UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 or 15d-16

UNDER THE SECURITIES EXCHANGE ACT of 1934

 

For the Month of May 2018

 

001-37521

(Commission File Number)

 

INTEC PHARMA LTD.

(Translation of registrant’s name into English)

 

12 Hartom Street
Har Hotzvim, Jerusalem 9777512, Israel

(+972) (2) 586-4657

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover

Form 20-F or Form 40-F.

 

Form 20-F   Form 40-F 

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(l): _________

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7): _________

 

 

 

EXPLANATORY NOTE

 

On May 15, 2017, Intec Pharma Ltd. issued a press release titled “Intec Pharma Reports First Quarter 2018 Financial Results and Corporate Update.”

 

A copy of the press release is attached hereto as Exhibit 99.1. Also attached are the unaudited condensed interim financial information and Management’s Discussion and Analysis of Financial Condition and Results of Operation (as Exhibits 99.2 and 99.3, respectively), both of which are incorporated by reference into the Company’s registration statements on Form S-8 (File Nos. 333-209700, 333-212801 and 333-222217).

 

2

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  INTEC PHARMA LTD.  
       
  By: /s/ Nir Sassi  
    Name: Nir Sassi  
   

Title: Chief Financial Officer

 

 Date: May 15, 2018      

 

3

 

EXHIBIT INDEX

 

Exhibit No. Description
   
99.1 Press release dated May 15, 2018.
99.2 Unaudited Condensed Interim Financial Information for the Period Ended March 31, 2018.
99.3 Management’s Discussion and Analysis of Financial Condition and Results of Operation for the Period Ended March 31, 2018.

 

4

 

 

Exhibit 99.1

 

Intec Pharma Reports First Quarter 2018 Financial Results and Corporate Update

 

More than 350 patients enrolled in pivotal Phase 3 ACCORDANCE trial and more than 80% of eligible patients entered the open label extension study

 

JERUSALEM (May 15, 2018) – Intec Pharma Ltd. (NASDAQ, TASE: NTEC) (“Intec” or “the Company”) today announces financial results for the three months ended March 31, 2018 and provides a corporate update.

 

Highlights of the first quarter 2018 and recent weeks include:

 

Presented favorable data from two Phase 1 studies of the Accordion Pill Carbidopa/Levodopa (AP-CD/LD) in a poster presentation titled, Optimizing Delivery of Carbidopa/Levodopa via the Accordion Pill: Comparative PK and Safety from 2 Randomized Crossover Studies in Healthy Volunteers,” at the American Academy of Neurology 2018 Annual Meeting (AAN).

 

Raised approximately $37.5 million in a public offering of 6.75 million ordinary shares and 400,000 ordinary shares following the exercise of part of the underwriters’ over-allotment option.

 

Hosted a Key Opinion Leader event highlighting the treatment landscape in Parkinson’s disease and rang the Nasdaq Capital Markets Closing Bell on World Parkinson’s Disease Day.

 

Appointed Roger J. Pomerantz, M.D., Chief Executive Officer of Seres Therapeutics, Inc. and former Worldwide Head of Licensing & Acquisitions, Senior Vice President at Merck & Co., to the Company’s Board of Directors.

 

Partnered with LTS Lohmann Therapie-Systeme AG (“LTS”), the global leader in formulation and film technology manufacture, to establish commercial scale production capabilities for AP-CD/LD in LTS’ U.S. Food and Drug Administration (FDA) compliant facility in Germany.

 

Management Commentary

 

“We continue to build on the momentum established in 2017 and are pleased with our continued growth in 2018 as we made meaningful progress advancing our clinical, commercial and corporate objectives. We are especially pleased by the developments in our Phase 3 program of AP-CD/LD as a treatment for advanced Parkinson’s disease. To date, we have enrolled more than 350 patients and remain on track to complete enrollment of this pivotal trial later this year, with top-line results expected in mid-2019. We continue to be encouraged by the number of patients entering the open label extension study, as more than 80% of patients who completed the double-blind portion of the study have opted into the extension study. In addition, we are nearing initiation of a pharmacokinetic (PK) study of the 500 mg AP-CD/LD three times a day (TID) dose in order to demonstrate the PK profile of LD provided by AP-CD/LD. This dosing regimen is one frequently used in our ACCORDANCE study and we believe this important PK data will be of interest to potential partners and for commercialization. Finally, we were delighted to present Phase 1 PK data at AAN that are supportive of our clinical development program for AP-CD/LD and demonstrated that our technology provided more consistent LD plasma levels and less peak-trough fluctuation when compared to IR-CD/LD,” stated Jeffrey A. Meckler, Vice Chairman and Chief Executive Officer of Intec Pharma.

 

 

 

  

“We also made great inroads with our pre-commercial activities, particularly with regard to manufacturing where we have partnered for the commercial production of AP-CD/LD at LTS’ cGMP facilities in Germany. We have invested in the build-out of the commercial scale machine and expect it to be ready for delivery to LTS in the third quarter. In the meantime, a dedicated Accordion Pill manufacturing area is under construction at LTS and the scale-up and commercial manufacturing project is underway.

 

“Following on favorable PK data from our Phase 1 study of AP-CBD/THC, which combined two key components of cannabis, we are moving forward with a series of Phase 1 PK studies of each of these components alone and in combination. We will initiate the AP-THC study in the second half of 2018. We believe that exploring the individual components of cannabis provides the potential to pursue additional opportunities in target pain indications.

 

“During the first quarter we enhanced our Board with the addition of Dr. Pomerantz, expanded our executive team with the addition of Michael Gendreau, M.D., Ph.D. as Chief Medical Officer and strengthened our balance sheet with the recent $37.5 million public offering. We now have the resources to support our objectives into 2020 and the team to lead us to achieve a number of key milestones that should significantly enhance shareholder value,” concluded Mr. Meckler.

 

First Quarter 2018 Financial Results

 

Research and Development expenses (R&D), net, for the first quarter of 2018 were approximately $8.9 million, an increase of $ 5.0 million, or approximately 128%, compared to approximately $3.9 million for the first quarter of 2017. The increase was primarily due to an increase in expenses related to the progression of our Phase 3 ACCORDANCE clinical trial for AP-CD/LD, expenses related to the establishment of the commercial scale production capabilities for AP-CD/LD and payroll and related expenses, mostly due to an increase in headcount.

 

General and administrative expenses for the first quarter of 2018 were approximately $1.9 million, an increase of $0.9 million, or approximately 90%, compared to approximately $1.0 million for the first quarter of 2017. The increase was primarily due to the increase in share-based compensation to employees and payroll and related expenses primarily related to the hiring of personnel in the United States and expenses related to investor relations activities.

 

 

 

 

Comprehensive loss attributable to common stockholders for the first quarter of 2018 was approximately $10.7 million, an increase of $6.0 million, or approximately 128%, compared to the Company’s comprehensive loss for the first quarter of 2017 of approximately $4.7 million.

 

Loss per share attributed to common stockholders for the first quarter of 2018 was $0.40 compared with $0.41 for the first quarter of 2017.

 

As of March 31, 2018, the Company had cash and cash equivalents and financial assets at fair value through profit or loss of approximately $42.8 million compared with approximately $55.2 million at December 31, 2017. The Company used net cash of $12.4 million during the first quarter of 2018, primarily for the Phase 3 ACCORDANCE trial, the construction of a commercial-scale Accordion Pill production line and repayment of $2.3 million of the Israeli Innovation Authority grants, as previously reported.

 

Following the close of the quarter, the Company raised approximately $37.5 million in gross proceeds from a public offering of 6.75 million ordinary shares on the NASDAQ Capital Market, together with the exercise of the underwriters’ option to purchase 400,000 ordinary shares.

 

About Intec Pharma Ltd.  

Intec Pharma is a clinical-stage biopharmaceutical company focused on developing drugs based on its proprietary Accordion Pill platform technology. The Company’s Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention and specific release mechanism. The Company’s product pipeline includes two product candidates in clinical trial stages: Accordion Pill Carbidopa/Levodopa, or AP-CD/LD, which is being developed for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, and AP-cannabinoids, an Accordion Pill to deliver either or both of the primary cannabinoids contained in Cannabis sativa, cannabidiol (CBD) and tetrahydrocannabinol (THC) for various indications including low back neuropathic pain and fibromyalgia.

 

For more information, visit www.intecpharma.com.

 

 

 

Cautionary Note Regarding Forward-Looking Statements 

This press release contains forward-looking statements about the Company’s expectations, beliefs and intentions. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should”, “could”, “might”, “seek”, “target”, “will”, “project”, “forecast”, “continue” or “anticipate” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements are based on assumptions and assessments made in light of management’s experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements in this press release are made as of the date of this press release, and the company undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of the company’s control. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in the company’s filings with the Securities and Exchange Commission, and include the following: the company’s ability to develop and commercialize its product candidates and obtain additional financing necessary therefor; the length, cost and uncertain results of the company’s clinical trials; including uncertainty regarding the Company’s ability to enroll the required number of patients therein; the potential of adverse side effects, other safety risks, or legal prohibitions on the use of certain products in certain jurisdictions that could preclude the approval of the company’s drug candidates; the availability of reimbursement from government authorities and health insurance companies for the company’s products; the impact of product liability lawsuits; and the influence of extensive and costly government regulation.

 

Intec Pharma Investor Contact: 

Anne Marie Fields 

VP-Corporate Communications & Investor Relations

646-200-8808  

amf@intec-us.com

 

# # #

 

 

 

 

INTEC PHARMA LTD. 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited)

 

   December 31,   March 31, 
  

2017

  

2018

 
  

U.S. dollars in thousands

 
A s s e t s          
CURRENT ASSETS:          
Cash and cash equivalents   53,324    41,134 
Financial assets at fair value through profit or loss   1,825    1,706 
Restricted bank deposits   69    68 
Other receivables   1,125    1,223 
TOTAL  CURRENT ASSETS   56,343    44,131 
           
NON-CURRENT ASSETS-          
Property and equipment   8,206    10,022 
TOTAL  ASSETS   64,549    54,153 

Liabilities and equity

          
CURRENT LIABILITIES -          
Accounts payable and accruals:          
Trade   1,854    3,575 
Other   3,893    1,782 
TOTAL CURRENT LIABILITIES   5,747    5,357 
NON-CURRENT LIABILITIES -          
COMMITMENTS AND CONTINGENT LIABILITIES          
TOTAL  LIABILITIES   5,747    5,357 
           

EQUITY:

          
Ordinary shares   727    727 
Share premium   148,968    148,968 
Currency translation differences   (378)   (378)
Accumulated deficit   (90,515)   (100,521)
TOTAL EQUITY   58,802    48,796 
TOTAL LIABILITIES AND EQUITY   64,549    54,153 

 

 2

 

  

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE LOSS

(Unaudited)

 

  

Three months ended
March 31

 
  

2017

  

2018

 
  

U.S. dollars in thousands

 
RESEARCH AND DEVELOPMENT EXPENSES   (3,917)   (9,215)
LESS - PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES       335 
RESEARCH AND DEVELOPMENT EXPENSES, net   (3,917)   (8,880)
GENERAL AND ADMINISTRATIVE EXPENSES   (1,011)   (1,910)
OTHER GAINS (LOSSES), net   96    (73)
OPERATING LOSS   (4,832)   (10,863)
FINANCIAL INCOME   156    203 
FINANCIAL EXPENSES   (8)   (6)
FINANCIAL INCOME, net   148    197 
LOSS BEFORE TAXES ON INCOME   (4,684)   (10,666)
TAXES ON INCOME       (63)
LOSS AND COMPREHENSIVE LOSS   (4,684)   (10,729)
           
   $ 
BASIC AND DILUTED LOSS PER ORDINARY SHARE   0.40    0.41 

 

 3

 

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited) 

 

  

Ordinary shares

                 
  

Number of

shares

   Issued and paid-up share capital   Share
premium
  

Currency

translation
differences

  

Accumulated

deficit

   Total 
                               
BALANCE AT JANUARY 1, 2018   26,075,770    727    148,968    (378)   (90,515)   58,802 
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2018:                              
Share-based compensation                       723    723 
Comprehensive loss for the period                       (10,729)   (10,729)
BALANCE AT MARCH 31, 2018   26,075,770    727    148,968    (378)   (100,521)   48,796 
                               
BALANCE AT JANUARY 1, 2017   11,448,191    727    84,980    (378)   (62,625)   22,704 
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2017:                              
Share-based compensation                       216    216 
Proceeds of issuance shares, net of issuance costs   2,289,638         9,525              9,525 
Comprehensive loss for the period                       (4,684)   (4,684)
BALANCE AT MARCH 31, 2017   13,737,829    727    94,505    (378)   (67,093)   27,761 

 

 4

 

 

INTEC PHARMA LTD. 

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

  

Three months ended

March 31 

 
   2017   2018 
   U.S. dollars in thousands 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Comprehensive loss   (4,684)   (10,729)
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities (see appendix A)   488    474 
Net cash used in operating activities   (4,196)   (10,255)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (332)   (77)
Advances payments for property and equipment       (1,945)
Proceeds from disposal  of financial assets at fair value through profit or loss, net   179    46 
Proceeds from sale of property and equipment   7     
Net cash used in investing activities   (146)   (1,976)
           
CASH FLOWS FROM FINANCING ACTIVITIES -          
Issuance of shares, net of issuance costs   9,525     
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   5,183    (12,231)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD   16,376    53,324 
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS   28    41 
CASH AND CASH EQUIVALENTS - END OF PERIOD   21,587    41,134 

  

 5

 

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three months ended
March 31
 
   2017   2018 
   U.S. dollars in thousands 
APPENDIX A:          
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities:          
Income and expenses not involving cash flows:          
Depreciation   198    206 
Changes in the fair value of derivative financial instruments   (69)    
Exchange differences on cash and cash equivalents   (28)   (41)
Exchange differences on restricted deposits   (4)   1 
Losses (gains) on financial assets at fair value through profit or loss   (98)   73 
Loss on sale of property and equipment   2     
Share-based compensation to employees and service providers   216    723 
    217    962 
Changes in operating asset and liability items:          
Decrease (increase) in other receivables   99    (98)
Increase (decrease) in accounts payable and accruals   172    (390)
    271    (488)
    488    474 
APPENDIX B:          

Information regarding investment activities not involving cash flows -

          
Liability with respect to property purchase   141     
Supplementary information to the statement of cash flows -           
Interest received  38    117 

 

 6

 

Exhibit 99.2

 

INTEC PHARMA LTD. 

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED) 

March 31, 2018

  

 

 

INTEC PHARMA LTD. 

CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

(UNAUDITED)

March 31, 2018

  

TABLE OF CONTENTS

 

    Page

CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS IN U.S. DOLLARS IN THOUSANDS ($): 

   
Consolidated Statements of Financial Position   2
Consolidated Statements of Comprehensive Loss   3
Consolidated Statements of Changes in Equity   4
Consolidated Statements of Cash Flows   5-6
Notes to the Condensed Consolidated Interim Financial Statements   7-11

 

 

 

 

 

 

 

 

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

(Unaudited) 

 

   December 31,   March 31, 
  

2017 

  

2018 

 
  

U.S. dollars in thousands 

 
           
A s s e t s          
CURRENT ASSETS:          
Cash and cash equivalents   53,324    41,134 
Financial assets at fair value through profit or loss   1,825    1,706 
Restricted bank deposits   69    68 
Other receivables   1,125    1,223 
TOTAL  CURRENT ASSETS   56,343    44,131 
           
NON-CURRENT ASSETS-          
Property and equipment   8,206    10,022 
TOTAL  ASSETS   64,549    54,153 
           

Liabilities and equity 

          
CURRENT LIABILITIES -          
Accounts payable and accruals:          
Trade   1,854    3,575 
Other   3,893    1,782 
TOTAL CURRENT LIABILITIES   5,747    5,357 
NON-CURRENT LIABILITIES -          
COMMITMENTS AND CONTINGENT LIABILITIES          
TOTAL  LIABILITIES   5,747    5,357 
           

EQUITY: 

          
Ordinary shares   727    727 
Share premium   148,968    148,968 
Currency translation differences   (378)   (378)
Accumulated deficit   (90,515)   (100,521)
TOTAL  EQUITY   58,802    48,796 
TOTAL  LIABILITIES AND EQUITY   64,549    54,153 

 

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

 

 2

 

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE LOSS

(Unaudited) 

 

   Three months ended
March 31
 
   2017   2018 
   U.S. dollars in thousands 
RESEARCH AND DEVELOPMENT EXPENSES   (3,917)   (9,215)
LESS - PARTICIPATION IN RESEARCH AND DEVELOPMENT EXPENSES       335 
RESEARCH AND DEVELOPMENT EXPENSES, net   (3,917)   (8,880)
GENERAL AND ADMINISTRATIVE EXPENSES   (1,011)   (1,910)
OTHER GAINS (LOSSES), net   96    (73)
OPERATING LOSS   (4,832)   (10,863)
FINANCIAL INCOME   156    203 
FINANCIAL EXPENSES   (8)   (6)
FINANCIAL INCOME, net   148    197 
LOSS BEFORE TAXES ON INCOME   (4,684)   (10,666)
TAXES ON INCOME       (63)
LOSS AND COMPREHENSIVE LOSS   (4,684)   (10,729)
           
    $ 
BASIC AND DILUTED LOSS PER ORDINARY SHARE   0.40    0.41 

 

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

 

 3

 

 

(Continued) - 1

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

(Unaudited) 

 

   Ordinary shares                 
   Number of
shares
   Issued and
paid-up
share capital
   Share
premium
   Currency translation differences   Accumulated deficit   Total 
BALANCE AT JANUARY 1, 2018   26,075,770    727    148,968    (378)   (90,515)   58,802 
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2018:                              
Share-based compensation                       723    723 
Comprehensive loss for the period                       (10,729)   (10,729)
BALANCE AT MARCH 31, 2018   26,075,770    727    148,968    (378)   (100,521)   48,796 
                               
BALANCE AT JANUARY 1, 2017   11,448,191    727    84,980    (378)   (62,625)   22,704 
CHANGES IN THE THREE-MONTH PERIOD ENDED MARCH 31, 2017:                              
Share-based compensation                       216    216 
Proceeds of issuance shares, net of issuance costs   2,289,638         9,525              9,525 
Comprehensive loss for the period                       (4,684)   (4,684)
BALANCE AT MARCH 31, 2017   13,737,829    727    94,505    (378)   (67,093)   27,761 

 

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

 

 4

 

 

(Continued) - 1

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited) 

 

   Three months ended
March 31
 
   2017   2018 
   U.S. dollars  in thousands 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Comprehensive loss   (4,684)   (10,729)
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities (see appendix A)   488    474 
Net cash used in operating activities   (4,196)   (10,255)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (332)   (77)
Advances payments for property and equipment       (1,945)
Proceeds from disposal  of financial assets at fair value through profit or loss, net   179    46 
Proceeds from sale of property and equipment   7     
Net cash used in investing activities   (146)   (1,976)
           
CASH FLOWS FROM FINANCING ACTIVITIES -          
Issuance of shares, net of issuance costs   9,525     
           
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   5,183    (12,231)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD   16,376    53,324 
EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS   28    41 
CASH AND CASH EQUIVALENTS - END OF PERIOD   21,587    41,134 

 

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

 5

 

 

(Concluded) - 2

 

INTEC PHARMA LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Unaudited) 

 

  

Three months ended

March 31

 
  

2017

  

2018

 
  

U.S. dollars in thousands

 
APPENDIX A:          
           
Adjustments to reconcile loss and comprehensive loss to net cash used in operating activities:          
           
Income and expenses not involving cash flows:          
Depreciation   198    206 
Changes in the fair value of derivative financial instruments   (69)    
Exchange differences on cash and cash equivalents   (28)   (41)
Exchange differences on restricted deposits   (4)   1 
Losses (gains) on financial assets at fair value through profit or loss   (98)   73 
Loss on sale of property and equipment   2     
Share-based compensation to employees and service providers   216    723 
    217    962 
Changes in operating asset and liability items:          
    Decrease (increase) in other receivables   99    (98)
    Increase (decrease) in accounts payable and accruals   172    (390)
    271    (488)
    488    474 
APPENDIX B:          

Information regarding investment activities not involving cash flows -

          
Liability with respect to property purchase   141     
Supplementary information to the statement of cash flows -          
Interest received   38    117 

 

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

 

 6

 

 

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited) 

 

NOTE 1 - GENERAL: 

 

a.General:

 

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

 

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

 

Intec’s ordinary shares are being traded on the Tel-Aviv Stock Exchange Ltd. (“TASE”) and on the Nasdaq Capital Market (“Nasdaq”). 

 

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

 

2)Intec together with its Subsidiary (the “Company”) engaged in research and development activities and has not yet generated revenues from its operations. Accordingly, there is no assurance that the Company’s operations will generate positive cash flows. As of March 31, 2018, the cumulative losses of the Company were approximately USD 100.5 million. Management expects that the Company will continue to incur losses from its operations, which will result in negative cash flows from operating activities. The Company’s management estimates that its cash resources, as of the date of approval of the financial statements, will allow the Company to complete its Phase III clinical trial for AP-CD/LD. However, management estimates that further fund raising will be required in order for the Company to complete the research and development of all of its product candidates including the manufacturing activities of the AP-CD/LD in the foreseeable future. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

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

 

3)On April 13, 2018, the Company completed an underwritten public offering of its ordinary shares on the Nasdaq. The Company raised, together with the exercise of part of the underwriting over-allotment option, a total of approximately $34.9 million (net of underwriting discounts, commissions and other offering expenses in the amount of $2.6 million). For more details see note 9.

 

 7

 

 

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited)

 

NOTE 1 – GENERAL (continued):

 

b.Approval of consolidated financial statements

 

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

 

NOTE 2 - BASIS OF PREPARATION 

 

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

 

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES:  

 

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

 

b.International Financial Reporting Standard No. 16 “Leases”, which is not yet in effect, and the Company did not elect to early adopt, was disclosed in the 2017 annual financial statements.

 

NOTE 4 - CRITICAL ACCOUNTING ESTIMATES 

 

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

 

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

 

NOTE 5 - FINANCIAL INSTRUMENTS:

 

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

 

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

 

 8

 

 

INTEC PHARMA LTD.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (continued)

(Unaudited) 

 

NOTE 6 - EQUITY: 

 

Share-based payment to employees: 

 

1)The following are the grants of options to employees:

 

Date of grant 

  

Number of
options
granted
 

  

Exercise price
per option
(USD)
 

  

Fair value on
grant date- USD
in thousands
 

  

Expiration date  

January 2018    135,000    5.19    389   January 2025
February 2018    865,000    6.10 - 6.67    2,089   February 2025
March 2018    75,000    6.40 -  6.45    209   March 2025

 

Vesting conditions of all of the above options are service conditions and the options will vest over a three-year period, with one third of the options vesting at the end of the first year from the date of grant, and the remaining vesting in 8 equal quarterly tranches, subsequent to the first year from the grant date. 

 

Each 1 option is exercisable into 1 ordinary share. 

 

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

 

Date of grant 

  

Share price on date of grant- in USD 

  

Expected dividend 

 

Expected volatility 

  

Risk free interest* 

  

Expected term 

January 2018    6.05   None   46.32%    2.3%  5 years
February 2018    5.70 - 6.10   None   45.87% - 46.47%    2.5% - 2.7%   5 years
March 2018    6.40 - 6.45   None   46.03%    2.6%   5 years

  

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

 

2)During the three-month period ended March 31, 2018, options to purchase 11,082 ordinary shares granted to employees were forfeited or expired.

 

 9

 

 

INTEC PHARMA LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 

 

NOTE 7 - COMMITMENTS AND CONTINGENT LIABILITIES: 

 

a.In April 2017, the Company engaged with an international manufacturer for ordering a large scale automated production line for manufacturing Accordion Pills in the amount of approximately € 7.5 million. The order covers engineering, manufacture and assembly of the automated production line. As of March 31, 2018, the Company had transferred payments of approximately € 5.25 million (approximately $ 6.2 million) and recognized it as advances for property and equipment.

 

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

 

c.In March 2018, the Company entered into a Term Sheet for Manufacturing Services with an international manufacturer (the “Manufacturer”) for the manufacture of AP-CD/LD. Under the Term Sheet, the Company will bear the costs incurred by the Manufacturer to acquire the production equipment for AP-CD/LD, however such amount will later be reimbursed to the Company by the Manufacturer in the form of a reduction in the purchase price of the product. The Term Sheet contains several termination rights which are expected to be included in a definitive manufacturing and supply agreement.

 

NOTE 8 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES: 

 

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

 

a.        Transactions with related parties:

 

   Three months ended March 31  
   2017   2018 
Key management compensation expenses:  U.S. dollars in thousands 
Salaries and short-term employee benefits   164    218 
Long term employment benefits   11     
Share-based compensation expenses   114    213 
    289    431 

  

b.       Balances with related parties: 

   December 31,
2017
   March 31,
2018
 
  

U.S. dollars in thousands

 
Statement of financial position items -        
current liabilities -  Accounts payable and accruals - other   190    91 

 

 10

 

 

INTEC PHARMA LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

NOTE 9 - EVENT SUBSEQUENT TO MARCH 31, 2018

 

On April 13, 2018, the Company completed an underwritten public offering of its ordinary shares on the Nasdaq, pursuant to which the Company issued 6,750,000 ordinary shares with no par value at a price of $5.25 per ordinary share. On May 10, 2018, the underwriters partially exercised their over-allotment option and purchased 400,000 additional ordinary shares. The total net proceeds were approximately $34.9 million, after deducting underwriting discounts, commissions and other offering expenses.

 

 

 

 

 

 

 

 11

 

Exhibit 99.3

 

Management’s Discussion and Analysis of Financial Condition and Results of Operation

  

General

 

The following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated interim financial statements and the notes to the financial statements, which are included in this Report of Foreign Private Issuer on Form 6-K. This information should also be read in conjunction with the information contained in our Annual Report on Form 20-F for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 9, 2018, including the annual financial statements as of December 31, 2017 and their accompanying notes included therein.

 

This Report of Foreign Private Issuer on Form 6-K of Intec Pharma Ltd. contains forward looking statements about the Company’s expectations, beliefs and intentions. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should”, “could”, “might”, “seek”, “target”, “will”, “project”, “forecast”, “continue” or “anticipate” or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements are based on assumptions and assessments made in light of management’s experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements in this Report of Foreign Private Issuer on Form 6-K are made as of the date of this Report of Foreign Private Issuer on Form 6-K, and the Company undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of the Company’s control. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in the Company’s filings with the Securities and Exchange Commission, and include the following: the Company’s ability to develop and commercialize its product candidates and obtain additional financing necessary therefor; the length, cost and uncertain results of the Company’s clinical trials; including uncertainty regarding the Company’s ability to enroll the required number of patients therein; the potential of adverse side effects, other safety risks, or legal prohibitions on the use of certain products in certain jurisdictions that could preclude the approval of the Company’s drug candidates; the availability of reimbursement from government authorities and health insurance companies for the Company’s products; the impact of product liability lawsuits; and the influence of extensive and costly government regulation.

 

All references to “we,” “us,” “our,” “Intec”, “the Company” and “our Company” in this Report of Foreign Private Issuer on Form 6-K are to Intec Pharma Ltd. and its U.S. subsidiary Intec Pharma Inc., unless the context otherwise requires.

 

Overview

 

We are a clinical stage biopharmaceutical company focused on developing drugs based on our proprietary Accordion Pill platform technology, which we refer to as the Accordion Pill. Our Accordion Pill is an oral drug delivery system that is designed to improve the efficacy and safety of existing drugs and drugs in development by utilizing an efficient gastric retention, or GR, and specific release mechanism. Our product pipeline currently includes several product candidates in various clinical trial stages. Our leading product candidate, Accordion Pill Carbidopa/Levodopa, or AP-CD/LD, is being developed for the indication of treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients.

 

We have successfully completed a Phase II clinical trial for AP-CD/LD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients and have agreed with the U.S. Food and Drug Administration, or the FDA, on the remaining clinical development program for AP-CD/LD for the treatment of Parkinson’s disease symptoms in advanced Parkinson’s disease patients, including the main principles of the single required pivotal Phase III clinical trial in advanced Parkinson’s disease patients. We have enrolled more than 350 patients to date in the ACCORDANCE study, the pivotal Phase III clinical trial for AP-CD/LD, and we currently expect to complete patient enrollment in the trial during the second half of 2018.

 

 

 

  

In our correspondence with the FDA, the FDA previously agreed that an acceptable regulatory pathway for AP-CD/LD would be to file a new drug application, or NDA, pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, which is a streamlined approval pathway that may accelerate the time to commercialize and decrease the costs of FDA approval for AP-CD/LD, as compared to those typically associated with a new chemical entity.

 

In addition, we have initiated a clinical development program for our Accordion Pill platform with the two primary cannabinoids contained in cannabis sativa, cannabidiol, or CBD, and 9-tetrahydrocannabinol, or THC, both individually and combined, which we refer to as AP-Cannabinoids. We are formulating and testing CBD and THC for the treatment of various indications, including low back pain, neuropathic pain and fibromyalgia. AP-Cannabinoids are designed to extend the absorption phase of CBD and THC, resulting in more consistent levels for an improved therapeutic effect, which may address several major drawbacks of current methods of treatments, such as short duration of effect, delayed onset, variability of exposure, variability of the administered dose and adverse events that correlate with peak levels.

 

In August 2017, we announced the results of a Phase I clinical trial that compared the safety, tolerability and pharmacokinetic (PK) of AP-CBD/THC with Sativex®. This Phase I trial was a single-center, single-dose, randomized, three-way crossover study in Israel to compare the safety, tolerability and PK of two formulations of AP-CBD/THC with Buccal Sativex® in 21 normal, healthy volunteers. The results showed that patients in the AP-CBD/THC arm demonstrated significant improvements in exposure to CBD (290% to 330%) and THC (25% to 50%) compared with Sativex®. The median time to peak concentration was 2-3 times longer than Sativex and absorption was significantly higher. Additionally, the formation of THC metabolites was meaningfully reduced, and the drug was found to be safe and well-tolerated with no serious adverse events reported. Sativex® is an oral buccal spray containing CBD and THC that is commercially available outside the United States. Following the Phase I clinical trial, we evaluated the program and decided as a next step to develop two new Accordion Pills containing only the individual cannabinoid components, namely CBD and THC. A Phase I PK study with AP-THC is planned to be initiated in the second half of 2018. We believe that exploring the individual components will provide additional indications to pursue.

 

In March 2018, we entered into a Term Sheet for Manufacturing Services with LTS Lohmann Therapie-Systeme AG, or LTS, for the manufacture of AP-CD/LD. Under the term sheet, LTS will exclusively manufacture and supply us with AP-CD/LD capsules using our proprietary Accordion Pill production technology in LTS’ manufacturing facility in Andernach, Germany upon the completion of assembly of the production line and subject to the execution and terms of a manufacturing and supply agreement to be negotiated and entered into between us and LTS.

 

Under the terms of the term sheet, we will bear the costs incurred by LTS to acquire the production equipment for AP-CD/LD; however, such amount will later be reimbursed to us by LTS in the form of a reduction in the purchase price of the product. The term sheet contains several termination rights which are expected to be included in a definitive manufacturing and supply agreement, including, among others, in the cases of breach by either party, as well as our right to terminate in the case of change of control of LTS or us, and in the event, we decide to halt the development of AP-CD/LD.

 

 -2-

 

Basis of Presentation

 

Our condensed consolidated interim financial statements as of March 31, 2018 and for the three months then ended, or the condensed consolidated interim financial statements, have been prepared in accordance with International Accounting Standard IAS 34, “Interim Financial Reporting”. These condensed consolidated interim financial statements, which are unaudited, do not include all disclosures necessary for a complete statement of financial position, results of operations, and cash flow in conformity with International Financial Reporting Standards, or IFRS. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements as of December 31, 2017 and for the year then ended and their accompanying notes, which have been prepared in accordance with IFRS as published by the International Accounting Standards Board, or IASB.

 

Results of Operations

 

Comparison of Three Months Ended March 31, 2018 and 2017

 

Research and Development Expenses, Net

 

Our research and development expenses, net, for the three-month period ended March 31, 2018 amounted to approximately $8.9 million, an increase of $5.0 million, or approximately 128%, compared to approximately $3.9 million in the comparable period in the preceding year. The increase was primarily due to an increase in expenses related to the progression of the ACCORDANCE study, our Phase III clinical trial for AP-CD/LD, expenses related to the establishment of the commercial scale production capabilities for AP-CD/LD and payroll and related expenses, mostly due to an increase in headcount. 

 

General and Administrative Expenses 

 

Our general and administrative expenses for the three-month period ended March 31, 2018 amounted to approximately $1.9 million, an increase of $0.9 million, or approximately 90%, compared to approximately $1.0 million in the comparable period in the preceding year. The increase was primarily due to the increase in share-based compensation to employees and payroll and related expenses primarily related to the hiring of management personnel in the United States and expenses related to investor relations activities.    

 

Financial Income, Net

 

For the three-month period ended March 31, 2018, we had financial income from interest on cash and cash equivalents in the amount of approximately $146,000 and foreign currency exchange income in the amount of approximately $57,000 offset by financial expenses from bank fees.

 

Loss and Comprehensive Loss

 

As a result of the foregoing, for the three-month period ended March 31, 2018, our loss and comprehensive loss was approximately $10.7 million, an increase of $6.0 million, or approximately 128%, compared to our loss and comprehensive loss for the three-month period ended March 31, 2017 of approximately $4.7 million. The increase was mainly due to an increase in research and development expenses, as detailed above.

 

Liquidity and Capital Resources  

 

Since our inception, we have funded our operations primarily through public and private offerings (in Israel and in the United States) of our equity securities, grants from governmental authorities and grants from other organizations such as the Michael J. Fox Foundation, as well as payments received under feasibility and related agreements that we have entered into with multinational pharmaceutical companies, pursuant to which we have historically been entitled to full coverage of our development costs with regard to the projects specified in those agreements. 

  

 -3-

 

As of March 31, 2018, we had cash and cash equivalents and financial assets at fair value through profit or loss of approximately $42.8 million. As of December 31, 2017, we had cash and cash equivalents and financial assets at fair value through profit or loss of approximately $55.2 million. 

 

Net cash used in operating activities was approximately $10.3 million for the three-month period ended March 31, 2018 compared with net cash used in operating activities of approximately $4.2 million for the three-month period ended March 31, 2017. This increase resulted primarily from an increase in our loss and comprehensive loss of approximately $6.0 million.

 

We had negative cash flow from investing activities of approximately $2.0 million for the three-month period ended March 31, 2018 compared to negative cash flow from investing activities of approximately $0.2 million for the three-month period ended March 31, 2017. This increase resulted primarily from an increase in purchase of property and equipment in the amount of approximately $1.7 million.

 

In April 2018, we completed an underwritten public offering of our ordinary shares on the Nasdaq Capital Market, pursuant to which we issued 6,750,000 ordinary shares at a price of $5.25 per share. On May 10, 2018, the underwriters partially exercised their over-allotment option and purchased 400,000 additional ordinary shares. The total net proceeds were approximately $34.9 million (net of underwriting discounts, commissions and other offering expenses in the amount of $2.6 million).

 

Current Outlook

 

We estimate that our cash resources as of the date of this Report of Foreign Private Issuer on Form 6-K will allow us to complete our Phase III clinical trial for AP-CD/LD. We believe however, that further fund raising will be required in order to complete the research and development of all of our product candidates, including the manufacturing activities of the AP-CD/LD in the foreseeable future. As a result, there is substantial doubt about our ability to continue as a going concern. We expect to satisfy our future cash needs through submissions of applications for grants from private funds, license agreements with third parties and capital raising from the public, private investors and institutional investors, such as through the public offering of ordinary shares that we completed in April 2018. We may also engage with a partner in order to share the costs associated with the development and manufacturing of our product candidates. For more information see note 1a(2) in our consolidated interim financial statements for the three months ended March 31, 2018.

 

 -4-