EX-99.2 3 s111900_ex99-2.htm EXHIBIT 99.2

Exhibit 99.2

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

JUNE 30, 2018

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

JUNE 30, 2018

TABLE OF CONTENTS

		Page
CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS – IN U.S. DOLLARS IN THOUSANDS ($):
Condensed Consolidated Interim Statements of Financial Position		2
Condensed Consolidated Interim Statements of Comprehensive Loss		3
Condensed Consolidated Interim Statements of Changes in Equity		4
Condensed Consolidated Interim Statements of Cash Flows		5-6
Notes to the Condensed Consolidated Interim Financial Statements		7-11

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited)

	December 31,			June 30,
	2017			2018
	U.S. dollars in thousands

Assets
CURRENT ASSETS:
Cash and cash equivalents		53,324			64,481
Financial assets at fair value through profit or loss		1,825			1,670
Restricted bank deposits		69			147
Other receivables		1,125			2,869
TOTAL CURRENT ASSETS		56,343			69,167

NON-CURRENT ASSETS:
Other assets		—			1,696
Property and equipment		8,206			12,143
TOTAL NON-CURRENT ASSETS		8,206			13,839

TOTAL ASSETS		64,549			83,006

Liabilities and equity
CURRENT LIABILITIES -
Accounts payable and accruals:
Trade		1,854			5,256
Other		3,893			4,079
TOTAL CURRENT LIABILITIES		5,747			9,335

NON-CURRENT LIABILITIES -
COMMITMENTS AND CONTINGENT LIABILITIES

EQUITY:
Ordinary shares		727			727
Share premium		148,968			183,998
Currency translation differences		(378	)		(378	)
Accumulated deficit		(90,515	)		(110,676	)
TOTAL EQUITY		58,802			73,671

TOTAL LIABILITIES AND EQUITY		64,549			83,006

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

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended June 30						Six months ended June 30
	2017			2018			2017			2018
	U.S. dollars in thousands

RESEARCH AND DEVELOPMENT EXPENSES		(5,621	)		(8,523	)		(9,538	)		(17,738	)
LESS - PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES		—			123			—			458
RESEARCH AND DEVELOPMENT EXPENSES, net		(5,621	)		(8,400	)		(9,538	)		(17,280	)
GENERAL AND ADMINISTRATIVE EXPENSES		(1,075	)		(2,194	)		(2,086	)		(4,104	)
OTHER GAINS (LOSSES), net		75			(81	)		171			(154	)
OPERATING LOSS		(6,621	)		(10,675	)		(11,453	)		(21,538	)
FINANCIAL INCOME		104			239			258			389
FINANCIAL EXPENSES		(4	)		(450	)		(10	)		(403	)
FINANCIAL INCOME (EXPENSES), net		100			(211	)		248			(14	)
LOSS BEFORE TAXES ON INCOME		(6,521	)		(10,886	)		(11,205	)		(21,552	)
TAXES ON INCOME		—			(147	)		—			(210	)
LOSS AND COMPREHENSIVE LOSS		(6,521	)		(11,033	)		(11,205	)		(21,762	)

	$
BASIC AND DILUTED LOSS PER ORDINARY SHARE		(0.47	)		(0.34	)		(0.88	)		(0.75	)

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

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

	Ordinary shares
	Number of shares		Issued and paid-up share capital		Share premium		Currency translation differences			Accumulated deficit			Total
			U.S. dollars in thousands
BALANCE AT JANUARY 1, 2017		11,448,191		727		84,980		(378	)		(62,625	)		22,704
CHANGES IN THE SIX MONTH PERIOD ENDED JUNE 30, 2017:
Proceeds of issuance shares, net of issuance costs		2,289,638				9,525								9,525
Share-based compensation											560			560
Exercise of options by employees		377				*								*
Comprehensive loss											(11,205	)		(11,205	)
BALANCE AT JUNE 30, 2017		13,738,206		727		94,505		(378	)		(73,270	)		21,584

BALANCE AT JANUARY 1, 2018		26,075,770		727		148,968		(378	)		(90,515	)		58,802
CHANGES IN THE SIX MONTH PERIOD ENDED JUNE 30, 2018:
Proceeds of issuance shares, net of issuance costs		7,150,000				35,029								35,029
Share-based compensation											1,601			1,601
Exercise of options by employees		218				1								1
Comprehensive loss											(21,762	)		(21,762	)
BALANCE AT JUNE 30, 2018		33,225,988		727		183,998		(378	)		(110,676	)		73,671

* Represents an amount less than $ 1,000

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

(Continued) - 1

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended
	June 30
	2017			2018
	U.S. dollars
	in thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Comprehensive loss		(11,205	)		(21,762	)
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities (see appendix A)		2,677			1,907
Net cash used in operating activities		(8,528	)		(19,855	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(1,636	)		(2,613	)
Other assets		—			(1,696	)
Proceeds from disposal of financial assets at fair value through profit or loss, net		219			1
Changes in restricted bank deposits, net		—			(85	)
Proceeds from sale of property and equipment		7			—
Net cash used in investing activities		(1,410	)		(4,393	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of shares, net of issuance costs		9,525			35,029
Exercise of options by employees		*			1
Net cash provided by financing activities		9,525			35,030
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(413	)		10,782
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		16,376			53,324
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS		99			375
CASH AND CASH EQUIVALENTS - END OF PERIOD		16,062			64,481

* Represents an amount less than $ 1,000

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

(Concluded) - 2

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended June 30
	2017			2018
	U.S. dollars in thousands

APPENDIX A:

Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities:

Income and expenses not involving cash flows:
Depreciation		400			416
Changes in the fair value of derivative financial instruments		(80	)		—
Exchange differences on cash and cash equivalents		(99	)		(375	)
Exchange differences on restricted deposits		(7	)		7
Losses (gains) on financial assets at fair value through profit or loss		(173	)		154
Loss on sale of property and equipment		2			—
Share-based compensation		560			1,601
		603			1,803
Changes in operating asset and liability items:
Decrease (increase) in other receivables		1,058			(502	)
Increase in accounts payable and accruals		1,016			606
		2,074			104
		2,677			1,907
APPENDIX B:

Information regarding investment activities not involving cash flows:
Liability with respect to property purchase		80			1,740
Supplementary information to the statement of cash flows:
Taxes paid		—			31
Interest received		73			209

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

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL:

General:

Intec Pharma Ltd. (“Intec”) is engaged in the development of proprietary technology which enables the gastric retention of certain drugs. The technology is intended to significantly improve the efficiency of the drugs and substantially reduce their side-effects or the effective doses.

Intec is a limited liability public company incorporated and domiciled in Israel. The registered address of its offices is 12 Hartom St., Jerusalem, Israel.

Intec’s ordinary shares are traded on the Nasdaq Capital Market ("NASDAQ"). Intec’s ordinary shares are delisting from the Tel-Aviv Stock Exchange Ltd. in August 2018.

In September 2017, Intec incorporated a wholly-owned subsidiary in the United States of America in the State of Delaware – Intec Pharma Inc. (the “Subsidiary”). The Subsidiary was incorporated mainly to provide Intec executive and management services, including business development, medical affairs and investor relationship activities outside of Israel.

Intec together with its Subsidiary (the "Company") engage in research and development activities and as a group have not yet generated revenues from their operations. Accordingly, there is no assurance that the Company’s operations will generate positive cash flows. As of June 30, 2018, the cumulative losses of the Company were approximately $110.7 million. Management expects that the Company will continue to incur losses from its operations, which will result in negative cash flows from operating activities. The Company's management estimates that its current cash resources, will allow the Company to complete its Phase III clinical trial for AP-CD/LD. However, management estimates that further fund raising will be required in order for the Company to complete the research and development of all of its product candidates including the manufacturing activities of the AP-CD/LD in the foreseeable future. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

The Company plans to fund its future operations through submissions of applications for grants from private funds, license agreements with third parties and raising capital from the public and/or private investors and/or institutional investors. There is no assurance, however, that the Company will be successful in obtaining the level of financing needed for its operations and the research and development of its product candidates. If the Company is unsuccessful in securing sufficient financing, it may need to make the necessary changes to its operations to reduce the level of expenditures in line with available resources.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

On April 13, 2018, the Company completed an underwritten public offering of its ordinary shares. The Company raised, together with the partial exercise of the underwriters’ over-allotment option, a total of approximately $35.0 million (net of underwriting discounts, commissions and other offering expenses in the amount of $2.5 million). For more details see note 6(a).

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 1 - GENERAL (continued):

Approval of consolidated financial statements

These condensed consolidated interim financial statements were approved by the Board of Directors on August 14, 2018.

NOTE 2 - BASIS OF PREPARATION:

The Company’s condensed consolidated interim financial statements as of June 30, 2018 and for the three and six months then ended (the “condensed consolidated interim financial statements”) have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting”. These condensed interim consolidated financial statements, which are unaudited, do not include all disclosures necessary for a complete statement of financial position, results of operations, and cash flow in conformity with International Financial Reporting Standards (“IFRS”). The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements as of December 31, 2017 and for the year then ended and their accompanying notes, which have been prepared in accordance with IFRS as published by the International Accounting Standards Board. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:

The accounting policies and calculation methods applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2017 and for the year then ended, except for the adoption of International Financial Reporting Standard No. 9 "Financial Instruments", effective from January 1, 2018, which did not have a material effect on the Company's financial statements.

International Financial Reporting Standard No. 16 “Leases” is effective for periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of this new standard on its consolidated financial statements and the impact is currently expected to be immaterial.

NOTE 4 - CRITICAL ACCOUNTING ESTIMATES:

As part of the preparation of the condensed consolidated interim financial statements, Company management is required to make estimates that affect the value of assets, liabilities, income, expenses and certain disclosures included in the Company’s condensed consolidated interim financial statements. By their very nature, such estimates are subjective and complex and consequently may differ from actual results.

The critical accounting estimates applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the preparation of the annual financial statements as of December 31, 2017.

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 5 - FINANCIAL INSTRUMENTS:

As of June 30, 2018 and as of December 31, 2017, the Company holds financial assets at fair value through profit and loss in an amount of approximately $1.7 million and $1.8 million, respectively, which are included in Level 1.

The fair value of restricted bank deposits, other receivables and other payables which constitute financial assets and financial liabilities, approximates their carrying amount.

NOTE 6 - EQUITY:

Changes in share capital:

On April 13, 2018, the Company completed an underwritten public offering of its ordinary shares pursuant to which the Company issued 6,750,000 ordinary shares with no par value at a price of $5.25 per ordinary share. On May 10, 2018, the underwriters partially exercised their over-allotment option and purchased 400,000 additional ordinary shares. The total net proceeds were approximately $35.0 million, after deducting underwriting discounts, commissions and other offering expenses.

Share-based payment to employees:

The following are the grants of options to employees:

Date of grant	Number of options granted	Exercise price per option (USD)	Fair value on grant date- USD in thousands	Expiration date
January 2018	135,000	5.19	389	January 2025
February 2018	865,000	6.10 - 6.67	2,089	February 2025
March 2018	75,000	6.40 - 6.45	209	March 2025
June 2018	220,000	4.44	387	June 2025

Vesting conditions of all of the above options are service conditions and the options will vest over a three-year period, with one third of the options vesting at the end of the first year from the date of grant, and the remaining vesting in eight equal quarterly tranches, subsequent to the first year from the grant date.

Each one option is exercisable into one ordinary share.

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 6 - EQUITY (continued):

The fair value of all of the options was calculated using the Black-Scholes options pricing model, and based on the following assumptions:

Date of grant	Share price on date of grant- in USD	Expected dividend	Expected volatility	Risk free interest*	Expected term
January 2018	6.05	None	46.32%	2.3%	5 years
February 2018	5.70 - 6.10	None	45.87% - 46.47%	2.5% - 2.7%	5 years
March 2018	6.40 - 6.45	None	46.03%	2.6%	5 years
June 2018	4.20	None	46.15%	2.7%	5 years

The risk-free interest rate was determined on the basis of the yield rates to maturity of unlinked government bonds bearing a fixed interest rate, whose maturity dates correspond to the expected exercise dates of the options.

During the six-month period ended June 30, 2018, options to purchase 52,382 ordinary shares granted to employees were forfeited or expired.

NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES:

In April 2017, the Company engaged with an international manufacturer for ordering a large scale automated production line for manufacturing Accordion Pills in the amount of approximately €7.5 million. The order covers engineering, manufacture and assembly of the automated production line. As of June 30, 2018, the Company had transferred payments of €5.25 million (approximately $6.2 million), of which €1.5 million (approximately $1.8 million) was paid during the six-month period ended June 30, 2018, and recognized a liability in an additional amount of €1.5 million (approximately $1.7 million).

In January 2018, the Company entered into a Feasibility and Option Agreement with Novartis Pharmaceuticals to explore using the Accordion Pill platform for a proprietary Novartis compound. Under the agreement and the research plan, the Company’s activities will be funded by Novartis subject to the achievement of agreed milestones.

In March 2018, the Company entered into a Term Sheet for Manufacturing Services with an international manufacturer (the "Manufacturer") for the manufacture of AP-CD/LD. Under the Term Sheet, the Company will bear the costs incurred by the Manufacturer to acquire the production equipment for AP-CD/LD ("Equipment") in the amount of approximately €7.0 million, however such amount will later be reimbursed to the Company by the Manufacturer in the form of a reduction in the purchase price of the AP-CD/LD product. As of June 30, 2018, the Company had transferred payments of approximately €1.4 million (approximately $1.7 million) in costs of the Equipment and recognized it as non-current other assets.

The Term Sheet contains several termination rights which are expected to be included in a definitive manufacturing and supply agreement. According to the Term Sheet, upon early termination, the Manufacturer has the right to purchase the Equipment from the Company.

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

NOTE 8 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES:

Key management includes members of the Board of Directors and the Chief Executive Officer.

a. Transactions with related parties:

	Three months ended June 30				Six months ended June 30
	2017		2018		2017		2018
	U.S. dollars in thousands

Key management compensation expenses:
Salaries and short-term employee benefits		178		204		342		422
Long term employment benefits		11		—		22		—
Share-based compensation expenses		267		200		381		413
		456		404		745		835

b. Balances with related parties:

	December 31,		June 30,
	2017		2018
	U.S. dollars
	in thousands
Statements of financial position items -
current liabilities - Accounts payable and accruals - other		190		95