REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
(The Nasdaq Global Market)
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Large accelerated filer ☐
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Non-accelerated filer ☐
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Emerging growth company
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International Financial Reporting Standards as issued
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Other ☐
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by the International Accounting Standards Board ☐
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1 | ||
1 | ||
1 | ||
47 | ||
65 | ||
65 | ||
76 | ||
98 | ||
ITEM 8. |
99 | |
100 | ||
100 | ||
108 | ||
109 | ||
109 | ||
ITEM 14. | 109 | |
ITEM 15. | 109 | |
ITEM 16. | 109 | |
ITEM 16A. | 110 | |
ITEM 16B. | 110 | |
ITEM 16C. | 110 | |
ITEM 16D. | 111 | |
ITEM 16E. | 111 | |
ITEM 16F. | 111 | |
ITEM 16G. | 111 | |
ITEM 16H. | 111 | |
ITEM 16I. | 112 | |
ITEM 17. | 112 | |
ITEM 18. | 112 | |
ITEM 19. | 113 |
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We have a history of losses and we expect to incur future losses and may never achieve or sustain profitability. |
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We may need to raise additional funds in the future, and if we are unable to raise such additional funds, we may need to limit, curtail
or cease operations. To the extent any such funding is based on the sale of equity, our existing shareholders would experience dilution
of their shareholdings. |
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We cannot provide assurance that our business model will succeed in generating substantial revenues. |
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In the near term, we are highly dependent on the success of COM701 and of COM902. We may not be able to advance our internal clinical
stage programs through clinical development or manufacturing or successfully partner or commercialize them, or obtain marketing approval,
either alone or with a collaborator, or may experience significant delays in doing so. |
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Clinical trials of any product candidates that we, or any current or future collaborators may conduct, may fail to satisfactorily
demonstrate safety and/or efficacy, and we, or any collaborator, may incur additional costs or experience delays in completing, or ultimately
be unable to complete the development and commercialization of these product candidates. |
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Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may encounter substantial delays or
even an inability to begin clinical trials for any specific product or may not be able to conduct or complete our trials on the timelines
we expect. |
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From time to time we publicly disclose preliminary data from our ongoing clinical trials. As more patient data become available the
data and the interpretation of the data may change. |
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We rely and expect to continue to rely on third parties to conduct our clinical trials. These third parties may not successfully
or professionally carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, and we may experience
significant delays in the conduct of our clinical trials as well as significant increased expenditures. |
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Serious adverse events or undesirable side effects or lack of efficacy, may emerge in clinical trials conducted by other companies
running clinical trials investigating the same target as us, which could adversely affect our development programs or our capability to
enroll patients or partner the program for further development and commercialization. |
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We are subject to certain manufacturing risks, any of which could either result in additional costs or delays in completing, or ultimately
make us unable to complete, the development and commercialization of our product candidates. |
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Our current and future relationships, and/or the relationships of our collaborators through which we may market, sell, and distribute
our products, with healthcare professionals, physicians and other parties in the United States and elsewhere may be subject, directly
or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information and general
privacy and security and other healthcare laws and regulations, which could expose us to adverse consequences. |
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There are risks that are inherent in the development and commercialization of new therapeutic products. |
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We have limited experience in the development of therapeutic product candidates, and we may be unable to implement our business strategy.
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Our approach to the discovery of therapeutic products is based on our predictive computational discovery capabilities that are not
yet fully proven clinically, and we do not know whether we will be able to discover and develop additional potential product candidates
or products of commercial value. |
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We are focusing our discovery and therapeutic development activities on therapeutic product candidates for uses in immuno-oncology.
Our current candidates may fail, and we may fail to continue to discover and develop therapeutic product candidates of industry interest
in this field. |
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We depend significantly on third parties to carry out the research, development and commercialization of our therapeutic product
candidates. If we are unable to maintain our existing agreements or to enter into additional agreements with such third parties, including
collaborators, in the future, our business will likely be materially harmed. |
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Our dependence on collaboration agreements with third parties presents number of risks. |
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We operate in a highly competitive and rapidly changing industry which may result in others discovering, developing or commercializing
competing products ahead of us or more successfully than we do. |
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Given our level of managerial, operational, financial and other resources, our current activities and future growth may be limited.
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We may be unable to safeguard the integrity, security and confidentiality of our data or third parties’ data. |
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Our information technology systems, or those of our cloud providers, contract research organizations, or CROs, or other contractors
or consultants, may fail or suffer security breaches, which could result in a material disruption of our pipeline and our business, as
well as to regulatory investigations or actions; litigation; fines and penalties; reputational harm; loss of revenue and other adverse
consequences. |
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Our business and operations would suffer if our information technology systems or infrastructure or data, or our vendors’ or
partners’, are or were compromised. |
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We are subject to stringent and changing obligations related to data privacy and security. Failure or perceived failure to comply
with current or future obligations could lead to government enforcement actions (which could include civil or criminal penalties), private
litigation, and/or adverse publicity and could negatively affect our operating results and business. |
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If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability
to prevent our competitors from commercializing similar or identical product candidates would be adversely affected. |
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In the future, we may need to obtain additional licenses of third-party technology or other rights that may not be available to us
or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise
adverse manner that was not anticipated. |
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We, or potential collaborators and licensees, may infringe third-party rights and may become involved in litigation, which may materially
harm our business. |
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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time
consuming and unsuccessful. |
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Conditions in the Middle East and in Israel may adversely affect our operations. |
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Our results of operations may be adversely affected by the exchange rate fluctuations between the dollar and the New Israeli Shekel.
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We may not be able to meet the continued listing standards of The Nasdaq Stock Market LLC, or Nasdaq, which require a minimum closing
bid price of $1.00 per share, which could result in our delisting and negatively impact the price of our ordinary shares and our ability
to access the capital markets. |
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Future sales of our ordinary shares or securities convertible or exchangeable for our ordinary shares may depress our share price.
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If we sell ordinary shares in future financings, shareholders may experience immediate dilution and, as a result, our share price
may decline. |
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Our share price and trading volume have been volatile and may be volatile in the future and that could limit investors’ ability
to sell our shares at a profit and could limit our ability to successfully raise funds. |
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If we are a passive foreign investment company, or PFIC, our U.S. shareholders may be subject to adverse U.S. federal income tax
consequences. |
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the successful clinical trial design (and implementation thereof) and results; |
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our ability to fund clinical trials designed to obtain regulatory approval and to become commercially successful;
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our ability to design trials required to allow for a path for registration or obtain regulatory approval;
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the success of trials designed to allow for a path for registration/approval by regulatory authorities;
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our selected regulatory strategy; |
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our timely initiation, enrollment and completion of clinical trials; |
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demographics, past therapy and other criteria of patients enrolled, even if they meet the inclusion/exclusion
enrollment criteria; |
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a safety, tolerability and efficacy profile, alone or in combination with other approved or investigational
products, that is satisfactory to the FDA or comparable foreign regulatory authorities; |
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selection of drug dosing; |
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selection of indications; |
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selection of drug(s) for combinations; |
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access to drugs required for combination studies or approval; |
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successful identification of biomarkers, including for patient selection; |
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timely receipt of marketing approvals from applicable regulatory authorities; |
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the performance of our current and future collaborators, if any; |
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the extent of any required post-marketing approval commitments to applicable regulatory authorities;
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establishment and monitoring of manufacturing arrangements and processes with third-party service providers
and clinical manufacturing organizations for manufacturing drug substance and drug product; |
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establishment and monitoring of arrangements with third-party suppliers of raw materials and service for
fill-finish, packaging and labeling; |
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stability of our drug substance and drug products; |
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supply of our drugs in sufficient quantities and quality for our clinical trials; |
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establishment of arrangements with third-party manufacturers and processes monitoring to obtain commercial
quality drug product that is appropriately packaged for sale; |
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adequate ongoing availability of raw materials and drug product for clinical development and any commercial
sales; |
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protection of our rights in our intellectual property portfolio; |
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successful launch of commercial sales following any marketing approval; |
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a continued acceptable safety profile following any marketing approval; and |
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commercial acceptance by patients, the medical community and third-party payors. |
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cease the development of the product candidates; |
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incur additional unplanned costs; |
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not obtain approval to proceed to next development phase; |
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be delayed in obtaining marketing approval for our product candidates; |
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not obtain marketing approval at all; |
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obtain approval for indications or patient populations that are not as broad as intended or desired;
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obtain approval with labeling that includes significant use or distribution restrictions or significant
safety warnings, including boxed warnings; |
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be subject to additional post-marketing testing or other requirements; or |
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be required to remove the product from the market after obtaining marketing approval. |
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inability to generate sufficient preclinical, toxicology, or other scientific data to support the initiation of clinical trials;
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lack of authorization from regulators or institutional review boards, or IRBs, or ethics committees to allow us or our investigators
to amend a clinical trial or commence a clinical trial or conduct a clinical trial at a prospective trial site or continue such clinical
trial; |
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delays in sufficiently developing, characterizing, or controlling a manufacturing process suitable for clinical trials; |
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inability to generate sufficient quantities or quality of our drug substance or drug product to support the initiation or continuation
of clinical trials; |
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delays in reaching a consensus with collaborators or regulatory agencies on trial design or trial amendment; |
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delays in reaching 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 clinical trial sites; |
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imposition of a temporary or permanent clinical hold by the FDA, or a similar delay imposed by foreign regulatory agencies for a
number of reasons, including after review of an IND, other application or amendment; (i) as a result of a new safety finding that presents
unreasonable risk to clinical trial participants; (ii) a negative finding from an inspection of our clinical trial operations or trial
sites; (iii) developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of
the technology broadly; or (iv) if FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;
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clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results and we may
decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon product
development programs; |
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difficulty collaborating with patient groups and investigators; |
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failure by our CROs, other third parties, or us to adhere to clinical trial and related regulatory requirements; |
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failure to perform in accordance with the FDA’s Good Clinical Practice, or GCP, requirements, or similar applicable regulatory
guidelines in other countries; |
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failure to perform in accordance with the FDA’s Good Manufacturing Practice, or GMP, requirements, or similar applicable regulatory
guidelines in other countries; |
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the number of patients required for clinical trials of any product candidates may be larger than we anticipate or can financially
support, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials or
fail to return for post-treatment follow-up at a higher rate than we anticipate; |
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delays in having patients complete their participation in a trial or return for post-treatment follow-up; |
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occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; |
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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; |
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changes in the standard of care
or in the regulatory landscape on which a clinical development plan was based, which may require new or additional trials;
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the cost of clinical trials of our product candidates being greater than we anticipate; |
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clinical trials of our product candidates producing negative or inconclusive results, or early results that will not be repeated
in larger or future cohorts, which may result in our deciding, or regulators requiring us, to conduct additional clinical trials or abandon
product development programs; |
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choosing the wrong dosing regimen and/or the wrong drug combination; |
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delays or failure to secure supply agreements with suitable reagent suppliers, or any failures by suppliers to meet our quantity
or quality requirements for necessary reagents; and |
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delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates
for use in clinical trials or the inability to do any of the foregoing. |
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warning letters; |
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clinical trial holds; |
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recalls, product seizures or medical product safety alerts; |
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data lock or order to destroy or not use personal data; |
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restrictions on, or prohibitions against, marketing such products; |
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restrictions on importation of such products; |
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suspension of review or refusal to accept or approve new or pending applications; |
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withdrawal of product approvals; |
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injunctions; |
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civil and criminal penalties and fines; or |
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debarment or other exclusions from government programs. |
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our new target candidates will prove to be inappropriate for treatment of cancer; |
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our new target candidates will prove to be inappropriate targets for therapeutic product candidates; |
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our new target candidates will prove to be inappropriate targets for immunotherapy; |
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we will not succeed in selecting the appropriate tumor type, indication or patient population for the therapeutic
product candidate; |
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we will not succeed in choosing the appropriate mAb for these targets, or the appropriate mAb lead or the
appropriate mAb isotype; |
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we will not succeed in identifying or developing a biomarker or companion diagnostic for our therapeutic
product candidates; |
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we will not succeed in choosing the appropriate drug modality for these targets; |
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our therapeutic product candidates will fail to progress to preclinical studies or clinical trials; |
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our therapeutic product candidates will be found to be therapeutically ineffective; |
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we will not choose or have access to the right drug combination for our therapeutic product candidates;
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we will not select or find the appropriate dosing regimen; |
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our therapeutic product candidates will be found to be toxic or to have other unacceptable side effects or negative consequences;
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our therapeutic product candidates will be inferior, or not show added value, compared to competing products or the standard of care;
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our early-stage development efforts may provoke competition by others; |
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our products covered by our collaborations may face internal competition from our partners’ internal pipeline; |
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we or our collaborators will fail to receive required regulatory approvals; |
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we or our collaborators will fail to manufacture our therapeutic product candidates in the quantity or quality needed for preclinical
studies or clinical trials on a large or commercial scale, on time or in a cost-effective manner or with the drug stability required;
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the discovery of drug targets and the discovery, development or commercialization of our therapeutic product candidates will infringe
third-party intellectual property rights; |
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the development, marketing or sale of our therapeutic product candidates will fail because of our inability or failure to protect
or maintain our own intellectual property rights; |
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once a product is commercially available, there will be little or no demand for it for a number of possible reasons, including lack
of acceptance by the medical community or by patients, lack of or insufficient coverage and payment by third-party payors, inefficient
or insufficient marketing and sales activities or as a result of there being more attractive, less risky or less expensive, products available
for the same use; and |
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the product will be withdrawn from the market, or sales limited due to side effects observed in clinical
practice. |
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not being able to discover new drug targets in this field; |
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our full scope of target discovery capabilities may not be adequate; |
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not having chosen the right therapeutic area; |
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having chosen a therapeutic area with a very high degree of competition; |
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industry interest in this area or in specific classes/families of drug targets within this area of focus would decrease over time;
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having chosen a therapeutic area of great biological complexity and with very high failure rates in product development; |
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not choosing the appropriate drug modality; |
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having insufficient knowledge, expertise, personnel or capabilities in our chosen therapeutic area to identify the right unmet medical
needs, or drug targets, or to timely, properly and efficiently validate the targets and/or select the appropriate mAb for further development
as therapeutic product candidates, or to timely, properly or efficiently further them in development; and |
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the inherent risk of high program failure rate throughout therapeutic development. |
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we may not be able to initiate or continue preclinical and clinical trials of products that are under development; |
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we may experience significant disruption and delay to our clinical supply chain; |
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we may experience significant adverse effect if we are unable to transfer the manufacturing process to a different third-party manufacturer
in a timely and efficient manner; |
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we may need to repeat clinical trials or stop our clinical trials; |
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we may be delayed in submitting regulatory applications, or receiving regulatory approvals, for our product candidates; |
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we may lose the cooperation of our collaborators; |
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we may be required to cease distribution or recall some or all batches of our products; and |
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ultimately, we may not be able to meet commercial demands for our products, if approved. |
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we may be unable to reach mutually agreeable terms and conditions with respect to potential new collaborations; |
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we or our current and/or future collaborators may be unable to comply or fully comply with the obligations under collaboration agreements
to which we are (or will become) a party, and as a result, we may not generate royalties or milestone payments from such agreements, and
our ability to enter into additional agreements may be harmed; |
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our obligations under existing or future collaboration agreements may harm our ability to enter into additional collaboration agreements;
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collaborators generally have significant discretion in electing whether to pursue any of the planned activities and the manner in
which it will be done, including the amount and nature of the resources to be devoted to the development and commercialization of our
product candidates; |
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collaborators generally have significant discretion in terminating the collaborations for scientific, clinical, business or other
reasons; |
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if our current and/or future collaborators breach or terminate an agreement with us, the development and commercialization of our
therapeutic product candidates could be adversely affected because at such time we may not have sufficient financial or other resources
or capabilities or access to the other partner’s data and drug(s) to successfully develop and commercialize these therapeutics on
our own or find other partners or enforce our rights under breached or terminated agreement; |
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our current and/or future collaborators may fail to design and implement or analyze appropriate preclinical and/or clinical trials;
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our current and/or future collaborators may not have access to the drug combination treatment required for an effective treatment;
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our current and/or future collaborators may not be able to identify biomarkers that may be required for further product development
or approval; |
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our current and/or future collaborators may require us changing or adopting the trial design to fit their business priorities, standards
and other objectives; |
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our current and/or future collaborators may fail to manufacture our therapeutic product candidates needed for either clinical trials
or for commercial purposes on a sufficiently large scale, in the required quality and/or in a cost-effective manner; |
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our current and/or future collaborators may fail to develop and market products based on our discoveries due to various development
hurdles or regulatory restrictions; |
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our current and/or future collaborators may fail to develop and market products based on our discoveries prior to the successful
marketing of competing products by others or prior to expiry of the patents protecting such products; |
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changes in a collaborator’s business strategy may negatively affect its willingness or ability to complete its obligations
under its arrangement or to continue with its collaboration with us; |
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our current and/or future collaborators may terminate the program or the agreement and then compete against us in the development
or commercialization of similar therapeutics; |
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our current and/or future collaborators may terminate the program or the agreement due to the competitive threat we may present to
them with similar products; |
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ownership of the intellectual property generated under or incorporated in our current and/or future collaborations may be disputed;
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our ownership of rights in any intellectual property or products that may result from our current and/or future collaborations may
depend on additional investment of resources that we may not be able or willing to make; |
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current and/or future collaborators may pursue alternative products or technologies, by internally developing them or by preferring
those of our competitors; |
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disagreements between us and our current and/or future collaborators may lead to delays in, or termination of, the collaboration;
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our current and/or future collaborators may fail to develop or commercialize successfully any products based on our novel drug targets
or therapeutic product candidates to which they have obtained rights from us; |
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we or our current and/or future collaborators may not choose the right drug combinations for our therapeutic product; |
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our current and/or future collaborations may face internal competition by their internal pipelines; |
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prospective collaborators may hesitate to pursue collaborations on novel target candidates that lack robust validation to serve as
a basis for the development of therapeutics; and |
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our current and/or future collaborators may be acquired by, acquire, or merge with, another company, and the resulting entity may
have different priorities or competitive products to the collaboration product being developed previously by these collaborators.
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much greater financial, technical and human resources than we have at every stage of the discovery, development, manufacture and
commercialization process; |
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more extensive experience in computational discovery, preclinical testing, conducting clinical trials, obtaining regulatory approvals,
and in manufacturing and marketing therapeutics; |
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more extensive experience in oncology and immuno-oncology and in the fields of mAb therapeutics; |
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accessibility to enhanced technologies that may result in better products; |
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access to and experience in the development of therapeutic modalities that are competitive to mAb therapeutics; |
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more extensive experience in oncology and immuno-oncology and in the field of target discovery; |
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more extensive experience in the research and development of biological or genetic markers to determine response of or responders
to therapeutic agents or for patient selection; |
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greater accessibility to data and proprietary data from patients; |
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access to internally developed, proprietary technologies for the discovery, research, development, or manufacturing of therapeutic
agents; |
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greater resources and means to compete with us on target discovery and as well as in acquiring or generating technologies complementary
to, or necessary for, our programs as well as in recruiting and retaining qualified scientific and management personnel and establishing
clinical trial sites; |
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products that have been approved or are in late stages of development and in many cases, PD-1 or PDL-1 inhibitors that are serving
or will be serving as the backbone of cancer immunotherapy; |
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reduced reliance on collaborations or partnerships with third parties in order to further develop and commercialize competitive therapeutic
products; and |
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collaborative arrangements in our target markets with leading companies and research institutions. |
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the patenting of inventions involves complex legal issues relating to intellectual property laws, prosecution and enforcement of
patent claims across a number or patent jurisdictions, many of which have not yet been settled; |
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legislative and judicial changes, or changes in the examination guidelines of governmental patent offices may negatively affect our
ability to obtain patent claims to certain biological molecules- and/or use of certain therapeutic targets; |
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if we are not the first to file a patent application on one of our inventions, we may not be able to obtain a patent on our invention,
and may not be able to protect one or more of our therapeutic product candidates; |
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competition from other biotechnology and pharmaceutical companies who have already sought patent protection relating to proteins
and protein based products, as well as therapeutic antibodies or other modulators specifically binding these proteins, and their utility
based discoveries that we may intend to develop and commercialize; such prior patents may negatively affect our ability to obtain patent
claims on antibodies or certain proteins or other biologic modulators, or may hinder our ability to obtain sufficiently broad patent claims
for our inventions, and/or may limit our freedom to operate; |
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publication of data on gene products or proteins by non-commercial and commercial entities may hinder our ability to obtain sufficiently
broad patent claims for our inventions; |
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even if we succeed in obtaining patent protection, such protection may not be sufficient to prevent third parties from circumventing
our patent claims; |
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even if we succeed in obtaining patent protection, we may face freedom to operate issues; |
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even if we succeed in obtaining patent claims protecting our inventions and product candidates, our patents could be subject to challenge
and litigation by our competitors, and may be partially or wholly invalidated as a result of such legal/judicial challenges and in connection
with such challenges; |
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significant costs that may need to be incurred in registering and filing patents; |
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insufficient data to support our claims and/or may support others in strengthening their patents; |
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seeking patent protection at an early stage may prevent us from providing comprehensive data supporting the patent claims and may
prevent allowance of certain patent claims or limit the scope of patent claim coverage; |
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we may not be able to supply sufficient data to support our claims, within the legally prescribed time following our initial filing
in order to support our patent claims and this may harm our ability to get appropriate patent protection or protection at all; |
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our claims may be too broad and not have sufficient enablement, in which case such claims might be rejected by patent offices or
invalidated in court; and |
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we might fail to demonstrate a unique technical feature for our antibodies as compared to existing prior art, in which case our claims
might be rejected by the respective patent office, requiring superiority over prior art. |
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forgo the research, development and commercialization of certain drug target candidates and product candidates that we discover,
notwithstanding their promising scientific and commercial merits; or |
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invest substantial management and financial resources to either challenge or in-license such third-party intellectual property, and
we cannot be sure that we will succeed in doing so on commercially reasonable terms, if at all. |
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issued patents that we may own or that we license may be held invalid or unenforceable, as a result of legal challenges; |
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others may be able to make products
that are similar to our products but that are not covered by the claims of our patent rights; |
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we or our licensors or any future strategic partners might not
have been the first to file patent applications on the inventions covered by the issued patent or pending patent application that we own
or have exclusively licensed; |
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others may independently develop similar or alternative technologies
without infringing our intellectual property rights; |
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it is possible that our pending patent applications will not
lead to issued patents; |
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issued patents that we may own or that we license may not provide
us with any competitive advantage; |
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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; |
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third parties performing manufacturing or testing for us using
our product candidates or technologies could use the intellectual property of others without obtaining a proper license; |
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we may not develop additional proprietary technologies that are
patentable; and |
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the patents of others may have an adverse effect on our business. |
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hostilities involving Israel; |
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a full or partial mobilization of the reserve forces of the Israeli army; |
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the interruption or curtailment of trade between Israel and its present trading partners; and |
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a downturn in the economic, political, social or financial condition in Israel. |
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the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q and current reports on Form
8-K; |
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the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act, including extensive disclosure of compensation paid or payable to certain of our highly compensated executives
as well as disclosure of the compensation determination process; |
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the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and
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the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and establishing
insider liability for profits realized from any “short-swing” trading transaction (a purchase and sale, or sale and purchase,
of the issuer’s equity securities within less than six months). |
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global or regional macroeconomic developments; |
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the spread, and resulting actions, of COVID-19 or other global or regional health pandemics or epidemics; |
• |
clinical data disclosed by us or our competitors; |
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massive sell of our shares by a large shareholder; |
• |
our success (or lack thereof) in entering into collaboration agreements and achieving certain research and developmental milestones
thereunder; |
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our need to raise additional capital and our success or failure in doing so; |
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our ability (or lack thereof) to disclose key discoveries or developments due to competitive concerns or need to secure our intellectual
property position; |
• |
achievement or denial of regulatory approvals by us or our competitors; |
• |
announcements of technological innovations or new commercial products by our competitors; |
• |
trends in share price of companies in our field or industry; |
• |
announcement of corporate transactions, merger and acquisition activities or other similar events by companies
in our field or industry; |
• |
changes and developments effecting our field or industry; |
• |
developments concerning material proprietary rights, including material patents; |
• |
developments concerning our existing or new collaborations; |
• |
regulatory developments in the United States, Israel and other countries; |
• |
changes in the structure of healthcare payment systems; |
• |
delay or failure by us or our partners in initiating, completing or analyzing preclinical or clinical trials or the unsatisfactory
design or results of such trials; |
• |
period to period fluctuations in our results of operations; |
• |
changes in estimates by securities analysts; |
• |
changes in senior management or the board of directors or changes in the size or structure of the company; |
• |
our ability (or lack thereof) to disclose the commercial terms of, or progress under, our collaborations; |
• |
our ability (or lack thereof) to show and accurately predict revenues; and |
• |
transactions with respect to our ordinary shares by insiders or institutional investors. |
• |
We discover novel drug targets and biological pathways with the potential to address the unmet need of patients non-responsive to
current cancer immunotherapies; |
• |
We integrate our cutting-edge computational capabilities with our ground-breaking immuno-oncology research and drug development expertise
to inform our target discovery and drug development process; and |
• |
We identify drug combinations and design biomarker strategy for potential future patient selection. |
• |
COM701
is our lead immuno-oncology pipeline program. COM701 is a humanized antibody
that binds with high affinity to PVRIG, a novel immune checkpoint target candidate discovered by us that blocks the interaction with its
ligand, PVRL2. Our data suggests that the PVRIG pathway is parallel and complementary to TIGIT, an immune checkpoint discovered computationally
by us in 2009. These two pathways intersect with DNAM-1, a costimulatory receptor on T cells and NK cells. The PD-1 pathway also intersects
with DNAM-1. In certain tumors, the blockade of both TIGIT and PVRIG may be required to stimulate an antitumor immune response, with or
without additional PD-1 pathway blockade. Phase 1 trials for COM701 were initiated in September 2018. |
• |
COM902
is a high affinity, fully human antibody developed by us, targeting TIGIT, an immune checkpoint. COM902 blocks the interaction of TIGIT
with PVR, its ligand. Our preclinical data suggests that in certain tumor indications the blockage of both TIGIT and PVRIG, two coinhibitory
arms of the DNAM-1 axis, may be required to stimulate an anti-tumor immune response with or without the blockade of the PD-1 pathway.
Phase 1 trials for COM902 were initiated in March 2020. |
• |
Rilvegostomig is
a novel PD-1/TIGIT bispecific antibody with a TIGIT component that is derived from COM902 and is being developed by AstraZeneca pursuant
to an exclusive license agreement with AstraZeneca. AstraZeneca initiated its Phase 2 trial in patients with advanced or metastatic non-small
cell lung cancer in September 2022. In February 2023, AstraZeneca announced that it plans to initiate a Phase 3 trial for rilvegostomig
and that expanded Phase 2 for rilvegostomig is in development. |
• |
COM701 - a therapeutic antibody targeting PVRIG |
• |
COM701 in combination with nivolumab induced preliminary anti-tumor activity and TME immune-modulation in patients with MSS-CRC typically
not responsive to approved checkpoint inhibitors |
• |
PVRIG has a unique dominant expression on early differentiated T like stem cells (Tscm) and its ligand, PVRL2, is expressed on dendritic
cells (DCs) |
• |
Spatial transcriptomic analysis showed that Tscm and DCs preferentially localize to Tertiary Lymphoid Structures (TLS) regions while
exhausted T cells localize to the tumor |
• |
PVRIG is dominantly expressed on CD8+ T cells in TLS region |
• |
PVRIG blockade may enhance Tscm activation by DCs in lymph-nodes and TLS, a mechanism which potentially could lead to increased T
cell expansion and infiltration into cold tumors |
• |
COM701+ nivolumab combination is well tolerated with a favorable safety profile |
• |
ORR 2/22 (9%) higher than ORR (1-2%) reported for standard of care - regorafenib or TAS-102 |
• |
Encouraging preliminary antitumor activity in the subset of MSS-CRC patients with liver metastases, ORR 2/17 (12%), compared to 0%
ORR historically for other immunotherapies in a U.S. patient population |
• |
Translational data demonstrated potent TME immune activation, in the majority of patients based on 13 paired biopsies, most notable
in responders and consistent with COM701 mechanism of action. Such modulation is not typical of checkpoint inhibitors in cold indications
|
• |
In 20 patients who had exhausted all standard therapies, with a median number of 6 prior therapies, the dual combination demonstrated:
|
• |
Encouraging overall response rate of 10%, with 2 partial responses and 1 ongoing at the data cut-off date |
• |
Disease control rate of 45% (2 confirmed partial responses, 7 stable disease) |
• |
Translational assessment of peripheral blood, showed a pharmacodynamic activation of the immune system |
• |
One patient with a partial response supported by increased infiltration of CD8 cells into the tumor microenvironment, had high grade
serous adenocarcinoma, 7 prior lines of treatment including best response of progressive disease on the combination of nivolumab and lucitanib
(an investigational agent) |
• |
Most frequent treatment related adverse events grade 1/2, no grade 4/5 adverse events |
• |
65% of the patients had high-grade serous adenocarcinoma, including the two responders |
• |
In 20 patients who had exhausted all standard therapies, with a median number of 4 prior therapies, the triple combination demonstrated:
|
• |
Encouraging overall response rate of 20%, with 4 confirmed partial responses, out of which 3 are responding for at least 9 months.
All 4 responders are still on study treatment at the data cut-off date, therefore median duration of response has not been reached
|
• |
Disease control rate of 45% (4 confirmed partial responses, 5 stable disease) |
• |
Low pre-treatment PD-L1 expression in 2 of the responders (CPS <1 and 3), analysis of the other responders is still ongoing
|
• |
Translational assessment of peripheral blood, including profiling of cytokines and circulating immune cells, showed a pharmacodynamic
activation of the immune system |
• |
Most frequent treatment related adverse events grade 1/2, no grade 4/5 treatment related adverse events |
• |
55% of the patients had high-grade serous adenocarcinoma, including three of the responders |
• |
COM902 - a therapeutic antibody targeting TIGIT |
• |
Rilvegostomig
- a therapeutic PD-1/TIGIT bi-specific antibody with a TIGIT component that is derived from our COM902 |
• |
Bapotulimab (formerly known as BAY1905254) – a therapeutic antibody targeting
CGEN-15001T/ILDR2 |
• |
completion of preclinical laboratory tests and animal studies in compliance with the FDA’s GLP or other applicable regulations;
|
• |
submission to the FDA of an IND, which must become effective before human clinical trials may begin; |
• |
performance of adequate and well-controlled human clinical trials in accordance with GCPs to establish the safety and efficacy of
the product for its intended use; |
• |
submission of annual reports to regulatory authorities; |
• |
submission to the FDA of a biologics license application, or BLA; |
• |
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug or biologic is produced
to assess compliance with current Good Manufacturing Practice, or cGMP, to assure that the facilities, methods and controls are adequate
to preserve the product’s identity, strength, quality and purity; and |
• |
FDA review and approval of the BLA. |
• |
Phase 1: The product candidate is initially introduced into healthy
human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In the case of some
products, usually for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer
to healthy volunteers, the initial human testing may be conducted in patients. |
• |
Phase 2: Involves studies in a limited patient population to identify
possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted
diseases and to determine dosage tolerance and optimal dosage. |
• |
Phase 3: Involves studies undertaken to further evaluate dosage,
clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These
studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling and
approval. |
• |
cash at hand; and |
• |
proceeds from AstraZeneca in connection with its 2022 milestone payment. |
Payments due by period
(US$ in thousands)
|
||||||||||||||||||||
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
||||||||||||||||
Operating Lease Obligations(1)
|
2,091 |
699 |
1,278 |
114 |
- |
|||||||||||||||
Accrued Severance Pay, net(2)
|
471 |
- |
- |
- |
471 |
|||||||||||||||
Total |
2,562 |
699 |
1,278 |
114 |
471 |
Name |
Age |
Positions | ||
Paul Sekhri(3)
|
64 |
Chairman of the Board of Directors (Chairman of the Nomination and Corporate Governance Committee)
| ||
Anat Cohen-Dayag, Ph.D. |
56 |
President and Chief Executive Officer, Director | ||
Mathias Hukkelhoven, Ph.D. |
69 |
Director | ||
Gilead Halevy(2)
|
56 |
Director (Chairman of the Audit Committee) | ||
Kinneret Livnat Savitzky, Ph.D.(1)(3)
|
55 |
Director | ||
Eran Perry(1)(2)
|
52 |
Director | ||
Sanford (Sandy) Zweifach(1)(2)(3)
|
66 |
Director (Chairman of the Compensation Committee) | ||
Alberto Sessa |
60 |
Chief Financial Officer | ||
Henry Adewoye, MD |
58 |
Senior Vice President and Chief Medical Officer | ||
Oliver Froescheis, Ph.D.(4)
|
57 |
Senior Vice President, Corporate and Business Development | ||
Zurit Levine, Ph.D. |
55 |
Senior Vice President, Technology Innovation | ||
Yaron Turpaz, Ph.D. |
52 |
Senior Vice President and Senior Advisor, Computational Discovery | ||
Eran Ophir, Ph.D. |
45 |
Senior Vice President, Research and Drug Discovery | ||
Pierre Ferre, Ph.D. |
46 |
Vice President, Preclinical Development |
(1) |
Member of our Compensation Committee |
(2) |
Member of our Audit Committee |
(3) |
Member of our Nomination and Corporate Governance Committee |
(4) |
Dr. Oliver Froescheis retired from his position on February 10, 2023. |
Information Regarding the Covered Office Holders |
Compensation for Services(2)
|
|||||||||||||||
Name and Principal Position(1)
|
Base Salary ($) |
Benefits and
Perquisites ($)(3)
|
Stock-Based
Compensation ($)(4)
|
Total ($) |
||||||||||||
Dr. Anat Cohen-Dayag
President & Chief Executive Officer |
479,073 |
317,446 |
567,035 |
1,363,554 |
||||||||||||
Dr. Henry Adewoye
Senior Vice President and Chief Medical Officer |
420,833 |
184,458 |
306,884 |
912,175 |
||||||||||||
Dr. Oliver Froescheis(5)
Senior Vice President, Corporate and Business Development |
382,500 |
560 |
263,290 |
646,350 |
||||||||||||
Dr. Pierre Ferre
Vice President, Preclinical Development |
205,441 |
209,659 |
108,945 |
524,045 |
||||||||||||
Dr. Zurit Levine
Senior VP, Technology Innovations |
205,381 |
140,316 |
178,097 |
523,794 |
1) |
All Covered Office Holders listed in the table were full-time officers of the Company during their term of service in 2022.
|
2) |
Cash compensation amounts denominated in currencies other than the dollar were converted into dollars at an exchange rate of NIS
3.3596= $1.00, which reflects the average conversion rate for 2022, or the Representative Rate. |
3) |
Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites
may include, to the extent applicable to the respective Covered Office Holder, bonuses, payments, contributions and/or allocations for
savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurance (e.g., life, disability,
accident), phone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent
with the Company’s policies. |
4) |
Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2022,
with respect to options to purchase our ordinary shares granted to our Covered Office Holders. Assumptions and key variables used in the
calculation of such amounts are discussed in Note 2m to our 2022 consolidated financial statements set forth elsewhere in this report.
|
5) |
Dr. Oliver Froescheis retired from his position on February 10, 2023. |
(a) |
Audit Committee - $2,500 for a member, or $5,000 for the chairperson; |
(b) |
Compensation Committee - $2,000 for a member, or $4,000 for the chairperson; and |
(c) |
Nomination and Governance Committee - $1,000 for a member, or $3,000 for the chairperson. |
• |
a breach of duty of care to us or to another person; |
• |
a breach of duty of loyalty to us, provided that the Office Holder acted in good faith and had reasonable grounds to assume that
such act would not prejudice our interests; |
• |
monetary liabilities or obligations imposed upon him or her in favor of another person; |
• |
A payment which the Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Israel
Securities Law, 5728-1968, or the Securities Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters
H’3, H’4 or I’1 of the Securities Law, including reasonable litigation expenses, including attorney’s fees, or
in connection with Article D of Chapter Four of Part Nine of the Companies Law; and |
• |
Expenses incurred by the Office Holder in connection with a proceeding under Chapter G’1, of the Israel Restrictive Trade Practices
Law, 5748-1988, or Restrictive Trade Law, including reasonable litigation expenses, including attorney’s fees. |
• |
For any monetary liabilities or obligations imposed on our Office Holder in favor of another person pursuant to a court judgment,
including a compromise judgment or an arbitrator’s decision approved by a court; |
• |
For any payments which our Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the
Securities Law and expenses the Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1
of the Securities Law, including reasonable litigation expenses, including attorney’s fees, or in connection with Article D of Chapter
Four of Part Nine of the Companies Law; |
• |
For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder in consequence of an investigation
or proceeding instituted against the Office Holder by an authority that is authorized to conduct such investigation or proceeding, and
which was concluded without filing of an indictment against the Office Holder and without imposing on the Office Holder a financial obligation
in lieu of criminal proceedings, or which was concluded without filing of an indictment against the Office Holder but with imposing on
such Office Holder a financial obligation in lieu of criminal proceedings in respect of an offense that does not require proof of criminal
intent or in connection with a financial sanction; For the purposes hereof: (i) “a proceeding that concluded without filing an indictment
in a matter in respect of which an investigation was conducted”; and (ii) “financial obligation in lieu of a criminal proceeding”,
shall have the meanings specified in Section 260(a)(1A) of the Companies Law; |
• |
For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder or which the Office Holder is
ordered to pay by a court, in a proceeding filed against the Office Holder by the Company or on its behalf or by another person, or in
a criminal action of which the Office Holder is acquitted, or in a criminal action in which the Office Holder is convicted of an offense
that does not require proof of criminal intent; |
• |
For expenses incurred by our Office Holder in connection with a proceeding under Chapter G’1, of the Restrictive Trade Law,
including reasonable litigation expenses, including attorney’s fees; and |
• |
For any other liability, obligation or expense indemnifiable or which our Officer Holders may from time to time be indemnifiable
by law. |
• |
a breach by the Office Holder of his or her duty of loyalty, except that the company may enter into an insurance contract or indemnify
an Office Holder if the Office Holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
• |
a breach by the Office Holder of his or her duty of care if such breach was intentional or reckless, but unless such breach was solely
negligent; |
• |
any act or omission done with the intent to derive an illegal personal benefit; or |
• |
any fine, civil fine, financial sanction or monetary settlement in lieu of criminal proceedings imposed on such Office Holder.
|
Board Diversity Matrix as of February 15, 2023 | ||||
Total Number of Directors |
7 | |||
Female |
Male |
Non-Binary |
Did Not Disclose Gender | |
Part I: Gender Identity |
||||
Directors |
2 |
4 |
1 | |
Part II: Demographic Background |
||||
African American or Black |
||||
Alaskan Native or Native American |
||||
Asian |
||||
Hispanic or Latinx |
||||
Native Hawaiian or Pacific Islander |
||||
White |
2 |
3 |
||
Two or More Races or Ethnicities |
1 |
|||
LGBTQ+ |
1 | |||
Did Not Disclose Demographic Background |
1 |
• |
information regarding the business advisability of a given action brought for the Office Holder’s approval or performed by
the Office Holder by virtue of his or her position; and |
• |
all other information of importance pertaining to the aforesaid actions. |
• |
refrain from any act involving a conflict of interest between the fulfillment of his or her position in the company and the fulfillment
of any other position or his or her personal affairs; |
• |
refrain from any act that is competitive with the business of the company; |
• |
refrain from exploiting any business opportunity of the company with the aim of obtaining a personal gain for himself or herself
or for others; and |
• |
disclose to the company all relevant information and provide it with all documents relating to the company’s affairs which
the Office Holder obtained due to his or her position in the company. |
December 31, 2022 |
December 31, 2021 |
December 31, 2020 | |
Research & Development |
46 |
51 |
45 |
Administration, Accounting and Operations |
21 |
21 |
21 |
Marketing and Business Development |
2 |
1 |
2 |
Total |
69 |
73 |
68 |
Beneficial Owner |
Amount
Owned |
Percent of
Class |
||||||
Anat Cohen-Dayag(1)
|
1,029,872 |
1.2 |
% | |||||
All directors and executive officers as
a group (14 persons)(2) |
2,996,117 |
3.3 |
% |
(1) |
Includes (i) 56,122 shares held by Dr. Cohen-Dayag, and (ii) 973,750 shares subject to options that are exercisable within 60 days
after February 9, 2023, with a weighted average exercise price of $6.18 per share, and which expire between September 2023 and March 2032.
|
(2) |
Includes (i) a total of 76,259 ordinary shares held by directors and executive officers, and (ii) a total of 2,919,858 shares subject
to options that are beneficially owned by directors and executive officers that are exercisable within 60 days after February 9, 2023,
with a weighted average exercise price of $5.43 per share and which expire between July 2023 and March 2032. |
Reporting Beneficial Owner |
Number of Ordinary Shares
Beneficially Owned |
Percent of Ordinary Shares
Beneficially Owned(1)
|
||||||
Bristol-Myers
Squibb Company(2) |
4,757,058 |
5.5 |
% |
(1) |
Based upon 86,624,643 ordinary shares issued and outstanding as of February 15, 2023. |
(2) |
Based upon information provided by the shareholder in its Form 13G filed with the SEC on November 19, 2021.
With respect to the ordinary shares reported in its Schedule 13G, Bristol-Myers Squibb Company, indicated as having (i) sole voting power
and dispositive power with respect to 4,757,058 ordinary shares, and (ii) no shared voting power nor shared dispositive power with respect
to ordinary shares. Furthermore, in such filing BMS indicated aggregate beneficial ownership of 4,757,058 ordinary shares. The address
of the principal business office of BMS is 430 East 29th Street, New York, NY 10016. |
• |
at least 75% of its gross income is passive income, or |
• |
at least 50% of the value (determined on the basis of a quarterly weighted average) of its total assets for the taxable year is attributable
to assets that produce or are held for the production of passive income. |
2022
|
2021
|
|||||||
Audit Fees |
$ |
163,000 |
$ |
133,000 |
||||
Audit Related Fees |
$ |
10,000 |
$ |
25,000 |
||||
Tax Fees |
$ |
4,500 |
$ |
4,500 |
||||
All Other Fees |
$ |
2,500 |
$ |
2,500 |
||||
Total |
$ |
180,000 |
$ |
165,000 |
Exhibit
Number |
Description |
101* |
The following financial information from Compugen Ltd.’s Annual Report on Form
20-F for the year ended December 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Statements
of Operations for the years ended December 31, 2022, 2021 and 2020; (ii) Consolidated Balance Sheets as of December 31, 2022 and 2021;
(iii) Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2022, 2021 and 2020; (iv) Consolidated
Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020; and (v) Notes to Consolidated Financial Statements.
|
101.INS |
Inline XBRL Instance Document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
101.CAL |
Inline XBRL Taxonomy Calculation Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Label Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
104 |
Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101). |
* |
Filed herewith. |
@ |
Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions. |
# |
Portions of this exhibit (indicated by asterisks therein) have been omitted as these portions are both not material and confidential.
|
|
COMPUGEN LTD.
Signature:
/s/ Dr. Anat Cohen-Dayag
Name: Dr. Anat Cohen-Dayag
Title: President and Chief Executive Officer,
Director
Date: August 23, 2023 |
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
U.S. DOLLARS IN THOUSANDS
INDEX
Page |
|
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID:
|
F-2 - F-4 |
F-5 - F-6 |
|
|
|
F-7 |
|
|
|
F-8 |
|
|
|
F-9 - F-10 |
|
|
|
F-11 - F-38 |
- - - - - - - - - - -
|
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Compugen Ltd. and its subsidiary (the “Company“) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and related notes (collectively referred to as the “consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 28, 2023, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F - 2
Accrued pre-clinical and clinical trial expenses |
||
Description of the matter |
As discussed in Note 2(k) to the consolidated financial statements, the Company records costs for pre-clinical and clinical trial activities based upon estimates of costs incurred through the balance sheet date that have yet to be invoiced by the contract research organizations and other vendors.
Auditing the Company’s accruals for pre-clinical and clinical trial activities is challenging due to the fact that information necessary to estimate the accruals for the services that have been received during the reporting period is accumulated from multiple sources such as Company’s personnel that oversee the pre-clinical and clinical trial activities, information from service providers and terms and conditions included in the contracts with the service providers. In addition, in certain circumstances, the determination of the nature and level of services that have been received during the reporting period requires judgment because the timing and pattern of vendor invoicing does not correspond to the level of services provided and there may be delays in invoicing from pre-clinical and clinical study sites and other vendors. |
|
How we addressed the matter in our audit |
We obtained an understanding of, evaluated the design and tested the operating effectiveness of internal controls that addressed the identified risks related to the Company’s process for recording accrued pre-clinical and clinical trial expenses.
To test the pre-clinical and clinical trial accruals, our audit procedures included, among others, reviewing a sample of agreements with the service providers to corroborate key terms and conditions and testing the accuracy and completeness of the underlying data used in the accrual computations. We also evaluated management’s estimates of the progress of a sample of pre-clinical and clinical trial activities by making direct inquiries of the Company’s personnel that oversee the pre-clinical and clinical trial activities and obtaining information directly from certain service providers which indicated the progress of pre-clinical and clinical trial completed through the balance sheet date and compared that to the Company’s accrual computations. To evaluate the completeness of the accruals, we also examined subsequent invoices from the service providers and cash disbursements to the service providers, to the extent such invoices were received, or payments were made prior to the date that the consolidated financial statements were issued. |
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
We have served as the Company’s auditor since 2002
Tel-Aviv, Israel
February 28, 2023
F - 3
|
Kost Forer Gabbay & Kasierer 144 Menachem Begin Road, Building A, Tel-Aviv 6492102, Israel |
Tel: +972-3-6232525 Fax: +972-3-5622555 ey.com |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on Internal Control over Financial Reporting
We have audited Compugen Ltd. and its subsidiary’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Compugen Ltd. and its subsidiary (the “Company“) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021 and the related consolidated statements of comprehensive loss, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A Member of Ernst & Young Global
February 28, 2023
F - 4
COMPUGEN LTD. AND ITS SUBSIDIARY
December 31,
|
|||||||||||
Note
|
2022
|
2021
|
|||||||||
ASSETS
|
|||||||||||
CURRENT ASSETS:
|
|||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
|||||||
Restricted cash
|
|
|
|||||||||
Short-term bank deposits
|
|
|
|||||||||
Other accounts receivable and prepaid expenses
|
3
|
|
|
||||||||
Total current assets
|
|
|
|||||||||
NON-CURRENT ASSETS:
|
|||||||||||
Long-term prepaid expenses
|
|
|
|||||||||
Severance pay fund
|
|
|
|||||||||
Operating lease right of use asset
|
4
|
|
|
||||||||
Property and equipment, net
|
5
|
|
|
||||||||
Total non- current assets
|
|
|
|||||||||
Total assets
|
$
|
|
$
|
|
F - 5
COMPUGEN LTD. AND ITS SUBSIDIARY
December 31,
|
|||||||||||
Note
|
2022
|
2021
|
|||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||||||||||
CURRENT LIABILITIES:
|
|||||||||||
Trade payables
|
$
|
|
$
|
|
|||||||
Short-term deferred participation in R&D expenses
|
|
|
|||||||||
Current maturity of operating lease liability
|
4
|
|
|
||||||||
Other accounts payable and accrued expenses
|
6
|
|
|
||||||||
Total current liabilities
|
|
|
|||||||||
NON- CURRENT LIABILITIES:
|
|||||||||||
Long-term deferred participation in R&D expenses
|
|
|
|||||||||
Long-term operating lease liability
|
|
|
|||||||||
Accrued severance pay
|
|
|
|||||||||
Total non-current liabilities
|
|
|
|||||||||
COMMITMENTS AND CONTINGENT LIABILITIES
|
7
|
||||||||||
SHAREHOLDERS’ EQUITY:
|
8
|
||||||||||
Share capital:
|
|||||||||||
Ordinary shares of NIS
|
|
|
|||||||||
Additional paid-in capital
|
|
|
|||||||||
Accumulated deficit
|
(
|
)
|
(
|
)
|
|||||||
Total shareholders’ equity
|
|
|
|||||||||
Total liabilities and shareholders’ equity
|
$
|
|
$
|
|
F - 6
Year ended December 31,
|
|||||||||||||||
Note
|
2022
|
2021
|
2020
|
||||||||||||
Revenue
|
$
|
|
$
|
|
$
|
|
|||||||||
Cost of revenue
|
|
|
|
||||||||||||
Gross profit
|
|
|
|
||||||||||||
Operating expenses:
|
|||||||||||||||
Research and development expenses, net
|
|
|
|
||||||||||||
Marketing and business development expenses
|
|
|
|
||||||||||||
General and administrative expenses
|
|
|
|
||||||||||||
Total operating expenses
|
|
|
|
||||||||||||
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Financial and other income, net
|
11
|
|
|
|
|||||||||||
Loss before taxes on income
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Taxes on income
|
9
|
|
|
|
|||||||||||
Net loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
Basic net loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||
Diluted net loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||
Total comprehensive loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
||||||
Weighted average number of ordinary shares used in computing basic net loss per share
|
|
|
|
||||||||||||
Weighted average number of ordinary shares used in computing diluted net loss per share
|
|
|
|
F - 7
COMPUGEN LTD. AND ITS SUBSIDIARY
Ordinary shares
|
Additional paid-in
|
Accumulated
|
Total shareholders’
|
|||||||||||||||||
Number
|
Amount
|
capital
|
deficit
|
equity
|
||||||||||||||||
Balance as of January 1, 2020
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||
Options exercised
|
|
|
|
-
|
|
|||||||||||||||
Warrants exercised
|
|
|
|
-
|
|
|||||||||||||||
Issuance of shares, net
|
|
|
|
-
|
|
|||||||||||||||
Stock-based compensation relating to options issued to employees, directors and non-employees
|
-
|
-
|
|
-
|
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance as of December 31, 2020
|
|
|
|
(
|
)
|
|
||||||||||||||
Exercise of options and ESPP shares
|
|
|
|
-
|
|
|||||||||||||||
Warrants exercised
|
|
(
|
)
|
|
-
|
|
||||||||||||||
Issuance of shares, net
|
|
|
|
-
|
|
|||||||||||||||
Stock-based compensation issued to employees, directors and non-employees
|
-
|
-
|
|
-
|
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(
|
)
|
(
|
)
|
|||||||||||||
Balance as of December 31, 2021
|
|
|
|
(
|
)
|
|
||||||||||||||
Exercise of options and ESPP shares
|
|
|
|
|
||||||||||||||||
Stock-based compensation issued to employees, directors and non-employees
|
|
|
||||||||||||||||||
Net loss
|
(
|
)
|
(
|
)
|
||||||||||||||||
Balance as of December 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
F - 8
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Adjustments required to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Stock-based compensation
|
|
|
|
|||||||||
Depreciation
|
|
|
|
|||||||||
Increase (decrease) in severance pay, net
|
(
|
)
|
(
|
)
|
|
|||||||
Loss (gain) from property and equipment sales and disposals
|
|
(
|
)
|
(
|
)
|
|||||||
Decrease (increase) in interest receivables from short-term bank deposits
|
(
|
)
|
|
(
|
)
|
|||||||
Decrease (increase) in trade receivables
|
|
|
(
|
)
|
||||||||
Decrease (increase) in other accounts receivable and prepaid expenses
|
|
(
|
)
|
(
|
)
|
|||||||
Decrease (increase) in long-term prepaid expenses
|
|
(
|
)
|
(
|
)
|
|||||||
Decrease in operating lease right of use asset
|
|
|
|
|||||||||
Increase (decrease) in trade payables and other accounts payable and accrued expenses
|
(
|
)
|
|
|
||||||||
Increase (decrease) in deferred participation in R&D expenses
|
(
|
)
|
|
(
|
)
|
|||||||
Decrease in operating lease liability
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Cash flows from investing activities:
|
||||||||||||
Proceeds from maturity of short-term bank deposits
|
|
|
|
|||||||||
Investment in short-term bank deposits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Costs of disposal of property and equipment
|
(
|
)
|
|
|
||||||||
Proceeds from sale of property and equipment
|
|
|
|
|||||||||
Net cash provided by (used in) investing activities
|
|
|
(
|
)
|
F - 9
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from issuance of ordinary shares, net
|
|
|
|
|||||||||
Proceeds from exercise of warrants
|
|
|
|
|||||||||
Proceeds from exercise of stock-based awards
|
|
|
|
|||||||||
Net cash provided by financing activities
|
|
|
|
|||||||||
Increase (decrease) in cash, cash equivalents and restricted cash
|
|
|
(
|
)
|
||||||||
Cash, cash equivalents and restricted cash at the beginning of the year
|
|
|
|
|||||||||
Cash and cash equivalents and restricted cash at the end of the year
|
$
|
|
$
|
|
$
|
|
||||||
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||||||
Purchase of property and equipment
|
$
|
|
$
|
|
$
|
|
||||||
Right-of-use asset obtained in exchange for operating lease liability
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||
Cash paid (received) during the year for:
|
||||||||||||
Interest payments received from short-term bank deposits and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
Reconciliation of cash, cash equivalents and restricted cash:
|
||||||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
Restricted cash
|
|
|
|
|||||||||
Total cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
$
|
|
F - 10
COMPUGEN LTD. AND ITS SUBSIDIARY
U.S. dollars in thousands (except share and per share data)
a. |
Compugen Ltd. (the “Company”) is a clinical-stage therapeutic discovery and development company utilizing its broadly applicable predictive computational discovery capabilities to identify novel drug targets and new biological pathways to develop therapeutics in the field of cancer immunotherapy. Compugen’s innovative immuno-oncology pipeline consists of three clinical stage programs, targeting immune checkpoints Compugen discovered computationally by COM701, COM902 and rilvegostomig. The Company’s lead product candidates, COM701, a potential first-in-class anti-PVRIG antibody, and COM902, a potential best-in-class therapeutic anti-TIGIT antibody are in Phase 1 clinical trials and have been evaluated, for the treatment of solid tumors as a monotherapy and in combination of dual (PVRIG/PD-1, PVRIG/TIGIT) and triple (PVRIG/PD-1/TIGIT) blockade. As part of Phase 1 clinical trials for the Company’s lead product candidates, COM701, the Company evaluated COM701 as a monotherapy and under clinical collaboration with Bristol Myers Squibb Company in combination with nivolumab ± Bristol Myers Squibb investigational anti-TIGIT, BMS-986207. Following the termination of the Company’s collaboration with Bristol Myers Squibb Company, these combination studies are being wound down while the monitoring of patients on study treatment is ongoing. Rilvegostomig, a novel anti PD-1/TIGIT bispecific antibody with a TIGIT specific component that is derived from Compugen’s COM902 antibody, is being developed by AstraZeneca pursuant to an exclusive license agreement between Compugen and AstraZeneca and is in Phase 2 clinical trial in patients with advanced or metastatic non-small cell lung and locally advanced or metastatic gastric cancer. Compugen’s therapeutic pipeline of early-stage immuno-oncology programs consists of programs aiming to address various mechanisms of immune resistance. The Company’s most advanced early-stage program, COM503, is a potential first-in-class, high affinity antibody, which blocks the interaction between IL-18 binding protein and IL-18, thereby releasing the natural IL-18 into the tumor microenvironment to inhibit cancer growth. COM503 is being advanced into IND enabling studies. Compugen’s business model is to selectively enter into collaborations for its novel targets and drug product candidates at various stages of research and development under various revenue-sharing arrangements. Integrating cutting edge computational capabilities with ground-breaking immuno-oncology research and drug development expertise is the Company’s differentiator and has enabled the advancement of three drug targets from computer prediction through successful preclinical studies to the clinic.
|
b. |
The Company is headquartered in Holon, Israel. Its clinical development activities are headed from its United States subsidiary, Compugen USA, Inc, located in San Francisco, CA.
|
c. |
The Company has incurred losses in the amount of $
|
F - 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
d. |
On August 5, 2013, the Company entered into a Research and Development Collaboration and License Agreement (“Bayer Agreement“) with Bayer Pharma AG (“Bayer“) for the research, development, and commercialization of antibody-based therapeutics against two novel, Compugen-discovered immune checkpoint regulators.
|
|
e. |
Effective March 30, 2018, the Company entered into an exclusive license agreement with MedImmune Limited, the global biologics research and development arm of AstraZeneca (“AstraZeneca”) to enable the development of bi-specific and multi-specific immuno-oncology antibody products. Under the terms of the agreement, Compugen provided an exclusive license to AstraZeneca for the development of bi-specific and multi-specific antibody products derived from COM902. AstraZeneca has the right to create multiple products under this license and will be solely responsible for all research, development, and commercial activities under the agreement. Compugen received a $
|
f. |
On October 10, 2018, the Company entered into a Master Clinical Trial Collaboration Agreement (the “Agreement”) with Bristol-Myers Squibb Company (“Bristol-Myers Squibb”) to evaluate the safety and tolerability of Compugen’s COM701 in combination with Bristol-Myers Squibbs’ PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors.
|
F - 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
f. |
(Cont.)
|
|
F - 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
a.Use of estimates:
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
b.Financial statements in U.S. dollars:
The reporting and functional currency of the Company is the U.S. dollar, as the Company’s management believes that the U.S. dollar is the primary currency of the economic environment in which the Company and Compugen USA, Inc. have operated and expect to continue to operate in the foreseeable future.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the consolidated statement of comprehensive loss as financial income or expenses, as appropriate.
c.Basis of consolidation:
The consolidated financial statements include the accounts of the Company and Compugen USA, Inc. Intercompany transactions and balances have been eliminated upon consolidation.
d.Cash equivalents:
Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.
e.Restricted cash:
Restricted cash is held in interest bearing saving accounts which are used as a security for the Company’s Israeli facility leasehold and leased cars fueling bank guarantees and credit card security for Compugen USA, Inc.
F - 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
f.Short-term bank deposits:
Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximates market values.
The short-term bank deposits as of December 31, 2022 and 2021 are in U.S. dollars and bear an annual weighted average interest rate of
g.Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
% |
||
|
||
Computers, software and related equipment |
|
|
Laboratory equipment and office furniture |
|
|
Leasehold improvements |
|
h.Impairment of long-lived assets:
The long-lived assets of the Company and Compugen USA, Inc. are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years 2022, 2021 and 2020, no impairment losses have been identified.
i.Leases:
The Company accounts for its leases according to ASC 842 - Leases (“ASC 842”). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less.
F - 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.Leases (Cont.):
ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured based on the discounted present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate the lease is considered unless it is reasonably certain that the Company will not exercise the option.
j.Revenue recognition:
The Company generates revenues mainly from its collaborative and license agreements. The revenues are derived mainly from upfront license payments, research and development services and contingent payments related to milestone achievements.
The Company recognizes revenue in accordance with ASC 606 – “Revenue from Contracts with Customers”.
As such, the Company analyzes its contracts to assess whether they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps:
•
Identification of the contract, or contracts, with a customer
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, the Company satisfies a performance obligation
F - 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
j.Revenue recognition (Cont.):
At the contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Under ASC 606, the Company determined the license to the IP to be a functional IP that has significant standalone functionality. The Company is not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the IP. Therefore, the license to the IP is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license is transferred to the customer.
Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable consideration is resolved). Therefore, as the milestone payments are not probable, revenue was not recognized in respect to such milestone payments prior to achievement of such milestone.
Sales or usage-based royalties to be received in exchange for licenses of IP are recognized at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales or usage-based royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on future Commercial Sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties.
On December 18, 2020 the first milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $
On September 29, 2021 the second milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $
F - 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
j.Revenue recognition (Cont.):
On November 11, 2022, the third milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $
For additional information regarding revenues, please refer to Note 10 below.
k.Cost of revenues:
Cost of revenues consist of certain royalties and milestones paid or accrued.
l.Research and development expenses, net:
Research and development costs are charged to the statement of comprehensive loss as incurred and are presented net of the amount of any grants the Company receives for research and development in the period in which the grant was received.
As part of the process of preparing the consolidated financial statements, the Company accrues costs for pre-clinical and clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations or other pre-clinical or clinical trial vendors that perform the activities. In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, and amortized as the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
The portion of the Bristol-Myers Squibb $
Amortization of participation in R&D expenses for the years ended December 31, 2022, 2021 and 2020 were $
F - 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
m.Severance pay:
The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and is in large part covered by regular deposits with recognized pension funds, deposits with severance pay funds and purchases of insurance policies. The value of these deposits and policies is recorded as an asset in the Company’s balance sheet. Pursuant to Section 14 of the Israeli Severance Pay Law, for Israeli employees under this section, the Company’s contributions for severance pay have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee.
Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.
Severance expenses for the years ended December 31, 2022, 2021 and 2020 amounted to approximately $
n.Stock-based compensation:
The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, “Compensation - Stock Compensation”, (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company accounts for forfeitures as they occur.
The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards.
The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the most appropriate fair value method for its share-options awards and Employee Stock Purchase Plan (“ESPP”). The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding.
The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
F - 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n.Stock-based compensation (Cont.):
The Company used the following assumptions for options granted to employees, directors and non-employees and ESPP:
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
|
||||||||||||
Employee stock options |
||||||||||||
Volatility |
|
|
|
|||||||||
Risk-free interest rate |
|
|
|
|||||||||
Dividend yield |
|
|
|
|||||||||
Expected life (years) |
|
|
|
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
ESPP |
||||||||||||
Volatility |
|
|
|
|||||||||
Risk-free interest rate |
|
|
|
|||||||||
Dividend yield |
|
|
|
|||||||||
Expected life (years) |
|
|
- |
o.Concentration of credit risks:
Financial instruments that potentially subject the Company and Compugen USA, Inc. to concentration of credit risk consist principally of cash and cash equivalents, restricted cash and short-term bank deposits.
Cash, cash equivalents, restricted cash and short-term bank deposits are invested in major banks in Israel. Generally, these deposits may be redeemed upon demand and bear minimal risk.
p.Basic and diluted loss per share:
Basic loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year. Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Share“.
All outstanding share options and warrants for the years ended December 31, 2022, 2021 and 2020 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. As of December 31, 2022, 2021 and 2020 the average number of shares related to outstanding options and warrants excluded from the calculations of diluted net loss per share were
F - 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q.Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes“, (“ASC 740“) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2022 and 2021, a full valuation allowance was provided by the Company.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10.
r.Fair value of financial instruments:
The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputting that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
F - 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.Fair value of financial instruments (Cont.):
Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The hierarchy is broken down into three levels based on the inputs as follows:
Level 1 - |
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. |
Level 2 - |
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. | |
Level 3 - |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, other accounts receivable and prepaid expenses, trade payable and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments.
s.Recently issued and recently adopted Accounting Standards:
Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial statements.
F - 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 3: - OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Prepaid expenses
|
$
|
|
$
|
|
||||
Government authorities
|
|
|
||||||
Other
|
|
|
||||||
$
|
|
$
|
|
NOTE 4: - LEASES
F - 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
Year ended
|
||||
December 31,
2022
|
||||
Weighted average remaining lease term
|
|
|||
Weighted average discount (annual) rate
|
|
|
December 31,
2022
|
||||
2023
|
$
|
|
||
2024
|
|
|||
2025
|
|
|||
2026
|
|
|||
Total operating lease payments
|
|
|||
Less: imputed interest
|
|
|||
Present value of lease liabilities
|
|
|||
Lease liabilities, current
|
|
|||
Lease liabilities, non- current
|
|
|||
Present value of lease liabilities
|
$
|
|
F - 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5: - PROPERTY AND EQUIPMENT, NET
December 31, |
||||||||
2022 |
2021 |
|||||||
Cost: |
||||||||
|
||||||||
Computers, software and related equipment |
$ |
|
$ |
|
||||
Laboratory equipment and office furniture |
|
|
||||||
Leasehold improvements |
|
|
||||||
|
||||||||
|
|
|||||||
Accumulated depreciation: |
||||||||
|
||||||||
Computers, software and related equipment |
|
|
||||||
Laboratory equipment and office furniture |
|
|
||||||
Leasehold improvements |
|
|
||||||
|
||||||||
|
|
|||||||
|
||||||||
Depreciated cost |
$ |
|
$ |
|
During 2022 and 2021 total cost of $
For the years ended December 31, 2022, 2021 and 2020, depreciation expenses were approximately $
NOTE 6: - OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31,
|
||||||||
2022
|
2021
|
|||||||
Employees and related accruals
|
$
|
|
$
|
|
||||
Accrued expenses
|
|
|
||||||
$
|
|
$
|
|
F - 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7: - COMMITMENTS AND CONTINGENCIES
a.The Company provided bank guarantees in the amount of $
b.Under the Office of the Israel Innovation Authority of the Israeli Ministry of Industry, Trade and Labor, formerly known as the Office of the Chief Scientist, (the “IIA”), the Company is not obligated to repay any amounts received from the IIA if it does not generate any income from the results of the funded research program(s). If income is generated from a funded research program, the Company is committed to pay royalties at a rate of between
As of December 31, 2022, the Company’s aggregate contingent obligations for payments to IIA, based on royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled approximately to $
c.On June 25, 2012 the Company entered into an Antibodies Discovery Collaboration Agreement (the “Antibodies Discovery Agreement”) with a U.S. antibody technology company (“mAb Technology Company”), providing an established source for fully human mAbs. Under the Antibodies Discovery Agreement, the mAb Technology Company will be entitled to certain royalties that could be eliminated, upon payment of certain one-time fees (all payments referred together as “Contingent Fees”). For the years ended December 31, 2022, 2021 and 2020, the Company incurred such Contingent Fees in the amounts of $
d.On
Under the agreement the Advisor was entitled to
The Bayer Agreement was terminated effective February 27, 2023 and no further payments are expected under the May 2012 Agreement
For the years ended December 31, 2022, 2021 and 2020, the Company has not paid and did not accrue payments under this agreement.
F - 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7: - COMMITMENTS AND CONTINGENCIES (Cont.)
e.Effective as of January 5, 2018, the Company entered into a Commercial License Agreement (CLA) with a European cell line development company. Under the agreement the Company is required to pay an annual maintenance fee, certain amounts upon the occurrence of specified milestones events, and
f.Effective as of October 28, 2020, the Company entered into a collaboration agreement with a U.S. antibody discovery and optimization company for generation and optimization of therapeutic antibodies for the Company. Under the agreement the Company is required to pay service fees per services performed and certain amounts upon the occurrence of specified milestones events, and single-digit percent royalties on annual net sales with respect to each product sold that comprises or contains one or more antibodies so generated or optimized. The royalty rate is dependent upon the product type and any third-party contribution. For the years ended December 31, 2022, 2021 and 2020, the Company incurred in the research and development expenses such milestone payment in the amounts of $
NOTE 8: - SHAREHOLDERS’ EQUITY
a.Ordinary shares:
The ordinary shares confer upon their holders the right to attend and vote at general meetings of the shareholders. Subject to the rights of holders of shares with limited or preferred rights which may be issued in the future, the ordinary shares of the Company confer upon the holders thereof equal rights to receive dividends, and to participate in the distribution of the assets of the Company upon its winding-up, in proportion to the amount paid up or credited as paid up on account of the nominal value of the shares held by them respectively and in respect of which such dividends are being paid or such distribution is being made, without regard to any premium paid in excess of the nominal value, if any.
b.Issuance of shares:
On June 14, 2018, the Company entered into securities purchase agreement with certain institutional investors and a placement agency agreement with JMP Securities LLC in connection with a registered direct offering (the “Offering”) of an aggregate of 5,316,457 ordinary shares (the “RD Shares”) of the Company at a purchase price of $ 3.95 per RD Share. In connection with the issuance of the RD Shares, the Company also issued warrants to purchase an aggregate of up to 4,253,165 additional ordinary shares. The Warrants are exercisable at a price of $ 4.74 per ordinary share and have a term of five years from the date of issuance. The Offering was made pursuant to the Company’s Registration Statement. Proceeds from the Offering were $ 19,767 (net of $ 1,233 issuance expenses).
F - 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
b.Issuance of shares: (Cont.)
During the years ended December 31, 2021 and 2020, warrants to purchase an aggregate of
On October 10, 2018, the Company entered into a Master Clinical Trial Collaboration Agreement (the “Master Clinical Agreement”) with Bristol-Myers Squibb to evaluate the safety and tolerability of the Company’s COM701 in combination with Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors. In conjunction with the Master Clinical Agreement, Bristol-Myers Squibb made a $
Under the terms of the securities purchase agreement, Bristol-Myers Squibb purchased
In conjunction with the signing of the amendment to the Master Clinical Agreement in November 2021, Bristol Myers Squibb made a $
F - 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
b.Issuance of shares: (Cont.)
In March 2020, the Company entered into an underwriting agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, as representatives of several underwriters relating to the issuance and sale in a public offering of
c.Share option plan:
Under the Company’s 2010 Share Option Plan as amended (the “Plan“), options may be granted to employees, directors and non-employees of the Company and Compugen USA, Inc.
Under the 2010 Share Option Plan the Company reserved for issuance up to an aggregate of
In general, options granted under the Plan vest over a
Any options that are cancelled, forfeited or expired become available for future grants.
F - 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
c.Share option plan: (Cont.)
Transactions related to the grant of options to employees, directors and non-employees under the above Plan during the year ended December 31, 2022, were as follows:
Number of options |
Weighted average exercise price |
Weighted average remaining contractual life |
Aggregate intrinsic value |
|||||||||||||
$ |
Years |
$ |
||||||||||||||
|
||||||||||||||||
Options outstanding at beginning of year |
|
|
|
|
||||||||||||
Options granted |
|
|
||||||||||||||
Options exercised |
( |
) |
|
|||||||||||||
Options forfeited |
( |
) |
|
|||||||||||||
Options expired |
( |
) |
|
|||||||||||||
|
||||||||||||||||
Options outstanding at end of year |
|
|
|
|
||||||||||||
|
||||||||||||||||
Exercisable at end of year |
|
|
|
|
Weighted average fair value of options granted to employees, directors and non-employees during the years 2022, 2021 and 2020 was $
Aggregate intrinsic value of exercised options by employees, directors and non-employees during the years 2022, 2021 and 2020 was $
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing share price on the last trading day of calendar 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022. This amount is impacted by the changes in the fair market value of the Company’s shares.
As of December 31, 2022, the total unrecognized estimated compensation cost related to non-vested share options granted prior to that date was $
d.Employee Stock Purchase Plan:
The Company adopted an ESPP in November 2020, with the first offering period starting at January 1, 2021. In connection with its adoption, a total of
F - 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8: - SHAREHOLDERS’ EQUITY (Cont.)
d.Employee Stock Purchase Plan: (Cont.)
The ESPP is implemented through six-month offering periods (except for the first offering period that was
Since its adoption and through December 31, 2022,
In accordance with ASC No. 718, the ESPP is compensatory and, as such, results in recognition of compensation cost.
e.The stock-based compensation expenses related to stock options and ESPP are included as follows in the expense categories:
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Research and development expenses
|
$
|
|
$
|
|
$
|
|
||||||
Marketing and business development expenses
|
|
|
|
|||||||||
General and administrative expenses
|
|
|
|
|||||||||
$
|
|
$
|
|
$
|
|
NOTE 9: - INCOME TAXES
a. Israeli taxation:
1.Tax rates applicable to the income of the Company.
Taxable income of the Company is subject to a corporate tax rate of
2.Measurement of taxable income in US dollars:
The Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations (Principles Regarding the Management of Books of Account of Foreign Invested Companies and Certain Partnerships and the Determination of Their Taxable Income), 1986. Accordingly, results for tax purposes are measured in terms of earnings in dollars.
F - 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
a. Israeli taxation (Cont.):
3.Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):
On April 1, 2005, an amendment to the Investment Law came into effect (the “Amendment 60”) that significantly changed the provisions of the Investment Law. The Amendment 60 limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as a “Beneficiary Enterprise” including a provision generally requiring that at least
Another condition for receiving the benefits under the alternative track in respect of expansion programs pursuant to Amendment 60 is a minimum qualifying investment. The Company was eligible under the terms of minimum qualifying investment and elected 2012 as its “year of election”.
Additionally, the Amendment 60 enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits. However, the Investment Law provides that terms and benefits included in any certificate of approval already granted will remain subject to the provisions of the Investment Law as they were on the date of such approval.
As of December 31, 2022, there was no taxable income attributable to the Beneficiary Enterprise.
In January 2011, another amendment to the Investment Law came into effect (“the 2011 Amendment”). According to the 2011 Amendment, the benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company’s entire income subject to this amendment (the “Preferred Income”).
Once an election is made, the Company’s income will be subject to the amended tax rate of 16% from 2015 and thereafter (or 9% for a preferred enterprise located in development area A).
Commencing 2011 tax year, the Company can elect (without possibility of reversal) to apply the Amendment in a certain tax year and from that year and thereafter, it will be subject to the amended tax rates.
The Company does not currently intend to adopt the 2011 Amendment and intends to continue to comply with the Investment Law as in effect prior to enactment of the 2011 Amendment. Accordingly, the Company did not adjust its deferred tax balances as of December 31, 2022. The Company’s position may change in the future.
F - 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
a. Israeli taxation (Cont.):
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2016 and 2017 Budget Years), 2016, which includes Amendment 73 to the Law (the “Amendment 73”) was published. According to Amendment 73, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2016 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).
Amendment 73 also prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Minister of Finance in May 2017. The new tax tracks under the Amendment are as follows:
Preferred Technological Enterprise (“PTE”) - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion in a tax year. A PTE, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A - a tax rate of 7.5%).
The above changes in the tax rates relating to PTE tax track were not taken into account in the computation of deferred taxes as of December 31, 2022 and 2021, since the Company estimates that it will not implement the PTE tax track.
4.Tax benefits under the law for the Encouragement of Industry (Taxes), 1969 (the “Encouragement Law”):
The Encouragement Law provides several tax benefits for industrial companies. An industrial company is defined as a company resident in Israel, at least 90% of the income of which in a given tax year exclusive of income from specified Government loans, capital gains, interest and dividends, is derived from an industrial enterprise owned by it. An industrial enterprise is defined as an enterprise whose major activity in a given tax year is industrial production activity.
Management believes that the Company is currently qualified as an “industrial company” under the Encouragement Law and, as such, is entitled to tax benefits, including: (1) deduction of purchase of know-how and patents and/or right to use a patent over an eight-year period; (2) the right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli industrial companies and an industrial holding company; (3) accelerated depreciation rates on equipment and buildings; and (4) expenses related to a public offering on the Tel-Aviv Stock exchange and on recognized stock markets outside of Israel, are deductible in equal amounts over three years.
F - 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
a. Israeli taxation (Cont.):
Eligibility for benefits under the Encouragement Law is not subject to receipt of prior approval from any Governmental authority. No assurance can be given that the Israeli tax authorities will agree that the Company qualifies, or, that the Company will continue to qualify as an industrial company or that the benefits described above will be available to the Company in the future.
5.Net operating losses carryforward and capital loss:
As of December 31, 2022, Compugen Ltd. ’s net operating losses carryforward for tax purposes in Israel amounted to approximately $
b.Non-Israeli subsidiary, Compugen USA, Inc.:
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “U.S. Tax Reform” or “TCJA”); a comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include several key tax provisions that might impact the Company, among others: (i) a permanent reduction to the statutory federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017; (ii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain new rules designed to prevent erosion of the U.S. income tax base - “BEAT”); (iii) establishing immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits; and (iv) providing a permanent deduction to corporations generating revenues from non-US markets (known as a deduction for foreign derived intangible income - “FDII”).
As of December 31, 2022, Compugen USA, Inc. has net operating loss carryforwards for federal income tax purposes of approximately $
Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the Company’s foreign subsidiary. This is because the Company has the intent and ability to reinvest these earnings indefinitely in the foreign subsidiary and therefore those earnings are continually redeployed in those jurisdictions.
F - 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
c.Loss (income) before taxes is comprised as follows:
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
|
||||||||||||
Domestic (Israel) |
$ |
|
$ |
|
$ |
|
||||||
Foreign |
( |
) |
( |
) |
( |
) |
||||||
|
||||||||||||
$ |
|
$ |
|
$ |
|
d. |
Taxes on income for the year ended December 31, 2022, represent state income taxes in the United States.
|
e.Deferred taxes:
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company and Compugen USA, Inc.’s deferred tax assets are comprised of operating loss carryforward and other temporary differences. Significant components of the Company and Compugen USA, Inc. deferred tax assets are as follows:
December 31,
|
||||||||
2022
|
2021
|
|||||||
Operating loss carryforward
|
$
|
|
$
|
|
||||
Research and development
|
|
|
||||||
Accrued social benefits and other
|
|
|
||||||
Right of use assets
|
(
|
)
|
(
|
)
|
||||
Lease liabilities
|
|
|
||||||
Property and equipment
|
|
|
||||||
Deferred tax asset before valuation allowance
|
|
|
||||||
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
Net deferred tax asset
|
$
|
|
$
|
|
F - 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9: - INCOME TAXES (Cont.)
f.Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit):
The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and Compugen USA, Inc. due to the uncertainty of the realization of such tax benefits.
g.Tax assessments:
The Company has tax assessments through 2017 that are deemed to be final.
NOTE 10: - GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
The Company’s business is currently comprised of
The following represents the total revenue for the years ended December 31, 2022, 2021 and 2020 and long-lived assets as of December 31, 2022 and 2021:
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
Revenue from sales to customers: |
||||||||||||
|
||||||||||||
Europe |
$ |
|
$ |
|
$ |
|
||||||
|
||||||||||||
Total revenue |
$ |
|
$ |
|
$ |
|
December 31, |
||||||||
2022 |
2021 |
|||||||
Long-lived assets: |
||||||||
|
||||||||
Israel |
$ |
|
$ |
|
||||
United States |
|
|
||||||
|
||||||||
Total long-lived assets |
$ |
|
$ |
|
F - 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10: - GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS (Cont.)
Year ended December 31, |
||||||||||
2022 |
2021 |
2020 |
||||||||
Sales to a single customer exceeding 10%: |
||||||||||
|
||||||||||
Customer A |
|
% |
|
% |
|
% |
NOTE 11: - FINANCIAL AND OTHER INCOME, NET
Year ended December 31, |
||||||||||||
2022 |
2021 |
2020 |
||||||||||
|
||||||||||||
Interest income |
$ |
|
$ |
|
$ |
|
||||||
Bank fees and other finance expenses |
( |
) |
( |
) |
( |
) |
||||||
Foreign currency transaction adjustments |
|
|
( |
) |
|
|
||||||
Gain (loss) from sales and disposals of fixed assets |
( |
) |
|
|
||||||||
|
||||||||||||
Financial and other income, net |
$ |
|
$ |
|
$ |
|
NOTE 12: - RELATED PARTY BALANCES AND TRANSACTIONS
December 31,
|
||||||||
2022
|
2021
|
|||||||
Trade payables and accrued expenses
|
$
|
|
$
|
|
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Amounts charged to:
|
||||||||||||
Research and development expenses
|
$
|
|
$
|
|
$
|
|
F - 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 13: - LOSSES PER SHARE
Year ended December 31,
|
||||||||||||
2022
|
2021
|
2020
|
||||||||||
Numerator:
|
||||||||||||
Net loss for basic and diluted loss per share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
|||
Denominator:
|
||||||||||||
Weighted average number of ordinary shares used in computing basic and diluted net loss per share
|
|
|
|
|||||||||
Basic and diluted loss per ordinary share
|
$
|
(
|
)
|
$
|
(
|
)
|
$
|
(
|
)
|
NOTE 14: - Subsequent Events
On January 31, 2023, the Company entered into a Sales Agreement with SVB Securities LLC (“SVB”), as sales agent, pursuant to which the Company may offer and sell, from time to time through SVB, our ordinary shares. The offer and sale of our ordinary shares, if any, will be made pursuant to our shelf registration statement on Form F-3, as supplemented by the prospectus supplement filed on January 31, 2023. Pursuant to the said prospectus supplement, the Company may offer and sell up to $
- - - - - - - - - - -
F - 38
Document and Entity Information |
12 Months Ended |
---|---|
Dec. 31, 2022
shares
| |
Entity Central Index Key | 0001119774 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2022 |
Document Fiscal Period Focus | FY |
Document Type | 20-F/A |
Amendment Flag | true |
Amendment Description | Compugen Ltd. is filing this Amendment No. 1 on Form 20-F/A to its Annual Report on Form 20-F for the fiscal year ended December 31, 2022, as filed with the Securities and Exchange Commission on February 28, 2023, to include updated certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 as Exhibit 13.1, or the Certifications. The Certifications contained in the previously filed Form 20-F inadvertently referred to an incorrect fiscal year end date. This Amendment No. 1 replaces those Certifications with the corrected certifications filed as Exhibit 13.1 hereto. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment No. 1 also contains new certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, which are filed herewith as Exhibit 12.1 and Exhibit 12.2. Other than as expressly set forth above, Item 19 and the exhibits hereto, this Amendment No. 1 does not, and does not purport to, revise, update, amend or restate the information presented in any Item of the previously filed Form 20-F, nor does it reflect any events that have occurred after the filing of the previously filed Form 20-F. |
Document Registration Statement | false |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Document Period End Date | Dec. 31, 2022 |
Entity File Number | 000-30902 |
Entity Registrant Name | Compugen Ltd |
Entity Incorporation State Country Code | L3 |
Entity Address, Address Line One | Azrieli Center |
Entity Address, Address Line Two | 26 Harokmim Street |
Entity Address, Address Line Three | Building D |
Entity Address, City or Town | Holon |
Entity Address Country | IL |
Entity Address, Postal Zip Code | 5885849 |
Title of 12(b) Security | Ordinary shares, par value NIS 0.01 per share |
Trading Symbol | CGEN |
Name of Exchange on which Security is Registered | NASDAQ |
Entity Common Stock, Shares Outstanding | 86,624,643 |
Entity Well-known Seasoned Issuer | No |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Accelerated Filer |
Entity Emerging Growth Company | false |
Auditor Attestation Flag | true |
Document Accounting Standard | U.S. GAAP |
Entity Shell Company | false |
Auditor Name | KOST FORER GABBAY & KASIERER |
Auditor Location | Tel-Aviv, Israel |
Auditor Firm Id | 1281 |
Business Contact [Member] | |
Contact Personnel Name | Alberto Sessa |
Entity Address, Address Line One | Azrieli Center |
Entity Address, Address Line Two | 26 Harokmim Street |
Entity Address, Address Line Three | Building D |
Entity Address, City or Town | Holon |
Entity Address Country | IL |
Entity Address, Postal Zip Code | 5885849 |
City Area Code | 972 |
Local Phone Number | 3-765-8585 |
Contact Personnel Fax Number | 972-3-765-8555 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - ₪ / shares |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Ordinary shares, par value | ₪ 0.01 | ₪ 0.01 |
Ordinary shares, shares authorized | 200,000,000 | 200,000,000 |
Ordinary shares, shares issued | 86,624,643 | 86,433,432 |
Ordinary shares, shares outstanding | 86,624,643 | 86,433,432 |
GENERAL |
12 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | ||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||
GENERAL |
NOTE 1: - GENERAL
Under the terms of the Bayer Agreement, the Company received an upfront payment of $10,000, and, following the return of the CGEN 15022 program in 2017, the Company is eligible to receive an aggregate amount of over $250,000 in potential milestone payments for Bapotulimab (formerly known as BAY1905254), not including aggregate milestone payments of $23,200 received to date. Additionally, the Company is eligible to receive mid to high single digit royalties on global net sales of any approved products under the collaboration.
Pursuant to the terms of Bayer Agreement, Bapotulimab program was transferred to Bayer’s full control for further preclinical and clinical development activities, and worldwide commercialization under milestone and royalty bearing license from Compugen.
On November 29, 2022, Bayer notified the Company that it has resolved to terminate, effective as of February 27, 2023, the Bayer Agreement.
Pursuant to the Agreement, Compugen was responsible for and sponsored the ongoing two-part Phase 1 trial, which included the evaluation of the combination of COM701 and Opdivo®. The collaboration was also designed to address potential future combinations, including trials sponsored by Bristol-Myers Squibb to investigate combined inhibition of checkpoint mechanisms, such as PVRIG and TIGIT. Bristol-Myers Squibb and Compugen each supplied the other company with its own compound for the other party’s study, and otherwise each party was responsible for all costs associated with the study that it is conducting.
In conjunction with the signing of the Agreement in October 2018, Bristol-Myers Squibb made a $12,000 investment in Compugen, see Note 8b. On February 14, 2020, the Agreement was amended to include a triple combination clinical trial to evaluate the safety, tolerability and antitumor activity of COM701 in combination with Opdivo® (nivolumab), and Bristol-Myers Squibb’s investigational antibody targeting TIGIT known as BMS-986207, in patients with advanced solid tumors, instead of the planned expansion of the combined therapy study designed to evaluate the dual combination of COM701 and Opdivo®.
Pursuant to the Agreement, as amended, the Company sponsored the two-part Phase 1/2 trial, which evaluates the triple combination of COM701, Opdivo® and BMS-986207, in patients with advanced solid tumors where Bristol-Myers Squibb provided Opdivo® and BMS-986207 at no cost to the Company.
As part of the amended Agreement, it was agreed that the Company will complete the dose escalation arm of the dual combination of COM701 with Opdivo® under the ongoing Phase 1 study and will not continue the expansion cohorts of the dual combination. However, on February 19, 2021, the Agreement was further amended to include an expansion of the Phase 1 combination study designed to evaluate the dual combination of COM701 and Opdivo® in patients with advanced solid tumors, where the Company is responsible for and sponsored the expansion cohort and Bristol Myers Squibb provided Opdivo® at no cost to the Company for this study.
On November 10, 2021, the Agreement was further amended to establish a joint steering committee (alongside the existing joint development committee which acts at an operational level) to facilitate strategic oversight and guidance for the programs run under the collaboration.
In conjunction with the signing of the amendment to the Agreement in November 2021, Bristol-Myers Squibb made a $20,000 investment in Compugen, see Note 8b.
On August 3, 2022, the Company and Bristol-Myers Squibb entered into a letter agreement pursuant to which the Agreement, as amended thereafter, was terminated as of such date.
|
SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SIGNIFICANT ACCOUNTING POLICIES |
NOTE 2: - SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). a.Use of estimates: The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. b.Financial statements in U.S. dollars: The reporting and functional currency of the Company is the U.S. dollar, as the Company’s management believes that the U.S. dollar is the primary currency of the economic environment in which the Company and Compugen USA, Inc. have operated and expect to continue to operate in the foreseeable future. Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the consolidated statement of comprehensive loss as financial income or expenses, as appropriate. c.Basis of consolidation: The consolidated financial statements include the accounts of the Company and Compugen USA, Inc. Intercompany transactions and balances have been eliminated upon consolidation. d.Cash equivalents: Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition. e.Restricted cash: Restricted cash is held in interest bearing saving accounts which are used as a security for the Company’s Israeli facility leasehold and leased cars fueling bank guarantees and credit card security for Compugen USA, Inc.
f.Short-term bank deposits: Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximates market values. The short-term bank deposits as of December 31, 2022 and 2021 are in U.S. dollars and bear an annual weighted average interest rate of 4.84% and 0.77%, respectively. g.Property and equipment, net: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
h.Impairment of long-lived assets: The long-lived assets of the Company and Compugen USA, Inc. are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years 2022, 2021 and 2020, no impairment losses have been identified. i.Leases: The Company accounts for its leases according to ASC 842 - Leases (“ASC 842”). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less.
ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured based on the discounted present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate the lease is considered unless it is reasonably certain that the Company will not exercise the option.
j.Revenue recognition:
The Company generates revenues mainly from its collaborative and license agreements. The revenues are derived mainly from upfront license payments, research and development services and contingent payments related to milestone achievements. The Company recognizes revenue in accordance with ASC 606 – “Revenue from Contracts with Customers”. As such, the Company analyzes its contracts to assess whether they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the Company satisfies a performance obligation
At the contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company entered into an exclusive license agreement with AstraZeneca. Under the terms of the agreement, Compugen provided AstraZeneca with an exclusive license to intellectual property ("IP”) rights of the Company for the development of bi-specific and multi-specific antibody products derived from COM902. Compugen received a $10,000 upfront nonrefundable payment and is eligible to receive up to $200,000 for development, regulatory and commercial milestones for the first product, of which $15,500 was received to date as well as tiered royalties on future product sales.
Under ASC 606, the Company determined the license to the IP to be a functional IP that has significant standalone functionality. The Company is not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the IP. Therefore, the license to the IP is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license is transferred to the customer. Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable consideration is resolved). Therefore, as the milestone payments are not probable, revenue was not recognized in respect to such milestone payments prior to achievement of such milestone. Sales or usage-based royalties to be received in exchange for licenses of IP are recognized at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales or usage-based royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on future Commercial Sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties. On December 18, 2020 the first milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 2,000 in accordance with the criteria prescribed under ASC 606. On September 29, 2021 the second milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 6,000 in accordance with the criteria prescribed under ASC 606.
On November 11, 2022, the third milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 7,500 in accordance with the criteria prescribed under ASC 606. For additional information regarding revenues, please refer to Note 10 below. k.Cost of revenues: Cost of revenues consist of certain royalties and milestones paid or accrued. l.Research and development expenses, net: Research and development costs are charged to the statement of comprehensive loss as incurred and are presented net of the amount of any grants the Company receives for research and development in the period in which the grant was received. As part of the process of preparing the consolidated financial statements, the Company accrues costs for pre-clinical and clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations or other pre-clinical or clinical trial vendors that perform the activities. In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, and amortized as the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
The portion of the Bristol-Myers Squibb $ 12,000 investment in 2018 over the fair market value of the shares issued in the amount of $ 4,121 and the portion of the $ 20,000 investment in 2021 over the fair market value of the shares issued in the amount of $ 5,000 were considered as deferred participation of Bristol-Myers Squibb in R&D expenses which is amortized over the period of the clinical trial based on the progress in the R&D, see Note 1f and Note 8b. Amortization of participation in R&D expenses for the years ended December 31, 2022, 2021 and 2020 were $ 6,019, $ 1,291 and $ 829, respectively.
m.Severance pay: The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and is in large part covered by regular deposits with recognized pension funds, deposits with severance pay funds and purchases of insurance policies. The value of these deposits and policies is recorded as an asset in the Company’s balance sheet. Pursuant to Section 14 of the Israeli Severance Pay Law, for Israeli employees under this section, the Company’s contributions for severance pay have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid. Severance expenses for the years ended December 31, 2022, 2021 and 2020 amounted to approximately $ 468, $ 383 and $ 572, respectively. n.Stock-based compensation: The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, “Compensation - Stock Compensation”, (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company accounts for forfeitures as they occur. The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards. The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the most appropriate fair value method for its share-options awards and Employee Stock Purchase Plan (“ESPP”). The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company used the following assumptions for options granted to employees, directors and non-employees and ESPP:
o.Concentration of credit risks: Financial instruments that potentially subject the Company and Compugen USA, Inc. to concentration of credit risk consist principally of cash and cash equivalents, restricted cash and short-term bank deposits. Cash, cash equivalents, restricted cash and short-term bank deposits are invested in major banks in Israel. Generally, these deposits may be redeemed upon demand and bear minimal risk. p.Basic and diluted loss per share: Basic loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year. Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Share“. All outstanding share options and warrants for the years ended December 31, 2022, 2021 and 2020 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. As of December 31, 2022, 2021 and 2020 the average number of shares related to outstanding options and warrants excluded from the calculations of diluted net loss per share were 8,405,615, 6,758,300 and 7,150,648, respectively.
q.Income taxes: The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes“, (“ASC 740“) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2022 and 2021, a full valuation allowance was provided by the Company. ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10. r.Fair value of financial instruments: The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputting that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, other accounts receivable and prepaid expenses, trade payable and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments. s.Recently issued and recently adopted Accounting Standards: Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial statements. |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES |
NOTE 3: - OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
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LEASES |
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Lessee Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
NOTE 4: - LEASES The Company leases all its real estate, storage area and cars under various operating lease agreements that expire on various dates.
The Company’s operating leases have original lease periods expiring between 2021 and 2025. The offices in Israel lease include two options to renew, one of which was exercised in 2020. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably certain.
In October 2020 the Company’s lease for its offices in Israel was amended. The amendment was not accounted for as a new lease. As a result of the amendment the operating lease right of use asset increased by $43, the operating lease liability decreased by $194 and the Company recorded foreign currency exchange rate of $237.
Lease payments included in the measurement of the lease liability comprise the following: the fixed non-cancelable lease payments and payments for optional renewal periods where it is reasonably certain the renewal period will be exercised.
Under ASC 842, all leases, including non-cancelable operating leases, are now recognized on the balance sheet. The aggregated present value of lease payments is recorded as a long-term asset titled Operating lease right of use asset. The corresponding lease liabilities are split between current maturity of operating lease liability within current liabilities and long-term operating lease liability within long-term liabilities. The Company’s leases do not provide an implicit rate, therefore the Company uses its incremental borrowing rate based on information available on the commencement date in determining the present value of lease payments.
The following table represents the weighted-average remaining lease term and discount rate:
Operating lease expenses were approximately $884, $956 and $944 in the years ended December 31, 2022, 2021 and 2020, respectively.
Cash paid for amounts included in the measurement of lease liabilities was approximately $959, $914 and $927 in the years ended December 31, 2022, 2021 and 2020, respectively.
Maturities of operating lease liabilities were as follows:
The above annual minimum future rental commitments include the period covered by the first exercised option with respect to the leased facility of Compugen Ltd. through March 2026 and exclude the second option to extend the lease of the Company facility for additional five-year period following expiration of the current lease period.
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PROPERTY AND EQUIPMENT, NET |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT, NET |
NOTE 5: - PROPERTY AND EQUIPMENT, NET
During 2022 and 2021 total cost of $ 99 and $ 26, respectively and total accumulated depreciation of $ 95 and $ 26, respectively were disposed from the consolidated balance sheets. For the years ended December 31, 2022, 2021 and 2020, depreciation expenses were approximately $ 482, $ 461 and $ 715, respectively. |
OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
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Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
NOTE 6: - OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
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COMMITMENTS AND CONTINGENCIES |
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Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
NOTE 7: - COMMITMENTS AND CONTINGENCIES a.The Company provided bank guarantees in the amount of $ 318 related to its offices in Israel, leased cars fueling in Israel and credit card security for its U.S. subsidiary. b.Under the Office of the Israel Innovation Authority of the Israeli Ministry of Industry, Trade and Labor, formerly known as the Office of the Chief Scientist, (the “IIA”), the Company is not obligated to repay any amounts received from the IIA if it does not generate any income from the results of the funded research program(s). If income is generated from a funded research program, the Company is committed to pay royalties at a rate of between 3% to 5% of future revenue arising from such research program(s), and up to a maximum of 100% of the amount received, linked to the U.S. dollar (for grants received under programs approved subsequent to January 1, 1999, the maximum to be repaid is 100% plus interest at LIBOR). For the years ended December 31, 2022, 2021 and 2020, the Company had an aggregate of paid or accrued royalties to the IIA, recorded as cost of revenue in the consolidated statements of comprehensive loss in the amount of $ 225, $ 180 and $ 60, respectively. As of December 31, 2022, the Company’s aggregate contingent obligations for payments to IIA, based on royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled approximately to $ 9,631. c.On June 25, 2012 the Company entered into an Antibodies Discovery Collaboration Agreement (the “Antibodies Discovery Agreement”) with a U.S. antibody technology company (“mAb Technology Company”), providing an established source for fully human mAbs. Under the Antibodies Discovery Agreement, the mAb Technology Company will be entitled to certain royalties that could be eliminated, upon payment of certain one-time fees (all payments referred together as “Contingent Fees”). For the years ended December 31, 2022, 2021 and 2020, the Company incurred such Contingent Fees in the amounts of $ 750, $ 500 and $ 500. d.On May 9, 2012, the Company entered into agreement (the “May 2012 Agreement”) with a U.S. Business Development Strategic Advisor (“Advisor”) for the purpose of entering into transactions with Pharma companies related to selected Pipeline Program Candidates. Under the agreement the Advisor was entitled to 4% of the cash considerations that may be received under such transactions. In 2014, the May 2012 Agreement was terminated except for certain payments arising from the Bayer Agreement which survive termination until August 5, 2025. The Bayer Agreement was terminated effective February 27, 2023 and no further payments are expected under the May 2012 Agreement For the years ended December 31, 2022, 2021 and 2020, the Company has not paid and did not accrue payments under this agreement.
e.Effective as of January 5, 2018, the Company entered into a Commercial License Agreement (CLA) with a European cell line development company. Under the agreement the Company is required to pay an annual maintenance fee, certain amounts upon the occurrence of specified milestones events, and 1% royalties on annual net sales with respect to each commercialized product manufactured using the company’s cell line. Royalties due under the CLA are creditable against the annual maintenance fee. In addition, the Company may at any time prior to the occurrence of a specific milestone event buy-out the royalty payment obligations in a single fixed amount. For the years ended December 31, 2022, 2021 and 2020, the Company incurred in the research and development expenses in connection with such milestone payment in the amounts of $ 0, $ 0 and $ 52. f.Effective as of October 28, 2020, the Company entered into a collaboration agreement with a U.S. antibody discovery and optimization company for generation and optimization of therapeutic antibodies for the Company. Under the agreement the Company is required to pay service fees per services performed and certain amounts upon the occurrence of specified milestones events, and single-digit percent royalties on annual net sales with respect to each product sold that comprises or contains one or more antibodies so generated or optimized. The royalty rate is dependent upon the product type and any third-party contribution. For the years ended December 31, 2022, 2021 and 2020, the Company incurred in the research and development expenses such milestone payment in the amounts of $ 0, $ 250 and $ 0. |
SHAREHOLDERS' EQUITY |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY |
NOTE 8: - SHAREHOLDERS’ EQUITY a.Ordinary shares: The ordinary shares confer upon their holders the right to attend and vote at general meetings of the shareholders. Subject to the rights of holders of shares with limited or preferred rights which may be issued in the future, the ordinary shares of the Company confer upon the holders thereof equal rights to receive dividends, and to participate in the distribution of the assets of the Company upon its winding-up, in proportion to the amount paid up or credited as paid up on account of the nominal value of the shares held by them respectively and in respect of which such dividends are being paid or such distribution is being made, without regard to any premium paid in excess of the nominal value, if any. b.Issuance of shares:
On June 14, 2018, the Company entered into securities purchase agreement with certain institutional investors and a placement agency agreement with JMP Securities LLC in connection with a registered direct offering (the “Offering”) of an aggregate of 5,316,457 ordinary shares (the “RD Shares”) of the Company at a purchase price of $ 3.95 per RD Share. In connection with the issuance of the RD Shares, the Company also issued warrants to purchase an aggregate of up to 4,253,165 additional ordinary shares. The Warrants are exercisable at a price of $ 4.74 per ordinary share and have a term of five years from the date of issuance. The Offering was made pursuant to the Company’s Registration Statement. Proceeds from the Offering were $ 19,767 (net of $ 1,233 issuance expenses).
During the years ended December 31, 2021 and 2020, warrants to purchase an aggregate of 3,955,696 ordinary shares were exercised with proceeds of approximately $ 18,750 and as of December 31, 2022 and 2021, warrants to purchase up to 297,469 ordinary shares remain outstanding. On October 10, 2018, the Company entered into a Master Clinical Trial Collaboration Agreement (the “Master Clinical Agreement”) with Bristol-Myers Squibb to evaluate the safety and tolerability of the Company’s COM701 in combination with Bristol-Myers Squibb’s PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors. In conjunction with the Master Clinical Agreement, Bristol-Myers Squibb made a $ 12,000 equity investment in the Company. Under the terms of the securities purchase agreement, Bristol-Myers Squibb purchased 2,424,243 ordinary shares of the Company at a purchase price of $ 4.95 per share. The share price represented a 33% premium over the average closing price of Compugen’s ordinary shares for twenty (20) Nasdaq trading days prior to the execution of the securities purchase agreement. The investment closed on October 12, 2018.
The premium over the fair market value in the amount of $4,121 represents the relative fair value of deferred participation of Bristol-Myers Squibb in R&D expenses (which are amortized over the period of the clinical trial, based on the progress in the R&D) and $7,788 (net of $91 issuance expenses) were considered equity investment.
In conjunction with the signing of the amendment to the Master Clinical Agreement in November 2021, Bristol Myers Squibb made a $ 20,000 investment in the Company, purchasing 2,332,815 ordinary shares of the Company at a purchase price of $ 8.57333 per share. The share price represented a 33% premium over the closing price of Company’s ordinary shares on the last Nasdaq trading day immediately prior to the execution of the securities purchase agreement.
The premium over the fair market value in the amount of $5,000 represents the relative fair value of deferred participation of Bristol-Myers Squibb in R&D expenses (which are amortized over the period of the clinical trial, based on the progress in the R&D) and $14,958 (net of $42 issuance expenses) were considered equity investment.
In March 2020, the Company entered into an underwriting agreement with SVB Leerink LLC and Stifel, Nicolaus & Company, Incorporated, as representatives of several underwriters relating to the issuance and sale in a public offering of 8,333,334 of the Company’s ordinary shares at a price to the public of $ 9.00 per share (and a price of $ 8.46 per share to the underwriters). Such shares were issued on March 16, 2020. In addition, the Company granted the underwriters a 30-day option to purchase additional ordinary shares at the price set forth above. On April 14, 2020, the Company issued and sold, pursuant to that underwriting agreement additional 483,005 ordinary shares pursuant to the underwriters’ option specified above. The Company sold a total of 8,816,339 ordinary shares in the offering with proceeds of $74,147 (net of $ 5,200 issuance expenses). c.Share option plan: Under the Company’s 2010 Share Option Plan as amended (the “Plan“), options may be granted to employees, directors and non-employees of the Company and Compugen USA, Inc.
Under the 2010 Share Option Plan the Company reserved for issuance up to an aggregate of 14,395,152 ordinary shares. The Company’s Board of Directors last amended the Plan in March 2022, to increase the number of shares available under the 2010 Plan. As of December 31, 2022, an aggregate of 1,918,297 options under the 2010 Share Option Plan of the Company were still available for future grants. In general, options granted under the Plan vest over a four-year period and expire 10 years from the date of grant and are granted at an exercise price of not less than the fair market value of the Company’s ordinary shares on the date of grant, unless otherwise determined by the Company’s board of directors. The exercise price of the options granted under the Plan may not be less than the nominal value of the shares into which such options are exercised and the expiration date may not be later than 10 years from the date of grant. If a grantee leaves his or her employment or other relationship with the Company, or if his or her relationship with the Company is terminated without cause (and other than by reason of death or disability, as defined in the Plan), the term of his or her unexercised options will generally expire in 90 days, unless determined otherwise by the Company. Any options that are cancelled, forfeited or expired become available for future grants.
Transactions related to the grant of options to employees, directors and non-employees under the above Plan during the year ended December 31, 2022, were as follows:
Weighted average fair value of options granted to employees, directors and non-employees during the years 2022, 2021 and 2020 was $ 1.51, $ 3.81 and $ 7.15 per share, respectively. Aggregate intrinsic value of exercised options by employees, directors and non-employees during the years 2022, 2021 and 2020 was $ 19, $ 759 and $ 21,610, respectively. The aggregate intrinsic value of the exercised options represents the total intrinsic value (the difference between the sale price of the Company’s share at the date of exercise, and the exercise price) multiplied by the number of options exercised. The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing share price on the last trading day of calendar 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022. This amount is impacted by the changes in the fair market value of the Company’s shares. As of December 31, 2022, the total unrecognized estimated compensation cost related to non-vested share options granted prior to that date was $ 8,715 which is expected to be recognized over a weighted average period of approximately 2.47 years. d.Employee Stock Purchase Plan: The Company adopted an ESPP in November 2020, with the first offering period starting at January 1, 2021. In connection with its adoption, a total of 600,000 ordinary shares were reserved for issuance under this plan.
The ESPP is implemented through six-month offering periods (except for the first offering period that was five months). According to the ESPP, eligible employees and non-employees may use up to 15% of their base salaries to purchase ordinary shares up to an aggregate limit of $ 40 per participant for every calendar year. The price of an ordinary share purchased under the ESPP is equal to 85% of the lower of the fair market value of the ordinary share on the first day of each offering period or on the last day of such period. Since its adoption and through December 31, 2022, 275,854 ordinary shares had been purchased under the ESPP and as of December 31, 2022, 324,146 ordinary shares were available for issuance under the ESPP. In accordance with ASC No. 718, the ESPP is compensatory and, as such, results in recognition of compensation cost.
e.The stock-based compensation expenses related to stock options and ESPP are included as follows in the expense categories:
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INCOME TAXES |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES |
NOTE 9: - INCOME TAXES a. Israeli taxation: 1.Tax rates applicable to the income of the Company. Taxable income of the Company is subject to a corporate tax rate of 23% in 2020, 2021 and 2022. 2.Measurement of taxable income in US dollars: The Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations (Principles Regarding the Management of Books of Account of Foreign Invested Companies and Certain Partnerships and the Determination of Their Taxable Income), 1986. Accordingly, results for tax purposes are measured in terms of earnings in dollars.
3.Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”): On April 1, 2005, an amendment to the Investment Law came into effect (the “Amendment 60”) that significantly changed the provisions of the Investment Law. The Amendment 60 limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as a “Beneficiary Enterprise” including a provision generally requiring that at least 25% of the Beneficiary Enterprise’s income will be derived from export. Another condition for receiving the benefits under the alternative track in respect of expansion programs pursuant to Amendment 60 is a minimum qualifying investment. The Company was eligible under the terms of minimum qualifying investment and elected 2012 as its “year of election”. Additionally, the Amendment 60 enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits. However, the Investment Law provides that terms and benefits included in any certificate of approval already granted will remain subject to the provisions of the Investment Law as they were on the date of such approval. As of December 31, 2022, there was no taxable income attributable to the Beneficiary Enterprise. In January 2011, another amendment to the Investment Law came into effect (“the 2011 Amendment”). According to the 2011 Amendment, the benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company’s entire income subject to this amendment (the “Preferred Income”). Once an election is made, the Company’s income will be subject to the amended tax rate of 16% from 2015 and thereafter (or 9% for a preferred enterprise located in development area A). Commencing 2011 tax year, the Company can elect (without possibility of reversal) to apply the Amendment in a certain tax year and from that year and thereafter, it will be subject to the amended tax rates. The Company does not currently intend to adopt the 2011 Amendment and intends to continue to comply with the Investment Law as in effect prior to enactment of the 2011 Amendment. Accordingly, the Company did not adjust its deferred tax balances as of December 31, 2022. The Company’s position may change in the future.
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2016 and 2017 Budget Years), 2016, which includes Amendment 73 to the Law (the “Amendment 73”) was published. According to Amendment 73, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2016 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%). Amendment 73 also prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Minister of Finance in May 2017. The new tax tracks under the Amendment are as follows: Preferred Technological Enterprise (“PTE”) - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion in a tax year. A PTE, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A - a tax rate of 7.5%). The above changes in the tax rates relating to PTE tax track were not taken into account in the computation of deferred taxes as of December 31, 2022 and 2021, since the Company estimates that it will not implement the PTE tax track. 4.Tax benefits under the law for the Encouragement of Industry (Taxes), 1969 (the “Encouragement Law”): The Encouragement Law provides several tax benefits for industrial companies. An industrial company is defined as a company resident in Israel, at least 90% of the income of which in a given tax year exclusive of income from specified Government loans, capital gains, interest and dividends, is derived from an industrial enterprise owned by it. An industrial enterprise is defined as an enterprise whose major activity in a given tax year is industrial production activity. Management believes that the Company is currently qualified as an “industrial company” under the Encouragement Law and, as such, is entitled to tax benefits, including: (1) deduction of purchase of know-how and patents and/or right to use a patent over an eight-year period; (2) the right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli industrial companies and an industrial holding company; (3) accelerated depreciation rates on equipment and buildings; and (4) expenses related to a public offering on the Tel-Aviv Stock exchange and on recognized stock markets outside of Israel, are deductible in equal amounts over three years.
Eligibility for benefits under the Encouragement Law is not subject to receipt of prior approval from any Governmental authority. No assurance can be given that the Israeli tax authorities will agree that the Company qualifies, or, that the Company will continue to qualify as an industrial company or that the benefits described above will be available to the Company in the future. 5.Net operating losses carryforward and capital loss: As of December 31, 2022, Compugen Ltd. ’s net operating losses carryforward for tax purposes in Israel amounted to approximately $ 398,100. These net operating losses may be carried forward indefinitely and may be offset against future taxable income. b.Non-Israeli subsidiary, Compugen USA, Inc.: On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “U.S. Tax Reform” or “TCJA”); a comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include several key tax provisions that might impact the Company, among others: (i) a permanent reduction to the statutory federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017; (ii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain new rules designed to prevent erosion of the U.S. income tax base - “BEAT”); (iii) establishing immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits; and (iv) providing a permanent deduction to corporations generating revenues from non-US markets (known as a deduction for foreign derived intangible income - “FDII”). As of December 31, 2022, Compugen USA, Inc. has net operating loss carryforwards for federal income tax purposes of approximately $ 700. These losses may be carried forward indefinitely, but the deductibility of such federal NOLs may be limited. Utilization of the U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership“ provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization. Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the Company’s foreign subsidiary. This is because the Company has the intent and ability to reinvest these earnings indefinitely in the foreign subsidiary and therefore those earnings are continually redeployed in those jurisdictions.
c.Loss (income) before taxes is comprised as follows:
e.Deferred taxes: Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company and Compugen USA, Inc.’s deferred tax assets are comprised of operating loss carryforward and other temporary differences. Significant components of the Company and Compugen USA, Inc. deferred tax assets are as follows:
The Company has provided full valuation allowances in respect of deferred tax assets resulting from operating loss carryforward and other temporary differences. Management currently believes that since the Company has a history of losses, it is more likely than not that the deferred tax regarding the operating loss carryforward and other temporary differences will not be realized in the foreseeable future.
f.Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit): The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and Compugen USA, Inc. due to the uncertainty of the realization of such tax benefits. g.Tax assessments: The Company has tax assessments through 2017 that are deemed to be final. |
GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS |
NOTE 10: - GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS The Company’s business is currently comprised of one operating segment, the research, development and commercialization of therapeutic and product candidates. The nature of the products and services provided by the Company and the type of customers for these products and services are similar. Operations in Israel and the United States include research and development, clinical operations, marketing and business development. The Company follows ASC 280, “Segment Reporting“. Total revenues are attributed to geographic areas based on the location of the end customer. The following represents the total revenue for the years ended December 31, 2022, 2021 and 2020 and long-lived assets as of December 31, 2022 and 2021:
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FINANCIAL AND OTHER INCOME, NET |
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Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL AND OTHER INCOME, NET |
NOTE 11: - FINANCIAL AND OTHER INCOME, NET
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RELATED PARTY BALANCES AND TRANSACTIONS |
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Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY BALANCES AND TRANSACTIONS |
NOTE 12: - RELATED PARTY BALANCES AND TRANSACTIONS
For the years ended December 31, 2022, 2021 and 2020 the Company received research and development services related with cancer studies in animal models, and breeding and maintenance of animals (mice) to support such studies. The transaction was at arm’s length.
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LOSSES PER SHARE |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LOSSES PER SHARE |
NOTE 13: - LOSSES PER SHARE The following table sets forth the computation of basic and diluted losses per share:
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Subsequent Events |
12 Months Ended |
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Dec. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events |
NOTE 14: - Subsequent Events On January 31, 2023, the Company entered into a Sales Agreement with SVB Securities LLC (“SVB”), as sales agent, pursuant to which the Company may offer and sell, from time to time through SVB, our ordinary shares. The offer and sale of our ordinary shares, if any, will be made pursuant to our shelf registration statement on Form F-3, as supplemented by the prospectus supplement filed on January 31, 2023. Pursuant to the said prospectus supplement, the Company may offer and sell up to $50 million of its ordinary shares. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of estimates: |
a.Use of estimates: The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
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Financial statements in U.S. dollars: |
b.Financial statements in U.S. dollars: The reporting and functional currency of the Company is the U.S. dollar, as the Company’s management believes that the U.S. dollar is the primary currency of the economic environment in which the Company and Compugen USA, Inc. have operated and expect to continue to operate in the foreseeable future. Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the consolidated statement of comprehensive loss as financial income or expenses, as appropriate. |
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Basis of consolidation: |
c.Basis of consolidation: The consolidated financial statements include the accounts of the Company and Compugen USA, Inc. Intercompany transactions and balances have been eliminated upon consolidation. |
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Cash equivalents: |
d.Cash equivalents: Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition. |
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Restricted cash: |
e.Restricted cash: Restricted cash is held in interest bearing saving accounts which are used as a security for the Company’s Israeli facility leasehold and leased cars fueling bank guarantees and credit card security for Compugen USA, Inc.
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Short-term bank deposits: |
f.Short-term bank deposits: Bank deposits with maturities of more than three months but less than one year are included in short-term bank deposits. Such short-term bank deposits are stated at cost which approximates market values. The short-term bank deposits as of December 31, 2022 and 2021 are in U.S. dollars and bear an annual weighted average interest rate of 4.84% and 0.77%, respectively. |
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Property and equipment, net: |
g.Property and equipment, net: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
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Impairment of long-lived assets: |
h.Impairment of long-lived assets: The long-lived assets of the Company and Compugen USA, Inc. are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset with the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years 2022, 2021 and 2020, no impairment losses have been identified. |
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Leases: |
i.Leases: The Company accounts for its leases according to ASC 842 - Leases (“ASC 842”). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less.
ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured based on the discounted present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate the lease is considered unless it is reasonably certain that the Company will not exercise the option.
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Revenue recognition: |
j.Revenue recognition:
The Company generates revenues mainly from its collaborative and license agreements. The revenues are derived mainly from upfront license payments, research and development services and contingent payments related to milestone achievements. The Company recognizes revenue in accordance with ASC 606 – “Revenue from Contracts with Customers”. As such, the Company analyzes its contracts to assess whether they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the performance obligations in the contract • Recognition of revenue when, or as, the Company satisfies a performance obligation
At the contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company entered into an exclusive license agreement with AstraZeneca. Under the terms of the agreement, Compugen provided AstraZeneca with an exclusive license to intellectual property ("IP”) rights of the Company for the development of bi-specific and multi-specific antibody products derived from COM902. Compugen received a $10,000 upfront nonrefundable payment and is eligible to receive up to $200,000 for development, regulatory and commercial milestones for the first product, of which $15,500 was received to date as well as tiered royalties on future product sales.
Under ASC 606, the Company determined the license to the IP to be a functional IP that has significant standalone functionality. The Company is not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the IP. Therefore, the license to the IP is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license is transferred to the customer. Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable consideration is resolved). Therefore, as the milestone payments are not probable, revenue was not recognized in respect to such milestone payments prior to achievement of such milestone. Sales or usage-based royalties to be received in exchange for licenses of IP are recognized at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales or usage-based royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on future Commercial Sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties. On December 18, 2020 the first milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 2,000 in accordance with the criteria prescribed under ASC 606. On September 29, 2021 the second milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 6,000 in accordance with the criteria prescribed under ASC 606.
On November 11, 2022, the third milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $ 7,500 in accordance with the criteria prescribed under ASC 606. For additional information regarding revenues, please refer to Note 10 below. |
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Cost of revenues: |
k.Cost of revenues: Cost of revenues consist of certain royalties and milestones paid or accrued. |
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Research and development expenses, net: |
l.Research and development expenses, net: Research and development costs are charged to the statement of comprehensive loss as incurred and are presented net of the amount of any grants the Company receives for research and development in the period in which the grant was received. As part of the process of preparing the consolidated financial statements, the Company accrues costs for pre-clinical and clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations or other pre-clinical or clinical trial vendors that perform the activities. In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, and amortized as the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
The portion of the Bristol-Myers Squibb $ 12,000 investment in 2018 over the fair market value of the shares issued in the amount of $ 4,121 and the portion of the $ 20,000 investment in 2021 over the fair market value of the shares issued in the amount of $ 5,000 were considered as deferred participation of Bristol-Myers Squibb in R&D expenses which is amortized over the period of the clinical trial based on the progress in the R&D, see Note 1f and Note 8b. Amortization of participation in R&D expenses for the years ended December 31, 2022, 2021 and 2020 were $ 6,019, $ 1,291 and $ 829, respectively.
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Severance pay: |
m.Severance pay: The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date, and is in large part covered by regular deposits with recognized pension funds, deposits with severance pay funds and purchases of insurance policies. The value of these deposits and policies is recorded as an asset in the Company’s balance sheet. Pursuant to Section 14 of the Israeli Severance Pay Law, for Israeli employees under this section, the Company’s contributions for severance pay have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional calculations are conducted between the parties regarding the matter of severance pay and no additional payments are made by the Company to the employee. Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid. Severance expenses for the years ended December 31, 2022, 2021 and 2020 amounted to approximately $ 468, $ 383 and $ 572, respectively. |
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Stock-based compensation: |
n.Stock-based compensation: The Company accounts for stock-based compensation to employees and non-employees in accordance with ASC 718, “Compensation - Stock Compensation”, (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company accounts for forfeitures as they occur. The Company recognizes compensation expenses for the value of its awards granted based on the straight-line method over the requisite service period of each of the awards. The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the most appropriate fair value method for its share-options awards and Employee Stock Purchase Plan (“ESPP”). The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company used the following assumptions for options granted to employees, directors and non-employees and ESPP:
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Concentration of credit risks: |
o.Concentration of credit risks: Financial instruments that potentially subject the Company and Compugen USA, Inc. to concentration of credit risk consist principally of cash and cash equivalents, restricted cash and short-term bank deposits. Cash, cash equivalents, restricted cash and short-term bank deposits are invested in major banks in Israel. Generally, these deposits may be redeemed upon demand and bear minimal risk. |
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Basic and diluted loss per share: |
p.Basic and diluted loss per share: Basic loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year. Diluted net loss per share is calculated based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential in accordance with ASC 260, “Earnings per Share“. All outstanding share options and warrants for the years ended December 31, 2022, 2021 and 2020 have been excluded from the calculation of the diluted net loss per share, because all such securities are anti-dilutive for all periods presented. As of December 31, 2022, 2021 and 2020 the average number of shares related to outstanding options and warrants excluded from the calculations of diluted net loss per share were 8,405,615, 6,758,300 and 7,150,648, respectively.
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Income taxes: |
q.Income taxes: The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes“, (“ASC 740“) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2022 and 2021, a full valuation allowance was provided by the Company. ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10. |
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Fair value of financial instruments: |
r.Fair value of financial instruments: The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputting that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, other accounts receivable and prepaid expenses, trade payable and other accounts payable and accrued expenses approximate their fair values due to the short-term maturities of such instruments. |
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Recently issued and recently adopted Accounting Standards: |
s.Recently issued and recently adopted Accounting Standards: Although there are several other new accounting standards issued or proposed by the FASB, which the Company has adopted or will adopt, as applicable, the Company does not believe any of these accounting pronouncements has had or will have a material impact on its consolidated financial statements. |
SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of depreciation rates for property and equipment |
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Schedule of weighted average assumptions for granted options |
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OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other accounts receivable and prepaid expenses |
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LEASES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lessee Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of weighted-average remaining lease term and discount rate |
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Schedule of operating leases |
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PROPERTY AND EQUIPMENT, NET (Tables) |
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment, net |
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OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other accounts payable and accrued expenses |
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SHAREHOLDERS' EQUITY (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock-based compensation expenses |
Transactions related to the grant of options to employees, directors and non-employees under the above Plan during the year ended December 31, 2022, were as follows:
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Schedule of option activity |
e.The stock-based compensation expenses related to stock options and ESPP are included as follows in the expense categories:
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INCOME TAXES (Tables) |
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of loss before taxes |
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Schedule of deferred tax assets and liabilities |
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GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS (Tables) |
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of total revenues and long-lived assets by geographic area |
The following represents the total revenue for the years ended December 31, 2022, 2021 and 2020 and long-lived assets as of December 31, 2022 and 2021:
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Schedule of sales to single customer xxceeding 10%:a |
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FINANCIAL AND OTHER INCOME, NET (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of financial and other income, net |
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RELATED PARTY BALANCES AND TRANSACTIONS (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of related party balances and transactions |
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LOSSES PER SHARE (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of computation of basic and diluted losses per share |
The following table sets forth the computation of basic and diluted losses per share:
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GENERAL (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Aug. 05, 2013 |
Dec. 31, 2022 |
Nov. 30, 2021 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Upfront payment received | $ 10,000 | $ 10,000 | |
Potential milestone compensation | 250,000 | 200,000 | |
Preclinical milestone compensation | $ 23,200 | ||
Amount of investment in Compugen | $ 12,000 | $ 20,000 |
SIGNIFICANT ACCOUNTING POLICIES (Narrative) (Details) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Nov. 11, 2022 |
Aug. 05, 2013 |
Sep. 29, 2021 |
Dec. 18, 2020 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Average interest rate, short-term bank deposits in U.S. dollars | 4.84% | 0.77% | |||||
Amortization in R&D expenses | $ 6,019 | $ 1,291 | $ 829 | ||||
Revenue recognition under milestone method | $ 7,500 | $ 6,000 | $ 2,000 | ||||
Severance expenses | 468 | $ 383 | $ 572 | ||||
Upfront payment received | $ 10,000 | 10,000 | |||||
Research And Development Arrangement Payments Receivable | $ 250,000 | 200,000 | |||||
Accrued milestone payment | $ 15,500 | ||||||
Options [Member] | |||||||
Weighted average number of shares related to outstanding options excluded from the calculations of diluted net loss per share | 8,405,615 | 6,758,300 | 7,150,648 | ||||
Master Clinical Agreement One [Member] | |||||||
Investment amount | $ 12,000 | ||||||
Deferred participation of BMS in R&D expenses | 4,121 | ||||||
Master Clinical Agreement Two [Member] | |||||||
Investment amount | 20,000 | ||||||
Deferred participation of BMS in R&D expenses | $ 5,000 |
SIGNIFICANT ACCOUNTING POLICIES (Schedule of Depreciation Rates for Property and Equipment) (Details) |
12 Months Ended |
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Dec. 31, 2022 | |
Computers, software and related equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Annual depreciation rate | 33.00% |
Laboratory equipment and office furniture [Member] | |
Property, Plant and Equipment [Line Items] | |
Annual depreciation rate | 20.00% |
Laboratory equipment and office furniture [Member] | Minimum [Member] | |
Property, Plant and Equipment [Line Items] | |
Annual depreciation rate | 6.00% |
Laboratory equipment and office furniture [Member] | Maximum [Member] | |
Property, Plant and Equipment [Line Items] | |
Annual depreciation rate | 20.00% |
Leasehold improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Annual depreciation rate | Shorter of the term of the lease or useful life |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid expenses | $ 2,100 | $ 5,272 |
Government authorities | 85 | 57 |
Other | 232 | 131 |
Other accounts receivable and prepaid expenses | $ 2,417 | $ 5,460 |
LEASES (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Lessee Disclosure [Abstract] | |||
Operating Lease, Payments | $ 884 | $ 956 | $ 944 |
Operating lease right of use asset increased | 43 | ||
Operating lease liability decreased | 194 | ||
Foreign Currency Translation income | 237 | ||
Cash paid for amounts included in measurement of lease liabilities | $ 959 | $ 914 | $ 927 |
LEASES (Schedule of Weighted-Average Remaining Lease Term and Discount Rate) (Details) |
Dec. 31, 2022 |
---|---|
Lessee Disclosure [Abstract] | |
Weighted average remaining lease term | 3 years 1 month 28 days |
Weighted average discount (annual) rate | 5.52% |
LEASES (Schedule of Operating Leases) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Lessee Disclosure [Abstract] | ||
2023 | $ 699 | |
2024 | 669 | |
2025 | 609 | |
2026 | 114 | |
Total operating lease payments | 2,091 | |
Less: imputed interest | 166 | |
Present value of lease liabilities | 1,925 | |
Lease liabilities, current | 613 | $ 768 |
Lease liabilities, non- current | 1,312 | $ 1,982 |
Present value of lease liabilities | $ 1,925 |
PROPERTY AND EQUIPMENT, NET (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Property, Plant and Equipment [Line Items] | |||
Cost | $ 7,762 | $ 7,501 | |
Accumulated depreciation | 6,230 | 5,843 | |
Depreciation | 482 | 461 | $ 715 |
Obsolete property and equipment and certain nonfunctional Lab equipment [Member] | |||
Property, Plant and Equipment [Line Items] | |||
Cost | 99 | 26 | |
Accumulated depreciation | $ 95 | $ 26 |
PROPERTY AND EQUIPMENT, NET (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Cost | $ 7,762 | $ 7,501 |
Accumulated depreciation | 6,230 | 5,843 |
Depreciated cost | 1,532 | 1,658 |
Computers, software and related equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 1,617 | 1,506 |
Accumulated depreciation | 1,435 | 1,351 |
Laboratory equipment and office furniture [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 3,831 | 3,674 |
Accumulated depreciation | 3,190 | 3,114 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 2,314 | 2,321 |
Accumulated depreciation | $ 1,605 | $ 1,378 |
OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Payables and Accruals [Abstract] | ||
Employees and related accruals | $ 2,812 | $ 3,299 |
Accrued expenses | 6,396 | 4,779 |
Other accounts payable and accrued expenses | $ 9,208 | $ 8,078 |
SHAREHOLDERS' EQUITY (Schedule Of Option Activity) (Details) - Employees and Directors [Member] - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
|
Number of options | ||
Options outstanding at beginning of year | 6,976,104 | |
Options granted | 2,186,400 | |
Options exercised | (33,186) | |
Options forfeited | (778,069) | |
Options expired | (193,500) | |
Options outstanding at end of year | 8,157,749 | 6,976,104 |
Exercisable at end of year | 4,635,040 | |
Weighted average exercise price | ||
Options outstanding at beginning of year | $ 6.39 | |
Options granted | 2.58 | |
Options exercised | 3.14 | |
Options forfeited | 6.42 | |
Options expired | 4.21 | |
Options outstanding at end of year | 5.43 | $ 6.39 |
Exercisable at end of year | $ 5.68 | |
Weighted average remaining contractual life | ||
Options outstanding | 6 years 3 months 25 days | 6 years 8 months 8 days |
Exercisable at end of year | 4 years 6 months 7 days | |
Aggregate intrinsic value | ||
Options outstanding at end of year | $ 0 | $ 3,323 |
Exercisable at end of year | $ 0 |
SHAREHOLDERS' EQUITY (Schedule Of Stock Compensation Expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Stock-based compensation expenses | $ 4,328 | $ 4,276 | $ 2,772 |
Research and development expenses [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Stock-based compensation expenses | 2,158 | 1,971 | 1,123 |
Marketing and business development expenses [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Stock-based compensation expenses | 269 | 215 | 172 |
General and administrative expenses [Member] | |||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |||
Stock-based compensation expenses | $ 1,901 | $ 2,090 | $ 1,477 |
INCOME TAXES (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Israeli corporate tax rate | 23.00% | 23.00% | 23.00% |
United States [Member] | |||
Net operating loss carryforward, Expired | $ 700 | ||
Domestic Tax Authority [Member] | |||
Net operating loss carryforward | $ 398,100 |
INCOME TAXES (Encouragement Of Capital Investments) (Narrative) (Details) |
12 Months Ended |
---|---|
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Reduced tax rate | 25.00% |
INCOME TAXES (Schedule of Loss before Taxes) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Income Tax Disclosure [Abstract] | |||
Domestic (Israel) | $ 34,096 | $ 34,619 | $ 30,010 |
Foreign | (460) | (416) | (312) |
Loss before taxes on income | $ (33,636) | $ (34,203) | $ (29,698) |
INCOME TAXES (Schedule of Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2022 |
Dec. 31, 2021 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Operating loss carryforward | $ 91,704 | $ 86,068 |
Research and development | 12,083 | 9,773 |
Accrued social benefits and other | 3,123 | 2,801 |
Right of use assets | (415) | (520) |
Lease liabilities | 444 | 636 |
Property and equipment | 2 | 2 |
Deferred tax asset before valuation allowance | 106,941 | 98,760 |
Valuation allowance | (106,941) | (98,760) |
Net deferred tax asset | $ 0 | $ 0 |
GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS (Details) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022
USD ($)
Item
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Segment Reporting Geograhic Area [Line Items] | |||
Number of operating segments | Item | 1 | ||
Revenue from sales to customers | $ 7,500 | $ 6,000 | $ 2,000 |
Long-lived assets | $ 3,358 | $ 3,905 | |
Revenue [Member] | Customer Concentration Risk [Member] | Customer A [Member] | |||
Segment Reporting Geograhic Area [Line Items] | |||
Sales to a single customer exceeding 10% | 100.00% | 100.00% | 100.00% |
Europe [Member] | |||
Segment Reporting Geograhic Area [Line Items] | |||
Revenue from sales to customers | $ 7,500 | $ 6,000 | $ 2,000 |
Israel [Member] | |||
Segment Reporting Geograhic Area [Line Items] | |||
Long-lived assets | 3,239 | 3,787 | |
Unites States [Member] | |||
Segment Reporting Geograhic Area [Line Items] | |||
Long-lived assets | $ 119 | $ 118 |
FINANCIAL AND OTHER INCOME, NET (Schedule of Financial and Other Income, Net) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Other Income and Expenses [Abstract] | |||
Interest income | $ 1,437 | $ 894 | $ 1,765 |
Bank fees and other finance expenses | (27) | (25) | (42) |
Foreign currency transaction adjustments | 340 | (1) | 63 |
Gain (loss) from sales and disposals of fixed assets | (12) | 3 | 12 |
Financial and other income, net | $ 1,738 | $ 871 | $ 1,798 |
RELATED PARTY BALANCES AND TRANSACTIONS (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Related Party Transactions [Abstract] | |||
Trade payables and accrued expenses | $ 83 | $ 94 | |
Amounts charged to research and development expenses | $ 194 | $ 240 | $ 294 |
LOSSES PER SHARE (Schedule of Computation of Basic and Diluted Losses Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
|
Numerator: | |||
Net loss for basic and diluted loss per share | $ (33,694) | $ (34,203) | $ (29,698) |
Denominator: | |||
Weighted average number of ordinary shares used in computing basic net loss per share | 86,555,628 | 84,203,971 | 79,591,187 |
Weighted average number of ordinary shares used in computing diluted net loss per share | 86,555,628 | 84,203,971 | 79,591,187 |
Basic loss per ordinary share | $ (0.39) | $ (0.41) | $ (0.37) |
Diluted net loss per share | $ (0.39) | $ (0.41) | $ (0.37) |
Subsequent Events (Narrative) (Details) $ in Millions |
1 Months Ended |
---|---|
Jan. 31, 2023
USD ($)
| |
Subsequent Event [Member] | Sales Agreement with SVB Securities LLC. [Member] | |
Subsequent Event [Line Items] | |
Proceeds from issuance of common stock | $ 50 |
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