EX-99.2 3 s113885_ex99-2.htm EXHIBIT 99.2

 

Exhibit 99.2

 

INTEC PHARMA LTD.

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

 

(UNAUDITED)

 

SEPTEMBER 30, 2018

 

 

 

 

INTEC PHARMA LTD.

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

 

(UNAUDITED)

 

SEPTEMBER 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,
2017
   September 30,
2018
 
   U.S. dollars in thousands 
A s s e t s          
CURRENT ASSETS:          
Cash and cash equivalents   53,324    52,733 
Financial assets at fair value through profit or loss   1,825    1,722 
Restricted bank deposits   69    149 
Other receivables   1,125    2,104 
TOTAL CURRENT ASSETS   56,343    56,708 
           
NON-CURRENT ASSETS:          
Other assets       2,694 
Property and equipment   8,206    12,097 
TOTAL NON-CURRENT ASSETS   8,206    14,791 
           
TOTAL ASSETS   64,549    71,499 
           
Liabilities and equity          
CURRENT LIABILITIES -          
Accounts payable and accruals:          
Trade   1,854    1,742 
Other   3,893    4,413 
TOTAL CURRENT LIABILITIES   5,747    6,155 
           
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)   (119,003)
TOTAL EQUITY   58,802    65,344 
TOTAL LIABILITIES AND EQUITY   64,549    71,499 

 

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

 

2 

 

 

INTEC PHARMA LTD. 

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS 

 

(Unaudited)

 

   Three months ended
September 30
  

Nine months ended
September 30

 
   2017   2018   2017   2018 
   U.S. dollars in thousands 
RESEARCH AND DEVELOPMENT EXPENSES   (5,888)   (7,901)   (15,426)   (25,639)
LESS - PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES       92        550 
RESEARCH AND DEVELOPMENT EXPENSES, net   (5,888)   (7,809)   (15,426)   (25,089)
GENERAL AND ADMINISTRATIVE EXPENSES   (1,480)   (1,696)   (3,566)   (5,800)
OTHER GAINS (LOSSES), net   (5)   13    166    (141)
OPERATING LOSS   (7,373)   (9,492)   (18,826)   (31,030)
FINANCIAL INCOME   29    254    209    643 
FINANCIAL EXPENSES   (308)   (104)   (240)   (507)
FINANCIAL INCOME (EXPENSES), net   (279)   150    (31)   136 
LOSS BEFORE TAXES ON INCOME   (7,652)   (9,342)   (18,857)   (30,894)
TAXES ON INCOME       164        (46)
LOSS AND COMPREHENSIVE LOSS   (7,652)   (9,178)   (18,857)   (30,940)
  

$

 
BASIC AND DILUTED LOSS PER ORDINARY SHARE   (0.40)   (0.28)   (1.27)   (1.01)

 

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

 

3 

 

 

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 NINE MONTH PERIOD ENDED SEPTEMBER 30, 2017:                              
Proceeds from issuance of shares, net of issuance costs   14,514,138        63,131            63,131 
Exercise of warrants as part of an investment agreement   102,058        812            812 
Share-based compensation                   914    914 
Exercise of options by employees   5,064        19            19 
Comprehensive loss                   (18,857)   (18,857)
BALANCE AT SEPTEMBER 30, 2017   26,069,451    727    148,942    (378)   (80,568)   68,723 
                               
BALANCE AT JANUARY 1, 2018   26,075,770    727    148,968    (378)   (90,515)   58,802 
CHANGES IN THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2018:                              
Proceeds of issuance shares, net of issuance costs   7,150,000        35,029            35,029 
Share-based compensation                   2,452    2,452 
Exercise of options by employees   218        1            1 
Comprehensive loss                   (30,940)   (30,940)
BALANCE AT SEPTEMBER 30, 2018   33,225,988    727    183,998    (378)   (119,003)   65,344 

 

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

 

4 

 

 

(Continued) - 1

 

INTEC PHARMA LTD.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

  

Nine months ended
September 30

 
   2017   2018 
   U.S. dollars
in thousands
 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Comprehensive loss   (18,857)   (30,940)
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities (see appendix A)   3,897    (9)
Net cash used in operating activities   (14,960)   (30,949)
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (2,447)   (2,632)
Investments in other assets       (2,450)
Proceeds from disposal (acquisition) of financial assets at fair value through profit or loss, net   254    (38)
Changes in restricted bank deposits, net       (85)
Proceeds from sale of property and equipment   7     
Net cash used in investing activities   (2,186)   (5,205)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Issuance of shares, net of issuance costs   63,131    35,029 
Exercise of warrants as part of an investment agreement   531     
Exercise of options by employees   19    1 
Net cash provided by financing activities   63,681    35,030 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   46,535    (1,124)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD   16,376    53,324 
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS   66    533 
CASH AND CASH EQUIVALENTS - END OF PERIOD   62,977    52,733 

 

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

 

5 

 

 

(Concluded) - 2

 

INTEC PHARMA LTD.

 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

 

(Unaudited)

 

   Nine months ended
September 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   613    639 
Changes in the fair value of derivative financial instruments   184     
Exchange differences on cash and cash equivalents   (66)   (533)
Exchange differences on restricted deposits   (6)   5 
Losses (gains) on financial assets at fair value through profit or loss   (168)   141 
Loss on sale of property and equipment   2     
Share-based compensation   914    2,452 
    1,473    2,704 
Changes in operating asset and liability items:          
Decrease (increase) in other receivables   1,051    (979)
Increase (decrease) in accounts payable and accruals   1,373    (1,734)
    2,424    (2,713)
    3,897    (9)
APPENDIX B:          
Information regarding investment and financing activities not involving cash flows:          
Liability with respect to property purchase   30    1,898 
Liability with respect to other assets       244 
Settlement of liability in respect to derivative financial instrument to equity   281     
Supplementary information to the statement of cash flows:          
Taxes paid       31 
Interest received   99    522 

 

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

 

6 

 

 

INTEC PHARMA LTD.

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

(Unaudited)

 

NOTE 1 - GENERAL:

 

a.General:

 

1)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 delisted 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.

 

2)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 September 30, 2018, the cumulative losses of the Company were approximately $119.0 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.

 

3)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).

 

b.Approval of consolidated financial statements

 

These condensed consolidated interim financial statements were approved by the Board of Directors on November 8, 2018.

 

7

 

 

INTEC PHARMA LTD.

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

(Unaudited)

 

NOTE 2 - BASIS OF PREPARATION

 

The Company’s condensed consolidated interim financial statements as of September 30, 2018 and for the three and nine 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 nine months ended September 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:

 

a.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.

 

b.International Financial Reporting Standard No. 16 “Leases” is effective for periods beginning on or after January 1, 2019. The Company currently anticipates that the adoption will result in an increase in assets and liabilities on our consolidated statements of financial position and will not have a material impact on our consolidated statements of comprehensive loss or consolidated statements of cash flows.

 

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.

 

NOTE 5 - FINANCIAL INSTRUMENTS:

 

a.As of September 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.

 

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

 

8

 

 

INTEC PHARMA LTD.

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

(Unaudited)

 

NOTE 6 - EQUITY:

 

a.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.

 

b.Share-based payment to employees:

 

1)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.

 

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.

 

2)During the nine-month period ended September 30, 2018, options to purchase 59,482 ordinary shares granted to employees were forfeited or expired.

 

9

 

 

INTEC PHARMA LTD.

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

 

(Unaudited)

 

NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES:

 

a.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 September 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 nine-month period ended September 30, 2018, and recognized a liability in an additional amount of €1.6 million (approximately $1.9 million).

 

b.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.

 

c.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 September 30, 2018, the Company has recognized the Equipment as non-current other assets in total amount of approximately €2.3 million (approximately $2.7 million). As of that date, the Company had transferred payments of approximately €2.1 million (approximately $2.5 million) in costs of the Equipment and recognized a liability in an additional amount of approximately €210,000 (approximately $244,000).

 

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.

 

10

 

 

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
September 30
   Nine months ended
September 30
 
   2017   2018   2017   2018 
   U.S. dollars in thousands 
Key management compensation expenses:                    
Salaries and short-term employee benefits   453    240    795    662 
Long term employment benefits   12        34     
Share-based compensation expenses   193    225    574    638 
    658    465    1,403    1,300 

 

b.       Balances with related parties:

 

   December 31,
2017
   September 30,
2018
 
  

U.S. dollars

in thousands

 
Statements of financial position items -        
current liabilities -  Accounts payable and accruals - other   190    121 

 

11