-party claims of intellectual property infringement; (xi) the timing and results of clinical trials and studies that we may conduct or that our competitors and others may conduct relating to our or their products; (xii) intense competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do; (xiii) potential product liability claims; (xiv) potential adverse federal, state and local government regulation in the United States, Europe or Israel; and (xv) loss or retirement of key executives and research scientists. These and other important factors discussed in the Company's Annual Report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on March 21, 2019 and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. Except as required by law, we undertake no obligation to update publicly any forward-looking statements after the date of this press release to conform these statements to changes in our expectations.

 

 

SOL-GEL TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

SOL-GEL TECHNOLOGIES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

For further information, please contact:

Sol-Gel Contact:

Gilad Mamlok

Chief Financial Officer

+972-8-9313433

Investor Contact:

Chiara Russo

Solebury Trout

+1-617-221-9197

 

 

Source: Sol-Gel Technologies Ltd.

 

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Exhibit 99.2

SOL-GEL TECHNOLOGIES LTD.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

 

SOL-GEL TECHNOLOGIES LTD.

UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2019

 

TABLE OF CONTENTS

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The amounts are stated in U.S. dollars in thousands, except share and per share data

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

* less than $1 thousand.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

		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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NOTE 1 - NATURE OF OPERATIONS

Sol-Gel Technologies Ltd. (the "Company") is an Israeli Company incorporated in 1997.

The Company is a clinical stage specialty pharmaceutical company focused on developing and commercializing topical dermatological drug products. The Company’s lead product candidates are based upon its proprietary microencapsulation delivery system, consisting of microcapsules made of precipitated silica. In addition to these novel product candidates, the Company’s product pipeline includes generic product candidates.

On August 4, 2014, 100% of the Company’s shares were acquired by its current controlling shareholder (the “controlling shareholder”).

In January 2018, the Company completed an Initial Public Offering ("IPO") on the NASDAQ Stock Market, in which it issued 6,250,000 Ordinary shares at a price per share of $12. During February 2018 the underwriters exercised their green shoe option and purchased additional 937,500 ordinary shares at the same price per share. The total proceeds received from the IPO, net of issuance costs, were approximately $78.8 million.

Since incorporation through June 30, 2019, the Company has an accumulated deficit of approximately $138,100 and its activities have been funded mainly by its shareholders and revenue from royalties. The Company's cash and cash equivalents, bank deposits and marketable securities as of June 30, 2019 will allow the Company to fund its operating plan through at least the next 12 months  from the financial statements issuance date. However, the Company expects to continue to incur significant research and development and other costs related to its ongoing operations and in order to continue its future operations, the Company will need to obtain additional funding until becoming profitable.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES:

The consolidated results for the six and three months period ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2018. The comparative balance sheet at December 31, 2018 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP.

At contract inception, once the contract is determined to be within the scope of ASC 606, the Company identifies the performance obligations in the contract by assessing whether the goods or services promised within each contract are distinct. The Company then recognize revenue for the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Collaborative Arrangements

 

The Company entered into collaborative arrangements with partners that fall under the scope of ASC, Topic 808, Collaborative Arrangements (“ASC 808”). While these arrangements are in the scope of ASC 808, the Company may analogize to ASC 606 for some aspects of the arrangements. The Company analogizes to ASC 606 for certain activities within the collaborative arrangement for the delivery of a good or service (i.e., a unit of account) that is part of its ongoing major or central operations. Revenue recognized by analogizing to ASC 606 is recorded as “collaboration revenues”.

The terms of the Company’s collaborative arrangements typically include one or more of the following: (i) royalties on net sales of licensed products; (ii) reimbursements or cost-sharing of R&D expenses. Each of these payments results in collaboration revenues or an offset against R&D expense.

Royalties: For arrangements that include sales-based royalties and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Under certain collaborative arrangements, the Company has been reimbursed for a portion of its R&D expenses or participates in the cost-sharing of such R&D expenses. Such reimbursements and cost-sharing arrangements have been reflected as a reduction of R&D expense in the Company’s consolidated statements of operations, as the Company does not consider performing research and development services for reimbursement to be a part of its ongoing major or central operations.

Right of Use ("ROU") assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses the implicit rate when readily determinable. As the Company’s leases do not provide an implicit rate, the Company’s uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company elected the practical expedient to not separate lease and non-lease components for the leases.

SOL-GEL TECHNOLOGIES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

 

(Unaudited)

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (continued):

The Condensed Consolidated Financial Statements for the six and three months ended June 30, 2019 are presented under the new standard, while comparative period presented is not adjusted and continue to be reported in accordance with the historical accounting policy.

Upon adoption, the new standard resulted in an increase of $1,200 in operating lease ROU assets and corresponding liabilities on the Company’s consolidated balance sheet and did not have a material impact on the Company’s condensed consolidated statements of operations or condensed consolidated statements of cash flows.  See also note 5.

NOTE 3 — MARKETABLE SECURITIES

The following table sets forth the Company’s marketable securities for the indicated periods:

* Investments in Corporate bonds rated A or higher.

The Company’s debt securities are traded in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Accordingly, these assets are categorized as Level 2.

The table below sets forth a summary of the changes in the fair value of the Company’s marketable securities for the indicated periods:

SOL-GEL TECHNOLOGIES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

 

(Unaudited)

NOTE 3 — MARKETABLE SECURITIES (continued):

As of June 30, 2019, the Company’s debt securities had the following maturity dates:

The carrying amount of the cash and cash equivalents, bank deposits, restricted cash, restricted long term deposits, accrued expenses and other liabilities approximates their fair value.

NOTE 4 – REVENUE FROM COLLABORATION AGREEMENTS

This Agreement is considered to be within the scope of ASC 808, as the parties are active participants and exposed to the risks and rewards of the collaborative activity.

The Company recognizes revenues from royalty when the related sales occur. 

NOTE 5 – COMMITMENTS

The Company leases offices and Vehicles under operating leases. For leases with terms greater than 12 months, the Company record the related asset and obligation at the present value of lease payments over the term.

The Company leases do not provide a readily determinable implicit rate. Therefore, the Company estimated the incremental borrowing rate to discount the lease payments based on information available at lease commencement.

SOL-GEL TECHNOLOGIES LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share and per share data)

 

(Unaudited)

NOTE 5 – COMMITMENTS (continued):

		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

NOTE 5 – COMMITMENTS (continued):

NOTE 6 - SHARE CAPITAL

Options grants

During the six months ended June 30, 2019, the Company granted 89,000 options to employees:

The options vest over a period of 4 years; 25% of the options vest on the first anniversary of the vesting commencement date (as described in each agreement) and the rest vest quarterly over the following three years. The options expire on the tenth anniversary of their grant date.

The fair value of options granted in 2019 was $446. The underlying data used for computing the fair value of the options are as follows:

NOTE 7 - RELATED PARTIES: