0001104659-21-019580.txt : 20210210 0001104659-21-019580.hdr.sgml : 20210210 20210210131943 ACCESSION NUMBER: 0001104659-21-019580 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 36 FILED AS OF DATE: 20210210 DATE AS OF CHANGE: 20210210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Anchiano Therapeutics Ltd. CENTRAL INDEX KEY: 0001534248 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 000000000 STATE OF INCORPORATION: L3 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-252070 FILM NUMBER: 21612763 BUSINESS ADDRESS: STREET 1: 5 KIRYAT HAMADA ST STREET 2: PO BOX 45032 CITY: JERUSALEM STATE: L3 ZIP: 9777401 BUSINESS PHONE: 972-2-5486555 MAIL ADDRESS: STREET 1: 5 KIRYAT HAMADA ST STREET 2: PO BOX 45032 CITY: JERUSALEM STATE: L3 ZIP: 9777401 FORMER COMPANY: FORMER CONFORMED NAME: BioCancell Ltd. DATE OF NAME CHANGE: 20111104 S-4/A 1 tm211883-4_s4a.htm S-4/A tm211883-4_s4a - block - 47.3127516s
As filed with the Securities and Exchange Commission on February 10, 2021
Registration No. 333-252070
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Anchiano Therapeutics Ltd.
(Exact name of Registrant as specified in its charter)
Israel
2834
81-3676773
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
One Kendall Square
Building 1400E
Suite 14-105
Cambridge, MA 02139
(857) 259-4622
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Anchiano Therapeutics, Inc.
One Kendall Square
Building 1400E
Suite 14-105
Cambridge, MA 02139
(857) 259-4622
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Please send copies of all communications to:
Michal Berkner
Joshua A. Kaufman
Cooley LLP
69 Old Broad Street
London, UK EC2M 1QS
+44 20 7583 4055
Aaron M. Lampert
Goldfarb Seligman & Co.
Ampa Tower
98 Yigal Alon Street
Tel Aviv 6789141, Israel
+972 (3) 608-9999
Adi Mor
Chief Executive Officer
Chemomab Ltd.
Kiryat Atidim, Building 7
Tel Aviv 6158002, Israel
+972-77-331-0156
Shachar Hadar
Ronen Bezalel
David S. Glatt
Jonathan M. Nathan
Meitar | Law Offices
16 Abba Hillel Rd.
Ramat Gan 5250608, Israel
+972 (3) 610-3100
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effectiveness of this registration
statement and the satisfaction or waiver of all other conditions under the Merger Agreement described herein.
If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, please check the following box.   ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.   ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13(e)-4(i) (Cross-Border Issuer Tender Offer)   ☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)   ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Security Being Registered
Amount
to be
Registered
Proposed
Maximum
Offering Price
Per Share
Proposed
Maximum
Aggregate
Offering Price
Amount of
Registration Fee
Ordinary shares of Anchiano Therapeutics Ltd., no par value per share(1)(2)
622,444,113(3) N/A $ 643,192(4) $ 70.18(5)(7)
Ordinary shares of Anchiano Therapeutics Ltd., no par value per share(1)(2)
371,401,496(6) N/A N/A N/A
TOTAL
993,845,609 N/A $ 643,192 $ 70.18(7)
(1)
These ordinary shares are represented by American Depositary Shares, or ADSs, each of which represents ordinary shares of the registrant.
(2)
ADSs issuable upon deposit of the ordinary shares registered hereby are being registered pursuant to a separate registration statement on Form F-6 (File No. 333-229522).
(3)
Relates to ordinary shares, no par value per share, of Anchiano Therapeutics Ltd., an Israeli limited company, or Anchiano, issuable to holders of ordinary shares, par value NIS 0.01 per share, and options of Chemomab Ltd., an Israeli limited company, or Chemomab, in the proposed merger of CMB Acquisition Ltd., an Israeli limited company and wholly-owned subsidiary of Anchiano, with and into Chemomab, or the Merger. The amount of Anchiano ordinary shares to be registered is based on the estimated number of Anchiano ordinary shares, to be represented by American Depositary Shares, that are expected to be issued (or reserved for issuance) pursuant to the Merger, without giving effect to the reverse split of the Anchiano ordinary shares expected upon the effective time of the Merger, assuming an exchange ratio of 1,028.99 ordinary shares of Anchiano for each outstanding Chemomab share and for each Chemomab share issuable upon exercise of outstanding Chemomab options. The estimated exchange ratio calculation contained herein is based upon Anchiano’s and Chemomab’s capitalization at the signing of the Merger Agreement, and, pursuant to the Merger Agreement, will be based on the amount of Anchiano net cash and changes in the capitalization of Anchiano or Chemomab prior to the closing of the Merger.
(4)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(f) of the Securities Act of 1933, as amended, based upon an amount equal to one-third of the par value of the Chemomab securities to be exchanged in the Merger (par value NIS 0.01 per share, as expressed in U.S. dollars based on an exchange rate of NIS 3.1872 per U.S. dollar, as reported by Bloomberg L.P. on January 8, 2021), as of immediately prior to the Merger. Chemomab is a private company, no market exists for its securities and Chemomab has an accumulated capital deficit.
(5)
This fee has been calculated pursuant to Section 6(b) of the Securities Act of 1933, as amended.
(6)
Relates to ordinary shares of Anchiano that may be sold from time to time pursuant to this registration statement by the selling shareholders named herein. Pursuant to Rule 416 of the Securities Act of 1933, as amended, this registration statement also includes additional ordinary shares issuable upon stock splits, stock dividends or similar transactions. Pursuant to Rule 457(f)(5), no additional filing fee is required to be paid for the resale registration of such ordinary shares.
(7)
Previously paid.
The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this proxy statement/prospectus is not complete and may be changed. Anchiano may not sell its securities pursuant to the proposed transactions until the Registration Statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
Subject to completion, dated February 10, 2021
[MISSING IMAGE: lg_anchiano-4c.jpg]
PROPOSED MERGER
YOUR VOTE IS VERY IMPORTANT
To the Shareholders of Anchiano Therapeutics Ltd.:
You are cordially invited to attend a special meeting of the shareholders of Anchiano Therapeutics Ltd., an Israeli limited company, which we refer to as “we,” “Anchiano,” or the “Company,” which will be held at 4:30 p.m., local time, on March 15, 2021, at the law offices of Goldfarb Seligman & Co., Ampa Tower, 98 Yigal Alon Street, 36th floor, Conference Room 36-1, Tel Aviv, Israel, unless postponed or adjourned to a later date. This is an important meeting that affects your investment in Anchiano. Please note that in light of current circumstances and various restrictions that are being imposed because of COVID-19, it may become necessary to change the venue of the meeting. Any such change will be announced in a Form 8-K filed with the Securities and Exchange Commission.
On December 14, 2020, Anchiano, CMB Acquisition Ltd., an Israeli limited company and wholly-owned subsidiary of Anchiano, or Merger Sub, and Chemomab Ltd., an Israeli limited company, or Chemomab, entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which Merger Sub will merge with and into Chemomab, with Chemomab surviving as a wholly-owned subsidiary of Anchiano, and ordinary shares, represented by American Depositary Shares, or ADSs, will be issued to the Chemomab securityholders at the effective time of such merger, or the Merger, pursuant to an exchange ratio. The final exchange ratio, or the Exchange Ratio, will be determined pursuant to a formula described in more detail in the Merger Agreement and later in this proxy statement/prospectus. Under the Exchange Ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the Financing described below), Chemomab’s securityholders are expected to own approximately 90% of Anchiano’s share capital (on a fully diluted basis) and Anchiano’s securityholders are expected to own approximately 10% of Anchiano’s share capital (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. The Exchange Ratio formula is based on a $135.0 million valuation for Chemomab and a $15.0 million valuation for Anchiano, assuming Anchiano’s net cash at the effective time of the Merger is more than $0.5 million but not more than $2.0 million. The Merger has been unanimously approved by the boards of directors of both companies and by the shareholders of Chemomab, and is expected to close in the first half of 2021, subject to approval of Anchiano’s shareholders as well as other customary conditions.
The parties are seeking to obtain between $30.0 million and $50.0 million of financing for the combined company through a private placement, or the Financing. As a condition to the Merger, the parties must raise at least $30.0 million in the Financing. The amount to be raised in the Financing will be invested by the investors, or the Investors, in exchange for ordinary shares of Anchiano (to be represented by ADSs) immediately following the effective time of the Merger. The Financing will dilute both Anchiano and Chemomab securityholders on a pro rata basis. Immediately following the closing of the Merger and the Financing, and assuming the Financing raises $30.0 million, the Chemomab securityholders immediately before the Merger are expected to own approximately 75% of the aggregate number of ordinary shares of Anchiano (on a fully diluted basis) and the securityholders of Anchiano immediately before the Merger are expected to own approximately 8.3% of the aggregate number of ordinary shares of Anchiano (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. If the Financing raises more than $30.0 million, it will have a greater dilutive effect on the securityholders of both Anchiano and Chemomab. Additionally, the price per share sold in the Financing could be at a discount to the closing price of our ADSs as reported on The Nasdaq Stock Market LLC, or Nasdaq, on the execution date of the share purchase agreements for the Financing.
Upon the effective time of the Merger, the officers of Anchiano will include Adi Mor, Chief Executive Officer and Chief Scientific Officer, Sigal Fattal, interim Chief Financial Officer, and Arnon Aharon, Chief Medical Officer. In addition, each of Ruth Alon, Isaac Kohlberg and Stanislav Polovets will resign from Anchiano’s board of directors effective upon the effective time of the Merger; the designees of Chemomab pursuant to the Merger Agreement will be appointed to fill the vacancies created by the resignations of the current Anchiano directors listed above; and Neil Cohen

will continue as a director of Anchiano. Following the Merger, the headquarters of Anchiano will be located in Tel-Aviv, Israel, at Chemomab’s current headquarters.
Anchiano’s ordinary shares, represented by ADSs, are currently listed on the Nasdaq Capital Market under the symbol “ANCN.” Anchiano has filed an initial listing application with Nasdaq, as required by Nasdaq to effect the initial listing of Anchiano’s ordinary shares issuable in connection with the Merger and the Financing or upon exercise of Chemomab’s outstanding options that will be assumed by Anchiano in connection with the Merger. After completion of the Merger, Anchiano will assume the name “Chemomab Therapeutics Ltd.,” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies, and expects to trade on the Nasdaq Capital Market under the symbol “CMMB.”
Anchiano is holding a special meeting of shareholders, or the Special Meeting, for the following purposes, as more fully described in the accompanying proxy statement:
1.   To approve the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares, to be represented by ADSs, at the effective time of the Merger to the securityholders of Chemomab;
2.   To approve the issuance of such number of Anchiano ordinary shares (including ordinary shares represented by ADSs) in the private placement financing, as described in this proxy statement/prospectus, as would yield at least $30.0 million and up to $50.0 million of aggregate gross proceeds to Anchiano;
3.   To approve and adopt Anchiano’s amended and restated articles of association, attached as Annex E to this proxy statement/prospectus, or the Amended and Restated Articles of Association, effective upon the effective time of the Merger, which among other things will (i) increase the registered share capital of Anchiano from 500,000,000 ordinary shares, without par value, to 650,000,000 ordinary shares, without par value, (ii) effect a reverse split of Anchiano’s ordinary shares, or the Reverse Split, at a ratio in the range of between 1-for-2 to 1-for-4, inclusive, with such ratio to be determined in the discretion of Anchiano’s board of directors, (iii) amend the manner in which directors are elected to a classified board format, (iv) change the name of Anchiano from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies and (v) make such other changes as are set forth in the Amended and Restated Articles of Association;
4.   To approve the form of indemnification agreement for directors and officers of Anchiano, attached as Annex F to this proxy statement/prospectus, or the Indemnification Agreement, effective upon the effective time of the Merger, and to authorize the execution and delivery of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano;
5.   To approve an amendment to Anchiano’s Compensation Policy, attached as Annex J to this proxy statement/prospectus, to remove the limit on the annual premium for directors and officers insurance;
6.   To approve an amendment to the compensation terms of the current and future directors of Anchiano, and related amendments to Anchiano’s Compensation Policy, included in Annex J to this proxy statement/prospectus; and
7.   To transact any other business that may be properly brought before the meeting or any continuation, adjournment or postponement thereof.
After careful consideration, Anchiano’s board of directors has determined that the Merger is fair to, and in the best interests of, Anchiano and its shareholders, has approved the Merger Agreement, the Merger, the issuance of ordinary shares (including ordinary shares represented by ADSs) of Anchiano to Chemomab’s securityholders pursuant to the terms of the Merger Agreement, the approval and adoption of the Amended and Restated Articles of Association, the approval of the Indemnification Agreement, and the other actions contemplated by the Merger Agreement, and has determined to recommend that the Anchiano shareholders vote to approve each of the proposals set forth in this proxy statement/prospectus. Accordingly, Anchiano’s board of directors unanimously recommends that the Anchiano shareholders vote FOR each of the Proposals Nos. 1 through 6 described above.
Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend the Special Meeting in person, please complete, date, sign and promptly return the accompanying proxy card in the enclosed postage paid envelope to ensure that your shares will be represented and voted at the Special Meeting.
More information about Anchiano, Chemomab and the proposed transactions is contained in this proxy statement/prospectus. Anchiano urges you to read this proxy statement/prospectus carefully and in its entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 29.

Anchiano is excited about the opportunities the Merger brings to its shareholders, and thanks you for your consideration and continued support.
Sincerely,
[MISSING IMAGE: sg_stanislavpolo-bw.jpg]
Stanislav Polovets
Chairman of the Board
None of the Securities and Exchange Commission, the Israel Securities Authority or any state securities commission has approved or disapproved the Merger or the Financing described in this proxy statement/prospectus or the Anchiano ordinary shares to be represented by ADSs to be issued in connection with the Merger or the Financing or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated            , 2021, and is first being mailed to Anchiano shareholders on or about            , 2021.

 
PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION
ANCHIANO THERAPEUTICS LTD.
One Kendall Square, Building 1400E
Suite 14-105
Cambridge, Massachusetts 02139
(857) 259-4622
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2021
Dear Shareholders of Anchiano Therapeutics Ltd.:
You are cordially invited to attend the Special Meeting of the shareholders of Anchiano Therapeutics Ltd., or Anchiano, to be held at 4:30 p.m., local time, on March 15, 2021, at the law offices of Goldfarb Seligman & Co., Ampa Tower, 98 Yigal Alon Street, 36th floor, Conference Room 36-1, Tel Aviv, Israel, for the following purposes:
1.   To approve the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares, to be represented by ADSs, at the effective time of the Merger to the securityholders of Chemomab;
2.   To approve the issuance of such number of Anchiano ordinary shares (including ordinary shares represented by ADSs) in the private placement financing, as described in this proxy statement/prospectus, as would yield at least $30.0 million and up to $50.0 million of aggregate gross proceeds to Anchiano;
3.   To approve and adopt Anchiano’s amended and restated articles of association, attached as Annex E to this proxy statement/prospectus, or the Amended and Restated Articles of Association, effective upon the effective time of the Merger, which among other things will (i) increase the registered share capital of Anchiano from 500,000,000 ordinary shares, without par value, to 650,000,000 ordinary shares, without par value, (ii) effect the Reverse Split, at a ratio in the range of between 1-for-2 to 1-for-4, inclusive, with such ratio to be determined in the discretion of Anchiano’s board of directors, (iii) amend the manner in which directors are elected to a classified board format, (iv) change the name of Anchiano from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies and (v) make such other changes as are set forth in the Amended and Restated Articles of Association;
4.   To approve the form of indemnification agreement for directors and officers of Anchiano, attached as Annex F to this proxy statement/prospectus, or the Indemnification Agreement, effective upon the effective time of the Merger, and to authorize the execution and delivery of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano;
5.   To approve an amendment to Anchiano’s Compensation Policy to remove the limit on the annual premium for directors and officers insurance;
6.   To approve an amendment to the compensation terms of the current and future directors of Anchiano, and related amendments to Anchiano’s Compensation Policy; and
7.   To transact any other business that may be properly brought before the meeting or any continuation, adjournment or postponement thereof.
Please note that in light of current circumstances and various restrictions that are being imposed because of COVID-19, it may become necessary to change the venue of the meeting. Any such change will be announced in a Form 8-K filed with the Securities and Exchange Commission.
The board of directors of Anchiano has fixed February 5, 2021 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Special Meeting and any adjournment or postponement thereof. Only holders of record of ordinary shares (including ordinary shares represented by ADSs) of Anchiano at the close of business on the record date are entitled to notice of, and to vote at, the
 

 
Special Meeting. At the close of business on the record date, Anchiano had 37,099,352 ordinary shares outstanding and entitled to vote.
Your vote is important. The affirmative vote of a simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast) is required for approval of each of Proposals Nos. 1 through 4. The approval of Proposals No. 5 and 6 also require such affirmative majority, plus either (i) a simple majority of shares voted at the Special Meeting, excluding the shares of controlling shareholders, if any, and of shareholders who have a personal interest in the approval of the resolution, or (ii) the total number of shares of non-controlling shareholders and of shareholders who do not have a personal interest in the resolution voting against approval of the resolution does not exceed two percent of the outstanding voting power in Anchiano. We encourage you to read this proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call our proxy solicitor:
Alliance Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003
+1 (866) 613-3006 (toll free in the United States)
Even if you plan to attend the Special Meeting in person, Anchiano requests that you sign and return the enclosed proxy card or grant your proxy by telephone or through the Internet to ensure that your shares will be represented at the Special Meeting if you are unable to attend.
By Order of the Board of Directors of
Anchiano Therapeutics Ltd.
[MISSING IMAGE: sg_stanislavpolo-bw.jpg]
Stanislav Polovets
Chairman of the Board
Cambridge, Massachusetts
           , 2021
THE ANCHIANO BOARD OF DIRECTORS HAS DETERMINED AND BELIEVES THAT EACH OF THE PROPOSALS OUTLINED ABOVE IS ADVISABLE TO, AND IN THE BEST INTERESTS OF, ANCHIANO AND ITS SHAREHOLDERS AND HAS APPROVED EACH SUCH PROPOSAL. THE ANCHIANO BOARD OF DIRECTORS RECOMMENDS THAT ANCHIANO SHAREHOLDERS VOTE “FOR” EACH SUCH PROPOSAL.
 

 
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and financial information about Anchiano that is not included in or delivered with this document. You may obtain this information without charge through the Securities and Exchange Commission, or the SEC, website (www.sec.gov) or upon your written or oral request by contacting the Chief Financial Officer of Anchiano Therapeutics Inc., at One Kendall Square, Building 1400E, Suite 14-105, Cambridge, Massachusetts 02139, or by calling (857) 259-4622.
You may also request information from Alliance Advisors, LLC, Anchiano’s proxy solicitor, at the following address and telephone number:
Alliance Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, New Jersey 07003
+1 (866) 613-3006 (toll free in the United States)
To facilitate timely delivery of these documents, any request should be made no later than March 1, 2021 to receive them before the Special Meeting.
For additional details about where you can find information about Anchiano, please see the section entitled “Where You Can Find More Information” in this proxy statement/prospectus.
ABOUT THIS DOCUMENT
Anchiano Therapeutics Ltd., which we refer to herein as the “Company,” “Anchiano,” “we,” “our,” or “us,” is providing these proxy materials in connection with the solicitation by our board of directors of proxies to be voted at a Special Meeting of our shareholders to be held on March 15, 2021, commencing at 4:30 p.m., local time, at the law offices of Goldfarb Seligman & Co., Ampa Tower, 98 Yigal Alon Street, 36th floor, Conference Room 36-1, Tel Aviv, Israel, or at any adjournment or postponement thereof. This proxy statement/prospectus and the enclosed proxy card will be mailed to each shareholder entitled to notice of, and to vote at, the Special Meeting of shareholders commencing on or about            , 2021.
You are cautioned not to rely on any information other than the information contained in this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated            , 2021. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any other date. The mailing of this proxy statement/prospectus to our shareholders will not create any implication to the contrary.
Except where specifically noted, the following information and all other information contained in this proxy statement/prospectus does not give effect to a Reverse Split described in Proposal No. 3, beginning on page 128 of this proxy statement/prospectus.
This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
 

 
TABLE OF CONTENTS
Page
1
14
23
28
29
82
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88
113
124
126
137
147
182
192
201
210
213
215
225
230
237
244
246
248
250
250
250
252
F-1
F-27
F-40
F-62
A-1
B-1
C-1
D-1
 
i

 
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following section provides answers to frequently asked questions about the Merger and other matters relating to the Special Meeting. This section, however, provides only summary information. For a more complete response to these questions and for additional information, please refer to the cross-referenced sections. Anchiano urges its shareholders to read this document in its entirety prior to making any decision.
What is the Merger?
Anchiano, Chemomab and Merger Sub have entered into an Agreement and Plan of Merger, dated as of December 14, 2020, or the Merger Agreement. The Merger Agreement contains the terms and conditions of the proposed merger of Anchiano and Chemomab. Under the Merger Agreement, Merger Sub will merge with and into Chemomab, with Chemomab surviving as a wholly-owned subsidiary of Anchiano. Unless the context requires otherwise, when we refer to the “Merger” in this proxy statement/prospectus, we are referring to the merger of Merger Sub with and into Chemomab with Chemomab surviving as a wholly-owned subsidiary of Anchiano, together with the issuance of ordinary shares of Anchiano, to be represented by American Depositary Shares, or ADSs, each representing 5 Anchiano ordinary shares, to the Chemomab securityholders at the effective time of such merger.
At the effective time of the Merger, we anticipate that each share of Chemomab outstanding immediately prior to the effective time of the Merger (excluding certain shares to be canceled pursuant to the Merger Agreement) will be converted into the right to receive approximately 1,028.99 Anchiano ordinary shares to be represented by ADSs, subject to adjustment to account for a Reverse Split of Anchiano ordinary shares, at a Reverse Split ratio of between 1-for-2 and 1-for-4, inclusive, to be determined by Anchiano’s board of directors and to be implemented prior to the consummation of the Merger. The estimated Exchange Ratio calculation contained herein is based upon Anchiano’s and Chemomab’s capitalization at the signing of the Merger Agreement, and, pursuant to the Merger Agreement, will be based on the amount of Anchiano net cash and changes in the capitalization of Anchiano or Chemomab prior to the closing of the Merger. Under the Exchange Ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the Financing described below), Chemomab’s securityholders are expected to own approximately 90% of Anchiano’s share capital (on a fully diluted basis) and Anchiano’s securityholders are expected to own approximately 10% of Anchiano’s share capital (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. The Exchange Ratio formula is based on a $135.0 million valuation for Chemomab and a $15.0 million valuation for Anchiano, assuming Anchiano’s net cash at the effective time of the Merger is more than $0.5 million but not more than $2.0 million. After the completion of the Merger, Anchiano will assume the name “Chemomab Therapeutics Ltd.,” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies.
For a more complete description of the Merger, please see the section entitled “The Merger Agreement” in this proxy statement/prospectus.
What will happen to Anchiano if, for any reason, the Merger does not close?
If, for any reason, the Merger does not close, the Anchiano board of directors may, following the termination of the Merger Agreement, elect to, among other things, attempt to complete another strategic transaction like the Merger, attempt to sell or otherwise dispose of the various assets of Anchiano or continue to operate the business of Anchiano. If Anchiano decides to dissolve and liquidate its assets, Anchiano would be required to pay all of its contractual obligations, and to set aside certain reserves for potential future claims, and there can be no assurance as to the amount or timing of available cash left to distribute to shareholders after paying the obligations of Anchiano and setting aside funds for reserves.
Why are the two companies proposing to merge?
Anchiano and Chemomab believe that the Merger will result in a combined company that will lead the discovery and development of innovative therapeutics for fibrosis-related diseases with high unmet need.
 
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Anchiano’s board of directors considered a number of factors that supported its decision to approve the Merger Agreement. In the course of its deliberations, Anchiano’s board of directors also considered a variety of risks and other countervailing factors related to entering into the Merger Agreement.
For a discussion of Anchiano’s reasons for the Merger, please see the section entitled “The Merger — Reasons for the Merger.
Why am I receiving these materials?
You are receiving these proxy materials because you have been identified as a shareholder of Anchiano as of the record date, and you are entitled to vote at the Special Meeting to approve the matters described in this proxy statement/prospectus. This proxy statement/prospectus contains important information about the proposed Merger, Financing and the Special Meeting and you should read it carefully and in its entirety. The enclosed voting materials allow you to authorize a proxy to vote your Anchiano ordinary shares without attending the Special Meeting. As promptly as practicable, please complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or call the toll-free telephone number listed on your proxy card or access the Internet Web site described in the instructions on the enclosed proxy card.
What am I voting on?
There are six matters scheduled for a vote at the Special Meeting:
1.   The approval of the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares, to be represented by ADSs, at the effective time of the Merger to the securityholders of Chemomab;
2.   To approve the issuance of such number of Anchiano ordinary shares (including ordinary shares represented by ADSs) in the private placement financing, as described in this proxy statement/prospectus, as would yield at least $30.0 million and up to $50.0 million of aggregate gross proceeds to Anchiano.
3.   The approval and adoption of Anchiano’s amended and restated articles of association, attached as Annex E to this proxy statement/prospectus, or the Amended and Restated Articles of Association, effective upon the effective time of the Merger, which among other things will (i) increase the registered share capital of Anchiano from 500,000,000 ordinary shares, without par value, to 650,000,000 ordinary shares, without par value, (ii) effect the Reverse Split, at a ratio in the range of between 1-for-2 to 1-for-4, inclusive, with such ratio to be determined in the discretion of Anchiano’s board of directors, (iii) amend the manner in which directors are elected to a classified board format, (iv) change the name of Anchiano from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies and (v) make such other changes as are set forth in the Amended and Restated Articles of Association;
4.   The approval of the form of indemnification agreement for directors and officers of Anchiano, attached as Annex F to this proxy statement/prospectus, or the Indemnification Agreement, effective upon the effective time of the Merger, and to authorize the execution and delivery of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano;
5.   To approve an amendment to Anchiano’s Compensation Policy, attached as Annex J to this proxy statement/prospectus, to remove the limit on the annual premium for directors and officers insurance; and
6.   To approve an amendment to the compensation terms of the current and future directors of Anchiano, and related amendments to Anchiano’s Compensation Policy, included in Annex J to this proxy statement/prospectus.
What is required to consummate the Merger?
To consummate the Merger, Proposals Nos. 1, 2 and 3 must be approved at the Special Meeting, or at any permitted adjournment thereof, by the requisite holders of Anchiano ordinary shares on the record
 
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date for the Special Meeting. The Merger will not occur if Proposals Nos. 1, 2 and 3 are not approved by Anchiano’s shareholders.
In addition to the requirement of obtaining such shareholder approvals, each of the other closing conditions set forth in the Merger Agreement must be satisfied or waived.
For a more complete description of the closing conditions under the Merger Agreement, we urge you to read the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus.
Are there any federal or state regulatory requirements that must be complied with or federal or state regulatory approvals or clearances that must be obtained in connection with the Merger and the Financing?
Neither Anchiano nor Chemomab is required to make any filings or obtain any approvals or clearances from any antitrust regulatory authorities in the United States or other countries to consummate the Merger or the Financing. In the United States, Anchiano must comply with applicable federal and state securities laws and Nasdaq rules and regulations in connection with the issuance of the shares in connection with the Merger and the Financing, including the filing with the SEC of this proxy statement/prospectus. Prior to consummation of the Merger, Anchiano has filed an initial listing application with Nasdaq, as required by Nasdaq to effect the initial listing of Anchiano’s ordinary shares issuable in connection with the Merger and the Financing or upon exercise of Chemomab’s outstanding options that will be assumed by Anchiano in connection with the Merger. In addition, in connection with the Merger, Chemomab has applied for a 104H Tax Ruling or Interim 104H Tax Ruling from the tax authorities in Israel.
What will Chemomab shareholders receive in the Merger?
As a result of the Merger, Chemomab shareholders will become entitled to receive Anchiano ordinary shares, to be represented by ADSs, in exchange for Chemomab ordinary shares in an amount to be calculated by the application of an Exchange Ratio formula described in the Merger Agreement.
Under the Exchange Ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the Financing), Chemomab’s securityholders are expected to own approximately 90% of Anchiano’s share capital (on a fully diluted basis) and Anchiano’s securityholders are expected to own approximately 10% of Anchiano’s share capital (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. The Exchange Ratio formula is based on a $135.0 million valuation for Chemomab and a $15.0 million valuation for Anchiano, assuming Anchiano’s net cash at the effective time of the Merger is more than $0.5 million but not more than $2.0 million.
For a more complete description of what Chemomab shareholders will receive in the Merger, please see the sections entitled “Market Price and Dividend Information” and “The Merger Agreement – Merger Consideration” in this proxy statement/prospectus.
What will happen to Chemomab’s outstanding options in the Merger?
As a result of the Merger, Anchiano will assume all outstanding unexercised Chemomab options to purchase Chemomab ordinary shares and each such Chemomab option will be converted into an option to purchase ordinary shares of Anchiano (including ordinary shares represented by ADSs), with the number of Anchiano ordinary shares subject to such option and the exercise price being appropriately adjusted to reflect the Exchange Ratio.
Will holders of the Anchiano ordinary shares to be represented by ADSs issued in the Merger and the Financing be able to sell those shares without restriction?
The sale of the Anchiano ordinary shares issued as consideration in the Merger has been registered under the Securities Act of 1933, as amended, or the Securities Act, pursuant to the registration statement of which this prospectus forms a part, and will be able to be sold without restriction following the consummation of the Merger, including by affiliates of Anchiano following the Merger, whose ordinary
 
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shares of Anchiano received in the Merger are also being registered for resale hereby, for so long as such registration statement remains effective.
The Anchiano ordinary shares issued in the Financing will be issued in transactions exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, and may not be offered or sold by the holders of those shares absent registration or an applicable exemption from registration requirements. As a general matter, holders of such shares will not be able to transfer any of their shares until at least six months after receiving Anchiano ordinary shares, which is when the shares would first be eligible to be sold under Rule 144 promulgated under the Securities Act, assuming the conditions thereof are otherwise satisfied. In connection with the Financing, Anchiano has agreed to register for resale on Form S-3 (or on Form S-1 if Anchiano is not eligible to use Form S-3 at the time of the proposed filing of the registration statement) the Anchiano ordinary shares issued in the Financing. However, even when the shares issued in the Financing are registered for resale, such shares may be subject to transfer restrictions, as described in the following paragraph.
Directors, officers and certain shareholders of Chemomab have agreed to certain transfer restrictions on Anchiano ordinary shares to be issued to them in the Merger, and if applicable, the Financing, for a period of 180 days following the effective time of the Merger. See the section entitled “Agreements Related to the Merger — Lock-Up Agreements” in this proxy statement/prospectus for more detail.
Who will be the directors of Anchiano following the Merger?
At and immediately after the effective time of the Merger, the board of directors of Anchiano and its committees are expected to be composed of the individuals set forth in the table below. The directors shall serve until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.
Designee
Director
Age
Position(s)
Chemomab Designees
Stephen Squinto
64
Chairman of the Board of Directors
Adi Mor
39
Chief Executive Officer, Chief Scientific Officer and Director
Nissim Darvish
56
Director
Joel Maryles
61
Director
Alan Moses
73
Director
Claude Nicaise
68
Director
Anchiano Designee Neil Cohen
57
Director
Who will be the executive officers of Anchiano immediately following the Merger?
Immediately following the Merger, the executive management team of Anchiano is expected to be composed as set forth below:
Name
Position with Anchiano
Current Position
Age
Adi Mor Chief Executive Officer, Chief Scientific Officer and Director Chief Executive Officer, Chief Scientific Officer and Director of Chemomab
39
Sigal Fattal Interim Chief Financial Officer Interim Chief Financial Officer of Chemomab
50
Arnon Aharon Chief Medical Officer Chief Medical Officer of Chemomab
52
What are the material Israeli income tax consequences of the Merger to me?
You are urged to consult with your own tax advisor for a full understanding of the tax consequences of the Merger to you, including the consequences under any applicable, state, local, foreign or other tax laws.
For a more detailed description of the material Israeli tax consequences of the Merger, see the section entitled “The Merger — Certain Material Israeli Income Tax Consequences of the Merger.
 
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As an Anchiano shareholder, how does the Anchiano board of directors recommend that I vote?
After careful consideration, the Anchiano board of directors recommends that Anchiano shareholders vote:

“FOR” Proposal No. 1 to approve the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares, to be represented by ADSs, at the effective time of the Merger to the securityholders of Chemomab;

“FOR” Proposal No. 2 to approve the issuance of Anchiano ordinary shares in the Financing;

“FOR” Proposal No. 3 to approve and adopt Anchiano’s Amended and Restated Articles of Association, attached as Annex E to this proxy statement/prospectus, effective upon the effective time of the Merger;

“FOR” Proposal No. 4 to approve the Indemnification Agreement and authorize the execution and delivery of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano;

“FOR” Proposal No. 5 to approve an amendment to Anchiano’s Compensation Policy to remove the limit on the annual premium for directors and officers insurance; and

“FOR” Proposal No. 6 to approve an amendment to the compensation terms of the current and future directors of Anchiano, and related amendments to Anchiano’s Compensation Policy.
What risks should I consider in deciding whether to vote in favor of the matters set forth above?
You should carefully review the section of this proxy statement/prospectus entitled “Risk Factors,” which sets forth certain risks and uncertainties related to the Merger, risks and uncertainties to which Anchiano’s business will be subject, risks and uncertainties to which Anchiano, as an independent company, is subject and risks and uncertainties to which Chemomab, as an independent company, is subject.
When do you expect the Merger to be consummated?
We anticipate that the Merger will occur as promptly as practicable after the Special Meeting to be held March 15, 2021 and following satisfaction or waiver of all closing conditions, but we cannot predict the exact timing. For a more complete description of the closing conditions under the Merger Agreement, please see the section entitled “The Merger Agreement  — Conditions to the Completion of the Merger” in this proxy statement/prospectus.
How will the Merger affect share options to acquire Chemomab ordinary shares?
Upon the effectiveness of the Merger, each Chemomab option to purchase Chemomab ordinary shares would be assumed in the Merger and would become an option to purchase Anchiano’s ordinary shares based on the Exchange Ratio.
If effected, how will the Reverse Split and the Merger affect share options and warrants to acquire Anchiano’s ordinary shares and Anchiano’s share incentive plans?
As of the effective time of the Reverse Split, Anchiano will adjust and proportionately decrease the number of ordinary shares of Anchiano reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants to acquire Anchiano’s ordinary shares at the Reverse Split ratio approved by its board of directors. The holders of all outstanding warrants to acquire Anchiano ordinary shares have agreed to exercise such warrants immediately prior to the effective time of the Merger, and therefore none of such Anchiano warrants will be outstanding after the Merger. In addition, as of the effective time of the Reverse Split, Anchiano will adjust and proportionately decrease the total number of Anchiano’s ordinary shares that may be the subject of future grants under Anchiano’s share incentive plans at the selected Reverse Split ratio.
All share options to acquire Anchiano’s ordinary shares that are outstanding immediately prior to the effective time of the Merger will remain outstanding following the effective time of the Merger. For a more
 
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complete description of the effects of the Merger, please see the section entitled “The Merger Agreement” in this proxy statement/prospectus.
What are the Chemomab Warrants?
In connection with the closing of the Merger, each shareholder of Chemomab will be issued a warrant, or the Chemomab Warrant, which may be exercisable for Anchiano ordinary shares to be represented by ADSs in certain circumstances described immediately below, pro rata based on the Chemomab shareholders’ respective holdings of Chemomab’s share capital immediately prior to the closing of the Merger. The Chemomab Warrant is exercisable if (i) a claim is filed within one year after the closing of the Merger for contingent liabilities of Anchiano related to the pre-closing period as described in the Merger Agreement, and (ii) a judgment or settlement is paid within five years after the closing of the Merger in connection with such claims. The maximum number of ordinary shares to be represented by ADSs that may be issued to all Chemomab shareholders under the Chemomab Warrant is (i) $1.0 million worth of ordinary shares, to be represented by ADSs, in the aggregate for all claims that result in cash payments, and (ii) the number of ordinary shares to be represented by 500,000 ADSs (adjusted for, among other things, any reverse splits, or adjustment in the shares per ADS ratio) for all claims that result in the issuance of additional ordinary shares to be represented by ADSs. Investors in the Financing will be provided anti-dilution protection if any ordinary shares to be represented by ADSs are issued under the Chemomab Warrant.
What do I need to do now?
Anchiano urges you to read this proxy statement/prospectus carefully, including its annexes, and to consider how the Merger affects you.
Holders of Anchiano Ordinary Shares
If you are a shareholder of record of Anchiano, you may provide your proxy instructions in one of two different ways. First, you can mail your signed proxy card in the enclosed return envelope. Second, you may also provide your proxy instructions via telephone or the Internet by following the instructions on your proxy card or instruction form. Please provide your proxy instructions only once, unless you are revoking a previously delivered proxy instruction, and as soon as possible so that your shares can be voted at the Special Meeting. The laws of Israel, under which Anchiano is incorporated, permit electronically transmitted proxies, provided that each such proxy contains or is submitted with information from which the inspector of elections can determine that the proxy was authorized by the shareholder.
The telephone and Internet voting procedures below are designed to authenticate shareholders’ identities, to allow shareholders to grant a proxy to vote their shares and to confirm that shareholders’ instructions have been recorded properly. Shareholders granting a proxy to vote via the Internet should understand there may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, that must be borne by the shareholder.
Whether you hold your shares directly as the shareholder of record or beneficially in “street name,” you may vote your shares by proxy without attending the Special Meeting. Depending on how you hold your shares, you may vote your shares in one of the following ways:
Shareholders of Record: For Shares Registered in Your Name
1.
BY INTERNET: Go to www.ProxyVote.com
2.
BY TOLL-FREE TELEPHONE: Call 1-800-454-8683
3.
BY MAIL: Mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope.

By telephone or over the Internet. You may vote your shares by telephone or via the Internet by following the instructions provided on your proxy card. If you vote by telephone or via the Internet, you do not need to return a proxy card by mail. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient, reduces the use of natural resources and saves significant postage and processing costs. In addition, when you vote via the Internet
 
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or by phone prior to the meeting date, your vote is recorded immediately and there is no risk that postal delays will cause your vote to arrive late and therefore not be counted.

By Mail. If you received printed proxy materials, you may submit your vote by completing, signing and dating each proxy card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy card.

In person at the Special Meeting. You may vote your shares in person at the Special Meeting. Even if you plan to attend the Special Meeting in person, we recommend that you also submit your proxy card or voting instructions or vote by telephone or via the Internet by the applicable deadline so that your vote will be counted if you later decide not to attend the Special Meeting.
Beneficial Shareholders: For Shares Registered in the Name of a Broker or Bank
Most beneficial owners whose ordinary shares are held in “street name” receive instructions for granting proxies from their banks, brokers or other agents, rather than using Anchiano’s proxy card. If you are a beneficial owner of your shares, you should have received a Voting Instruction Form from the broker or other nominee holding your shares. You should follow the voting instructions provided by your broker or nominee in order to instruct your broker or other nominee on how to vote your shares. The availability of telephone and Internet voting will depend on the voting process of the broker or nominee. Shares held beneficially may be voted in person at the Special Meeting only if you contact the broker or nominee giving you the right to vote the shares and obtain a legal proxy from such broker or nominee.
General Information for All Shares Voted Via the Internet or By Telephone
Votes submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time on March 14, 2021. Submitting your proxy by telephone or via the Internet will not affect your right to vote in person should you decide to attend the Special Meeting.
Holders of ADSs
If you hold ADSs representing Anchiano ordinary shares, you cannot attend the shareholders’ meeting or vote Anchiano ordinary shares directly.
If you are a registered holder of ADSs as of the ADS voting record date set by the ADS depositary, you will receive an ADS voting card from the ADS depositary. To vote, you must complete and sign the card and return it to the ADS depositary, to be received before the cutoff date and time specified on the ADS voting card.
If you hold ADS in a securities account with a broker or other securities intermediary as of the ADS voting record date, you will be contacted by your intermediary soliciting your instructions. To vote, you must give your instructions in accordance with the instructions you received from your intermediary, to be received before the cutoff date and time set by your intermediary.
Who can vote at the Special Meeting?
If, on the record date, your Anchiano ordinary shares are registered directly in your name with the Anchiano transfer agent, you are considered to be the shareholder of record with respect to those shares, and the proxy materials and proxy card are being sent directly to you by Anchiano. If you are an Anchiano shareholder of record, you may attend the Special Meeting of Anchiano shareholders and vote your shares in person. Even if you plan to attend the Special Meeting in person, Anchiano requests that you sign and return the enclosed proxy to ensure that your shares will be represented at the Special Meeting if you are unable to attend.
If, on the record date, your Anchiano ordinary shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of ordinary shares held in “street name,” and the proxy materials are being forwarded to you by your broker or other nominee together with a voting instruction card. As the beneficial owner, you are also invited to attend the Special Meeting of Anchiano shareholders. Because a beneficial owner is not the shareholder of record, you may not vote these shares in person at the
 
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Special Meeting unless you obtain a proxy from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.
Holders of ADSs cannot attend or vote at the shareholders meeting unless they surrender their ADSs and become holders of Anchiano ordinary shares by the record date.
How are votes counted?
Votes will be counted by the inspector of elections appointed for the meeting, who will separately count votes “For” and “Against,” abstentions and, if applicable, broker non-votes. Abstentions and broker non-votes will have no effect and will not be counted towards the vote total with respect to any proposal.
What are “broker non-votes”?
If you hold Anchiano ADSs beneficially in street name and do not provide your broker or other agent with voting instructions, your Anchiano ADSs may constitute “broker non-votes.” Broker non-votes occur on a matter when banks, brokers and other nominees are not permitted to vote on certain non-discretionary matters without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-discretionary” matters. Proposals Nos. 1 through 6 are non-discretionary matters. As a result, banks, brokers and other nominees will not have discretion to vote on Proposals Nos. 1 through 6.
Broker non-votes will not be considered as votes cast by the holders of Anchiano ordinary shares present in person or represented by proxy at the Special Meeting, and will therefore not have any effect with respect to Proposals Nos. 1 through 6.
How many votes are needed to approve each proposal?
The following table summarizes the minimum vote needed to approve each proposal and the effect of abstentions and broker non-votes.
Proposal
Number
Proposal Description
Vote Required for Approval
Effect of
Abstentions
Effect of
Broker
Non-Votes
1
To approve the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares, to be represented by ADSs, at the effective time of the Merger to the securityholders of Chemomab. A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast). None None
2
To approve the issuance of such number of Anchiano ordinary shares (including ordinary shares represented by ADSs) in the private placement financing, as described in this proxy statement/prospectus, as would yield at least $30.0 million and up to $50.0 million of aggregate gross proceeds to Anchiano. A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast). None None
3
To approve and adopt Anchiano’s Amended and Restated Articles of Association, attached as Annex E to this proxy statement/prospectus, effective upon the A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast). None None
 
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Proposal
Number
Proposal Description
Vote Required for Approval
Effect of
Abstentions
Effect of
Broker
Non-Votes
effective time of the Merger, which among other things will (i) increase in the registered share capital of Anchiano from 500,000,000 ordinary shares, without par value, to 650,000,000 ordinary shares, without par value, (ii) effect the Reverse Split of Anchiano’s ordinary shares, at a ratio in the range of between 1-for-2 to 1-for-4, inclusive, with such ratio to be determined in the discretion of Anchiano’s board of directors, (iii) amend the manner in which directors are elected to a classified board format, (iv) change the name of Anchiano from “Anchiano Therapeutics Ltd.” to “Chemomab Therapeutics Ltd.” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies and (v) make such other changes as are set forth in the Amended and Restated Articles of Association.
4
To approve the form of indemnification agreement for directors and officers of Anchiano, attached as Annex F to this proxy statement/prospectus, or the Indemnification Agreement, effective upon the effective time of the Merger, and to authorize the execution and delivery of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano. A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast). None None
5
To approve an amendment to Anchiano’s Compensation Policy, attached as Annex J to this proxy statement/prospectus to remove the limit on the annual premium for directors and officers insurance.
A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast), provided that either:
1. a simple majority of shares voted at the Special Meeting,
None None
 
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Proposal
Number
Proposal Description
Vote Required for Approval
Effect of
Abstentions
Effect of
Broker
Non-Votes
excluding the shares of controlling shareholders, (1) if any, and of shareholders who have a personal interest (2) in the approval of the resolution, are voted “FOR” the resolution; or
2. the total number of shares of non-controlling shareholders and of shareholders who do not have a personal interest in the approval of the resolution voing against approval of the resolution does not exceed two percent of the outstanding voting power in the Company.
6
To approve an amendment to the compensation terms of the current and future directors of Anchiano, and related amendments to Anchiano’s Compensation Policy, included in Annex J to this proxy statement/prospectus.
A simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast), provided that either:
1. a simple majority of shares voted at the Special Meeting, excluding the shares of controlling shareholders, if any, and of shareholders who have a personal interest in the approval of the resolution, are voted “FOR” the resolution; or
2. the total number of shares of non-controlling shareholders and of shareholders who do not have a personal interest in the approval of the resolution voting against approval of the resolution does not exceed two percent of the outstanding voting power in the Company.
None None
(1)
The term “controlling shareholder” means a shareholder having the ability to direct the activities of a company, other than by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. To the knowledge of Anchiano, there is no shareholder who is a controlling shareholder.
(2)
Under the Israeli Companies Law, 5759-1999, or the Companies Law, a “personal interest” of a shareholder (i) includes a personal interest of the shareholder and any member of the shareholder’s family, family members of the shareholder’s spouse, or a spouse of any of the foregoing, or a personal interest of a company with respect to which the shareholder (or such family member) serves as a director or chief executive officer, owns at least 5% of the shares or has the right to appoint a director or chief executive officer, and (ii) excludes an interest arising solely from the ownership of our ordinary shares.
 
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Under the Companies Law, in the case of a person voting by proxy for another person, “personal interest” includes a personal interest of either the proxy holder or the shareholder granting the proxy, whether or not the proxy holder has discretion how to vote. If you do not have a personal interest in this matter, you may assume that using the form of proxy enclosed herewith will not create a personal interest. To avoid confusion, in the form of proxy card, we refer to such a personal interest as a “personal benefit or other interest”.
When and where will the Special Meeting of Anchiano shareholders be held?
The Special Meeting of Anchiano shareholders will be held at 4:30 p.m., local time, on March 15, 2021, at the law offices of Goldfarb Seligman & Co., Ampa Tower, 98 Yigal Alon Street, 36th floor, Conference Room 36-1, Tel Aviv, Israel. Subject to space availability, all Anchiano shareholders as of the record date, or their duly appointed proxies, may attend the meeting. Since seating is limited, admission to the meeting will be on a first-come, first-served basis. Registration and seating will begin at 4:00 p.m., local time. Please note that in light of current circumstances and various restrictions that are being imposed because of COVID-19, it may become necessary to change the venue of the meeting. Any such change will be announced in a Form 8-K filed with the Securities and Exchange Commission.
What happens if I do not return a proxy card or otherwise provide proxy instructions, as applicable?
Shareholder of Record: Shares Registered in Your Name
If you are a shareholder of record and do not vote by telephone, through the Internet, by completing the enclosed proxy card or in person at the Special Meeting, your shares will not be voted.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
Proposals Nos. 1 through 6 are non-discretionary matters. As a result, banks, brokers and other nominees will not have discretion to vote on Proposals Nos. 1 through 6.
What if I return a proxy card or otherwise vote but do not make specific choices?
If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the approval of the consummation of the Merger and the other transactions contemplated by the Merger Agreement, including the issuance of Anchiano ordinary shares to be represented by ADSs at the effective time of the Merger to the securityholders of Chemomab (Proposal No. 1), “For” the approval of the issuance of ordinary shares of Anchiano in the Financing (Proposal No. 2), “For” the approval and adoption of Anchiano’s Amended and Restated Articles of Association, effective upon the effective time of the Merger (Proposal No. 3), “For” the approval of the Indemnification Agreement, effective upon the effective time of the Merger, and the authorization of the execution of such Indemnification Agreement with all directors of Anchiano to be in office immediately following the effective time of the Merger or thereafter elected or appointed to the board of directors of Anchiano (Proposal No. 4), “For” the approval of an amendment to Anchiano’s Compensation Policy to remove the limit on the annual premium for directors and officers insurance (Proposal No. 5), and “For” the approval of an amendment to the compensation terms of the directors of Anchiano, and related amendments to Anchiano’s Compensation Policy (Proposal No. 6).
May I change my vote after I have submitted a proxy or provided proxy instructions?
Anchiano shareholders of record, other than those Anchiano shareholders who are parties to Support Agreements (as defined herein), may change their vote at any time before their proxy is voted at the Special Meeting in one of three ways. First, a shareholder of record of Anchiano can send a written notice to the Chief Financial Officer of Anchiano stating that it would like to revoke its proxy. Second, a shareholder of record of Anchiano can submit new proxy instructions either on a new proxy card or via telephone or the Internet. Third, a shareholder of record of Anchiano can attend the Special Meeting and vote in person. Attendance alone will not revoke a proxy. If an Anchiano shareholder of record or a shareholder who owns Anchiano shares in “street name” has instructed a broker to vote its Anchiano ordinary shares, the shareholder must follow directions received from its broker to change those instructions.
 
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Your most current proxy card or telephone or Internet proxy is the one that will be counted.
Should Anchiano’s shareholders send in their share certificates now?
No. The Bank of New York Mellon, as depositary with respect to the Anchiano ADSs, will advise Anchiano shareholders regarding the exchange of outstanding Anchiano ADSs (and outstanding American Depositary Receipts, if any). No fractional new ADSs would be issued in a reverse split of ADSs. Instead, The Bank of New York Mellon, DTC or the relevant securities intermediary would aggregate and sell the fractional entitlement ADSs and deliver net proceeds of the sale to the ADS holders in lieu of their fractional entitlements.
Am I entitled to dissenters’ rights?
No, Anchiano’s shareholders are not entitled to dissenters’ rights in connection with the Merger.
Have Chemomab’s shareholders agreed to adopt the Merger Agreement?
Yes. On January 7, 2021, Chemomab’s shareholders adopted the Merger Agreement and approved the Merger and related transactions.
Who is paying for this proxy solicitation?
Anchiano will bear the cost of soliciting proxies. In addition to these proxy materials, Anchiano’s directors and employees, and Anchiano’s proxy solicitor, Alliance Advisors, LLC, may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies, Alliance Advisors, LLC will be paid its customary fee of approximately $5,000, plus out-of-pocket expenses if it solicits proxies. We and Chemomab may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What is the quorum requirement?
A quorum of shareholders is necessary to hold a valid meeting. Two shareholders who are present in person or by proxy, and who hold or represent at least thirty-three and one-third percent (33-1/3%) of the voting rights in the Company, shall constitute a quorum. On the record date, there were 37,099,352 shares outstanding and entitled to vote. Thus, the holders of at least 12,366,451 shares must be present in person or represented by proxy at the Special Meeting to have a quorum.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Special Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If half an hour has elapsed from the time set for the Special Meeting and a quorum is not present, the Special Meeting will be adjourned to the following business day, at the same time and place, or to a different date, as shall be determined by the Board of Directors in a notice to the shareholders. If a quorum is not present at the adjourned Special Meeting, as stated above, a minimum of one shareholder, whether present in person or by proxy, shall be deemed as constituting a quorum.
What happens if a quorum is not present?
If half an hour has elapsed from the time set for the Special Meeting and a quorum is not present, the Special Meeting will be adjourned to the following business day, at the same time and place, or to a different date, as shall be determined by the board of directors in a notice to the shareholders.
Are representatives of Anchiano’s independent registered accounting firm expected to be present at the Special Meeting?
Yes, representatives of Somekh Chaikin, member firm of KPMG International, the independent registered public accounting firm for Anchiano, are expected to be present at the Special Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
 
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Who can help answer my questions?
If you are an Anchiano shareholder and would like additional copies, without charge, of this proxy statement/prospectus or if you have questions about the Merger and related transactions, including the procedures for voting your shares, you should contact Alliance Advisors, LLC, Anchiano’s proxy solicitor, by telephone at the following address and phone number, or Chief Financial Officer of Anchiano, at the following address and phone number:
Alliance Advisors, LLC
200 Broadacres Drive, 3rd Floor
Bloomfield, New Jersey 07003
+1 (866) 613-3006 (toll free in the United States)
One Kendall Square
Building 1400E
Suite 14-105
Cambridge, Massachusetts 02139
Attn: Chief Financial Officer
Telephone: +1 (857) 259-4622
 
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SUMMARY
This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the Merger, and the proposals being considered at the Special Meeting, you should read this entire proxy statement/prospectus carefully, including the Merger Agreement attached as Annex A, the forms of Voting and Support Agreements attached as Annexes B and C and the other annexes to which you are referred herein.
The Companies
Anchiano Therapeutics Ltd.
One Kendall Square, Building 1400E
Suite 14-105
Cambridge, Massachusetts 02139
(857) 259-4622
Anchiano is a preclinical biotechnology company committed to discovering and developing new cancer therapies designed to target the products of mutated genes that are drivers of human malignancies. These therapies are called small molecule targeted therapies. Anchiano has obtained the option to license small molecule technologies that it believes it can develop into product candidates that can deliver novel treatments for cancer patients whose cancers are caused by mutated genes and for whom existing therapies are limited in effectiveness. The first of these technologies comprises small molecules that potently inhibit the products of RAS oncogenes. RAS oncogenes are the most frequently mutated family of genes in human cancer, responsible for almost a third of all human malignancies, and almost half of the three most lethal cancers (i.e., lung cancer, colorectal cancer and pancreatic cancer). To date, there are no approved therapies that are effective in countering their tumorigenic effects. Anchiano’s second technology consists of small molecules that interfere with the Wnt/APC/β-catenin biochemical pathway through the inhibition of phosphodiesterase 10. Mutations in this pathway are involved in most human colorectal cancers, the second leading cause of cancer deaths in the United States, as well as in the hereditary cancer predisposition syndrome, familial adenomatous polyposis, which gives rise to colorectal cancer. As is true for RAS-driven cancers, to date there are no approved therapies specifically for cancers that carry mutations in the Wnt/APC/β-catenin pathway genes.
On September 13, 2019, Anchiano entered into a Collaboration and License Agreement, or the ADT License Agreement, with ADT Pharmaceuticals, LLC, or ADT, pursuant to which Anchiano acquired the rights to these two small molecule developmental programs targeting oncogenic pathways, focused on pan-mutant RAS inhibitors, or the pan-RAS-inhibitor program, and inhibitors of PDE10 and the β-catenin pathway, respectively. Under the ADT License Agreement, Anchiano is primarily responsible for the research, development, manufacturing, regulatory and commercial activities with respect to the compounds conveyed and contemplated thereunder.
Since entering into the ADT License Agreement, Anchiano has focused its efforts on the development of the pan-RAS-inhibitor program. In order to advance this program, Anchiano’s management had been working to identify additional financing sources and/or potential co-development partners. Such efforts, however, did not result in opportunities that were sufficiently mature. As a result, in July 2020, Anchiano decided to undertake certain cost-saving measures, including a workforce reduction and temporary reduction of its internal and external research and development activities with respect to the pan-RAS-inhibitor program, in order to conserve cash and preserve optionality while alternatives were being identified and assessed. These include plans to temporarily reduce its internal and external research and development work on Anchiano’s pan-RAS-inhibitor program until there is greater clarity regarding Anchiano’s ability to fund the program. The workforce reduction included three employees, which represented approximately 60% of its workforce as of June 30, 2020. Anchiano incurred severance related charges of $0.3 million in the third quarter as well as $0.9 million in other costs due to events associated with or resulting from our research and development workforce reduction and refocus with respect to external development activities. Anchiano continues to undertake actions for the promotion of the program and its assets and towards strengthening the protection of all related intellectual property.
 
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After conducting a diligent and extensive process of evaluating strategic alternatives for Anchiano and identifying and reviewing potential candidates for a strategic acquisition or other transaction, and following extensive negotiation with Chemomab, on December 14, 2020, Anchiano entered into the Merger Agreement with Chemomab. Pursuant to the Merger Agreement, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, at the effective time of the Merger, CMB Acquisition Ltd., an Israeli limited company and wholly-owned subsidiary of Anchiano, or Merger Sub, will merge with and into Chemomab, with Chemomab continuing as a wholly-owned subsidiary of Anchiano and the surviving corporation of the Merger. Anchiano and Chemomab (as successor in interest to Anchiano following the Merger) may decide to assign the ADT License Agreement or terminate such agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT. If the Merger is completed, the business of Anchiano will become the business of Chemomab as described beginning on page 147 of this proxy statement/prospectus under the caption “Chemomab Business.”
Chemomab Ltd.
Kiryat Atidim, Building 7
Tel Aviv 6158002, Israel
+972-77-331-0156
Chemomab is a clinical-stage biotech company discovering and developing innovative therapeutics for conditions with high unmet medical need that involve inflammation and fibrosis. CM-101, the company’s lead clinical candidate, is a first-in-class humanized monoclonal antibody which hinders the fundamental function of the soluble chemokine CCL24, also known as eotaxin-2, as a regulator of major inflammatory and fibrotic pathways. Chemomab has shown that CM-101 interferes with the underlying biology of fibrosis using a novel and differentiated mechanism of action and is actively advancing CM-101 into staggered Phase 2 clinical studies to treat patients with liver, skin, and lung fibrosis. Chemomab has completed two Phase 1a studies at varying doses using different administration methods, as well as a Phase 1b safety, tolerability and proof-of-mechanism study of CM-101 in non-alcoholic fatty liver disease, or NAFL, patients. A Phase 2a study in primary sclerosing cholangitis, or PSC, a rare obstructive and cholestatic liver disease that reduces or blocks the flow of bile from the liver, is currently ongoing in the United Kingdom and Israel and Chemomab is planning a Phase 2 study in systemic sclerosis, or SSc, a rare autoimmune rheumatic disease characterized by accumulation of collagen (fibrosis), to follow this year. Although the primary focus of Chemomab is in these two orphan indications, Chemomab is planning an additional Phase 2a study expanding the mechanistic understanding of CM-101 in early 2021 in non-alcoholic steatohepatitis, or NASH, patients.
Fibrosis is the abnormal and excessive accumulation of collagen and extracellular matrix leading to scarring and thickening of connective tissues, affecting tissue properties and potentially leading to organ failure. Fibrosis can occur in many different tissues, including lung, liver, kidney, muscle, skin, and the gastrointestinal tract, resulting in a growing number of progressive fibrotic conditions. A healthy inflammatory response is necessary for efficient tissue repair; however, fibrosis and inflammation are intrinsically linked and a prolonged inflammatory response can contribute to the pathogenesis of fibrosis.
Chemomab has pioneered the therapeutic targeting of CCL24, a chemokine that promotes various types of cellular processes that regulate inflammatory and fibrotic activities through the CCR3 receptor. The chemokine is expressed in monocytes, macrophages, activated T cells, fibroblasts, endothelial cells, and epithelial cells including cholangiocytes. Chemomab has developed a novel CCL24 inhibiting product with dual anti-fibrotic and anti-inflammatory activity allowing it to challenge the complex interplays of both of the pathogenic mechanisms that drive fibrotic indications. This innovative approach is being developed for difficult to treat orphan diseases such as PSC and SSc, where patients have no established standard of care options.
CMB Acquisition Ltd.
CMB Acquisition Ltd. is a wholly-owned subsidiary of Anchiano, and was formed solely for the purposes of carrying out the Merger.
 
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The Merger (see page 88)
If the Merger is completed, Merger Sub will merge with and into Chemomab, with Chemomab surviving as a wholly-owned subsidiary of Anchiano.
At the effective time of the Merger, each Chemomab ordinary share outstanding immediately prior to the effective time (excluding certain Chemomab ordinary shares that may be cancelled pursuant to the Merger Agreement) will be automatically converted into the right to receive a number of Anchiano American Depositary Shares, or ADSs, each representing Anchiano ordinary shares, plus a warrant that may be exercisable under certain circumstances to purchase ADSs. The final exchange ratio, or the Exchange Ratio, will be determined pursuant to a formula described in more detail in the Merger Agreement and later in this proxy statement/prospectus. Under the Exchange Ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the Financing), Chemomab’s securityholders are expected to own approximately 90% of Anchiano’s share capital (on a fully diluted basis) and Anchiano’s securityholders are expected to own approximately 10% of Anchiano’s share capital (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. The percentages set forth above assume that the initial estimate of the Exchange Ratio is not changed; however, the Exchange Ratio is subject to change as described in the section entitled “The Merger Agreement — Merger Consideration” in this proxy statement/prospectus.
The Exchange Ratio is calculated using a formula intended to allocate a percentage of the combined company to existing Chemomab securityholders. The initial estimate of the Exchange Ratio set forth below is based on a $135.0 million valuation for Chemomab and a $15.0 million valuation for Anchiano, assuming Anchiano’s net cash at the effective time of the Merger is more than $0.5 million but not more than $2.0 million. Based on the assumptions described above, the Exchange Ratio would be equal to approximately 205 Anchiano ADSs, each representing 5 Anchiano ordinary shares, for each share of Chemomab (without giving effect to the Reverse Split), which Exchange Ratio is subject to change based on the amount of Anchiano net cash and changes in the capitalization of Anchiano or Chemomab prior to the closing of the Merger (and as a result, Anchiano securityholders and Chemomab securityholders could own more or less of the combined company).
Immediately prior to the effective time of the Merger, all outstanding preferred shares of Chemomab will be converted into ordinary shares of Chemomab. Anchiano will assume all outstanding and unexercised Chemomab options to purchase Chemomab ordinary shares, and each such Chemomab option will be converted into an option to purchase ordinary shares of Anchiano (including ordinary shares represented by ADSs), with the number of Anchiano ordinary shares subject to such option and the exercise price being appropriately adjusted to reflect the Exchange Ratio. For a more complete description of the Merger and the Exchange Ratio, please see the section entitled “The Merger Agreement” in this proxy statement/prospectus.
The closing of the Merger will occur as promptly as practicable (but in no event later than the second business day after the last of the conditions to the Merger has been satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver of each such conditions), or at such other time as Anchiano and Chemomab agree. Anchiano and Chemomab anticipate that the consummation of the Merger will occur in Anchiano’s first or second fiscal quarter of 2021 (the quarters ending March 31 and June 30, 2021, respectively). However, because the Merger is subject to a number of conditions, neither Anchiano nor Chemomab can predict exactly when the closing of the Merger will occur or if it will occur at all.
Reasons for the Merger (see page 96)
Anchiano and Chemomab believe that the combined company will have the following potential advantages:

the combined company’s public position, in particular as it relates to the current plans of Chemomab for developing CM-101, and the likelihood that Chemomab post-merger would possess sufficient financial resources to allow the management team to execute the continued development of CM-101;

the range of options available to the combined company to access the public equity markets to fund future capital needs or to complete business development transactions, which would likely be greater than the options available to Chemomab alone as a privately held company;
 
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the expected reaction and support of the transaction from the market, investment banks, Chemomab shareholders and Anchiano shareholders; and

the fact that the Merger will result in Chemomab becoming a publicly traded company, which would provide Chemomab shareholders with the opportunity to obtain liquidity for their shares.
Each of the boards of directors of Anchiano and Chemomab also considered other factors for the Merger, as described herein. For example, the Anchiano board of directors considered, among other things:

the strategic alternatives to the Merger available to Anchiano, including the discussions that Anchiano’s management and the Anchiano board of directors previously conducted with other potential merger partners;

the risks associated with continuing to operate Anchiano on a stand-alone basis, including liquidity needs and cash-burn, and the risks associated with delisting from the Nasdaq Stock Market;

Anchiano’s management’s belief that it would be difficult to obtain sufficient equity or debt financing on acceptable terms, if at all; and

the projected liquidation value of Anchiano and the risks, costs and timing associated with liquidating compared to the value Anchiano shareholders will receive in the Merger.
Opinion of Oppenheimer & Co. (see page 101)
At the December 14, 2020 meeting of the board of directors of Anchiano, representatives of Oppenheimer & Co. Inc., or Oppenheimer, rendered Oppenheimer’s oral opinion, which was subsequently confirmed by delivery of a written opinion to the Anchiano board of directors dated December 14, 2020, as to the fairness, as of such date, from a financial point of view, to Anchiano of the Exchange Ratio in the Merger pursuant to the Merger Agreement, based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Oppenheimer in connection with the preparation of its opinion.
The full text of the written opinion of Oppenheimer, dated December 14, 2020, which sets forth, among other things, the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken, is attached as Annex I to this proxy statement/prospectus. Oppenheimer provided its opinion for the information and assistance of the Anchiano board of directors (in its capacity as such) in connection with, and for purposes of, its consideration of the Merger and its opinion only addresses whether the Exchange Ratio in the Merger pursuant to the Merger Agreement was fair, from a financial point of view, to Anchiano. The opinion of Oppenheimer did not address any other term or aspect of the Merger Agreement or the Merger. The Oppenheimer opinion does not constitute a recommendation to the board of directors of Anchiano or any Anchiano shareholder as to how the Anchiano board of directors, such shareholder or any other person should vote or otherwise act with respect to the Merger or any other matter.
Overview of the Merger Agreement (see page 113)
Merger Consideration and Exchange Ratio (see page 113)
At the Effective Time, each outstanding share of Chemomab will be converted into the right to receive a number of Anchiano ordinary shares to be represented by ADSs.
The Merger Agreement does not provide for an adjustment to the total number of Anchiano ADSs that Chemomab shareholders will be entitled to receive for changes in the market price of Anchiano ADSs. Accordingly, the market value of the shares of Anchiano ADSs issued pursuant to the Merger will depend on the market value of the Anchiano ADSs at the time the Merger closes, and could vary significantly from the market value of the Anchiano ADSs on the date of this proxy statement/prospectus.
At the effective time of the Merger:

Each Chemomab shareholder will receive Anchiano ordinary shares to be represented by ADSs in exchange for its Chemomab shares in an amount equal to the number of Chemomab shares held by
 
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such Chemomab shareholder multiplied by the Exchange Ratio. No fractional Anchiano ADSs will be issued in connection with the Merger. Instead, each Chemomab shareholder who otherwise would be entitled to receive a fractional Anchiano ADS (after aggregating all fractional Anchiano ADSs issuable to such Chemomab shareholder) will receive such amount rounded to the nearest whole number of Anchiano ADSs;

In addition, each shareholder of Chemomab will be issued a Chemomab Warrant, which may be exercisable for Anchiano ordinary shares to be represented by ADSs in certain circumstances described immediately below, pro rata based on the Chemomab shareholders’ respective holdings of Chemomab’s share capital immediately prior to the closing of the Merger. The Chemomab Warrant is exercisable if (i) a claim is filed within one year after the closing of the Merger for contingent liabilities of Anchiano related to the pre-closing period as described in the Merger Agreement, and (ii) a judgment or settlement is paid within five years after the closing of the Merger in connection with such claims. The maximum number of ordinary shares to be represented by ADSs that may be issued to all Chemomab shareholders under the Chemomab Warrant is (i) $1 million worth of ordinary shares, to be represented by ADSs, in the aggregate for all claims that result in cash payments, and (ii) the number of ordinary shares to be represented by 500,000 ADSs (adjusted for, among other things, any reverse splits, or adjustment in the shares per ADS ratio) for all claims that result in the issuance of additional ordinary shares to be represented by ADSs. Investors in the Financing will be provided anti-dilution protection if any ordinary shares to be represented by ADSs are issued under the Chemomab Warrant; and

Anchiano will assume all outstanding unexercised Chemomab options to purchase Chemomab ordinary shares and each such Chemomab option will be converted into an option to purchase ordinary shares of Anchiano (including ordinary shares represented by ADSs), with the number of Anchiano ordinary shares subject to such option and the exercise price being appropriately adjusted to reflect the Exchange Ratio.
Under the Exchange Ratio formula described in the Merger Agreement, immediately following the Merger (but without giving effect to the Financing), Chemomab’s securityholders are expected to own approximately 90% of Anchiano’s share capital (on a fully diluted basis) and Anchiano’s securityholders as of immediately prior to the Merger are expected to own approximately 10% of Anchiano’s share capital (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. The Exchange Ratio formula is based on a $135.0 million valuation for Chemomab and a $15.0 million valuation for Anchiano, assuming Anchiano’s net cash at the effective time of the Merger is more than $0.5 million but not more than $2.0 million.
Treatment of Anchiano Share Options and Warrants
All options to acquire Anchiano’s ordinary shares that are outstanding immediately prior to the effective time of the Merger will remain outstanding following the effective time of the Merger unless otherwise terminated in accordance with their terms. All outstanding Anchiano warrants will be exercised on a cashless basis in accordance with the Crossover Round Waiver (see “The Merger — Background of the Merger — History of Strategic Alternatives Discussions and Significant Corporate Events for Anchiano”), and there will be no Anchiano warrants outstanding after the Merger.
As of the effective time of the Reverse Split, Anchiano will adjust and proportionately decrease the number of ordinary shares of Anchiano reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants to acquire Anchiano’s ordinary shares at the Reverse Split ratio approved by its board of directors. In addition, as of the effective time of the Reverse Split, Anchiano will adjust and proportionately decrease the total number of Anchiano’s ordinary shares that may be the subject of future grants under Anchiano’s share incentive plans at the selected Reverse Split ratio.
Conditions to the Completion of the Merger (see page 116)
The obligations to consummate the Merger and the other transactions contemplated by the Merger Agreement shall be subject to the satisfaction or waiver, on or prior to the closing of the Merger, of the conditions set forth in the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” below.
 
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No Solicitation by Anchiano and Chemomab (see page 117)
Both Anchiano and Chemomab and their representatives are prohibited by the terms of the Merger Agreement from (i) soliciting, initiating or knowingly encouraging, inducing or facilitating the communication, making, submission or announcement of any acquisition proposal or acquisition inquiry or take any action that could reasonably be expected to lead to an acquisition proposal or acquisition inquiry; (ii) furnishing any non-public information regarding Anchiano or Chemomab, as applicable, or any of its respective subsidiaries to any person in connection with or in response to an acquisition proposal or acquisition inquiry; (iii) engaging in discussions or negotiations with any person with respect to any acquisition proposal or acquisition inquiry; (iv) approving, endorsing or recommending any acquisition proposal; (v) executing or entering into any letter of intent or any contract contemplating or otherwise relating to any acquisition transaction; or (vi) publicly proposing to do any of the foregoing.
Termination (see page 122)
Either Anchiano or Chemomab can terminate the Merger Agreement under certain circumstances, which would prevent the Merger from being consummated. In the event that the Merger Agreement is terminated, neither party is required to pay a termination fee to the other party.
Support Agreements (see page 124)
Shareholders of both Anchiano and Chemomab holding shares sufficient to approve the Merger have entered into shareholder support agreements with the respective companies in support of the Merger.
In connection with the execution of the Merger Agreement, certain shareholders of Anchiano entered into support agreements, or the Anchiano Shareholder Support Agreements, covering approximately 57% of the outstanding ordinary shares of Anchiano as of the execution of the Merger Agreement. The Anchiano Shareholder Support Agreements provide, among other things, that the shareholders party to the Anchiano Shareholder Support Agreements will vote all of the shares of Anchiano held by them (including shares represented by ADSs) in favor of the adoption of the Merger Agreement, the approval of the Merger, the issuance of our ADSs in connection with the Merger and the other transactions contemplated by the Merger Agreement.
In connection with the execution of the Merger Agreement, certain shareholders of Chemomab entered into support agreements, or the Chemomab Shareholder Support Agreements, covering approximately 83% of the outstanding shares of Chemomab as of the execution of the Merger Agreement. The Chemomab Shareholder Support Agreements provide, among other things, that the shareholders party to the Chemomab Shareholder Support Agreements will vote all of the shares of Chemomab held by them in favor of the adoption of the Merger Agreement, the approval of the Merger and the other transactions contemplated by the Merger Agreement.
Lock-up Agreements (see page 124)
Concurrently with and after the execution of the Merger Agreement, certain shareholders of Anchiano and Chemomab entered into lock-up agreements, or the Lock-Up Agreements, pursuant to which they accepted certain restrictions on transfers of shares of Anchiano held, or to be held, by them (including shares represented by ADSs) for 180 days following the effective time of the Merger. The shareholders party to the Lock-Up Agreements each agreed, absent the prior written consent of Anchiano, not to (i) lend, grant, offer, pledge, encumber, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any Anchiano ordinary shares, or any securities convertible into or exercisable or exchangeable for Anchiano ordinary shares, whether then owned or thereinafter acquired, including without limitation, Anchiano ordinary shares or such other securities which may be deemed to be beneficially owned by the shareholder in accordance with the rules and regulations of the SEC and securities of Anchiano that may be issued upon exercise of a share option or warrant or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of such shareholder’s shares.
 
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Executive Officers of Anchiano Following the Merger (see page 205)
Immediately following the Merger, the executive management team of Anchiano is expected to be composed as set forth below:
Name
Position with Anchiano
Age
Current Position
Adi Mor Chief Executive Officer,
Chief Scientific Officer and Director
39
Chief Executive Officer, Chief Scientific Officer and Director of Chemomab
Sigal Fattal Interim Chief Financial Officer
50
Interim Chief Financial Officer of Chemomab
Arnon Aharon Chief Medical Officer
52
Chief Medical Officer of Chemomab
Directors of Anchiano Following the Merger (see page 201)
At and immediately after the effective time of the Merger, the board of directors of Anchiano and its committees are expected to be composed of the individuals set forth in the table below. The directors shall serve until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal.
Designee
Director
Age
Position(s)
Chemomab Designees
Stephen Squinto
64
Chairman of the Board of Directors
Adi Mor
39
Chief Executive Officer, Chief Scientific Officer and Director
Nissim Darvish
56
Director
Joel Maryles
61
Director
Alan Moses
73
Director
Claude Nicaise
68
Director
Anchiano Designee Neil Cohen
57
Director
Interests of the Anchiano and Chemomab Directors and Executive Officers in the Merger (see page 106)
In considering the recommendation of Anchiano’s board of directors with respect to the issuance of Anchiano ordinary shares in connection with the Merger and the Financing and the other matters to be acted upon by Anchiano’s shareholders at the Special Meeting, Anchiano’s shareholders should be aware that certain members of the board of directors and executive officers of Anchiano have interests in the Merger that may be different from, or in addition to, your interests.
As of December 28, 2020, all directors and executive officers of Anchiano, together with their affiliates, beneficially owned approximately 0.17% of the outstanding Anchiano ordinary shares. The affirmative vote of a simple majority of all votes properly cast in person or by proxy at the Special Meeting (not counting “abstentions” or “broker non-votes” as votes cast) is required for approval of each of Proposals Nos. 1 through 4. The approval of Proposals Nos. 5 and 6 also require such affirmative majority, plus either (i) a simple majority of shares voted at the Special Meeting, excluding the shares of controlling shareholders, if any, and of shareholders who have a personal interest in the approval of the resolution, or (ii) the total number of shares of non-controlling shareholders and of shareholders who do not have a personal interest in the resolution voting against approval of the resolution does not exceed two percent of the outstanding voting power in Anchiano.
Certain Material Israeli Income Tax Consequences of the Merger (see page 109)
In general, under the Israeli Tax Ordinance [New Version], 5721-1961, the disposition of shares of an Israeli company, such as Chemomab, is deemed to be a sale of capital assets subject to capital gains tax by both residents and non-residents of Israel, unless a specific exemption is available or unless a treaty for the prevention of double taxation between Israel and the seller’s country of residence provides otherwise.
 
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Assuming Chemomab obtains the Tax Ruling (as defined herein) from the Israel Tax Authority for which Chemomab has applied, the Israeli income tax consequences of the Merger shall be in accordance with the Tax Ruling (if applicable to a particular Chemomab securityholder). For more information, please see the section entitled “The Merger — Certain Material Israeli Income Tax Consequences of the Merger” of this proxy statement/prospectus.
Risk Factors (see page 29)
Both Anchiano and Chemomab are subject to various risks associated with their businesses and their industries. In addition, the Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective shareholders, including the following risks:

The Exchange Ratio is not adjustable based on the market price of Anchiano ADSs, so the Merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed;

If the Merger is not completed, Anchiano’s board of directors may decide to pursue a dissolution and liquidation of Anchiano;

If the conditions to the Merger are not fulfilled, the Merger will not occur;

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes;

The market price of the combined company’s shares may decline as a result of the Merger;

Anchiano and Chemomab shareholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger;

During the pendency of the Merger, Anchiano and Chemomab will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties’ ability to enter into business combination transactions with another party; and

Because the lack of a public market for Chemomab’s ordinary shares makes it difficult to evaluate the fairness of the Merger, Chemomab’s shareholders may receive consideration in the Merger that is greater than or less than the fair market value of Chemomab’s ordinary shares.
These risks and other risks are discussed in greater detail under the section entitled “Risk Factors” in this proxy statement/prospectus. Anchiano and Chemomab both encourage you to read and consider all of these risks carefully.
Regulatory Approvals (see page 109)
In the United States, Anchiano must comply with applicable federal and state securities laws and the rules and regulations of Nasdaq in connection with the issuance of shares of Anchiano and the filing of this proxy statement/prospectus with the SEC. As of the date hereof, the Registration Statement, of which this proxy statement/prospectus is a part, has not become effective.
Nasdaq Stock Market Listing (see page 112)
Prior to consummation of the Merger, Anchiano has filed an initial listing application with Nasdaq, as required by Nasdaq, to effect the initial listing of Anchiano’s ordinary shares issuable in connection with the Merger and the Financing or upon exercise of Chemomab’s outstanding options that will be assumed by Anchiano in connection with the Merger. If such application is accepted, Anchiano anticipates that its securities will be listed on the Nasdaq Capital Market following the closing of the Merger and will trade under Anchiano’s new name, “Chemomab Therapeutics Ltd.,” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies, and new trading symbol, “CMMB.”
Anticipated Accounting Treatment (see page 112)
The Merger will be accounted for by Anchiano as a “reverse merger” and recapitalization under existing U.S. generally accepted accounting principles, or GAAP. For accounting purposes, Chemomab is considered to be acquiring Anchiano in the Merger.
 
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Comparison of Shareholder Rights (see page 237)
Both Anchiano and Chemomab are incorporated under the laws of Israel and, accordingly, the rights of the shareholders of each are currently, and will continue to be, governed by Israeli law. If the Merger is completed, Chemomab shareholders will become Anchiano shareholders, and their rights will be governed by Israeli law and, assuming Proposal No. 3 is approved by Anchiano shareholders at the Special Meeting, the Amended and Restated Articles of Association attached to this proxy statement/prospectus as Annex E. The rights of Anchiano shareholders contained in the amended and restated articles of association of Anchiano, as in effect following the effective time of the Merger, differ from the rights of Chemomab shareholders under Chemomab’s current amended and restated articles of association, as more fully described under the section entitled “Comparison of Shareholder Rights” in this proxy statement/prospectus.
 
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SELECTED HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables present selected historical consolidated financial data for Anchiano, selected historical financial data for Chemomab, unaudited pro forma combined financial data for Anchiano and Chemomab and comparative historical and unaudited pro forma per share data for Anchiano and Chemomab.
Selected Historical Consolidated Financial Data of Anchiano
The following tables summarize Anchiano’s consolidated financial data for each of the periods indicated. The statements of operations data for the years ended December 31, 2019 and 2018 and the balance sheet data as of September 30, 2020 and 2019 have been derived from Anchiano’s audited consolidated financial statements, which are included in this proxy statement/prospectus. The statement of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 and 2019 have been derived from Anchiano’s unaudited interim condensed consolidated financial statements for the nine months period ended September 30, 2020 and 2019 included in this proxy statement/prospectus. The information set forth below should be read in conjunction with the sections titled “Anchiano Management’s Discussion and Analysis of Financial Condition and Results of Operations” and related notes appearing elsewhere in this proxy statement/prospectus. In the opinion of Anchiano’s management, the unaudited consolidated interim financial data reflects all adjustments necessary for a fair statement of the financial information in those statements. Anchiano’s historical results are not necessarily indicative of results that should be expected in any future period.
Statement of Operations Data
For the year ended December 31,
Nine months ended September 30,
2018
2019
2019
2020
(in thousands)
Operating expenses:
Research and development
$ 7,514 $ 13,303 $ 12,276 $ 3,609
General and administrative
5,521 6,245 4,958 5,126
Restructuring expense
3,350 749
Total operating expenses
13,035 22,898 17,234 9,484
Finance (income) expense, net
457 4,226 4,286 (19)
Loss before income taxes
13,492 27,124 21,520 9,465
Income taxes, net
306
Net loss and comprehensive loss
$ 13,798 $ 27,124 $ 21,520 $ 9,465
Basic and diluted loss per share
$ 1.09 $ 0.79 $ 0.64 $ 0.26
Weighted average number of shares outstanding – basic and diluted
12,634 34,446 33,551 37,099
Other comprehensive income
Foreign currency translation adjustments
(415)
Total comprehensive loss
$ 13,383 $ 27,124 $ 21,520 $ 9,465
 
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As of December 31,
2019
As of September 30,
2020
(in thousands)
Balance Sheet Data:
Cash, cash equivalents and short-term investments
$ 17,575 $ 6,768
Working capital(1)
$ 14,090 $ 5,113
Total assets
$ 19,755 $ 7,688
Total stockholders’ equity
$ 14,909 $ 5,350
(1)
Working capital is defined as current assets less current liabilities.
This figure is not derived from the financial statements
Selected Historical Financial Data of Chemomab
The following tables summarize Chemomab’s financial data for each of the periods indicated. The statements of operations data for the years ended December 31, 2019 and 2018 and the balance sheet data as of December 31, 2019 and 2018 have been derived from Chemomab’s audited financial statements appearing elsewhere in this proxy statement/prospectus. The statement of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 and 2019 have been derived from Chemomab’s unaudited condensed interim financial statements appearing elsewhere in this proxy statement/prospectus. The unaudited condensed interim financial statements of Chemomab have been prepared on the same basis as the audited financial statements of Chemomab. In the opinion of Chemomab’s management, the unaudited condensed interim financial data reflects all adjustments necessary for a fair statement of the financial information in those statements. The following selected financial data should be read together with “Chemomab Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Chemomab’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus. Chemomab’s historical results are not necessarily indicative of results that should be expected in any future period.
For the year ended December 31,
Nine months ended September 30,
Statement of Operations Data:
2018
2019
2019
2020
(in thousands)
Operating expenses:
Research and development
$ 5,553 $ 5,818 $ 3,543 $ 3,430
General and administrative
374 960 669 600
Total operating expenses
5,927 6,778 4,212 4,030
Finance (income) expense, net
(54) 2 8 (30)
Net loss and comprehensive loss
5,873 6,780 4,220 4,000
As of December 31,
2019
As of September 30,
2020
Balance Sheet Data:
Cash, cash equivalents and short-term investments
$ 12,259 $ 12,695
Working capital(1)
$ 12,122 $ 11,882
Total assets
$ 13,160 $ 13,396
Total stockholders’ equity
$ 12,373 $ 12,157
(1)
Working capital is defined as current assets less current liabilities.
This figure is not derived from the financial statements
 
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Selected Unaudited Pro Forma Combined Financial Data of Anchiano and Chemomab
The following unaudited pro forma combined financial information gives effect to the Merger but does not give effect to the proposed Reverse Split because the proposed reverse split is a range and is not final.
The acquisition will be accounted for as a “reverse merger” and recapitalization since immediately upon the completion of the Merger, the Chemomab shareholders prior to the Merger will hold a majority of the voting interest of the combined company. In addition, the board of directors of the combined company will include four of the current members of the Chemomab board of directors, and therefore, members of Chemomab’s current board of directors will possess majority control of the board of directors of the combined company. Moreover, Chemomab’s senior management will hold all key positions in senior management of the combined company. For accounting purposes, Chemomab will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a recapitalization of Chemomab. Accordingly, Chemomab’s assets, liabilities and results of operations will become the historical financial statements of the registrant, and Anchiano’s assets, liabilities and results of operations will be consolidated with Chemomab effective as of the acquisition date. No step-up in basis or goodwill will be recorded in this transaction.
The unaudited pro forma combined balance sheet data as of September 30, 2020 gives effect to the Merger as if it took place on September 30, 2020. The unaudited pro forma combined statements of operations for the year ended December 31, 2019 and the nine months ended September 30, 2020 gives effect to the Merger as if it took place on January 1, 2019. The historical financial statements of Anchiano and Chemomab have been adjusted to give pro forma effect to events that reflect the U.S. GAAP accounting for the transaction to illustrate the effects of the reverse merger and recapitalization to the company’s historical financial statements. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Merger.
The unaudited pro forma condensed combined financial information is based on assumptions and adjustments that are described in the accompanying notes. The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. The unaudited pro forma condensed combined financial information should not be relied upon as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. The actual amounts recorded as of the completion of the Merger may differ materially from the information presented in these unaudited pro forma combined financial statements as a result of the amount of cash used by Anchiano’s operations between the signing of the Merger Agreement and the closing of the Merger, the timing of closing of the Merger, and other changes in Anchiano’s assets and liabilities that occur prior to the completion of the Merger.
The unaudited pro forma combined financial statements, including the notes thereto, should be read in conjunction with the separate historical consolidated financial statements of Anchiano and Chemomab and the sections titled “Anchiano Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Chemomab Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this proxy statement/prospectus. Anchiano’s and Chemomab’s historical audited financial statements for the year ended December 31, 2019 and unaudited condensed interim unaudited financial statements for the nine months ended September 30, 2020 appear elsewhere in this proxy statement/prospectus.
 
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Combined Statement of Operations Data:
Year ended
December 31, 2019
Nine months ended
September 30, 2020
(in thousands)
Research and development expense
$ 19,121 $ 7,039
General and administrative expense
7,205 5,726
Restructuring expense
3,350 749
Loss from operations
$ (29,676) $ (13,514)
Net loss attributable to common
stockholders
$ (33,902) $ (13,465)
Net loss per share, basic and diluted
$ 0.04 $ 0.02
Combined Balance Sheet Data:
As of September 30,
2020
(in thousands)
Cash and cash equivalents
$ 48,063
Working capital
44,050
Total assets
50,884
Accumulated deficit
(24,489)
Total Stockholdes’ equity
44,563
Comparative Historical and Unaudited Pro Forma Per Share Data
The information below reflects the historical per share information for Anchiano and Chemomab and the unaudited pro forma per share information of the combined company as if Anchiano and Chemomab had been combined as of or for the periods presented.
The pro forma amounts in the tables below have been derived from the unaudited pro forma combined financial information included in the section titled “Unaudited Pro Forma Combined Financial Statements” of this proxy statement/prospectus. The pro forma amounts are presented for illustrative purposes only and are not necessarily indicative of what the financial position, results of operations or per share information of the combined company would have been had Anchiano and Chemomab been combined as of or for the periods presented.
The tables below should be read in conjunction with the consolidated financial statements and the related notes of Anchiano appearing elsewhere in this proxy statement/prospectus and the financial statements and the related notes of Chemomab appearing elsewhere in this proxy statement/prospectus.
Year ended
December 31, 2019
Nine months ended
September 30, 2020
Anchiano Historical Per Common Share Data:
Basic and diluted net loss per share
$ 0.79 $ 0.26
Book value per share(1)
$ 0.43 $ 0.14
Combined Unaudited Pro Forma Per Common Share Data:
Basic and diluted net loss per share
$ 0.04 $ 0.02
Book value per share(2)
$ 0.05
Chemomab Pro Forma Equivalent Per Common Share Data:(3)
Basic and diluted net loss per share
$ 42.30 $ 16.75
Book value per share
$ 55.42
(1)
Historical book value per share is calculated by dividing total shareholders’ equity by total outstanding ordinary shares.
 
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(2)
Combined pro forma book value per share is calculated by dividing pro forma combined total shareholders’ equity by pro forma combined total outstanding ordinary shares.
(3)
Chemomab pro forma equivalent data per ordinary share is calculated by applying the Exchange Ratio of 1,028.99 to the unaudited pro forma combined per share data.
 
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MARKET PRICE AND DIVIDEND INFORMATION
Anchiano Ordinary Shares
Anchiano’s ordinary shares represented by American Depositary Shares are listed on Nasdaq under the symbol “ANCN.” Chemomab is a private company and its ordinary shares are not publicly traded.
The closing price of Anchiano ADSs, each representing five ordinary shares, on January 8, 2021, as reported on Nasdaq, was $ 2.05 per ADS. The closing price of Anchiano ADSs on February 5, 2021, the record date for the Special Meeting, as reported on Nasdaq, was $2.82 per ADS.
Because the market price of Anchiano ADSs is subject to fluctuation, the market value of the Anchiano ADSs that Chemomab’s shareholders will be entitled to receive in the Merger may increase or decrease and the price at which Anchiano’s shares are sold in the Financing may be more or less than the market price of our shares on the date of the sale of Anchiano’s shares in the Financing.
Assuming approval of Proposal No. 1 and successful application for initial listing with Nasdaq, following the consummation of the Merger, Anchiano ADSs will be listed on Nasdaq and will trade under Anchiano’s new name, “Chemomab Therapeutics Ltd.,” or such other name as may be approved by Chemomab and the Israeli Registrar of Companies, and new trading symbol, “CMMB.”
As of February 5, 2021, the record date for the Special Meeting, Anchiano had 37,099,352 holders of record of its ordinary shares. As of February 5, 2021, Chemomab had 17 holders of record of its ordinary shares. For detailed information regarding the beneficial ownership of certain Anchiano shareholders upon consummation of the Merger, see the section entitled “Principal Shareholders of Combined Company” in this proxy statement/prospectus.
Dividends
Anchiano
Anchiano has never declared or paid any cash dividends on its share capital, and it does not currently anticipate declaring or paying cash dividends on its share capital in the foreseeable future. Anchiano intends to retain all future earnings, if any, to finance the operation and expansion of Anchiano’s business. Any future determination relating to Anchiano’s dividend policy will be made at the discretion of Anchiano’s board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictions and covenants and other factors that Anchiano’s board of directors may deem relevant.
Chemomab
Chemomab has never declared or paid any cash dividends on its share capital. Chemomab anticipates that Anchiano will retain all of its future earnings to advance the clinical studies for its products, and does not anticipate paying any cash dividends on shares of Anchiano’s share capital in the foreseeable future. Any future determination to declare cash dividends on shares of Anchiano’s share capital will be made at the discretion of its board of directors, subject to applicable law and contractual restrictions and will depend on its financial condition, results of operations, capital requirements, general business conditions and other factors that its board of directors may deem relevant.
 
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RISK FACTORS
The combined company will be faced with a market environment that cannot be predicted and that involves significant risks, many of which will be beyond its control. In addition to the other information contained in this proxy statement/prospectus, you should carefully consider the material risks described below before deciding how to vote your shares of Anchiano. You should also read and consider the risks associated with the business of Anchiano because these risks may also affect the combined company. You should also read and consider the other information in this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” on page 250 of this proxy statement/prospectus.
Risk Factors Summary
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below:
Risks Related to the Merger

The Exchange Ratio is not adjustable based on the market price of Anchiano ADSs, so the Merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.

If the Merger is not completed, Anchiano’s board of directors may decide to pursue a dissolution and liquidation of Anchiano.

If the conditions to the Merger are not fulfilled, the Merger will not occur.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.

The market price of the combined company’s shares may decline as a result of the Merger.

Anchiano and Chemomab shareholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

During the pendency of the Merger, Anchiano and Chemomab will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties’ ability to enter into business combination transactions with another party.

Because the lack of a public market for Chemomab’s ordinary shares makes it difficult to evaluate the fairness of the Merger, Chemomab’s shareholders may receive consideration in the Merger that is greater than or less than the fair market value of Chemomab’s ordinary shares.
Risks Related to the Reverse Split

The Reverse Split may not increase Anchiano’s share price over the long-term.

The Reverse Split may decrease the liquidity of Anchiano’s ADSs.

The Reverse Split may lead to a decrease in Anchiano’s overall market capitalization.
Risks Related to Anchiano’s Business and Dependency on Third Parties

There is substantial doubt as to whether Anchiano can continue as a going concern.

Anchiano is substantially dependent on its collaboration agreement with ADT. If Anchiano fails to comply with its obligations under the agreement with ADT, Anchiano could lose development and commercialization rights that are critical to the continuation of its business.
Risks Related to Anchiano’s ADSs

Our ADS market price may continue to be highly volatile and you may not be able to resell your ADSs at or above the price you paid for them.
 
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A limited number of shareholders will have the ability to influence the outcome of director elections and other matters requiring shareholder approval.

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ADSs, the market price of our ADSs could decline.
Risks Related to Chemomab’s Business, Research and Development and the Biopharmaceutical Industry

Chemomab has a limited operating history and funding, which may make it difficult to evaluate its prospects and likelihood of success.

Chemomab’s business is highly dependent on the success of its lead product candidate, CM-101, and any other product candidates that it advances into clinical studies. All of Chemomab’s programs will require significant additional clinical development.

Clinical development involves a lengthy, complex and expensive process, with an uncertain outcome.
Risks Related to Chemomab’s Intellectual Property Rights

If Chemomab is unable to protect its patents or other proprietary rights, or if Chemomab infringes the patents or other proprietary rights of others, its competitiveness and business prospects may be materially damaged.

Chemomab may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect its ability to develop, manufacture and market its product candidates.

Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing Chemomab’s ability to protect its product candidates.
Risks Related to Chemomab’s Regulatory Approvals

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if Chemomab is ultimately unable to obtain regulatory approval for CM-101 or any other product candidates, its business will be substantially harmed.

Obtaining and maintaining regulatory approval of Chemomab’s product candidates in one jurisdiction does not mean that it will be successful in obtaining regulatory approval of its product candidates in other jurisdictions.

Even if Chemomab obtains regulatory approval for CM-101 or any product candidate, it will still face extensive and ongoing regulatory requirements and obligations and any product candidates, if approved, may face future development and regulatory difficulties.
Risks Related to Commercialization of Chemomab’s Product Candidates

If Chemomab does not achieve its projected development and commercialization goals in the timeframes it announces and expects, the commercialization of its product candidates may be delayed and Chemomab’s business will be harmed.

Chemomab faces substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than it.

Even if CM-101 or any other product candidate Chemomab develops receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.
Risks Related to Chemomab’s Incorporation and Location in Israel

Conditions in Israel could materially and adversely affect Chemomab’s business.

Because a certain portion of Chemomab’s expenses are incurred in currencies other than the U.S. Dollar, its results of operations may be harmed by currency fluctuations and inflation.
 
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Risks Related to the Combined Company

The combined company does not anticipate paying any cash dividends on the combined company’s ordinary shares in the foreseeable future.

Maintaining and improving the combined company’s financial controls and the requirements of being a public company may strain the combined company’s resources, divert management’s attention and affect its ability to attract and retain qualified board members.

If securities or industry analysts do not publish research or publish unfavorable research about the combined company’s business, its share price and trading volume could decline.
RISKS RELATED TO THE MERGER
The Exchange Ratio is not adjustable based on the market price of Anchiano ADSs, so the Merger consideration at the closing of the Merger may have a greater or lesser value than at the time the Merger Agreement was signed.
The estimated Exchange Ratio calculation contained herein is based upon Anchiano’s and Chemomab’s capitalization immediately prior to the date of this proxy statement/prospectus, and will be adjusted based on the amount of Anchiano net cash and changes in the capitalization of Anchiano or Chemomab prior to the closing of the Merger, not taking into account the Reverse Split, as described in the section entitled “The Merger — Merger Consideration” of this proxy statement/prospectus. Any changes in the market price of Anchiano ADSs before the completion of the Merger will not affect the number of shares Chemomab securityholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of Anchiano ADSs declines from the market price on the date of the Merger Agreement, then Chemomab securityholders could receive the Merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of Anchiano ADSs increases from the market price on the date of the Merger Agreement, then, Chemomab securityholders could receive the Merger consideration with considerably more value for their shares of Chemomab share capital than the parties had negotiated for in the establishment of the Exchange Ratio. The Merger Agreement does not include a price-based termination right. Because the Exchange Ratio does not adjust as a result of changes in the value of Anchiano ADSs, for each one percentage point that the market value of Anchiano ADSs rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total Merger consideration issued to Chemomab securityholders.
If the proposed merger with Chemomab is not consummated, Anchiano could suffer materially and Anchiano’s share price could decline.
The consummation of the proposed Merger with Chemomab is subject to a number of closing conditions, including the approval by Anchiano’s shareholders, approval by Nasdaq of Anchiano’s initial listing application of its ordinary shares represented by American Depositary Shares in connection with the Merger, and other customary closing conditions. In addition, at the closing date of the Merger, the net cash held by Anchiano, as described in the Merger Agreement, shall be positive or zero, or, if it is negative, the deficit in such net cash at the closing date of the Merger shall be no greater than $300,000. Anchiano is targeting a closing of the transaction in the first half of 2021.
If the proposed Merger is not consummated, Anchiano may be subject to a number of material risks, and its share price could be adversely affected, as follows:

Anchiano has incurred and expects to continue to incur significant expenses related to the proposed Merger with Chemomab, even if the Merger is not consummated.

The Merger Agreement contains covenants restricting Anchiano’s solicitation of competing acquisition proposals and the conduct of Anchiano’s business between the date of signing the Merger Agreement and the closing of the Merger. As a result, significant business decisions and transactions before the closing of the Merger require the consent of Chemomab. Accordingly, Anchiano may be unable to pursue business opportunities that would otherwise be in its best interest as a standalone company. Anchiano has invested significant time and resources in the transaction
 
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process and if the Merger Agreement is terminated Anchiano will have a limited ability to continue its current operations without obtaining additional financing.

Anchiano’s collaborators and other business partners and investors in general may view the failure to consummate the Merger as a poor reflection on its business or prospects.

Some of Anchiano’s collaborators and other business partners may seek to change or terminate their relationships with Anchiano as a result of the proposed Merger or the failure thereof.

As a result of the Merger, current and prospective employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect Anchiano’s ability to retain its key employees, who may seek other employment opportunities.

Anchiano’s management team may be distracted from day to day operations as a result of the proposed Merger.

Nasdaq could determine to delist Anchiano’s ADSs which could have an adverse effect on the value of Anchiano’s ADSs and any future ability to raise capital.
In addition, if the Merger Agreement is terminated and Anchiano’s board of directors determines to seek another business combination, it may not be able to find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by each party in the Merger. In such circumstances, Anchiano’s board of directors may elect to, among other things, divest all or a portion of Anchiano’s business, or take the steps necessary to liquidate all of Anchiano’s business and assets, and in either such case, the consideration that Anchiano receives may be less attractive than the consideration to be received by Anchiano pursuant to the Merger Agreement and the concurrent Financing.
If the Merger is not completed, Anchiano’s board of directors may decide to pursue a dissolution and liquidation of Anchiano. In such an event, the amount of cash available for distribution to its shareholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.
There can be no assurance that the Merger will be completed. If the Merger is not completed, the Anchiano board of directors may decide to pursue a dissolution and liquidation of Anchiano. In such an event, the amount of cash available for distribution to its shareholders will depend heavily on the timing of such decision, as with the passage of time the amount of cash available for distribution will be reduced as Anchiano continues to fund its operations. In addition, if Anchiano’s board of directors were to approve and recommend, and its shareholders were to approve, a dissolution and liquidation, Anchiano would be required under Israeli law to pay its outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to its shareholders. As a result of this requirement, a portion of Anchiano’s remaining cash assets may need to be reserved pending the resolution of such obligations. In addition, Anchiano may be subject to litigation or other claims related to a dissolution and liquidation. If a dissolution and liquidation were pursued, Anchiano’s board of directors, in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of Anchiano ADSs could lose all or a significant portion of their investment in the event of Anchiano’s liquidation, dissolution or winding up.
Anchiano and Chemomab may not be able to successufully complete the Financing.
As a condition to the Merger, the parties are seeking to obtain financing for the combined company through a private placement investment for such number of Anchiano shares (including ordinary shares represented by ADSs) as would yield at least $30.0 million and up to $50.0 million of aggregate gross proceeds to Anchiano. The amount to be raised in the Financing will be invested by the Investors in exchange for ordinary shares of Anchiano (including ordinary shares represented by ADSs) immediately following the effective time of the Merger. However, there is a risk that market conditions will not be conducive to executing this financing plan, or that the Financing will not be available on favorable terms. As such, there is no guarantee that the Financing described herein will materialize. If the Financing is not successfully completed on satisfactory terms, then the proposed Merger will not be consummated.
 
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If the conditions to the Merger are not fulfilled, the Merger will not occur.
Even if the Merger is approved by the shareholders of Anchiano and Chemomab, specified conditions must be satisfied or waived to complete the Merger. These conditions are set forth in the Merger Agreement and described in the section entitled “The Merger Agreement — Conditions to the Completion of the Merger” in this proxy statement/prospectus. Anchiano and Chemomab cannot assure you that all of the conditions will be satisfied. If the conditions are not satisfied or waived, the Merger will not occur or will be delayed, and Anchiano and Chemomab each may lose some or all of the intended benefits of the Merger.
Some Anchiano and Chemomab officers and directors have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.
Certain officers and directors of Anchiano and Chemomab participate in arrangements that provide them with interests in the Merger that are different from yours, including, among others, the continued service as an officer or director of the combined company, continued indemnification and the potential ability to sell an increased number of shares of the combined company in accordance with Rule 144 under the Securities Act of 1933, as amended. These interests, among others, may influence the officers and directors of Anchiano and Chemomab to support or approve the Merger. For more information concerning the interests of Anchiano and Chemomab executive officers and directors, see the section entitled “Interests of the Anchiano and Chemomab Directors and Executive Officers in the Merger” in this proxy statement/prospectus.
The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.
In general, either party can refuse to complete the Merger if there is a material adverse change affecting the other party following December 14, 2020, the date of the Merger Agreement. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would have a material adverse effect on Anchiano or Chemomab, to the extent they resulted from the following (unless, in some cases, they have a disproportionate effect on Anchiano or Chemomab, as the case may be):

changes or conditions generally affecting the industries or markets in which Anchiano and Chemomab operate, and changes in the industries in which Anchiano and Chemomab operate regardless of geographic region (including legal and regulatory changes);

acts of war, armed hostilities or terrorism;

changes in financial, banking or securities markets;

any change in, or any compliance with or action taken for the purpose of complying with, any federal, state, national, foreign, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any governmental body (including under the authority of Nasdaq or the Financial Industry Regulatory Authority), or changes in any interpretations thereof;

any change in U.S. generally accepted accounting principles or interpretations thereof;

the announcement of the Merger Agreement or the pendency of the Merger;

the taking of any action required to be taken by the Merger Agreement;

pandemics (including the COVID-19 pandemic), including any worsening thereof, man-made disasters, natural disasters, acts of God or other force majeure event; and

changes in U.S. or non-U.S. general economic or political conditions, or in the financial, credit or securities markets in general, including any shutdown of any governmental authority.
If adverse changes occur but Anchiano and Chemomab must still complete the Merger, the combined company’s market price may suffer.
The market price of the combined company’s shares may decline as a result of the Merger.
The market price of the combined company’s shares may decline as a result of the Merger for a number of reasons, including if:
 
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the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts;

the effect of the Merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or

investors react negatively to the effect on the combined company’s business and prospects from the Merger.
Anchiano and Chemomab shareholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Merger, Anchiano and Chemomab shareholders will have experienced substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and share price following the Merger. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.
During the pendency of the Merger, Anchiano and Chemomab will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties’ ability to enter into business combination transactions with another party.
Covenants in the Merger Agreement impede the ability of Anchiano or Chemomab to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors. In addition, while the Merger Agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating, encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of such party’s securities, a tender offer for such party’s securities, a merger or other business combination outside the ordinary course of business. Any such transactions could be favorable to such party’s shareholders.
Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.
The terms of the Merger Agreement prohibit each of Anchiano and Chemomab from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals. Because the lack of a public market for Chemomab shares makes it difficult to evaluate the fairness of the Merger, the securityholders of Chemomab may receive consideration in the Merger that is less than the fair market value of the Chemomab shares.
Because the lack of a public market for Chemomab’s ordinary shares makes it difficult to evaluate the fairness of the Merger, Chemomab’s shareholders may receive consideration in the Merger that is greater than or less than the fair market value of Chemomab’s ordinary shares.
The outstanding share capital of Chemomab is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Chemomab’s ordinary shares. Since the number of shares of Anchiano’s ADSs to be issued to Chemomab’s shareholders was determined based on negotiations between the parties, it is possible that the value of the Anchiano’s ADSs to be issued in connection with the Merger will be greater than the fair market value of Chemomab’s ordinary shares.
The combined company will incur significant transaction costs as a result of the Merger, including investment banking, legal and accounting fees. In addition, the combined company will incur significant
 
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consolidation and integration expenses which cannot be accurately estimated at this time. Actual transaction costs may substantially exceed estimates and may have an adverse effect on the combined company’s financial condition and operating results.
Chemomab’s principal shareholders, and certain executive officers and directors, will own a significant percentage of Anchiano shares and will be able to exert significant control over matters submitted to the shareholders for approval.
Under the terms of the Merger Agreement, on a pro-forma basis and after closing of the Merger but prior to the closing of the Financing, the Chemomab securityholders immediately before the Merger are expected to own approximately 90% of the aggregate number of ordinary shares of Anchiano (on a fully diluted basis) and the securityholders of Anchiano immediately before the Merger are expected to own approximately 10% of the aggregate number of ordinary shares of Anchiano (on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement. On a pro forma basis, immediately following the closing of the Merger and the Financing, and assuming the Financing raises $30.0 million, the Chemomab securityholders immediately before the Merger are expected to own approximately 75% of the aggregate number of ordinary shares of the combined company and the securityholders of Anchiano immediately before the Merger are expected to own approximately 8.3% of the aggregate number of ordinary shares of the combined company (in each case on a fully diluted basis), subject to certain assumptions and to the net cash adjustment mechanism set forth in the Merger Agreement.
After the Merger with Anchiano, certain of Chemomab’s officers and directors, and shareholders who held more than 5% of the Chemomab ordinary shares, will beneficially own a significant percentage of Anchiano securities. This is further described below in the section entitled “Principal Shareholders of Chemomab Ltd.” This significant concentration of share ownership may adversely affect the trading price for Anchiano securities because investors often perceive disadvantages in owning shares in companies with controlling shareholders. These shareholders, if they acted together, could significantly influence all matters requiring approval by the shareholders following the Merger, including the election of directors and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with the interests of other shareholders.
Certain shareholders could attempt to influence changes within Anchiano that could adversely affect Anchiano’s operations, financial condition and the value of Anchiano’s ordinary shares.
Anchiano’s shareholders may from time to time seek to acquire a controlling stake in Anchiano, engage in proxy solicitations, advance shareholder proposals or otherwise attempt to effect changes. Campaigns by shareholders to effect changes at publicly-traded companies are sometimes led by investors seeking to increase short-term shareholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to proxy contests and other actions by activist shareholders can be costly and time-consuming and could disrupt Anchiano’s operations and divert the attention of the Anchiano board of directors and senior management from the pursuit of the proposed transaction. These actions could adversely affect Anchiano’s operations, financial condition, Anchiano’s ability to consummate the Merger and the value of Anchiano ordinary shares.
The combined company may not pursue the advancement of Anchiano’s existing developmental programs.
In September 2019, Anchiano entered into an option to license agreement with ADT Pharmaceuticals, LLC pursuant to which the parties agreed to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin). As part of the arrangement, Anchiano is primarily responsible for the research, development, manufacturing and regulatory activities and ADT assists with the research activities as necessary in exchange for a quarterly fee from Anchiano. In connection with the agreement, ADT also granted Anchiano exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating to patents owned by ADT and any products containing such compounds worldwide.
Following the effective time of the Merger, Chemomab (as successor in interest to Anchiano) will have sole authority over whether and how to pursue the continued development of the RAS compounds pursuant to the ADT License Agreement (if at all), and there is no guarantee that Chemomab will pursue the
 
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continued development. Anchiano and Chemomab (as successor in interest to Anchiano following the Merger) may decide to assign the license agreement or terminate the agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT.
Anchiano and Chemomab may become involved in securities litigation or shareholder derivative litigation in connection with the Merger, and this could divert the attention of Anchiano and Chemomab management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related costs and damages.
Securities litigation or shareholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. Anchiano and Chemomab may become involved in this type of litigation in connection with the Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could adversely affect the business of Anchiano, Chemomab and the combined company. See the section titled “Anchiano Business — Legal Proceedings” for certain information regarding existing legal proceedings.
If any of the events described in “Risks Related to Chemomab’s Business, Research and Development and the Biopharmaceutical Industry,” “Risks Related to Chemomab’s Intellectual Property Rights,” “Risks Related to Chemomab’s Regulatory Approvals,” “Risks Related to Commercialization of Chemomab’s Product Candidates,” “Risks Related to Chemomab’s Incorporation and Location in Israel,” or “Risks Related to the Combined Company” occur, those events could cause the potential benefits of the Merger not to be realized.
Chemomab’s business is expected to constitute a significant portion of the business of the combined company following the Merger. As a result, the risks described below in the sections entitled “Risks Related to Chemomab’s Business, Research and Development and the Biopharmaceutical Industry” beginning on page 57, ‘‘Risks Related to Chemomab’s Intellectual Property Rights” beginning on page 66, “Risks Related to Chemomab’s Regulatory Approvals” beginning on page 69, “Risks Related to Commercialization of Chemomab’s Product Candidates” beginning on page 73, “Risks Related to Chemomab’s Incorporation and Location in Israel” beginning on page 77 and “Risks Related to the Combined Company” beginning on page 78 are among the most significant risks to the combined company if the Merger is completed. To the extent any of the events in the risks described in the sections referenced in the previous sentence occur, those events could cause the potential benefits of the Merger not to be realized and the market price of the combined company’s shares to decline.
RISKS RELATED TO THE PROPOSED REVERSE SPLIT
The Reverse Split may not increase Anchiano’s share price over the long-term.
The principal purpose of the Reverse Split is to increase the per-share market price of Anchiano’s ordinary shares (including ordinary shares represented by ADSs) above the minimum bid price requirement under the rules of the Nasdaq Capital Market so that the listing of the combined company and the shares of Anchiano being issued in the Merger on the Nasdaq Capital Market will be approved. It cannot be assured, however, that the Reverse Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares will proportionally increase the market price of Anchiano’s shares, it cannot be assured that the Reverse Split will increase the market price of its shares by a multiple of the reverse split ratio chosen by Anchiano’s board of directors in its sole discretion, or result in any permanent or sustained increase in the market price of Anchiano’s shares (including ordinary shares represented by ADSs), which is dependent upon many factors, including Anchiano’s business and financial performance, general market conditions, and prospects for future success. Thus, while the share price of the combined company might meet the continued listing requirements for the Nasdaq Capital Market initially, it cannot be assured that it will continue to do so.
The Reverse Split may decrease the liquidity of Anchiano’s ADSs.
Although Anchiano’s board of directors believes that the anticipated increase in the market price of Anchiano’s ordinary shares (including ordinary shares represented by ADSs) could encourage interest in its
 
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shares and possibly promote greater liquidity for its shareholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the Reverse Split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for Anchiano’s shares (including ordinary shares represented by ADSs).
The Reverse Split may lead to a decrease in Anchiano’s overall market capitalization.
Should the market price of Anchiano’s shares (including ordinary shares represented by ADSs) decline after the Reverse Split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the Reverse Split. A reverse share split is often viewed negatively by investors and, consequently, can lead to a decrease in Anchiano’s overall market capitalization. If the per share market price does not increase in proportion to the reverse share split ratio, then the value of the combined company, as measured by its capitalization, will be reduced. In some cases, the per-share share price of companies that have effected reverse share splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of Anchiano’s ordinary shares (including ordinary shares represented by ADSs) will remain the same after the Reverse Split is effected, or that the Reverse Split will not have an adverse effect on Anchiano’s share price due to the reduced number of shares outstanding after the Reverse Split.
RISKS RELATED TO ANCHIANO
Unless the context otherwise requires, all references in this section to “we,” “us,” “our” or the “Company” refer to Anchiano and its subsidiaries prior to the consummation of the Merger.
Risks Related to Anchiano’s Business
A pandemic, epidemic or outbreak of an infectious disease in the United States or elsewhere may adversely affect our business.
If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or elsewhere, our business may be adversely affected. In December 2019, a novel strain of coronavirus, COVID-19, was identified in Wuhan, China. This virus continues to spread globally and, as of March 2020, has spread to over 100 countries, including the United States and Israel. The spread of COVID-19 from China to other countries resulted in the World Health Organization declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020. We are still assessing the effect on our business, from the spread of COVID-19 and the actions implemented by the governments across the globe. A significant outbreak of contagious diseases, such as COVID-19, could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn. As a result, our ability to raise additional funds may be adversely impacted by risks, or the public perception of the risks, related to the recent outbreak of COVID-19. Furthermore, the third parties we engage, or seek to engage, for preclinical and clinical development activities may be adversely impacted by risks, or the public perception of the risks, related to the recent outbreak of COVID-19, which may delay preclinical and clinical development, and increase our costs. If these third parties do not, or are unable to, successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them, which may likewise delay the affected trial preclinical and clinical development.
We will require substantial additional funds to complete our research and development activities, and, if additional funds are not available, we may need to significantly scale back or cease our business.
We have generated substantial accumulated losses since inception. We have not generated any revenues to date and do not expect to generate any revenue in the near future. As a result, we expect to continue to experience negative cash flow for the foreseeable future. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. A significant portion of our research and development activities has been financed by the issuance of equity securities (including in our initial public offering in February 2019). There is no certainty that we will be able to obtain additional sources of funding for our research and development activities (see the risk factor entitled “Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to
 
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our technologies or assets”). A lack of adequate funding may cause a cessation of all or part of our research and development activities and business.
We will require substantial funds to discover, develop, protect and conduct research and development for our prospective products, including pre-clinical studies and clinical trials, and to manufacture and market any such product that may be approved for commercial sale. As of September 30, 2020, we held approximately $6.8 million in cash and cash equivalents. Our current available funds are not sufficient for all of these activities and we expect our current available funds to be adequate to satisfy our capital and operating needs through to the completion of the Merger. Our financing needs may also increase substantially because of the results of our research and development, preclinical studies and clinical trials and costs arising from additional regulatory approvals. We may not succeed in raising additional funds in a timely manner. The timing of our need for additional funds will depend on a number of factors, which are difficult to predict or may be outside of our control, including:

the resources, time and costs required to initiate and complete our research and development and to initiate and complete preclinical studies and clinical trials and to obtain regulatory approvals for any products that we develop in the future;

progress in our research and development programs;

the timing and amount of milestone, royalty and other payments; and

costs necessary to protect any intellectual property rights.
If our estimates and predictions relating to any of these factors are incorrect, we may need to modify our business plan. Additional funds may not be available to us when needed on acceptable terms, or at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations. If we are not able to continue operations, investors may suffer a complete loss of their investments in our securities.
We are now an early-stage preclinical biotechnology company and may never be able to successfully develop a marketable product. We have acquired two preclinical programs, and there is no assurance that our future operations will generate any revenue. If we cannot develop a marketable product or generate sufficient revenues, we may be required to suspend or cease operations.
We are now an early-stage preclinical biotechnology company that acquired an option to develop, manufacture and commercialize two developmental programs targeting oncogenic pathways that are focused on small molecule inhibitors RAS and PDE10/ß-catenin, or the Compounds, pursuant to a collaboration and license agreement we entered into with ADT on September 20, 2019. Our operations prior to that date were not relevant to the development of the Compounds. Our operations relating to our two current preclinical programs have been limited to business planning, performing research, analyzing preclinical data and preparing to advance identified molecules through additional preclinical studies. The Compounds identified by us in connection with both our Pan-RAS and PDE10/ß-catenin programs are in the concept, research and preclinical stages. As a result, we cannot be certain that our research and development efforts will be successful or, if successful, that any products that are developed from the Compounds will ever be approved by the U.S. FDA. Typically, it takes 10 to 12 years to develop one new medicine from the time it is discovered to when it is available for treating patients, and longer timeframes are not uncommon. Even if approved, any products that are developed from the Compounds may not generate sufficient commercial revenues for us to continue operating. Our operating history should not be considered when evaluating our performance as it relates to our abandoned bladder cancer product candidate. As a result, we are subject to all of the business risks associated with a new enterprise, including, but not limited to, risks of unforeseen capital requirements, failure of business strategy either in research, preclinical testing or in clinical trials, failure to establish business relationships, and competitive disadvantages against other companies. If we fail to become profitable, we may be forced to suspend or cease our operations.
We do not have a history of commercial sales and do not anticipate earning operating income over the coming years, and our failure to receive marketing approval for a product that we develop in the future would negatively impact our ability to continue our business operations.
Our predecessor entity, BioCancell Therapeutics Inc. was formed on July 26, 2004, and since then we have been a development-stage company. We have never received marketing approval for any product
 
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candidate and, as a result, have not recorded any sales. We expect that we will operate at a loss over the coming years, as we do not expect to generate any revenue from operations in the near term. We may not be able to develop, or receive marketing approval for, any product from our current preclinical research and development efforts. In addition, even if we obtain all necessary approvals to market a product, there is no certainty that there will be sufficient demand to justify the production and marketing of any such product.
There is substantial doubt as to whether we can continue as a going concern.
Our consolidated financial statements as of September 30, 2020 contain an explanatory paragraph that states that our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any measurement or presentation adjustment for assets or liabilities that might result if we would be unable to continue as a going concern. We have incurred operating losses since inception, have not generated any revenues and have not achieved profitable operations. Our net loss, accumulated during the development stage through September 30, 2020, totaled approximately $114.9 million.
We depend completely on the success of our two preclinical programs and, if we are not able to advance these successfully through the preclinical and clinical development process, our business prospects will be materially and adversely affected.
We have no products that are in active clinical development or approved for commercial sale. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the research and development of small molecule inhibitors (pan-RAS and PDE10/β-catenin programs). Our business depends completely on the successful preclinical and clinical development of products derived from the Compounds. We cannot be certain that any such product candidate will be developed or receive regulatory approval given that the Compounds remain in early preclinical stages of development.
The Compounds will require additional non-clinical and clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can be in a position to generate any revenue from product sales. We are not permitted to market or promote any product derived from the Compounds before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval. If we are unable to develop or receive marketing approval in a timely manner or at all, we could experience significant delays or an inability to commercialize products derived from the Compounds, which would materially and adversely affect our business, financial condition and results of operations.
Raising additional capital may cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights to our technologies or assets.
Until such time, if ever, as we can generate sufficient revenues, we expect to finance our cash needs through equity offerings, debt financings or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. We will require substantial funding to fund our developmental efforts, our operating expenses and other activities. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, certain price protection rights may be triggered and the terms of the newly issued securities may include liquidation or other preferences that adversely affect your rights. Investors in the June 2018 fundraising received price protection rights with respect to their ordinary shares and warrants (such price protection rights will terminate upon the effective time of the Merger). Additionally, debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to obtain funding on a timely basis, we may be required to significantly curtail one or both of our preclinical development programs, which would adversely impact our potential revenues, results of operations and financial condition.
The pharmaceutical and biotechnology market is highly competitive. If we are unable to compete effectively with existing products, new treatment methods and new technologies, we may be unable to commercialize any products that we may develop in the future.
The biotechnology market is highly competitive, is subject to rapid technological change and is significantly affected by existing rival drugs and medical procedures, new product introductions and the
 
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market activities of other participants. Pharmaceutical and biotechnology companies, academic institutions, governmental agencies and other public and private research organizations may pursue the research and development of technologies, drugs or other therapeutic products for the treatment of some or all of the diseases that we are target. We also may face competition from products that have already been approved and accepted by the medical community for the treatment of these same indications. We are aware of a number of companies developing small molecule drugs for the treatment of cancer. Our competitors may develop products more rapidly or more effectively than us. Many of our competitors have:

much greater experience, financial, technical and human resources than we have at every stage of the discovery, development, manufacture and commercialization process;

more extensive experience in preclinical studies, conducting clinical trials, obtaining and maintaining regulatory approvals and manufacturing and marketing products;

products that have been approved or are in late stages of development;

established distribution networks;

collaborative arrangements with leading companies and research institutions; and

entrenched and established relationships with healthcare providers and payors.
In addition, many of these companies, in contrast to us, are well-capitalized. As a result of any of the foregoing factors, our competitors may develop or commercialize products, including small molecule inhibitors, with significant advantages over any product that we may develop in the future. If our competitors are more successful in commercializing their products than us, their success could adversely affect our competitive position and harm our business prospects.
Even if we receive regulatory approval to market a product that we develop in the future, the market may not be receptive to the product upon its commercial introduction.
We may have difficulties convincing the medical community and third-party payors to accept and use any product that we are able to develop in the future even following our receipt of regulatory approval for commercialization. Key participants in pharmaceutical marketplaces, such as physicians, third-party payors and consumers, may not accept a product that we develop. Even if such a product is accepted by these participants, the medical community may not consider effectiveness and safety alone as a sufficient basis for prescribing such as product in lieu of other alternative treatment methods and medications that are available.
Risks Related to Anchiano’s Preclinical Development
Our preclinical developmental programs are at an early stage. As a result, we are unable to predict if, or when, we will successfully develop or commercialize any product under either program.
We currently have no products beyond preclinical studies and our internal product development programs are at an early stage of preclinical development. Any product that we develop in the future will require significant investment in both preclinical studies and later clinical trials. We cannot be certain that preclinical and clinical development of any product derived from our current product development programs will be successful or that we will obtain regulatory approval or be able to successfully commercialize any product and generate revenue. Success in preclinical studies does not ensure that clinical trials will be successful, and the clinical trial process may fail to demonstrate that a product that we develop is safe and effective for its proposed use. Any such failure could cause us to abandon further development of one or more products and may delay development of other potential products. Any delay in, or termination of, our preclinical studies or clinical trials will delay and possibly preclude the filing of a new drug application with the FDA or comparable regulatory authorities and, ultimately, our ability to generate any product revenue.
Any product that we develop in the future will be required to undergo a time-consuming, costly and burdensome pre-market approval process, and we may be unable to obtain regulatory approval for such product.
Any product that we develop in the future will be subject to extensive governmental regulations relating to development, clinical trials, manufacturing and commercialization. Rigorous preclinical studies, clinical
 
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trials and extensive regulatory approval processes are required to be successfully completed in the United States and in many foreign jurisdictions, such as the European Union and Japan, before a new product may be offered and sold in any of these countries or regions. Satisfaction of these and other regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays.
Preclinical studies and clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because any product that we develop in the future will be based on new technologies, we expect that it will require extensive research and development and necessitate substantial manufacturing and processing costs. In addition, costs to treat potential side effects that may result from a product we develop may be significant. Accordingly, our preclinical and clinical trial costs could be significantly higher than for more conventional therapeutic technologies or drug products.
In the United States, the products that we intend to develop and market are regulated by the FDA under its drug development and review process. The time required to obtain FDA and other approvals for any product that we develop in the future is inherently unpredictable. Before such products can be marketed, we must obtain clearance from the FDA, first through submission of an investigational new drug application, or IND, then through successful completion of human testing under three phases of clinical trials and finally through submission of a new drug application, or NDA. Even after successful completion of clinical testing, there is a risk that the FDA may request further information from us, disagree with our findings or otherwise undertake a lengthy review of our NDA submission.
There can be no assurance that the FDA will grant a license for any NDA that we may submit. It is possible that none of the products that we develop in the future will obtain the appropriate regulatory approvals necessary for us to commence the offer and sale of such products. Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from a particular prospective product.
If we decide to market any drug that we develop in jurisdictions in addition to the United States, we may incur the same costs or more in satisfying foreign regulatory requirements governing the conduct of preclinical and clinical trials, manufacturing and marketing and commercialization of any product that we develop in the future. Approval by the FDA by itself does not assure approval by regulatory authorities outside the United States. Each of these foreign regulatory approval processes includes all of the risks associated with the FDA approval process, as well as risks attributable to having to satisfy local regulations within each of these foreign jurisdictions. Our inability to obtain regulatory approval outside the United States may adversely compromise our business prospects.
If the preclinical and clinical studies that we are required to conduct to gain regulatory approval are delayed or unsuccessful, we may not be able to market any product that we develop in the future.
We may experience delays in any phase of the preclinical or clinical development of a product, including during its research and development. The completion of any of these studies may be delayed or halted for numerous reasons, including, but not limited to, the following:

the FDA, IRBs, the European Union regulatory authorities (the European Medicines Agency, or EMA, and national authorities), or other regulatory authorities do not approve a clinical study protocol or place a clinical study on hold;

patients do not enroll in a clinical study or results from patients are not received at the expected rate;

patients discontinue participation in a clinical study prior to the scheduled endpoint at a higher than expected rate;

patients experience adverse events from a product we develop;

patients die during a clinical study for a variety of reasons that may or may not be related to the product that is the subject of the study;

third-party clinical investigators do not perform the studies in accordance with the anticipated schedule or consistent with the study protocol and good clinical practices or other third-party organizations do not perform data collection and analysis in a timely or accurate manner;
 
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third-party clinical investigators engage in activities that, even if not directly associated with our studies, result in their debarment, loss of licensure, or other legal or regulatory sanction;

regulatory inspections of manufacturing facilities, which may, among other things, require us to undertake corrective action or suspend the preclinical or clinical studies;

changes in governmental regulations or administrative actions;

the interim results of the preclinical or clinical study, if any, are inconclusive or negative; and

the study design, although approved and completed, is inadequate to demonstrate effectiveness and safety.
We have limited experience in conducting and managing preclinical studies and any product that we develop in the future may not have favorable results in later clinical trials or receive regulatory approvals.
We have limited experience in conducting and managing the preclinical studies and clinical trials necessary to obtain regulatory approvals for a product. We may rely on third parties for preclinical and clinical development activities and our reliance on third parties will reduce our control over these activities. Accordingly, third-party contractors may not complete activities on schedule, or may not conduct preclinical studies and clinical trials in accordance with regulatory requirements or our trial design. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them, which may delay the affected trial.
Clinical failure can occur at any stage of preclinical or clinical development. Preclinical studies and clinical trials may produce negative or inconclusive results, and our collaborators or we may decide, or regulators may require us, to conduct additional clinical trials or nonclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Success in pre-clinical studies and early clinical trials does not ensure that subsequent clinical trials will generate the same or similar results or otherwise provide adequate data to demonstrate the efficacy and safety of a product. A number of companies in the pharmaceutical industry, including those with greater resources and experience than us, have suffered significant setbacks in preclinical studies and clinical trials, even after seeing promising results in earlier trials or studies.
If toxicities or serious adverse or undesirable side effects are identified during preclinical or clinical development, we may need to abandon or limit such development.
We do not have a product candidate in clinical development and, as a result, the risk we are unable to successfully develop a future product is high. A product’s preclinical toxicology profile might not support moving the product into clinical studies, and even then, it is impossible to predict when, or if, any future product that we develop will prove effective or safe in humans or will receive regulatory approval. If any such product is associated with undesirable side effects or has characteristics that are unexpected, we may need to abandon its development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.
The commercial value of any clinical study that we may commence and conduct in the future will significantly depend upon our choice of medical indication and our selection of a patient population for our clinical study of an indication, and our inability to commence clinical testing or our choice of clinical strategy may significantly compromise our business prospects.
If we successfully complete a clinical study, the commercial value of any such study will depend significantly upon our choice of indication and our selection of a patient population for that indication. We may incorrectly assess the market opportunities of an indication or may incorrectly estimate or fail to appreciate fully the scientific and technological difficulties associated with treating an indication. Furthermore, the quality and robustness of the results and data of any clinical study that we may conduct in the future will depend upon our selection of a patient population for clinical testing. Our inability to commence clinical testing or our choice of clinical strategy may significantly compromise our business prospects.
 
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Risks Related to Anchiano’s Dependence on Third Parties
We are substantially dependent on our Collaboration Agreement with ADT. If we fail to comply with our obligations under the Collaboration Agreement into which we entered with ADT, we could lose development and commercialization rights that are critical to the continuation of our business.
On September 20, 2019, we entered into the Collaboration Agreement with ADT in which we agreed to use commercially reasonable efforts to conduct research and development activities with respect to the Compounds under the oversight of a jointly established steering committee. As part of the arrangement, we are primarily responsible for the research, development, manufacturing and regulatory activities relating to the Compounds. In consideration for the rights granted under the Collaboration Agreement, we agreed to make milestone payments to ADT with respect to the development and commercialization of any products containing the Compounds. ADT also granted us an exclusive option to research, develop, manufacture and commercialize Compounds relating to patents owned by ADT and any products containing such Compounds worldwide in exchange for an additional fee. We agreed to pay ADT royalties ranging in the low- to mid-single digit percentage on sales of any products containing the Compounds. ADT may terminate the Collaboration Agreement in the event of our material default in any of our material obligations under the Collaboration Agreement (following a cure period). In the event the Collaboration Agreement is terminated, all licenses and options granted to us will be terminated and we will not be able to develop the Compounds or any products containing the Compounds. The Collaboration Agreement also restricts assignment except to a successor of substantially all of the business to which the Collaboration Agreement relates, whether in a merger, sale of stock, sale of assets, reorganization or other transaction. The loss of such rights would materially adversely affect our business, financial condition, operating results and prospects. To the extent the strategic review results in a determination to monetize the pan-RAS program, we may be limited in our ability to do so.
The failure of ADT to effectively perform its obligations under the Collaboration Agreement could materially and adversely affect us.
Pursuant to the terms and conditions set forth in the Collaboration Agreement, ADT contractually agreed to collaborate with us in order to conduct research and development activities of the Compounds under the oversight of a joint steering committee that we established with ADT. As part of the arrangement, ADT is required to assist us with research activities relating to the Compounds as necessary. In connection with the Collaboration Agreement, ADT also granted us an exclusive option to research, develop, manufacture and commercialize Compounds relating to patents owned by ADT and any products containing such Compounds worldwide. Our right to research, develop, manufacturer and commercialize the Compounds is exclusively based upon the rights provided to us by ADT as part of the Collaboration Agreement. If ADT or a successor company fails or refuses to perform its obligations under, or comply with the terms and conditions set forth in, the Collaboration Agreement for any reason, we may not be able to research, develop, manufacture and/or commercialize the Compounds or any products containing the Compounds, which would materially adversely affect our business, financial condition, operating results and prospects.
We are dependent on ADT for certain support services related to our research and development activities with respect to the Compounds and any failure or delay by ADT to provide such services could harm our business.
In connection with the Collaboration Agreement, we also entered into a Consulting and Collaboration Research Support Agreement with ADT, or the Support Agreement, whereby ADT provides support services for our research and development activities with respect to the Compounds, including providing key research and discovery personnel. We are dependent upon ADT’s continued performance under the Support Agreement. To the extent ADT is unable to, or determines not to, perform these support services, we may not be able to undertake the research and development activities to develop the Compounds on our own or find other collaborators on acceptable terms. This could impact our ability to develop the Compounds and materially adversely impact our business, financial condition, operating results and prospects.
We expect to rely significantly on preclinical contract research organizations and clinical research organizations to assist us with the development of the Compounds and any product that we develop in the future.
Our reliance on clinical research organizations may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them. In the
 
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course of product development, we expect to engage clinical manufacturing organizations to manufacture drug material for us to be used in non-clinical and clinical testing and contract research organizations to conduct and manage non-clinical and clinical studies. As a result, many important aspects of our preclinical research activities and clinical testing will be out of our direct control. If any of these organizations we may engage in the future fail to perform their obligations under our agreements with them or fail to perform non-clinical testing and/or clinical trials in a satisfactory manner, we may face delays in completing such testing or trials. Furthermore, any loss or delay in obtaining contracts with such entities may also delay the completion of our preclinical studies, clinical trials, regulatory filings and the potential market approval of our potential drug compounds.
We may seek to enter into further collaborations in the future, and, if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.
Any collaboration or license agreements that we may enter into in the future may impose various development, commercialization, funding, royalty, diligence, sublicensing, insurance and other obligations on us. Our obligations under any of these license agreements could include, without limitation:

royalty payments;

annual maintenance fees;

providing progress reports;

maintaining insurance coverage;

paying fees related to prosecution, maintenance and enforcement of patent rights;

minimum annual payments; and

undertaking diligent efforts to develop and introduce therapeutic products into the commercial market as soon as practicable.
If we were to breach any of our material obligations as described above, the counterparties to any such agreements may have the right to terminate the agreement and any licenses contemplated thereby, which could result in our inability to develop, manufacture and sell products that are covered by the licensed technology or a competitor gaining access to the licensed technology.
If we, or if our service providers or any third-party manufacturers, fail to comply with regulatory requirements, we or they could be subject to enforcement actions, which could adversely affect our ability to market and sell a product we develop in the future.
If we, or if our service providers or any third-party manufacturers, fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could adversely affect our ability to successfully develop, market and sell a product we develop in the future and could harm our reputation. These enforcement actions may include:

restrictions on, or prohibitions against, marketing;

restrictions on importation;

suspension of review or refusal to approve new or pending applications;

suspension or withdrawal of product approvals;

product seizures;

injunctions; and

civil and criminal penalties and fines.
Risks Related to Anchiano’s Operations
Under applicable employment laws, we may not be able to enforce covenants not to compete.
Our employment agreements generally include covenants not to compete. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors
 
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for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work. For example, Israeli courts have required employers seeking to enforce covenants not to compete to demonstrate that the competitive activities of a former employee will harm one of a limited number of material interests of the employer, such as the secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such an interest will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our competitiveness may be diminished.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
Many of our employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our potential competitors. Some of these employees may have executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the agreements with our senior management, but future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
Our business may be affected by litigation and government investigations.
We may from time to time receive inquiries and subpoenas and other types of information requests from government authorities and others and we may become subject to claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests and legal proceedings is difficult to predict, defense of litigation claims can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, costs and significant payments, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Product liability claims or lawsuits could cause us to incur substantial liabilities.
We will face an inherent risk of product liability exposure related to the testing of our drug candidates in human clinical trials. If we cannot successfully defend ourselves against claims that our products caused injuries, we could incur substantial liabilities. Although we maintain product liability insurance coverage, it may not be adequate to cover all liabilities that we may incur. Insurance coverage may be increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.
We are exposed to a risk of substantial loss due to claims that may be filed against us in the future because our insurance policies may not fully cover the risk of loss associated with our operations.
We are exposed to the risk of having claims seeking monetary damages being filed against us for loss or harm suffered by participants of our preclinical and clinical studies or for loss or harm suffered by users of any drug that may receive approval for commercialization in the future. In either event, the FDA or the regulatory authorities of other countries or regions may commence investigations of the safety and effectiveness of any such trial or commercialized drug, the manufacturing processes and facilities or marketing programs utilized in respect of any such trial or drug, and may result in mandatory or voluntary recalls of any commercialized drug or other significant enforcement action such as limiting the indications for which any such drug may be used, or suspension or withdrawal of approval for any such drug. Investigations by the FDA or any other regulatory authority in other countries or regions also could delay or prevent the completion of any of our other clinical development programs. In the event that we are required to pay damages for any such claim, we may be forced to seek bankruptcy or to liquidate because our asset
 
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and revenue base may be insufficient to satisfy the payment of damages and any insurance that we have obtained or may obtain for product, preclinical study or clinical trial liability may not provide sufficient coverage against potential liabilities. Our insurance policy for the discontinued inodiftagene compound provides coverage in the amount of up to $10 million in the aggregate.
Significant disruptions of information technology systems or security breaches could adversely affect our operations.
We are increasingly dependent upon information technology systems, infrastructure and data to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information). It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information. We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors that may or could have access to our confidential information. Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise. The size and complexity of our information technology systems, and those of third-party vendors with whom we contract, and the large amounts of confidential information stored on those systems, make such systems vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party vendors, and/or business partners, or from cyber-attacks by malicious third parties. Cyber-attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability, and threated the confidentiality, integrity, and availability of information.
Significant disruptions of our information technology systems, or those of our third-party vendors, or security breaches could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary business information and personal information, and could result in financial, legal, business, and reputational harm to us.
Any failure or perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with our privacy, confidentiality, data security or similar obligations to third parties, or any data security incidents or other security breaches that result in the unauthorized access, release or transfer of sensitive information, including personally identifiable information, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause third parties to lose trust in us or could result in claims by third parties asserting that we have breached our privacy, confidentiality, data security, or similar obligations, any of which could have a material adverse effect on our reputation, business, financial condition, or results of operations. Moreover, data security incidents and other security breaches can be difficult to detect, and any delay in identifying them may lead to increased harm. While we have implemented data security measures intended to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or data security incidents.
Our business and operations would suffer in the event of system failures.
Despite the implementation of security measures, our internal computer systems and those of our contract research organizations, or CROs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of preclinical or clinical data from completed or ongoing or planned preclinical studies or clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of a product could be delayed.
 
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Risks Related to Government Regulation
We may be subject to U.S. federal and state healthcare fraud and abuse laws and regulations and other regulatory reforms, and a finding of our failure to comply with such laws, regulations and reforms could have a material adverse effect on our business.
Our operations may be directly or indirectly affected by various broad U.S. federal and state healthcare fraud and abuse laws. These include the U.S. federal anti-kickback statute, which prohibits any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce the referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of an item or service, for which payment may be made under U.S. federal healthcare programs, such as the Medicare and Medicaid programs. The U.S. federal anti-kickback statute is very broad in scope, and many of its provisions have not been uniformly or definitively interpreted by existing case law or regulations. In addition, many states have adopted laws similar to the U.S. federal anti-kickback statute, and some of these laws are broader than that statute in that their prohibitions are not limited to items or services paid for by a U.S. federal healthcare program but, instead, apply regardless of the source of payment. Violations of these laws could result in fines, imprisonment or exclusion from government-sponsored programs.
Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, program exclusion, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation of any product for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include the following:

the federal healthcare anti-kickback statute, as mentioned above, prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;

the federal False Claims Act imposes civil penalties, including civil whistleblower actions, against individuals or entities for knowingly presenting, or causing to be presented, claims for payment to the federal government that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;

the federal transparency requirements under applicable healthcare laws will require manufacturers of drugs, devices, biologics and medical supplies to report to the Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and

analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance
 
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guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Efforts to ensure that our business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines and exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.
Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, the ability to hire and retain key personnel and to accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
The successful commercialization of our product candidates will depend in part on the extent to which third-party payors establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of such product candidates will be covered and reimbursed by third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize an adequate return on our investment. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval. If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not successfully commercialize any product candidate for which we obtain marketing approval.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products. In the United States, for example, principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services. CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private third-party payors often follow CMS’s
 
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decisions regarding coverage and reimbursement to a substantial degree. However, one third-party payor’s determination to provide coverage for a product candidate does not assure that other payors will also provide coverage for the product candidate. Further, no uniform policy for coverage and reimbursement exists in the United States, and coverage and reimbursement can differ significantly from payor to payor. As a result, the coverage determination process is often time-consuming and costly. This process will require us to provide scientific and clinical support for the use of our products to each third-party payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and biologics and surgical procedures and other treatments, has become intense. As a result, increasingly high barriers are being erected to the entry of new products.
We cannot predict the likelihood, nature, or extent of health reform initiatives that may arise from future legislation or administrative action, particularly as a result of the recent presidential election. However, we expect healthcare reform initiatives to continue, particularly in light of the recent presidential election. We also expect these initiatives to increase pressure on drug pricing. Further, it is possible that additional governmental action is taken in response to the evolving effects of the COVID-19 pandemic.
Risks Related to Anchiano’s Intellectual Property
We may be required in the future to license patent rights from third-party owners in order to develop a product. If we cannot obtain such licenses, or if such owners do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospects will be harmed.
We currently license patents from ADT in conducting our research and development activities pursuant to the Collaboration Agreement. We may be required to obtain additional licenses in the future if we believe it is necessary or useful for our business and our research and development efforts to use third-party intellectual property or if our efforts would infringe upon the intellectual property rights of third parties. Our business prospects depend in part on the ability of ADT and any future licensor, to obtain, maintain and enforce patent protection for our licensed intellectual property. Our licensors may terminate our license, may not successfully prosecute or may fail to maintain their patent applications that we have licensed, may determine not to pursue litigation against other persons that are infringing these patents or may pursue such litigation less aggressively than we would. Without protection for the intellectual property that we have licensed and that we may license in the future, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive position and harm our business prospects.
Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.
We currently rely, and intend to rely in the future, on trade secrets, know-how and technology that are not protected by patents to maintain our competitive position. In order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our collaborators, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive position and harm our business prospects.
 
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If we are unable to obtain and enforce patent protection for our inventions, our ability to develop and commercialize any product that we develop in the future will be harmed.
Our success depends, to a considerable extent, on our ability to protect proprietary methods and technologies that we develop under the patent and other intellectual property laws of the United States and other countries, so that we may prevent others from unlawfully using our inventions and proprietary information. The patent position of pharmaceutical or biotechnology companies, including ours, is generally uncertain and involves complex legal and factual considerations. The standards that the U.S. Patent and Trademark Office, or the PTO, and its foreign counterparts use to grant patents are not always applied predictably or uniformly and may change. There also is no uniform, worldwide policy regarding the subject matter and scope of claims granted or allowable in pharmaceutical or biotechnology patents. Even if our rights are not directly challenged, disputes among third parties could lead to the weakening or invalidation of our intellectual property rights. Accordingly, we do not know the degree of future protection for our proprietary rights or the breadth of claims that will be allowed with respect to any patents issued to us or to others. Additionally, the mere issuance of a patent does not guarantee that it is valid or enforceable against third parties.
We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time consuming and unsuccessful.
A third party may sue us for infringing its patent rights or may claim that we have improperly obtained or used its confidential or proprietary information. Likewise, we may need to resort to litigation to enforce a patent issued or licensed to us or to determine the scope and validity of third-party proprietary rights. In addition, during an infringement proceeding, a court may decide that the patent rights we are asserting are invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, our licensors may have rights to file and prosecute such claims and we are reliant on them. The cost to us of any litigation or other proceeding relating to intellectual property rights, even if resolved in our favor, could be significant, and the litigation would divert our management’s efforts. From a financial perspective, there is a risk that we would not be able to sustain the costs of any such litigation and would be forced to seek bankruptcy or to liquidate because of our limited asset and revenue base.
We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
We may be subject to claims that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing a product for us. Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or the right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service invention rights and have specifically waived their right to receive any special remuneration for such assignment beyond their regular salary and benefits, we may face claims demanding remuneration in consideration for assigned inventions.
 
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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

Others may be able to make products that are similar to a product we develop, but that are not covered by the claims of the patents that we own or have exclusively licensed.

We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed.

We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions.

Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.

It is possible that our pending patent applications will not lead to issued patents.

Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.

Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.

We may not develop additional proprietary technologies that are patentable.

The patents of others may have an adverse effect on our business.

Should any of these events occur, they could significantly harm our business, results of operations and prospects.
Risks Related to Anchiano’s ADSs
Our ADS price could continue to be highly volatile and you may not be able to resell your ADSs at or above the price you paid for them.
The trading price of Anchiano ADSs has been highly volatile, and is likely to continue to be highly volatile as we undertake the Merger, and such volatility may continue or become more severe if and when the Merger or a transaction or business arrangement is announced or we announce that we are no longer exploring strategic opportunities. From our initial public offering on February 12, 2019 to December 31, 2020, our ADS price has ranged from $0.6 to $10.8 per ADS. The following factors, among others, could have a significant impact on the market price of Anchiano ADSs:

actual or anticipated fluctuations in our results of operations;

changes in operational strategy;

variance in our financial performance from the expectations of market analysts;

announcements by us or our competitors of significant business developments, changes in strategic relationships, acquisitions or development plans;

announcements by us regarding the clinical development, commercialization and market acceptance of a therapeutic candidate;

our involvement in litigation;

our sale of ADSs, ordinary shares or other securities in the future;

changes in personnel;

the trading volume of our ADSs, particularly as a microcap company with a few significant shareholders;
 
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changes in the estimation of the future size and growth rate of our markets;

market conditions in our industry; and

general economic and market conditions.
Anchiano ADSs may have a low trading volume for a number of reasons, including that a substantial portion of our ADSs are held by a few significant shareholders, limiting our public float. As a result, holders of Anchiano ADSs may encounter difficulty selling their ADSs or obtaining a suitable price at which to sell such ADSs.
In addition, the stock markets have experienced extreme price and volume fluctuations, and securities of small cap and microcap companies are particularly volatile. Broad market and industry factors may materially harm the market price of our ADSs, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted.
A limited number of shareholders will have the ability to influence the outcome of director elections and other matters requiring shareholder approval.
As of December 28, 2020, OrbiMed Israel Partners Limited Partnership is the beneficial owner of approximately 23.92% of the outstanding shares of the combined company, on a pro-forma basis. Rivendell Investments 2017-9, Adi Mor, The Centillion Fund and Kobi George, beneficially own approximately 9.17%, 7.66%, 6.91% and 5.71%, respectively, of the outstanding shares of the combined company.
As a result of their significant holdings in our shares, these shareholders may have the ability to exert substantial influence over matters requiring approval by our shareholders, including electing directors and approving mergers, acquisitions or other business combination or corporate restructuring transactions. This concentration of ownership may also discourage, delay or prevent a change in control of Anchiano, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of Anchiano and might reduce our share price.
If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ADSs, the price of our ADSs could decline.
The trading market for our ADSs relies in part on the research and reports that equity research analysts publish about us and our business. The price of our ADSs could decline if one or more securities analysts downgrade our ADSs or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. The analysts at many brokerage firms do not currently monitor the trading activity or otherwise provide coverage of lower priced stocks, such as our ADSs. As a result, many investment funds are reluctant to invest in lower priced stocks. Market prices for securities of biotechnology and other life sciences companies historically have been particularly volatile, subject even to large daily price swings, due in part to the failure to elicit meaningful stock analyst coverage and downgrades of the company’s stock by analysts.
 
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We do not intend to pay dividends in the foreseeable future.
We do not anticipate paying any cash dividends on our ADSs. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our ordinary shares will be the investors’ sole source of gain for the next several years. In addition, Israeli law limits our ability to declare and pay dividends, and may subject us to certain Israeli taxes.
In some limited circumstances, you may not receive dividends or other distributions on our ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.
The depositary for our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from foreign currency that was part of a dividend made in respect of deposited ordinary shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to affect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no obligation under U.S. securities laws to register any ADSs, ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions its fees and may withhold an amount on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This means that you may not receive the same distributions or dividends as those we make to the holders of our ordinary shares, and, in some limited circumstances, you may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of our ADSs.
ADS holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could augur less favorable results to the plaintiff(s) in any such action.
The deposit agreement governing our ADSs representing our ordinary shares provides that holders and beneficial owners of ADSs irrevocably waive the right to a trial by jury in any legal proceeding arising out of or relating to the deposit agreement or our ADSs, including claims under federal securities laws, against us or the depositary to the fullest extent permitted by applicable law. If this jury trial waiver provision is prohibited by applicable law, an action could nevertheless proceed under the terms of the deposit agreement with a jury trial. To our knowledge, the enforceability of a jury trial waiver under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a jury trial waiver provision is generally enforceable under the laws of the State of New York, which govern the deposit agreement, by a court of the State of New York or a federal court, which have non-exclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a jury trial waiver provision, New York courts and federal courts will consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party has knowingly waived any right to trial by jury. We believe that this is the case with respect to the deposit agreement and our ADSs. In addition, New York courts will not enforce a jury trial waiver provision in order to bar a viable setoff or counterclaim sounding in fraud or one that is based upon a creditor’s negligence in failing to liquidate collateral upon a guarantor’s demand, or in the case of an intentional tort claim (as opposed to a contract dispute), none of which we believe are applicable in the case of the deposit agreement or our ADSs. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any provision of the federal securities laws. If you or any other holder or beneficial owner of ADSs brings a claim against us or the depositary in connection with matters arising under the deposit agreement or our ADSs, you or such other holder or beneficial owner may not be
 
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entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may augur different results than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action, depending on, among other things, the nature of the claims, the judge or justice hearing such claims, and the venue of the hearing.
Holders of ADSs must act through the depositary to exercise their rights.
Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement for our ADSs. Under Israeli law and our articles of association, the minimum notice period required to convene a shareholders’ meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders meeting. Pursuant to the deposit agreement, in order to give holders of our ADSs a reasonable opportunity to instruct the Depositary as to the exercise of voting rights relating to Deposited Securities, if Anchiano requests the Depositary to act, it agrees to give the Depositary notice of any such meeting and details concerning the matters to be voted upon at least 45 days in advance of the meeting date. When a shareholder meeting is convened, holders of our ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their ordinary shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of our ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents are not responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as a holder of ADSs, they will not be able to call a shareholders’ meeting.
You may be subject to limitations on transfer of your ADSs.
Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement.
Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company, or PFIC.
Generally, if for any taxable year, 75% or more of our gross income is passive income, or at least 50% of our assets (calculated on the basis of a weighted quarterly average) are held for the production of, or produce, passive income, we would be characterized as a PFIC for U.S. federal income tax purposes. Because our PFIC status is subject to a number of uncertainties, our financials for the year ended December 31, 2020 have not yet been finalized or audited and it is very early in the year and we have no financial information for our current taxable year, neither we nor our tax advisors can provide any assurances regarding our PFIC status.
In any taxable year in which we are characterized as a PFIC for U.S. federal income tax purposes, a U.S. holder that owns ADSs could face adverse U.S. federal income tax consequences, including having gains realized on the sale of our ADSs classified as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on our ADSs by individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of ADS sales. Certain elections exist that may alleviate some adverse consequences of PFIC status and would result in an alternative treatment
 
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(such as mark-to-market treatment) of our ADSs. If we are a PFIC in any year, U.S. holders may be subject to additional Internal Revenue Service, or the IRS, filing requirements, including the filing of IRS Form 8621, as a result of directly or indirectly owning stock of a PFIC.
We may be treated as a U.S. corporation for U.S. federal income tax purposes.
For U.S. federal income tax purposes, a corporation generally is considered tax resident in the place of its incorporation. We are incorporated under the laws of the State of Israel and, therefore, we should be a non-U.S. corporation under this general rule. However, Section 7874 of the Internal Revenue Code of 1986, as amended, or the Code, contains rules that may result in a foreign corporation being treated as a U.S. corporation for U.S. federal income tax purposes. The application of these rules is complex and there is little guidance regarding certain aspects of their application.
Under Section 7874 of the Code, a corporation created or organized outside the United States will be treated as a U.S. corporation for U.S. federal tax purposes when (i) the foreign corporation directly or indirectly acquires substantially all of the properties held directly or indirectly by a U.S. corporation, (ii) the former shareholders of the acquired U.S. corporation hold at least 80% of the vote or value of the shares of the foreign acquiring corporation by reason of holding stock in the U.S. acquired corporation, and (iii) the foreign corporation’s “expanded affiliated group” does not have “substantial business activities” in the foreign corporation’s country of incorporation relative to its expanded affiliated group’s worldwide activities. For this purpose, “expanded affiliated group” generally means the foreign corporation and all subsidiaries in which the foreign corporation, directly or indirectly, owns more than 50% of the stock by vote and value, and “substantial business activities” generally means at least 25% of employees (by number and compensation), assets and gross income of our expanded affiliated group are based, located and derived, respectively, in the country of incorporation.
We were incorporated on September 22, 2011 under the laws of the State of Israel for the purpose of a reincorporation merger, or the Reincorporation, which merged BioCancell Therapeutics Inc. with and into a wholly-owned subsidiary of BioCancell Ltd. We do not believe that we should be treated as a U.S. corporation as a result of the Reincorporation under Section 7874 of the Code because we believe that we have substantial business activities in Israel. However, the IRS may disagree with our conclusion on this point. In addition, there could be legislative proposals to expand the scope of U.S. corporate tax residence and there could be changes to Section 7874 of the Code or the Treasury Regulations promulgated thereunder that could result in us being treated as a U.S. corporation.
If it were determined that we should be treated as a U.S. corporation for U.S. federal income tax purposes, we could be liable for substantial additional U.S. federal income tax on our taxable income since the Reincorporation. In addition, payments of dividends to non-U.S. holders may be subject to U.S. withholding tax.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have a material adverse effect on the price of our ADSs.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal controls, failing to remediate thesedeficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the price of our ADSs. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.
 
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As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, we are permitted to, and intend to continue to, rely on exemptions from certain disclosure requirements, which could make our ADSs less attractive to investors.
For as long as we are deemed an emerging growth company, we are permitted to and intend to take advantage of specified reduced reporting and other regulatory requirements that are generally unavailable to other public companies, including:

an exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting required by Section 404 of the Sarbanes-Oxley Act; and

an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about our audit and our financial statements.
We will be an emerging growth company until the earliest of (i) the last day of the fiscal year during which we had total annual gross revenues of $1.07 billion or more, (ii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt, (iii) December 31, 2024 or (iv) the date on which we are deemed a “large accelerated issuer” as defined in Regulation S-K of the Securities Act.
We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and the market price of our ADSs may be more volatile.
We could now be treated as a smaller reporting company given we will report under U.S. GAAP.
We may take advantage of reduced disclosure and governance requirements applicable to smaller reporting companies, which could make our ADSs less attractive to investors.
We have a public float of less than $250 million and therefore qualify as a “smaller reporting company” under the rules of the SEC. As a smaller reporting company we are able to take advantage of reduced disclosure requirements, such as simplified executive compensation disclosures and reduced financial statement disclosure requirements in our SEC filings. Decreased disclosures in our SEC filings due to our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our ADSs less attractive if we rely on these exemptions. If some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and our share price may be more volatile. We may take advantage of the reporting exemptions applicable to a smaller reporting company until we are no longer a smaller reporting company, which status would end once we have a public float greater than $250 million. In that event, we could still be a smaller reporting company if our annual revenues were below $100 million and we have a public float of less than $700 million.
Our ADSs may be delisted from Nasdaq if we fail to comply with continued listing standards.
If we fail to meet any of the continued listing standards of Nasdaq, our ADSs could be delisted from the Nasdaq Capital Market. These continued listing standards include specifically enumerated criteria, such as:

a $1.00 minimum closing bid price;

shareholders’ equity of $2.5 million;

500,000 publicly-held shares with a market value of at least $1 million;

300 round-lot shareholders; and

compliance with Nasdaq’s corporate governance requirements, as well as additional or more stringent criteria that may be applied in the exercise of Nasdaq’s discretionary authority.
 
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There can be no assurance that we will be able to maintain compliance and remain in compliance in the future. In particular, our share price may continue to decline for a number of reasons, including many that are beyond our control. See “— Our ADS price could continue to be highly volatile and you may not be able to resell your ADSs at or above the price you paid for them.”
If we fail to comply with Nasdaq’s continued listing standards, we may be delisted and our ADSs will trade, if at all, only on the over-the-counter market, such as the OTC Bulletin Board or OTCQX market, and then only if one or more registered broker-dealer market makers comply with quotation requirements. In addition, delisting of our ADSs could depress our share price, substantially limit liquidity of our ADSs and materially adversely affect our ability to raise capital on terms acceptable to us, or at all. Further, delisting of our ADSs would likely result in our ADSs becoming a “penny stock” under the Exchange Act.
RISKS RELATED TO CHEMOMAB
Unless the context otherwise requires, all references in this section to “we,” “us,” “our” or the “Company” refer to Chemomab and its subsidiaries prior to the consummation of the Merger.
Risks Related to Chemomab’s Business, Research and Development and the Biopharmaceutical Industry
Chemomab has a limited operating history and funding, which may make it difficult to evaluate its prospects and likelihood of success.
Chemomab is a clinical-stage biopharmaceutical company with a limited operating history. Chemomab was incorporated in 2015, has no products approved for commercial sale and has not generated any revenue. Its operations to date have been limited to organizing and staffing the company, business planning, raising capital, establishing its intellectual property portfolio and conducting research and development of its product candidates, technology related to CCL24 and novel therapies for the treatment of inflammation and fibrosis. Chemomab’s approach to the discovery and development of product candidates is unproven, and Chemomab does not know whether it will be able to develop any products of commercial value. In addition, Chemomab’s lead product candidate, CM-101, is in early clinical development for the treatment of PSC and SSc. The clinical programs will require substantial additional development and clinical research, both in time and resources, before Chemomab is in a position to apply for or receive regulatory approvals and begin generating revenue in connection with the sale of such product candidates. Chemomab has not yet demonstrated the ability to successfully complete a large-scale, pivotal clinical trial, obtain marketing approval, manufacture a commercial scale product, or arrange for a third party to do so on its behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, predictions about Chemomab’s future success or viability may not be as accurate as they could be if Chemomab had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.
In addition, as a business with a limited operating history, Chemomab may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors and risks frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields. Consequently, Chemomab has no meaningful history of operations upon which to evaluate its business, and predictions about its future success or viability may not be as accurate as they could be if Chemomab had a longer operating history or a history of successfully developing and commercializing drug products. Chemomab will eventually need to transition from a company with a research and development focus to a company capable of supporting commercial activities. Chemomab may not be successful in such a transition and, as a result, its business may be adversely affected.
As Chemomab continues to build its business, it expects its financial condition and operating results to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many of which are beyond Chemomab’s control.
Chemomab’s business is highly dependent on the success of its lead product candidate, CM-101, and any other product candidates that it advances into clinical studies. All of Chemomab’s programs will require significant additional clinical development.
Chemomab currently has no products that are approved for commercial sale and may never be able to develop marketable products. Chemomab is very early in its development efforts and has only one product
 
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candidate, CM-101, in early clinical development. Because CM-101 is Chemomab’s lead product candidate, if CM-101 encounters safety or efficacy problems, development delays, regulatory issues or other problems, Chemomab’s development plans and business would be significantly harmed. Chemomab has completed a Phase 1a SAD study with healthy volunteers, a Phase 1b MAD study of CM-101 in non-alcoholic fatty liver disease, or NAFLD, and is recruiting volunteers to participate in its Phase 2 studies in PSC. Chemomab plans to initiate a Phase 2 SSc study in the first half of 2021, and a Phase 2a biomarkers study in NASH patients in the first quarter of 2021, however, for certain additional risks described herein, Chemomab cannot guarantee it will reach this clinical milestone or produce desirable results.
Chemomab expects that a substantial portion of its efforts and expenditures over the next few years will be devoted to CM-101, which will require additional clinical development, management of clinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply, building of a commercial organization, substantial investment and significant marketing efforts before it can generate any revenues from any commercial sales. Chemomab cannot be certain that it will be able to successfully complete any of these activities. In addition, if one or more of Chemomab’s product candidates are approved, Chemomab must ensure access to sufficient commercial manufacturing capacity and conduct significant marketing efforts in connection with any commercial launch. These efforts will require substantial investment, and Chemomab may not have the financial resources to continue the development of its product candidates.
Chemomab’sapproach in the area of fibrotic diseases is novel and unproven and may not result in marketable products.
Chemomab’s central objective is to design and develop targeted treatments for inflammation and fibrosis with an initial focus on the antagonism of CCL24 signaling, which is known to regulate fibrotic and inflammatory processes. While several studies are currently underway, this mechanism has not yet been definitively proven to successfully treat inflammation and fibrosis. Targeting CCL24 to treat inflammation and fibrosis is a novel approach in a rapidly developing field, and there can be no assurance that Chemomab can avoid unforeseen problems or delays in the development of its product candidates, that such problems or delays will not result in unanticipated costs, or that any such development problems can or will be solved. Chemomab has only tested its lead product candidate, CM-101, in healthy volunteers and NAFLD patients. Therefore, Chemomab may ultimately discover that its approach does not possess properties required for therapeutic effectiveness. As a result, Chemomab may elect to abandon the program or never succeed in developing a marketable product, which would have a significant effect on the success and profitability of its business.
Clinical development involves a lengthy, complex and expensive process, with an uncertain outcome.
Before obtaining the requisite regulatory approvals from the FDA or other comparable foreign regulatory authorities for the sale of any of its product candidates, Chemomab must support its application with clinical studies that prove that such product candidate is safe and effective in humans. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. In particular, the general approach for FDA approval of a new drug requires positive data from two well-controlled Phase 3 clinical studies of the relevant drug in the relevant patient population. Failure can occur at any time during the clinical study process. Chemomab may experience delays in initiating and completing any clinical studies that it is conducting or intends to conduct, including as a result of the COVID-19 pandemic, and Chemomab does not know whether its ongoing or planned clinical studies will begin or progress on schedule, need to be redesigned, enroll patients on time or be completed on schedule, or at all.
Phase 3 clinical studies typically involve hundreds of patients, have significant costs and take years to complete. A product candidate can fail at any stage of testing, even after observing promising signals of activity in earlier preclinical studies or clinical trials. The results of preclinical studies and early clinical trials of Chemomab’s product candidates may not be predictive of the results of later-stage clinical studies. In addition, initial or interim success in clinical studies may not be indicative of results obtained when such studies are completed. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical studies. Product candidates in later stages of clinical studies may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial
 
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clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or unacceptable safety issues, notwithstanding promising results in earlier studies. Most product candidates that commence clinical studies are never approved as products and there can be no assurance that any of Chemomab’s future clinical studies will ultimately be successful or support further clinical development of CM-101. Product candidates that appear promising in the early phases of development may fail to reach the market for several reasons, including:

the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of Chemomab’s clinical studies;

obtaining regulatory authorizations to commence a trial or consensus with regulatory authorities on trial’s design;

reaching an agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

obtaining Institutional Review Board, or IRB, approval at each site, or Independent Ethics Committee, or IEC, approval at sites outside the United States;

imposition of a clinical hold by regulatory authorities, including as a result of unforeseen safety issues or side effects or failure of trial sites to adhere to regulatory requirements or follow trial protocols;

clinical studies may show the product candidates to be less effective than expected (e.g., a clinical study could fail to meet its primary endpoint(s)) or to have unacceptable side effects or toxicities;

failure to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful;

the occurrence of serious adverse events in trials of the same class of agents conducted by other companies;

adding a sufficient number of clinical study sites;

manufacturing sufficient quantities of product candidate with sufficient quality for use in clinical studies;

having patients complete a trial or return for post-treatment follow-up;

recruiting suitable patients to participate in a trial in a timely manner and in sufficient numbers;

a facility manufacturing Chemomab’s product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of current good manufacturing practice, or cGMP, regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;

third-party clinical investigators losing the licenses or permits necessary to perform Chemomab’s clinical studies, not performing its clinical studies on its anticipated schedule or consistent with the clinical study protocol, good clinical practices, or GCP, or other regulatory requirements;

third-party contractors not performing data collection or analysis in a timely or accurate manner;

manufacturing costs, formulation issues, pricing or reimbursement issues, or other factors that make a product candidate uneconomical; or

the proprietary rights of others and their competing products and technologies that may prevent one of Chemomab’s product candidates from being commercialized.
In addition, differences in trial design between early-stage clinical studies and later-stage clinical studies make it difficult to extrapolate the results of earlier clinical studies to later clinical studies. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical studies have nonetheless failed to obtain marketing approval of their products.
 
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In addition, the standards used by the FDA and comparable foreign regulatory authorities when regulating Chemomab require judgment and can change, which makes it difficult to predict with certainty how they will be applied. For more information, see “Risk Factors — Risks Related to Chemomab’s Regulatory Approvals.
Successful completion of clinical studies is a prerequisite to submitting a marketing application to the FDA and similar marketing applications to comparable foreign regulatory authorities, for each product candidate and, consequently, the ultimate approval and commercial marketing of any product candidates. Chemomab may experience negative or inconclusive results, which may result in it deciding, or it being required by regulators, to conduct additional clinical studies or trials or abandon some or all of its product development programs, which could have a material adverse effect on Chemomab’s business.
Chemomabmay incur additional costs or experience delays in completing the development and commercialization of CM-101 or any other product candidates.
Chemomab may experience delays in initiating or completing clinical studies. It also may experience numerous unforeseen events during, or as a result of, any future clinical studies that could delay or prevent its ability to receive marketing approval or commercialize CM-101 or any other product candidates, including:

regulators, IRBs, or ethics committees may not authorize Chemomab or its investigators to commence a clinical study or conduct a clinical study at a prospective trial site;

the FDA or other comparable regulatory authorities may disagree with Chemomab’s clinical study design, including with respect to dosing levels administered in its planned clinical studies, which may delay or prevent Chemomab from initiating its clinical studies with its originally intended trial design;

Chemomab may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospective CROs, which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

the number of subjects required for clinical studies of any product candidates may be larger than Chemomab anticipates or subjects may drop out of these clinical studies or fail to return for post-treatment follow-up at a higher rate than it anticipates;

Chemomab’s third-party contractors may fail to comply with regulatory requirements or meet its contractual obligations to Chemomab in a timely manner, or at all, or may deviate from the clinical study protocol or drop out of the trial, which may require that Chemomab add new clinical study sites or investigators;

due to the impact of the CO studies ID-19 pandemic, Chemomab has experienced, and may continue to experience, delays and interruptions to clinical studies, it may experience delays or interruptions to its manufacturing supply chain, or it could suffer delays in reaching, or it may fail to reach, agreement on acceptable terms with third-party service providers on whom it relies;

additional delays and interruptions to Chemomab’s clinical studies could extend the duration of the trials and increase the overall costs to finish the trials as its fixed costs are not substantially reduced during delays;

Chemomab may elect to, or regulators, IRBs, Data Safety Monitoring Boards or ethics committees may require that it or its investigators, suspend or terminate clinical research or trials for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

Chemomab may not have the financial resources available to begin and complete the planned trials, or the cost of clinical studies of any product candidates may be greater than it anticipates; and

the supply or quality of Chemomab’s product candidates or other materials necessary to conduct clinical studies of its product candidates may be insufficient or inadequate to initiate or complete a given clinical study.
 
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Chemomab’s product development costs will increase if it experiences additional delays in clinical testing or in obtaining marketing approvals. Chemomab does not know whether any of its clinical studies will begin as planned, will need to be restructured or will be completed on schedule, or at all. If Chemomab does not achieve its product development goals in the time frames it announces and expects, the approval and commercialization of its product candidates may be delayed or prevented entirely. Significant clinical study delays also could shorten any periods during which it may have the exclusive right to commercialize its product candidates and may allow its competitors to bring products to market before Chemomab does, potentially impairing its ability to successfully commercialize its product candidates and harming its business and results of operations. Any delays in Chemomab’s clinical development programs may harm its business, financial condition and results of operations significantly.
Chemomab’s ongoing and future clinical studies may reveal significant adverse events or immunogenicity related responses and may result in a safety profile that could delay or prevent regulatory approval or market acceptance of its product candidate.
Chemomab completed its Phase 1a and Phase 1b clinical studies of its lead product candidate, CM-101, in healthy volunteers and NAFLD patients, and, with the exception of a number of reported minor adverse events (including mild headaches, changes in blood pressure and mild-moderate increases in liver enzymes), CM-101 was observed to be generally well-tolerated across all doses in 42 trial participants. Some potential therapeutics developed in the biopharmaceutical industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development and ultimately commercialization. Even if side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies.
Protein biopharmaceuticals, including, monoclonal antibodies, or mAbs, may be immunogenic and promote immune responses against themselves. In particular, anti-drug antibodies, or ADAs, may be produced by patients following infusion mAbs and may disturb the pharmacokinetics of mAbs, neutralize their therapeutic activities or induce allergic or autoimmune symptoms. Clinical immunogenicity can range from mild, transient antibody responses with no apparent clinical manifestations to loss of therapeutic efficacy and even life-threatening reactions. Several approved therapeutic antibodies have been found to induce neutralizing antibodies, as illustrated by the approved anti-TNFa antibodies infliximab and adalimumab as well as anti IL-17 approved mAb ixekizumab. Chemomab’s product candidate, CM-101, is a humanized antibody that, similar to other humanized approved mAbs, was shown to include several non-germline sequences that may serve as a source for immunogenicity in therapeutic antibodies. In vitro testing was conducted and revealed that while T cell proliferation was not induced using the whole antibody (CM-101), specific fragments of the mAb that contained non-germline residues, induced T cell proliferation. Clinical studies to date have shown a lack of anti-drug antibodies, or ADAs. Additional larger clinical studies will be needed to address the risk of immunogenicity and, if discovered, Chemomab’s business will be materially and adversely affected.
Additionally, if unacceptable side effects, including materialized risks of immunogenicity, do arise in the development of Chemomab’s product candidates, Chemomab, the FDA or the IRBs at the institutions in which its studies are conducted, or the Data Safety Monitoring Board, if constituted for its clinical studies, could recommend a suspension or termination of Chemomab’s clinical studies, or the FDA or comparable foreign regulatory authorities could order Chemomab to cease further development of or deny approval of a product candidate for any or all targeted indications. In addition, drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete a trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. Chemomab expects to have to train medical personnel using its product candidates to understand the side effect profiles for its clinical studies and upon any commercialization of any of its product candidates. Inadequate training in recognizing or managing the potential side effects of its product candidates could result in patient injury or death. Any of these occurrences may harm Chemomab’s business, financial condition and prospects significantly.
Additionally, if one or more of Chemomab’s product candidates receives marketing approval, and Chemomab or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:
 
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regulatory authorities may withdraw approvals of such product;

regulatory authorities may require additional warnings on the label, such as a “black box” warning or contraindication;

additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component thereof;

Chemomab may be required to implement a Risk Evaluation and Mitigation Strategy, or REMS, or create a medication guide outlining the risks of such side effects for distribution to patients;

Chemomab could be sued and held liable for harm caused to patients;

the product may become less competitive; and

Chemomab’s reputation may suffer.
Any of these events could prevent Chemomab from achieving or maintaining market acceptance of a product candidate, if approved, and could significantly harm Chemomab’s business, results of operations and prospects.
If Chemomab encounters difficulties enrolling patients in its clinical studies, including due to COVID-19, its clinical development activities could be delayed or otherwise adversely affected.
Chemomab may experience difficulties in patient enrollment in its clinical studies for a variety of reasons. The timely completion of clinical studies in accordance with its protocols depends, among other things, on Chemomab’s ability to enroll a sufficient number of patients who remain in the trial until its conclusion. The enrollment of patients depends on many factors, including:

the patient eligibility and exclusion criteria defined in the protocol;

the size of the patient population required for analysis of the trial’s primary endpoints and the process for identifying patients;

the willingness or availability (including legality under applicable COVID-19 shelter-in-place regulations) of patients to participate in Chemomab’s trials (including due to fears of contracting COVID-19);

the proximity of patients to trial sites;

the design of the trial;

Chemomab’s ability to recruit clinical study investigators with the appropriate competencies and experience;

clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied with respect to other available therapies, including any new products that may be approved for the indications Chemomab is investigating;

the availability of competing commercially available therapies and other competing product candidates’ clinical studies;

Chemomab’s ability to obtain and maintain patient informed consents; and

the risk that patients enrolled in clinical studies will drop out of the trials before completion.
Further, timely enrollment in clinical studies is reliant on clinical study sites which may be adversely affected by global health matters, including, among other things, pandemics. For example, Chemomab’s clinical study sites have been affected by the COVID-19 pandemic. Commencement of the enrollment of Chemomab’s clinical studies of CM-101 in PSC has been delayed. Further, Chemomab anticipates delays in the enrollment for its CM-101 PSC Phase 2 study, and it could experience slower than expected enrollment. In addition, after enrollment in these trials, if patients contract COVID-19 during participation in Chemomab’s trials or are subject to isolation or shelter-in-place restrictions, this may cause them to drop out of Chemomab’s trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols. If patients are unable to follow the trial protocols or if Chemomab’s trial results are otherwise disputed
 
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due to the effects of the COVID-19 pandemic or actions taken to mitigate its spread, the integrity of data from Chemomab’s trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.
Some factors from the COVID-19 pandemic that Chemomab believes may adversely affect enrollment in its trials include:

the diversion of healthcare resources away from the conduct of clinical study matters to focus on pandemic concerns, including the attention of infectious disease physicians serving as Chemomab’s clinical study investigators, hospitals serving as Chemomab’s clinical study sites and hospital staff supporting the conduct of its clinical studies;

the inability of patients to come to hospitals to participate in Chemomab’s trials, which may force Chemomab to conduct its trials in patients’ homes, rendering the trials more difficult and costly to conduct;

limitations on travel that interrupt key trial activities, such as clinical study site initiations and monitoring; and

employee furlough days that delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.
These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with the virus or could continue to spread to additional countries, each of which may further adversely impact Chemomab’s clinical studies. The global outbreak of the COVID-19 pandemic continues to evolve and the conduct of Chemomab’s trials may continue to be adversely affected, despite efforts to mitigate this impact.
The market opportunities for CM-101, if approved, may be smaller than Chemomab anticipates.
Chemomab expects to initially seek approval of CM-101 for the treatment of PSC and SSc. Its projections of the number of PSC and SSc patients is based on its beliefs and estimates. These estimates have been derived from a variety of sources, including scientific literature, patient foundations and publicly available databases, and may prove to be incorrect. Further, new sources may reveal a change in the estimated number of patients, and the number of patients may turn out to be lower than Chemomab expected. The potential addressable patient population for Chemomab’s current programs or future product candidates may be limited. The ultimate market opportunity for Chemomab’s product candidates will depend on, among other things, the final labeling for such product candidates as agreed with the FDA or comparable foreign regulatory authorities, acceptance by the medical community and patient access, potential competition and drug pricing and reimbursement. Even if Chemomab obtains significant market share for any product candidate, if approved, if the potential target populations are small, Chemomab may never achieve profitability without obtaining marketing approval for additional indications.
Chemomabmay not be successful in its efforts to identify or discover additional product candidates in the future.
Chemomab’s research programs may initially show promise in identifying potential product candidates, yet may fail to yield product candidates for clinical development for a number of reasons, including:

Chemomab’s inability to design such product candidates with the pharmacological properties that it desires or attractive pharmacokinetics; or

potential product candidates may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be medicines that will receive marketing approval and achieve market acceptance.
Research programs to identify new product candidates require substantial technical, financial and human resources. If Chemomab is unable to identify suitable compounds for preclinical and clinical development, it will not be able to obtain product revenue in future periods, which likely would result in significant harm to Chemomab’s financial position and adversely impact the combined company’s stock price.
 
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Due to Chemomab’s limited resources and access to capital, it must make decisions on the allocation of resources to certain programs and product candidates; these decisions may prove to be wrong and may adversely affect Chemomab’s business.
Chemomab has limited financial and human resources and intends to initially focus on research programs and product candidates for a limited set of indications. As a result, Chemomab may forgo or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success.
There can be no assurance that Chemomab will ever be able to identify additional therapeutic opportunities for its product candidates or to develop suitable potential product candidates through internal research programs, which could materially adversely affect its future growth and prospects. Chemomab may focus its efforts and resources on potential product candidates or other potential programs that ultimately prove to be unsuccessful.
If product liability lawsuits are brought against Chemomab, it may incur substantial financial or other liabilities and may be required to limit commercialization of its product candidates.
Chemomab faces an inherent risk of product liability as a result of testing CM-101, and will face an even greater risk if Chemomab commercializes any products. For example, Chemomab may be sued if any of its product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical studies, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If Chemomab cannot successfully defend itself against product liability claims, it may incur substantial liabilities or be required to limit commercialization of its product candidates. Even successful defense would require significant financial and management resources. Chemomab’s inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products Chemomab develops. Chemomab will need to obtain additional insurance for clinical studies as it continues clinical development of CM-101 and as additional product candidates enter clinical studies. However, Chemomab may be unable to obtain, or may obtain on unfavorable terms, clinical study insurance in amounts adequate to cover any liabilities from any of its clinical studies. Chemomab’s insurance policies may also have various exclusions, and Chemomab may be subject to a product liability claim for which it has no coverage. Chemomab may have to pay any amount awarded by a court or negotiated in a settlement that exceed its coverage limitations or that are not covered by insurance, and Chemomab may not have, or be able to obtain, sufficient capital to pay such amounts. Even if Chemomab’s agreements with any future corporate collaborators entitles Chemomab to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
Chemomab has been granted Orphan Drug Designation for CM-101 in connection with three indications and may seek Orphan Drug Designation for other indications or product candidates, and Chemomab may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity, and may not receive Orphan Drug Designation for other indications or for its other product candidates.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs intended for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for grant funding toward clinical study costs, tax advantages and user-fee waivers. In addition, if a product that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA to market the same product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug
 
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exclusivity or where the manufacturer is unable to assure sufficient product quantity. However, Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.
The FDA and EMA granted Orphan Drug Designation to CM-101 in its primary indications of PSC, SSc and IPF. Chemomab may seek Orphan Drug Designations for CM-101 in other indications or for other product candidates. There can be no assurance that Chemomab will be able to obtain such designations.
Even if Chemomab obtains Orphan Drug Designation for any product candidate in specific indications, it may not be the first to obtain marketing approval of such product candidate for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if Chemomab seeks approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.
Further, even if Chemomab obtains orphan drug exclusivity in the United States for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care.
Chemomab will need to expand its organization, and it may experience difficulties in managing this growth, which could disrupt its operations.
As of December 31, 2020, Chemomab had 12 employees. Chemomab expect to experience significant growth in the number of its employees and the scope of its operations, particularly in the areas of product candidate development, regulatory affairs and sales and marketing. Chemomab may have difficulty identifying, hiring and integrating new personnel. Future growth would impose significant additional responsibilities on its management, including the need to identify, recruit, maintain, motivate and integrate additional employees, consultants and contractors. Also, Chemomab’s management may need to divert a disproportionate amount of its attention away from its day-to-day activities and devote a substantial amount of time to managing these growth activities. Chemomab may not be able to effectively manage the expansion of its operations, which may result in weaknesses in its infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Chemomab’s expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If Chemomab’s management is unable to effectively manage its growth, its expenses may increase more than expected, its ability to generate and/or grow revenues could be reduced, and it may not be able to implement its business strategy. Chemomab’s future financial performance and its ability to commercialize its product candidates and compete effectively will depend, in part, on its ability to effectively manage any future growth.
Many of the biopharmaceutical companies that Chemomab competes against for qualified personnel and consultants have greater financial and other resources, different risk profiles and a longer history in the industry than Chemomab does. If Chemomab is unable to continue to attract and retain high-quality personnel and consultants, the rate and success at which it can discover and develop product candidates and operate its business will be limited.
Chemomab has incurred significant operating losses since its inception and anticipates it will incur continued losses for the foreseeable future.
Chemomab has funded its operations to date through proceeds from sales of its equity and grants from the Israel Innovation Authority, or the IIA, which as of December 31, 2020, resulted in gross proceeds of approximately $35 million. As of September 30, 2020, Chemomab’s cash and cash equivalents were $12.7 million. Chemomab has incurred net losses in each year since its inception, and it has an accumulated deficit of $21.8 million as of September 30, 2020.
Substantially all of Chemomab’s operating losses have resulted from general and administrative costs associated with its operations, and costs associated with its research and development programs, including
 
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for its preclinical and clinical product candidates. Chemomab expects to incur increasing levels of operating losses over the next several years and for the foreseeable future. Chemomab’s prior losses, combined with expected future losses, have had and will continue to have an adverse effect on its shareholders’ deficit and working capital. In any particular quarter or quarters, Chemomab’s operating results could be below the expectations of securities analysts or investors, which could cause the combined company’s share price to decline.
Chemomab expects its research and development expenses to significantly increase in connection with its clinical studies of its product candidates. In addition, if Chemomab obtains marketing approval for its product candidates, it will incur significant sales and marketing, legal, and outsourced-manufacturing expenses. As a public company, Chemomab expects to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, Chemomab is also unable to predict the extent of any future losses or when it will become profitable, if at all. Even if Chemomab does become profitable, it may not be able to sustain or increase its profitability on a quarterly or annual basis.
The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases could seriously harm Chemomab’s research, development and potential future commercialization efforts, increase its costs and expenses and have a material adverse effect on its business, financial condition and results of operations.
Broad-based business or economic disruptions have, and could continue to, adversely affect Chemomab’s ongoing or planned research and development activities. For example, to date, the COVID-19 pandemic has caused significant disruptions to the Israeli, United States and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including Israel and the United States, have reacted by instituting quarantines, restrictions on travel and mandatory closures of businesses. Most countries, including where Chemomab or the third parties with whom it engages operate, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, and restrictions on types of business that may continue to operate.
The extent to which COVID-19 may impact Chemomab’s preclinical studies or clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, or the effectiveness of actions to contain and treat COVID-19. The continued spread of COVID-19 globally could adversely impact Chemomab’s preclinical studies or clinical study operations in Israel and the United States, including its ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography. COVID-19 may also affect employees of third-party CROs located in affected geographies that Chemomab relies upon to carry out its clinical studies. Any negative impact COVID-19 has on patient enrollment or treatment or the execution of its current product candidates and any future product candidates could cause costly delays to clinical study activities, which could adversely affect Chemomab’s ability to obtain regulatory approval for and to commercialize its current product candidates and any future product candidates, increase its operating expenses, and have a material adverse effect on its financial results.
Chemomab cannot presently predict the scope and severity of any potential business shutdowns or disruptions. If Chemomab or any of the third parties with whom it engages, however, were to experience shutdowns or other business disruptions, Chemomab’s ability to conduct its business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on its business and its results of operation and financial condition.
Risks Related to Chemomab’s Intellectual Property Rights
If Chemomab is unable to protect its patents or other proprietary rights, or if Chemomab infringes the patents or other proprietary rights of others, its competitiveness and business prospects may be materially damaged.
Patent and other proprietary rights are essential to Chemomab’s business. Chemomab’s success depends to a significant degree on its ability to obtain and enforce patents and licenses to patent rights,
 
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both in the United States and in other countries. Chemomab cannot guarantee that pending patent applications will result in issued patents, that patents issued or licensed will not be challenged or circumvented by competitors, that the patents and other intellectual property rights of Chemomab and its business partners will not be found to be invalid or that the intellectual property rights of others will not prevent Chemomab from selling its products or from executing on its strategies.
The patent position of a biopharmaceutical company is often uncertain and involves complex legal and factual questions. Significant litigation concerning patents and products is pervasive in Chemomab’s industry. Patent claims include challenges to the coverage and validity of Chemomab’s patents on products or processes as well as allegations that its products infringe patents held by competitors or other third parties. A loss in any of these types of cases could result in a loss of patent protection or the ability to market products, which could lead to a significant loss of sales, or otherwise materially affect future results of operations. Chemomab also relies on trademarks, copyrights, trade secrets and know-how to develop, maintain and strengthen its competitive positions. Third parties may know, discover or independently develop equivalent proprietary information or techniques, or they may gain access to Chemomab’s trade secrets or disclose such trade secrets to the public.
Although Chemomab’s employees, consultants, parties to collaboration agreements and other business partners are generally subject to confidentiality or similar agreements to protect its confidential and proprietary information, these agreements may be breached, and Chemomab may not have adequate remedies for any breach. In addition, Chemomab’s trade secrets may otherwise become known or be independently discovered by competitors. To the extent that Chemomab’s employees, consultants, parties to collaboration agreements and other business partners use intellectual property owned by others in their work for the company, disputes may arise as to the rights in related or resulting know-how and inventions.
Furthermore, Chemomab’s intellectual property, other proprietary technology and other sensitive company data is potentially vulnerable to loss, damage or misappropriation from system malfunction, computer viruses, unauthorized access to data or misappropriation or misuse thereof by those with permitted access and other events. While Chemomab has invested to protect its intellectual property and other data, and continue to work diligently in this area, there can be no assurance that its precautionary measures will prevent breakdowns, breaches, cyber incidents or other events. Such events could have a material adverse effect on Chemomab’s reputation, business, financial condition or results of operations. Misappropriation or other loss of Chemomab’s intellectual property from any of the foregoing could have a material adverse effect on its competitive position and may cause it to incur substantial litigation costs.
Chemomab may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent, which might adversely affect its ability to develop, manufacture and market its product candidates.
From time to time Chemomab may identify patents or applications in the same general area as its products and product candidates. Chemomab may determine these third-party patents are irrelevant to its business based on various factors, including its interpretation of the scope of the patent claims and its interpretation of when the patent expires. If the patents are asserted against Chemomab, however, a court may disagree with its determinations. Further, while Chemomab may determine that the scope of claims that will issue from a patent application does not present a risk, it is difficult to accurately predict the scope of claims that will issue from a patent application, its determination may be incorrect, and the issuing patent may be asserted against Chemomab. Chemomab cannot guarantee that it will be able to successfully settle or otherwise resolve such infringement claims. If Chemomab fails in any such dispute, in addition to being forced to pay monetary damages, it may be temporarily or permanently prohibited from commercializing its product candidates or be required to obtain a license under such patent, which may not be available on reasonable terms or at all. Chemomab might, if possible, also be forced to redesign its product candidates so that it no longer infringes, misappropriates or otherwise violates the third-party intellectual property rights. Any of these events, even if Chemomab were ultimately to prevail, could require it to divert substantial financial and management resources that it would otherwise be able to devote to its business. Any of the foregoing could have a material adverse effect on Chemomab’s business, financial condition, results of operations, and prospects.
 
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Changes in patent laws or patent jurisprudence could diminish the value of patents in general, thereby impairing Chemomab’s ability to protect its product candidates.
As is the case with other biopharmaceutical and pharmaceutical companies, Chemomab’s success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical and pharmaceutical industries involve both technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical and pharmaceutical patents is costly, time-consuming and inherently uncertain. In addition, the Leahy-Smith America Invents Act, or the AIA, which was passed in September 2011, resulted in significant changes to the United States patent system.
An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned from a “first-to-invent” to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. A third party that files a patent application in the USPTO after that date but before Chemomab could therefore be awarded a patent covering an invention of ours even if it made the invention before it was made by the third party. This will require Chemomab to be cognizant of the time from invention to filing of a patent application and be diligent in filing patent applications, but circumstances could prevent it from promptly filing patent applications on its inventions.
Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent with the USPTO. This applies to all of Chemomab’s United States patents, even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
Accordingly, a third party may attempt to use the USPTO procedures to invalidate Chemomab’s patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. It is not clear what, if any, impact the AIA will have on the operation of its business. However, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of Chemomab or its licensors’ patent applications and the enforcement or defense of Chemomab or its licensors’ issued patents.
Chemomab may become involved in opposition, interference, derivation, inter partes review, post-grant review, reexamination or other proceedings challenging Chemomab or its licensors’ patent rights, and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding could reduce the scope of, or invalidate, Chemomab’s owned or in-licensed patent rights, in whole or in part, allow third parties to commercialize its technology or products and compete directly with Chemomab, without payment to it, or result in Chemomab’s inability to manufacture or commercialize products without infringing third-party patent rights.
Additionally, the United States Supreme Court has ruled on several patent cases in recent years either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to Chemomab’s ability to obtain patents in the future, this combination of events has created uncertainty with respect to the validity, enforceability and value of patents, once obtained. Depending on decisions by Congress, the federal courts and the USPTO, as well as similar bodies in other jurisdictions, the laws and regulations governing patents could change in unpredictable ways that could weaken Chemomab’s ability to obtain new patents or to enforce its existing patents and patents that it might obtain in the future. Similarly, the complexity and uncertainty of European patent laws have also increased in recent years. In addition, the European patent system is relatively stringent in the type of amendments that are allowed during prosecution. Complying with these laws and regulations could limit Chemomab’s ability to obtain new patents in the future that may be important for its business, and these laws and regulations patents could continue to change in unpredictable ways that could have a material adverse effect on Chemomab’s existing patent rights and its ability to protect and enforce its intellectual property in the future.
 
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Obtaining and maintaining Chemomab’s patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and Chemomab’s patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO and European and other patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In addition, periodic maintenance, renewal and annuity fees on any issued patent are due to be paid to the USPTO and European and other patent agencies over the lifetime of a patent. While an inadvertent failure to make payment of such fees or to comply with such provisions can in many cases be cured by additional payment of a late fee or by other means in accordance with the applicable rules, there are situations in which such noncompliance will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents within prescribed time limits. If Chemomab or its licensors fails to maintain the patents and patent applications covering its product candidates or if Chemomab or its licensors otherwise allow its patents or patent applications to be abandoned or lapse, its competitors might be able to enter the market, which would hurt Chemomab’s competitive position and could impair its ability to successfully commercialize its product candidates in any indication for which they are approved, which could have a material adverse effect on Chemomab’s business, financial condition, results of operations, and prospects.
Risks Related to Chemomab’s Regulatory Approvals
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if Chemomab is ultimately unable to obtain regulatory approval for CM-101 or any other product candidates, its business will be substantially harmed.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical studiesand depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that Chemomab’s data is insufficient for approval and require additional preclinical, clinical or other data. Even if Chemomab eventually completes clinical testing and receives approval of any regulatory filing for its product candidates, the FDA and other comparable foreign regulatory authorities may approve Chemomab’s product candidates for a more limited indication or a narrower patient population than it originally requested. Chemomab has not obtained regulatory approval for any product candidate and it is possible that it will never obtain regulatory approval for CM-101 or any other product candidate. Chemomab is not permitted to market any of its product candidates in the United States until it receives regulatory approval of an NDA from the FDA.
Prior to obtaining approval to commercialize a product candidate in the United States or abroad, Chemomab must demonstrate with substantial evidence from well-controlled clinical studies, and to the satisfaction of the FDA or foreign regulatory agencies, thatsuch product candidate is safe and effective for its intended use. Results from preclinical studies and clinical trials can be interpreted in different ways. Even if Chemomab believes the preclinical or clinical data for its product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities.
The FDA or any foreign regulatory bodies can delay, limit or deny approval of Chemomab’s product candidates or require it to conduct additional preclinical or clinical testing or abandon a program for many reasons, including:

the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of Chemomab’s clinical studies;

Chemomab may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;
 
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serious and unexpected drug-related side effects experienced by participants in Chemomab’s clinical studies or by individuals using drugs similar to its product candidates, or other products containing the active ingredient in Chemomab’s product candidates;

negative or ambiguous results from Chemomab’s clinical studies or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

the population studied in the clinical study may not be sufficiently broad or representative to assure efficacy and safety in the full population for which Chemomab seeks approval;

Chemomab may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

the FDA or comparable foreign regulatory authorities may disagree with Chemomab’s interpretation of data from preclinical studies or clinical trials;

the data collected from clinical studies of Chemomab’s product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and Chemomab may be required to conduct additional clinical studies;

the FDA’s or the applicable foreign regulatory agency’s disagreement regarding the formulation, labeling and/or the specifications of Chemomab’s product candidates;

the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which Chemomab contracts for clinical and commercial supplies; and

the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering Chemomab’s clinical data insufficient for approval.
Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA or comparable foreign regulatory authority approval. Chemomab cannot guarantee that the FDA or foreign regulatory authorities will interpret trial results as it does, and more trials could be required before Chemomab is able to submit applications seeking approval of its product candidates. To the extent that the results of the trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, Chemomab may be required to expend significant resources, which may not be available to it, to conduct additional trials in support of potential approval of Chemomab’s product candidates. Furthermore, the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering Chemomab’s clinical data insufficient for approval, which may lead to the FDA or comparable foreign regulatory authorities delaying, limiting or denying approval of its product candidates.
Of the large number of drugs in development, only a small percentage successfully complete the regulatory approval processes and are commercialized. This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in Chemomab failing to obtain regulatory approval to market CM-101 or any other product candidate, which would significantly harm Chemomab’s business, results of operations and prospects.
In addition, the FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than Chemomab originally requested, and the FDA or applicable foreign regulatory agency may approve a product candidate with a REMS or a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Regulatory authorities may also grant approval contingent on the performance of costly post-marketing clinical trials. Any of the foregoing scenarios could materially harm the commercial prospects for Chemomab’s product candidates.
 
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Obtaining and maintaining regulatory approval of Chemomab’s product candidates in one jurisdiction does not mean that it will be successful in obtaining regulatory approval of its product candidates in other jurisdictions.
In order to market any product outside of the United States, Chemomab must establish and comply with the numerous and varying safety, efficacy, and other regulatory requirements of other countries. Obtaining and maintaining regulatory approval of its product candidates in one jurisdiction does not guarantee that Chemomab will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Chemomab’s product candidates may not receive marketing approval even if they achieve their primary endpoints in future Phase 3 clinical studies or registrational trials. The FDA or comparable foreign regulatory authorities may disagree with Chemomab’s trial designs and its interpretation of data from preclinical studies or clinical trials. In addition, any of these regulatory authorities may change requirements for the approval of a product candidate even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 or registrational clinical study. In addition, any of these regulatory authorities may also approve a product candidate for fewer or more limited indications than Chemomab’s request or may grant approval contingent on the performance of costly post-marketing clinical trials. The FDA or comparable foreign regulatory authorities may not approve the labeling claims that Chemomab believes would be necessary or desirable for the successful commercialization of its product candidates, if approved.
Furthermore, even if the FDA or other comparable foreign regulatory authority grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing, and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States, as well as other risks. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that Chemomab intends to charge for its products is also subject to approval.
Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for Chemomab and could delay or prevent the introduction of its products in certain countries. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair its ability to market its product candidates in such foreign markets. Any such impairment would reduce the size of its potential market, which could have a material adverse impact on its business, results of operations, and prospects.
Even if Chemomab obtains regulatory approval for CM-101 or any product candidate, it will still face extensive and ongoing regulatory requirements and obligations and any product candidates, if approved, may face future development and regulatory difficulties.
Any product candidate for which Chemomab obtains marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging, distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such product, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, establishment registration and drug listing requirements, continued compliance with cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping and GCP requirements for any clinical studies that Chemomab conducts post-approval.
Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval, including a requirement to implement a REMS. If any of Chemomab’s product candidates receives marketing approval, the accompanying label may limit the approved indicated use of the product candidate, which
 
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could limit sales of the product candidate. The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a product. Violations of the Federal Food, Drug, and Cosmetic Act, or FDCA, relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.
In addition, later discovery of previously unknown adverse events or other problems with Chemomab’s products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, may yield various results, including:

restrictions on manufacturing such products;

restrictions on the labeling or marketing of products;

restrictions on product manufacturing, distribution or use;

requirements to conduct post-marketing studies or clinical trials;

warning letters or untitled letters;

withdrawal of the products from the market;

refusal to approve pending applications or supplements to approved applications that Chemomab submits;

recall of products;

fines, restitution or disgorgement of profits or revenues;

suspension or withdrawal of marketing approvals;

refusal to permit the import or export of Chemomab’s products;

product seizure; or

injunctions or the imposition of civil or criminal penalties.
Further, the FDA’s policies may change, and additional government regulations may be enacted that could impose extensive and ongoing regulatory requirements and obligations on any product candidate for which Chemomab obtains marketing approval. If Chemomab is slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if Chemomab is not able to maintain regulatory compliance, it may lose any marketing approval that it may have obtained, which would adversely affect its business, prospects and ability to achieve or sustain profitability.
Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder Chemomab’s ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact its business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would harm Chemomab’s business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the United States government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process Chemomab’s regulatory submissions, which could harm its business.
 
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The COVID-19 pandemic has also resulted in the FDA imposing preventive measures, including postponements of non-United States manufacturing and product inspections. If global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process Chemomab’s regulatory submissions, which could have a material adverse effect on its business.
Risks Related to Commercialization of Chemomab’s Product Candidates
If Chemomab does not achieve its projected development and commercialization goals in the timeframes it announces and expects, the commercialization of its product candidates may be delayed and Chemomab’s business will be harmed.
For planning purposes, Chemomab sometimes estimates the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include Chemomab’s expectations regarding the commencement or completion of scientific studies and clinical trials, the regulatory submissions or commercialization objectives. From time to time, Chemomab may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical study, the initiation of other clinical studies, receipt of regulatory approval or the commercial launch of a product. The achievement of many of these milestones may be outside of Chemomab’s control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from Chemomab’s estimates, including:

Chemomab’s available capital resources or capital constraints it experiences;

the rate of progress, costs and results of Chemomab’s clinical studies and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators;

Chemomab’s ability to identify and enroll patients who meet clinical study eligibility criteria;

Chemomab’s receipt of authorizations by the FDA and comparable foreign regulatory authorities, and the timing thereof;

other actions, decisions or rules issued by regulators;

Chemomab’s ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of its product candidates;

Chemomab’s ability to manufacture and supply clinical study materials to its clinical sites on a timely basis;

the severity, duration and impact of the COVID-19 pandemic;

the efforts of Chemomab’s collaborators with respect to the commercialization of its products, if any; and

the securing of, costs related to, and timing issues associated with, commercial product manufacturing as well as sales and marketing activities.
If Chemomab fails to achieve announced milestones in the timeframes it expects, the commercialization of any of its product candidates may be delayed, and its business, results of operations, financial condition and prospects may be adversely affected.
Chemomab faces substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than it.
The development and commercialization of new drug products is highly competitive. Chemomab may face competition with respect to any product candidates that it seeks to develop or commercialize in the future from major biopharmaceutical companies, specialty biopharmaceutical companies, and biotechnology companies worldwide. Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.
 
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There are a number of large biopharmaceutical and biotechnology companies that are currently pursuing the development of products for the treatment of inflammation and fibrosis. Companies that Chemomab is aware of that are targeting the treatment of inflammation and fibrosis include large companies with significant financial resources such as Biogen, Inc., AbbVie Inc., Gilead Sciences, Inc., FibroGen, Inc., Galapagos NV, Bristol Myers Squibb Co., and Novartis AG. However, Chemomab does not know of any other companies currently in clinical development with an anti CCL24 mAb. For additional information regarding Chemomab’s competition, see “Chemomab Business — Competition.
Many of Chemomab’s current or potential competitors, either alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical studies, obtaining regulatory approvals, and marketing approved products than Chemomab does.
Even if CM-101 or any other product candidate Chemomab develops receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success.
If CM-101 or any other product candidate Chemomab develops receives marketing approval, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. If it does not achieve an adequate level of acceptance, Chemomab may not generate significant product revenues or become profitable. The degree of market acceptance of Chemomab’s product candidates, if approved, will depend on a number of factors, including but not limited to:

the efficacy and potential advantages compared to alternative treatments;

effectiveness of sales and marketing efforts;

the cost of treatment with respect to alternative treatments, including any similar generic treatments;

Chemomab’s ability to offer its products for sale at competitive prices;

the convenience and ease of administration compared to alternative treatments;

the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

the strength of marketing and distribution support;

the timing of market introduction of competitive products;

the availability of third-party coverage and adequate reimbursement;

product labeling or product insert requirements of the FDA, EMA or other regulatory authorities, including any limitations on warnings contained in a product’s approved labeling;

the prevalence and severity of any side effects; and

any restrictions on the use of Chemomab’ product together with other medications.
Because Chemomab expects sales of its product candidates, if approved, to generate substantially all of its revenues for the foreseeable future, the failure of its product candidates to find market acceptance would harm its business and could require it to seek additional financing.
Chemomab relies completely on third-party suppliers to manufacture its clinical drug supplies for its product candidates, and Chemomab intends to rely on third parties to produce preclinical, clinical, and commercial supplies of any future product candidates.
Chemomab does not currently have, nor does Chemomab plan to acquire, the infrastructure or capability to internally manufacture its clinical drug supply of its product candidates, or any future product candidates, for use in the conduct of its preclinical studies and clinical trials.
Chemomab lacks the internal resources and the capabilities to manufacture any product candidates on a clinical or commercial scale. The facilities used by its contract manufacturers to manufacture the active pharmaceutical ingredient and final drug product must complete a pre-approval inspection by the FDA and
 
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other comparable foreign regulatory agencies to assess compliance with applicable requirements, including cGMPs, after Chemomab submits its NDA or relevant foreign regulatory market application to the applicable regulatory agency.
Chemomab is responsible for setting the product specifications and approving master batch records, but does not oversee the manufacturing process itself, and is completely dependent on its contract manufacturers to comply with cGMPs for manufacture of both active drug substances and finished drug products. If its contract manufacturers cannot successfully manufacture material that conforms to its specifications and the strict regulatory requirements of the FDA or applicable foreign regulatory agencies, they will not be able to pass a pre-approval inspection or secure and/or maintain regulatory approval for their manufacturing facilities. In addition, Chemomab has no direct control over its contract manufacturers’ ability to maintain adequate quality control, quality assurance, and qualified personnel. Furthermore, all of its contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes its manufacturers to regulatory risks for the production of such materials and products. As a result, failure to satisfy the regulatory requirements for the production of those materials and products may affect the regulatory clearance of its contract manufacturers’ facilities generally. If the FDA or an applicable foreign regulatory agency determines now or in the future that these facilities for the manufacture of its product candidates are noncompliant, Chemomab may need to find alternative manufacturing facilities, which would adversely impact its ability to develop, obtain regulatory approval for or market its product candidates. Its reliance on contract manufacturers also exposes Chemomab to the possibility that they, or third parties with access to their facilities, will have access to and may compromise its trade secrets or other proprietary information.
If Chemomab is unable to establish sales, marketing and distribution capabilities either on its own or in collaboration with third parties, it may not be successful in commercializing CM-101, if approved.
Chemomab does not have any infrastructure for the sales, marketing or distribution of CM-101, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market and successfully commercialize CM-101 or any other product candidate Chemomab develops, if approved, it must build its sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. Chemomab expects to build a focused sales, distribution and marketing infrastructure to market CM-101, if approved. There are significant expenses and risks involved with establishing Chemomab’s own sales, marketing and distribution capabilities, including its ability to hire, retain and appropriately incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of Chemomab’s internal sales, marketing and distribution capabilities could delay any product launch, which would adversely impact the commercialization of that product. Additionally, if the commercial launch of CM-101 for which Chemomab recruits a sales force and establishes marketing capabilities is delayed or does not occur for any reason, it would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and Chemomab’s investment would be lost if it cannot retain or reposition its sales and marketing personnel.
Factors that may inhibit Chemomab’s efforts to commercialize its product candidates on its own include:

Chemomab’s inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;

the inability of sales personnel to obtain access to physicians or attain adequate numbers of physicians to prescribe Chemomab’s products; and

unforeseen costs and expenses associated with creating an independent sales and marketing organization.
Chemomab does not anticipate having the resources in the foreseeable future to allocate to the sales and marketing of its product candidates, if approved, in certain markets overseas. Therefore, Chemomab’s future success will depend, in part, on its ability to enter into and maintain collaborative relationships for such capabilities, the collaborator’s strategic interest in a product and such collaborator’s ability to successfully
 
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market and sell the product. Chemomab intends to pursue collaborative arrangements regarding the sale and marketing of CM-101, if approved, for certain markets overseas; however, Chemomab cannot guarantee that it will be able to establish or maintain such collaborative arrangements, or if able to do so, that it will have effective sales forces. To the extent that Chemomab depends on third parties for marketing and distribution, any revenues it receives will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.
If Chemomab is unable to build its own sales force or negotiate a collaborative relationship for the commercialization of CM-101, Chemomab may be forced to delay the potential commercialization of CM-101 or reduce the scope of its sales or marketing activities for CM-101. If Chemomab needs to increase its expenditures to fund commercialization activities for CM-101, it will need to obtain additional capital, which may not be available to it on acceptable terms, or at all. Chemomab may also have to enter into collaborative arrangements for CM-101 at an earlier stage than otherwise would be ideal and it may be required to relinquish rights to CM-101 or otherwise agree to terms unfavorable to it. Any of these occurrences may have an adverse effect on Chemomab’s business, operating results and prospects.
If Chemomab is unable to establish adequate sales, marketing and distribution capabilities, either on its own or in collaboration with third parties, it will not be successful in commercializing its product candidates and may never become profitable. Chemomab will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, it may be unable to compete successfully against these more established companies.
A variety of risks associated with operating internationally could materially adversely affect Chemomab’s business.
Chemomab’s principal executive offices are located in Israel and certain of its product candidates may be manufactured at third-party facilities located in Europe. In addition, Chemomab’s business strategy includes potentially expanding internationally if any of its product candidates receives regulatory approval. Doing business internationally involves a number of risks, including but not limited to:

multiple, conflicting and changing laws and regulations, such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

failure by Chemomab to obtain and maintain regulatory approvals for the use of its products in various countries;

additional potentially relevant third-party patent rights;

complexities and difficulties in obtaining protection and enforcing Chemomab’s intellectual property;

difficulties in staffing and managing foreign operations;

complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;

limits in Chemomab’s ability to penetrate international markets;

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for Chemomab’s products and exposure to foreign currency exchange rate fluctuations;

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;

certain expenses including, among others, expenses for travel, translation and insurance; and

regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the United States Foreign Corrupt Practices Act, its books and records provisions, or its anti-bribery provisions.
 
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Any of these factors could significantly harm Chemomab’s international expansion and operations and, consequently, its results of operations.
Risks Related to Chemomab’s Incorporation and Location in Israel
Conditions in Israel could materially and adversely affect Chemomab’s business.
Many of Chemomab’s employees, including certain management members operate from its offices that are located in Tel Aviv, Israel. In addition, a number of Chemomab’s officers and directors are residents of Israel. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect its business and operations. In recent years, Israel has been engaged in sporadic armed conflicts with Hamas, an Islamist terrorist group that controls the Gaza Strip, with Hezbollah, an Islamist terrorist group that controls large portions of southern Lebanon, and with Iranian-backed military forces in Syria. In addition, Iran has threatened to attack Israel and may be developing nuclear weapons. Some of these hostilities were accompanied by missiles being fired from the Gaza Strip against civilian targets in various parts of Israel, including areas in which Chemomab’s employees and some of its consultants are located, and negatively affected business conditions in Israel. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect Chemomab’s operations and results of operations.
Chemomab’s commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, Chemomab cannot guarantee that this government coverage will be maintained or that it will sufficiently cover its potential damages. Any losses or damages incurred by Chemomab could have a material adverse effect on its business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm Chemomab’s results of operations.
Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on Chemomab’s operating results, financial condition or the expansion of its business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact Chemomab’s business.
In addition, many Israeli citizens are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40 (or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be military reserve duty call-ups in the future. Chemomab’s operations could be disrupted by such call-ups, which may include the call-up of members of Chemomab’s management. Such disruption could materially adversely affect Chemomab’s business, prospects, financial condition and results of operations.
Because a certain portion of Chemomab’s expenses are incurred in currencies other than the U.S. Dollar, its results of operations may be harmed by currency fluctuations and inflation.
Chemomab’s reporting and functional currency is the United States Dollar, but some portion of its clinical studies and operations expenses are in NIS. As a result, Chemomab is exposed to some currency fluctuation risks. Fluctuation in the exchange rates of foreign currency has an influence on the cost of goods sold and Chemomab’s financing revenues and expenses. Chemomab may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above with respect to the U.S. Dollar. These measures, however, may not adequately protect Chemomab from adverse effects.
 
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Both Anchiano and Chemomab received Israeli government grants for certain of their research and development activities as detailed below. The terms of those grants require us to satisfy specified conditions in order to transfer outside of Israel the manufacture of products based on know-how funded by the Israel Innovation Authority or to transfer outside of Israel the know-how itself. If we fail to comply with the requirements of Israeli law in this regard, we may be required to pay penalties, and it may impair our ability to sell our technology outside of Israel.
Some of Anchiano’s and Chemomab’s research and development efforts were financed through grants that were received from the Israel Innovation Authority of the Israeli Ministry of Economy and Industry, or the IIA (formerly known as the Office of the Chief Scientist). When know-how is developed using IIA grants, the Encouragement of Research, Development and Technological Innovation in Industry Law 5744-1984, or the Innovation Law, and the regulations thereunder, restrict our ability to transfer outside of Israel either the manufacture of products based on IIA-funded know-how or the know-how itself. Such restrictions continue to apply even after financial obligations to the IIA are paid in full. The consideration available to our shareholders in a future transaction involving the transfer outside of Israel of know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the IIA.
RISKS RELATED TO THE COMBINED COMPANY
The combined company does not anticipate paying any cash dividends on the combined company’s ordinary shares in the foreseeable future.
Neither Anchiano nor Chemomab have ever declared or paid cash dividends on their respective ordinary shares. Neither Anchiano nor Chemomab anticipate paying any cash dividends on the combined company’s ordinary shares in the foreseeable future. It is anticipated that the combined company will retain all available funds and any future earnings to fund the development and growth of its business. As a result, capital appreciation, if any, of the combined company’s ordinary shares will be the combined company’s shareholders’ sole source of gain for the foreseeable future.
Maintaining and improving the combined company’s financial controls and the requirements of being a public company may strain the combined company’s resources, divert management’s attention and affect its ability to attract and retain qualified board members.
As a public company, the combined company will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and Nasdaq rules. The requirements of these rules and regulations will increase the combined company’s legal and financial compliance costs, make some activities more difficult, time-consuming or costly and place strain on its personnel, systems and resources. The Exchange Act requires, among other things, that the combined company file annual, quarterly and current reports with respect to its business and financial condition.
The Sarbanes-Oxley Act requires, among other things, that the combined company maintain effective disclosure controls and procedures and internal control over financial reporting. Ensuring that the combined company will have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently.
We do not expect that the combined company will have an internal audit group, and the combined company may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Implementing any appropriate changes to the combined company’s internal controls may require specific compliance training for the combined company’s directors, officers and employees, entail substantial costs, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of the combined company’s internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase the combined company’s operating costs and could materially impair its ability to operate its business. Moreover, effective internal controls are necessary for the combined company to produce reliable financial reports and are important to help prevent fraud.
 
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In accordance with Nasdaq rules, the combined company will be required to maintain a majority independent board of directors. The various rules and regulations applicable to public companies make it more difficult and more expensive for the combined company to maintain directors’ and officers’ liability insurance, and the combined company may be required to accept reduced coverage or incur substantially higher costs to maintain coverage. If the combined company is unable to maintain adequate directors’ and officers’ insurance, its ability to recruit and retain qualified officers and directors will be significantly curtailed.
We expect that the rules and regulations applicable to public companies will result in the combined company incurring substantial legal and financial compliance costs. These costs will decrease the combined company’s net income or increase its net loss and may require it to reduce costs in other areas of its business.
If securities or industry analysts do not publish research or publish unfavorable research about the combined company’s business, its share price and trading volume could decline.
The trading market for the combined company’s securities will depend in part on the research and reports that securities or industry analysts publish about the combined company. The combined company may never obtain sufficient research coverage by securities and industry analysts. If no sufficient securities or industry analysts commence coverage of the combined company, the trading price for the combined company’s shares could be negatively impacted. If the combined company obtains sufficient securities or industry analyst coverage and if one or more of the analysts who covers it downgrades the combined company’s shares or publishes inaccurate or unfavorable research about the combined company’s business, its share price would likely decline. If one or more of these analysts ceases coverage of the combined company or fails to publish reports regularly, demand for the combined company’s shares could decrease, which could cause its share price and trading volume to decline.
The combined company will be an “emerging growth company” and neither Anchiano nor Chemomab can be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make the combined company’s securities less attractive to investors.
The combined company will be an “emerging growth company,” as defined under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For so long as the combined company is an “emerging growth company,” it is expected that it will take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
The combined company is expected to be an “emerging growth company” until December 31, 2024, which is the last day of the fiscal year following the fifth anniversary of Anchiano’s initial public offering conducted after it became a reporting company under the Exchange Act pursuant to its registration statement on Form F-1 (File No. 333-229155).
Neither Anchiano nor Chemomab can predict if investors will find the combined company’s shares less attractive, or the combined company less comparable to certain other public companies because it will rely on these exemptions. If some investors find the combined company’s shares less attractive as a result, there may be a less active trading market for its shares and its share price may be more volatile.
Under the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The combined company will have irrevocably elected not to avail itself of this exemption from new or revised accounting standards, and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on the combined company’s share price.
Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC require an annual management assessment of the effectiveness of our internal control over financial
 
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