UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q/A

 

 

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2018

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                          to                         

 

001-33357

(Commission file number)

 

 

 

PROTALIX BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware __65-0643773__
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
   
2 Snunit Street
Science Park
POB 455
 
Carmiel, Israel 20100
(Address of principal executive offices) (Zip Code)

 

+972-4-988-9488

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨ 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x  No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer ¨ Accelerated filer x
Non-accelerated filer ¨       
Smaller reporting company ¨   Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.              ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨  No  x

 

On May 1, 2018, approximately 145,569,955 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

 

 

 

 

 

 

Except where the context otherwise requires, the terms “we,” “us,” “our” and “the Company” refer to the business of Protalix BioTherapeutics, Inc. and its consolidated subsidiaries, and “Protalix” or “Protalix Ltd.” refers to the business of Protalix Ltd., our wholly-owned subsidiary and sole operating unit.

 

Explanatory Note

 

This Amendment No. 1 to Form 10-Q, or this Amendment, amends the Quarterly Report on Form 10-Q for the three months ended March 31, 2018 we originally filed with the Securities and Exchange Commission, or the Commission, on May 9, 2018, or the Original Filing, in connection with the recognition in this Amendment of revenue from a license agreement that was not recognized previously.

 

All amendments and restatements to the financial statements are non-cash in nature.

 

Restatement

 

As further discussed in Note 1 to our unaudited condensed consolidated financial statements in Part I, Item 1, “Financial Statements” of this Amendment, on March 14, 2019, we concluded that we would restate our previously issued consolidated financial statements as of and for the three months ended March 31, 2018, as set forth in the Original Filing in connection with the recognition in this Amendment of revenue from a license agreement that was not recognized previously.

 

Disclosure Controls and Procedures

 

Management has reassessed its evaluation of the effectiveness of the design and operation of its disclosure controls and procedures as of March 31, 2018. As a result of that reassessment, management has concluded that we did not maintain effective disclosure controls and procedures due to the material weakness in internal control over financial reporting which existed at that date. For a description of the material weakness in internal control over financial reporting and actions taken, and to be taken, to address the material weakness, see Part 1, Item 4 “Controls and Procedures” of this Amendment.

 

Amendment

 

The purpose of this Amendment is to restate our previously issued unaudited condensed consolidated financial statements and related disclosures as of and for the three months ended March 31, 2018 in connection with the recognition in this Amendment of revenue from a license agreement that was not recognized previously. This Amendment also includes (a) an amended Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to reflect the correction of the errors described above, and (b) an amended Part I, Item 4 “Controls and Procedures” to restate the conclusion on the effectiveness of disclosure controls and procedures. Disclosure controls and procedures were deemed effective in the Original Filing on May 9, 2018 and are deemed ineffective as a result of the material weakness described in Part I, Item 4 “Controls and Procedures” of this Amendment.

 

Except as expressly set forth herein, including in the notes to the consolidated financial statements, this Amendment does not reflect events occurring after the date of the Original Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendment discussed above. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings with the Commission. Information not affected by the restatement is unchanged and reflects disclosures made at the time of the filing of the Original Filing.

 

Items Amended in this Filing

 

For reasons discussed above, we are filing this Amendment in order to amend the following items in our Original Filing to the extent necessary to reflect the adjustments discussed above and make corresponding revisions to our financial data cited elsewhere in this Amendment in connection with the recognition in this Amendment of revenue from a license agreement that was not recognized previously:

 

·Part I, Item 1. Financial Statements
·Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
·Part I, Item 4. Controls and Procedures

 

In accordance with applicable Commission rules, this Amendment includes new certifications required by Rule 13a-14 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, from our Chief Executive Officer and Chief Financial Officer dated as of the date of filing of this Amendment.

 

 

 

 

FORM 10-Q 

TABLE OF CONTENTS

 

   

Page

     
  PART I – FINANCIAL INFORMATION  
  Cautionary Statement Regarding Forward-Looking Statements ii
Item 1. Financial Statements  
  Condensed Consolidated Balance Sheets – As of March 31, 2018 (as restated) (Unaudited) and December 31, 2017 1
  Condensed Consolidated Statements of Operations (Unaudited) – For the Three Months Ended March 31, 2018 (as restated) and 2017 2
  Condensed Consolidated Statements of Changes in Capital Deficiency (Unaudited) – For the Three Months Ended March 31, 2018 (as restated) and 2017 3
  Condensed Consolidated Statements of Cash Flows (Unaudited) – For the Three Months Ended March 31, 2018 (as restated) and 2017 4
  Notes to Condensed Consolidated Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 19
     
  PART II – OTHER INFORMATION  
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5. Other Information 21
Item 6. Exhibits 21
     
Signatures 24

 

i

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

The statements set forth under the captions “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other statements included elsewhere in this Quarterly Report on Form  10-Q, which are not historical, constitute “forward-looking statements” within the meanings of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, including statements regarding expectations, beliefs, intentions or strategies for the future. When used in this report, the terms “anticipate,” “believe,” “estimate,” “expect,” “can,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and words or phrases of similar import, as they relate to the Company or our subsidiaries or our management, are intended to identify forward-looking statements. We intend that all forward-looking statements be subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance, and we undertake no obligation to update or revise, nor do we have a policy of updating or revising, any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required under applicable law. Forward-looking statements are subject to many risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements.

 

Examples of the risks and uncertainties include, but are not limited to, the following:

 

·failure or delay in the commencement or completion of our preclinical studies and clinical trials, which may be caused by several factors, including: slower than expected rates of patient recruitment; unforeseen safety issues; determination of dosing issues; lack of effectiveness during clinical trials; inability or unwillingness of medical investigators and institutional review boards to follow our clinical protocols; inability to monitor patients adequately during or after treatment; and or lack of sufficient funding to finance our clinical trials;

 

·the risk that the results of our clinical trials will not support the applicable claims of superiority, safety or efficacy and that our product candidates will not have the desired effects or will have undesirable side effects or other unexpected characteristics;

 

·risks relating to our ability to manage our relationship with Chiesi Farmaceutici S.p.A., or Chiesi, and any other collaborator, distributor or partner;

 

·risks relating to our ability to make scheduled payments of the principal of, to pay interest on or to refinance or satisfy conversions of our outstanding convertible notes or any other indebtedness;

 

·risks relating to our ability to defease the remaining outstanding 4.50% convertible notes on or prior to June 16, 2018;

 

·risks relating to the compliance by Fundação Oswaldo Cruz, or Fiocruz, an arm of the Brazilian Ministry of Health, or the Brazilian MoH, with its purchase obligations under our supply and technology transfer agreement, which may have a material adverse effect on us and may also result in the termination of such agreement;

 

·our dependence on performance by third-party providers of services and supplies, including without limitation, clinical trial services;

 

·risks relating to our ability to finance our activities and research programs;

 

·delays in preparing and filing applications for regulatory approval of our product candidates in the United States, the European Union and elsewhere;

 

·the impact of development of competing therapies and/or technologies by other companies;

 

·the risk that products that are competitive to our product candidates may be granted orphan drug status in certain territories and, therefore, one or more of our product candidate may become be subject to potential marketing and commercialization restrictions;

 

·risks related to our supply of drug product to Pfizer Inc., or Pfizer, pursuant to our amended and restated exclusive license and supply agreement with Pfizer;

 

ii

 

 

·risks related to the commercialization efforts for taliglucerase alfa in Brazil;

 

·risks related to our expectations with respect to the potential commercial value of our product and product candidates;

 

·the inherent risks and uncertainties in developing the types of drug platforms and products we are developing;

 

·potential product liability risks, and risks of securing adequate levels of product liability and clinical trial insurance coverage;

 

·the possibility of infringing a third-party’s patents or other intellectual property rights;

 

·the uncertainty of obtaining patents covering our products and processes and in successfully enforcing our intellectual property rights against third-parties;

 

·risks relating to changes in healthcare laws, rules and regulations in the United States or elsewhere; and

 

·the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of the operations of regulatory authorities, our subsidiaries, our manufacturing facilities and our customers, suppliers, distributors, collaborative partners, licensees and clinical trial sites.

 

Companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced or late-stage clinical trials, even after obtaining promising earlier trial results or preliminary findings for such clinical trials. Even if favorable testing data is generated from clinical trials of a drug product, the U.S. Food and Drug Administration, or the FDA, or foreign regulatory authorities may not accept or approve a marketing application filed by a pharmaceutical or biotechnology company for the drug product.

 

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. These and other risks and uncertainties are detailed under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2017, and are described from time to time in the reports we file with the Commission.

 

iii

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROTALIX BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

  

March 31, 2018

 (Unaudited)
(as restated)

   December 31,
2017
 
ASSETS          
           
CURRENT ASSETS:          
Cash and cash equivalents  $41,319   $51,163 
Accounts receivable – Trade   4,756    1,721 
Other assets   2,594    1,934 
Inventories   7,019    7,833 
Total current assets  $55,688   $62,651 
           
FUNDS IN RESPECT OF EMPLOYEE RIGHTS UPON RETIREMENT  $1,798   $1,887 
PROPERTY AND EQUIPMENT, NET   7,311    7,676 
Total assets  $64,797   $72,214 
           
LIABILITIES NET OF CAPITAL DEFICIENCY          
           
CURRENT LIABILITIES:          
           
Accounts payable and accruals:          
Trade  $4,872   $7,521 
Other   10,697    9,310 
Contracts liability   2,651    - 
Convertible notes   5,930    5,921 
Total current liabilities  $24,150   $22,752 
           
LONG TERM LIABILITIES:          
Convertible notes  $46,108   $46,267 
Contracts liability   22,382    25,015 
Liability for employee rights upon retirement   2,427    2,586 
Other long term liabilities   5,172    5,051 
Total long term liabilities  $76,089   $78,919 
Total liabilities  $100,239   $101,671 
           
COMMITMENTS          
           
CAPITAL DEFICIENCY   (35,442)   (29,457)
Total liabilities net of capital deficiency  $64,797   $72,214 

 

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

 

 1

 

 

PROTALIX BIOTHERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. dollars in thousands, except share and per share data)
(Unaudited)

 

   Three Months Ended 
  

March 31, 2018

(as restated)

   March 31,
2017
 
REVENUES FROM SELLING GOODS  $4,553   $2,889 
REVENUES FROM LICENSE AND R&D SERVICES   2,161      
COST OF GOODS SOLD   (2,924)   (2,088)
RESEARCH AND DEVELOPMENT EXPENSES (1)   (7,286)   (5,967)
Less – grants   843    1,338 
RESEARCH AND DEVELOPMENT EXPENSES, NET   (6,443)   (4,629)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (2)   (2,498)   (2,537)
OPERATING LOSS   (5,151)   (6,365)
FINANCIAL EXPENSES   (2,220)   (2,087)
FINANCIAL INCOME   132    1,625 
LOSS FROM CHANGE IN FAIR VALUE OF CONVERTIBLE NOTES embedded derivative        (52,321)
FINANCIAL (EXPENSES) INCOME, NET   (2,088)   (52,783)
LOSS FOR THE PERIOD  $(7,239)  $(59,148)
NET LOSS PER SHARE OF COMMON STOCK – BASIC AND DILUTED  $(0.05)  $(0.48)
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING LOSS PER SHARE-BASIC AND DILUTED   145,305,982    124,467,602 
(1) Includes share-based compensation  $42   $65 
(2) Includes share-based compensation  $20   $53 

 

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

 

 2

 

 

PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
CAPITAL DEFICIENCY

(U.S. dollars in thousands)

(Unaudited)

 

           Additional         
   Common   Common   Paid–In   Accumulated     
   Stock (1)   Stock   Capital   Deficit   Total 
   Number of
shares
   Amount 
Balance at December 31, 2016   124,134,085   $124   $202,575   $(212,656)  $(9,957)
Changes during the three-month period ended March 31, 2017:                         
Share-based compensation related to stock options             118         118 
Convertible notes conversions   923,018    1    516         517 
Net loss for the period                  (59,148)   (59,148)
Balance at March 31, 2017   125,057,103    125    203,209    (271,804)   (68,470)
Balance at December 31, 2017   143,728,797   $144   $266,495   $(296,096)  $(29,457)
Changes during the three-month period ended March 31, 2018:                         
Share-based compensation related to stock options             46         46 
Share-based compensation related to restricted stock award   29,898    *    16         16 
Convertible notes conversions   1,811,260    2    1,190         1,192 
Net loss for the period (as restated)                  (7,239)   (7,239)
Balance at March 31, 2018 (as restated)   145,569,955   $146   $267,747   $(303,335)  $(35,442)
  * Represents an amount less than $1.

 

(1)Common Stock, $0.001 par value; Authorized – as of March 31, 2018 and 2017 - 250,000,000.

 

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

 

 3

 

 

PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

 

   Three Months Ended 
   March 31, 2018
(as restated)
   March 31,
2017
 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(7,239)  $(59,148)
Adjustments required to reconcile net loss to net cash used in operating activities:          
Share based compensation   62    118 
Depreciation   430    492 
Financial (income) expenses, net (mainly exchange differences)   28    (9)
Changes in accrued liability for employee rights upon retirement   (124)   42 
Gain on amounts funded in respect of employee rights upon retirement   (44)   (20)
Net loss (income) in connection with conversions of convertible notes   218    (1,445)
Change in fair value of convertible notes embedded derivative        52,321 
Amortization of debt issuance costs and debt discount   619    590 
Issuance of shares for interest payment in connection with conversions of convertible notes   205      
Changes in operating assets and liabilities:          
Increase in contracts liability (including non-current portion)   18    1,088 
Increase in accounts receivable and other assets   (3,512)   (3,092)
Decrease (increase) in inventories   814    (1,855)
Increase (decrease) in accounts payable and accruals   (1,009)   2,370 
Increase in other long term liabilities   121     
Net cash used in continuing operations   (9,413)   (8,548)
Net cash provided by discontinued operations        122 
Net cash used in operating activities   (9,413)   (8,426)
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (249)   (220)
Increase in restricted deposit   (188)   (23)
Amounts funded in respect of employee rights upon retirement, net   109    (40)
Net cash used in investing activities   (328)   (283)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Net payment for conversion of convertible notes        (6,726)
Net cash used in financing activities        (6,726)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS
   (103)   171 
NET DECREASE IN CASH AND CASH EQUIVALENTS   (9,844)   (15,264)
BALANCE OF CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD
   51,163    63,281 
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD  $41,319   $48,017 

 

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

 

4

 

 

PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

 

(Continued) - 2

 

   Three Months Ended 
  

March 31, 2018

(as restated)
   March 31,
2017
 
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:          
Purchase of property and equipment  $342   $636 
Convertible notes conversions  $987   $517 
           
SUPPLEMENTARY DISCLOSURE ON CASH FLOWS          
Interest paid  $145   $432 

 

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

 

5

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

 

a.General

 

Protalix BioTherapeutics, Inc. (collectively with its subsidiaries, the “Company”), and its wholly-owned subsidiaries, Protalix Ltd. and Protalix B.V. (the “Subsidiaries”), are biopharmaceutical companies focused on the development and commercialization of recombinant therapeutic proteins based on the Company’s proprietary ProCellEx® protein expression system (“ProCellEx”). To date, the Company has successfully developed taliglucerase alfa (marketed under the name alfataliglicerase in Brazil and certain other Latin American countries and Elelyso® in the rest of the territories) for the treatment of Gaucher disease that has been approved for marketing in the United States, Brazil, Israel and other markets. The Company has a number of product candidates in varying stages of the clinical development process. The Company’s current strategy is to develop proprietary recombinant proteins that are therapeutically superior to existing recombinant proteins currently marketed for the same indications.

 

The Company’s product pipeline currently includes, among other candidates:

 

(1) pegunigalsidase alfa, or PRX-102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder;

 

(2) alidornase alfa, or PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease 1, or DNase, under development for the treatment of Cystic Fibrosis, to be administered by inhalation; and

 

(3) OPRX-106, the Company’s oral antiTNF product candidate which is being developed as an orally-delivered anti-inflammatory treatment using plant cells as a natural capsule for the expressed protein.

 

Obtaining marketing approval with respect to any product candidate in any country is directly dependent on the Company’s ability to implement the necessary regulatory steps required to obtain such approvals. The Company cannot reasonably predict the outcome of these activities.

 

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer Inc. (“Pfizer”), as provided in the exclusive license and supply agreement by and between Protalix Ltd. and Pfizer, which is referred to herein as the Pfizer Agreement. In October 2015, the Company entered into an Amended and Restated Exclusive License and Supply Agreement (the “Amended Pfizer Agreement”) which amends and restates the Pfizer Agreement in its entirety. Pursuant to the Amended Pfizer Agreement, the Company sold to Pfizer its share in the collaboration created under the Pfizer Agreement for the commercialization of Elelyso in exchange for a cash payment equal to $36.0 million. As part of the sale, the Company agreed to transfer its rights to Elelyso in Israel to Pfizer while gaining full rights to it in Brazil. Under the Amended Pfizer Agreement, Pfizer is entitled to all of the revenues, and is responsible for 100% of expenses globally for Elelyso, excluding Brazil where the Company is responsible for all expenses and retains all revenues.

 

On June 18, 2013, the Company entered into a Supply and Technology Transfer Agreement (the “Brazil Agreement”) with Fundação Oswaldo Cruz (“Fiocruz”), an arm of the Brazilian Ministry of Health (the “Brazilian MoH”), for taliglucerase alfa. Fiocruz’s purchases of alfataliglicerase to date have been significantly below certain agreed upon purchase milestones and, accordingly, the Company has the right to terminate the Brazil Agreement. Notwithstanding, the Company is, at this time, continuing to supply alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with alfataliglicerase in Brazil. Approximately 10% of adult Gaucher patients in Brazil are currently treated with alfataliglicerase. The Company is discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations and, based on such discussions, the Company will determine what it believes to be the course of action that is in the best interest of the Company.

 

6

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 

In 2017, the Company received a purchase order from the Brazilian MoH for the purchase of alfataliglicerase for the treatment of Gaucher patients in Brazil for consideration of approximately $24.3 million. Shipments started in June 2017. The Company recorded revenues of $7.1 million for sales of alfataliglicerase to Fiocruz in 2017, and $2.6 million during the three months ended March 31, 2018.

 

On October 19, 2017, Protalix Ltd. and Chiesi Farmaceutici S.p.A. (“Chiesi”) entered into an Ex-US license (the “Chiesi Agreement”) pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize pegunigalsidase alfa. Under the terms and conditions of the Chiesi Agreement, Protalix Ltd. retained the right to commercialize pegunigalsidase in the United States.

 

Under the Chiesi Agreement, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the agreement and Protalix Ltd. is entitled to additional payments of up to $25.0 million in development costs, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive additional payments of up to $320.0 million, in the aggregate, in regulatory and commercial milestone payments.

 

Under the terms of the Chiesi Agreement, Protalix Ltd. will manufacture all of the PRX-102 needed for all purposes under the agreement, subject to certain exceptions, and Chiesi will purchase pegunigalsidase alfa from Protalix, subject to certain terms and conditions. Chiesi will make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales, as consideration for the supply of pegunigalsidase alfa.

 

Based on its current cash resources and commitments, the Company believes it will be able to maintain its current planned development activities and the corresponding level of expenditures for at least 12 months from the date of approval of the March 31, 2018 financial statements, although no assurance can be given that it will not need additional funds prior to such time. If there are unexpected increases in general and administrative expenses or research and development expenses, the Company may need to seek additional financing.

 

b.Basis of presentation

 

1.Restatement of previously issued condensed consolidated financial statements

 

The Company has restated these financial statements to correct an error in the revenue recognition from the Chiesi Agreement. Previously, the Company had identified a single performance obligation with regard to its promises under the agreement. The Company subsequently concluded that there are two performance obligations under the agreement as follows: (i) the license together with research and development services and (ii) a contingent performance obligation regarding future manufacturing. As such, the Company has recognized revenue for the combined performance obligation (the license and the research and development services) for the three months ended March 31, 2018 for the satisfaction of the performance obligation that occurred during the three months ended March 31, 2018.

 

The Company’s decision to restate the financial statements previously reported on its Quarterly Reports on Form 10-Q, was approved by, and with the continuing oversight of, the Company’s Audit Committee.

 

7

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 

2.Impacts of restatement

 

The effects of the restatement on the line items within the Company’s condensed consolidated balance sheets as of March 31, 2018 are as follows:

 

   March 31, 2018 
 (U.S. dollars in thousands)  As
originally
reported
   Adjustments   As restated 
CURRENT LIABILITIES:               
Contracts liability  $-   $2,651   $2,651 
Total current liabilities   21,499    2,651    24,150 
LONG TERM LIABILITIES:               
Contracts liability   29,030    (6,648)   22,382 
Total long term liabilities   82,737    (6,648)   76,089 
Total liabilities   104,236    (3,997)   100,239 
CAPITAL DEFICIENCY  $(39,439)  $3,997   $(35,442)

 

The effects of the restatement on the line items within the Company’s condensed consolidated statements of operations for the three months ended March 31, 2018 are as follows:

 

   Three Months Ended March 31, 2018 
(U.S. dollars in thousands, except per share data)  As
originally
reported
   Adjustments   As restated 
REVENUES FROM LICENSE AGREEMENTS  $-   $2,161   $2,161 
OPERATING LOSS  $(7,312)  $2,161   $(5,151)
LOSS FOR THE PERIOD  $(9,400)  $2,161   $(7,239)
Net loss per share of common stock-basic and diluted  $(0.06)  $0.01   $(0.05)

 

The effects of the restatement on the line items within the Company’s condensed consolidated statements of changes in capital deficiency for the three months ended March 31, 2018 are as follows:

 

   Three Months Ended March 31, 2018 
(U.S. dollars in thousands)  As
originally
reported
   Adjustments   As restated 
Net loss  $(9,400)  $2,161   $(7,239)
Balances as of March 31, 2018               
Accumulated deficit   (307,332)   3,997    (303,335)
Total capital deficiency  $(39,439)  $3,997   $(35,442)

 

8

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 

Although there was with no impact to net cash provided by operating activities, net cash used in investing activities or net cash used in financing activities, the effects of the restatement on the line items within the condensed consolidated statements of cash flows for the three months ended March 31, 2018 are as follows:

 

   Three Months Ended March 31, 2018 
 (U.S. dollars in thousands)  As originally
reported
   Adjustments   As restated 
Cash flows from operating activities:               
Net loss  $(9,400)  $2,161   $(7,239)
Increase in contracts liability   2,179    (2,161)   18 
Net cash used in operating activities  $(9,413)  $-   $(9,413)

 

The impacts of the restatement have been reflected throughout the financial statements, including the applicable footnotes, as appropriate.

 

In addition, in connection with the agreement with Chiesi, the Company should have recognized $1.8 million of revenue in the last quarter of 2017 and accordingly has revised certain items in its consolidated financial statements for December 31, 2017 presented herein. The Company evaluated the materiality of the error from quantitative and qualitative perspectives, and concluded that the error was immaterial to the Company’s prior annual consolidated financial statements. Since the revision was not material to any prior interim period or annual consolidated financial statements, no amendments to previously filed interim or annual periodic reports was required. Consequently, the Company revised the historical consolidated financial information presented herein. Below are amounts as reported and as adjusted for December 31, 2017:

 

   December 31, 2017 
(U.S. dollars in thousands) 

As originally
reported

   Adjustments   As revised 
Contracts liability  $26,851   $(1,836)  $25,015 
Accumulated deficit   (297,932)   1,836    (296,096)

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.

 

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 2017, filed by the Company with the Commission. The comparative balance sheet at December 31, 2017 has been derived from the audited financial statements at that date.

 

c.Net loss per share

 

Basic and diluted loss per share (“LPS”) are computed by dividing net loss by the weighted average number of shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), outstanding for each period.

 

Diluted LPS is calculated in continuing operations. The calculation of diluted LPS does not include 78,142,133 and 73,800,491 shares of Common Stock underlying outstanding options and restricted shares of Common Stock and shares issuable upon conversion of outstanding convertible notes for the three months ended March 31, 2017 and 2018, respectively, because the effect would be anti-dilutive.

 

d.Revenue recognition (as restated)

 

1.Revenues from supply agreements

 

The Company recognizes revenues from supply agreements and from selling products when control is transferred to the customer and collectability is probable.

 

9

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued):

 

2.Revenue from Chiesi Agreement

 

According to Accounting Standard Codification Topic 606, Revenue from contracts with customers (“ASC 606”), a performance obligation is a commitment to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

 

The Company has identified two performance obligations in the Chiesi Agreement as follows: (1) the license and research and development services and (2) a contingent performance obligation regarding future manufacturing.

 

The Company determined that the license together with the research and development services should be combined into single performance obligation since Chiesi cannot benefit from the license without the research and development services. The research and development services are highly specialized and are dependent on the supply of the drug.

 

The future manufacturing is contingent on regulatory approvals of the drug and the Company deems these services to be separately identifiable from other performance obligations in the contract. Manufacturing services post-regulatory approval are not interdependent or interrelated with the license and research and development services.

 

The transaction price was comprised of fixed consideration and variable consideration (capped research and development reimbursements). Under ASC 606, the consideration to which the Company would be entitled upon the achievement of contractual milestones, which are contingent upon the occurrence of future events, are a form of variable consideration. The Company estimates variable consideration using the most likely method. Amounts included in the transaction price are recognized only when it is probable that a significant reversal of cumulative revenues will not occur, usually upon achievement of a specific milestone. The Company used significant judgment when it determined variable consideration.

 

Since the customer benefits from the research and development services as the entity performs, revenue from granting the license and the research and development services is recognized over time using the cost-to-cost method. The Company used significant judgment when it determined the costs expected to be incurred upon satisfying the identified performance obligation.

 

Revenue from additional research and development services ordered by Chiesi, is recognized over time using the cost-to-cost method.

 

The Company's revenue recognition accounting policy prior to January 1, 2018, was materially the same.

 

e.Recently adopted standards

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance on revenues from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled to in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions require capitalization of certain contracts costs, consideration of the time value of money in the transaction price, and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. The guidance also requires enhanced disclosures regarding the nature, amount timing and uncertainty of revenues and cash flows arising from an entity’s contracts with customers. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017. On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers, and all the related amendments, using the modified retrospective method. The implementation of this Accounting Standards Update (ASU) did not have a material impact on the Company’s consolidated financial statements.

 

In January 2016, the FASB issued ASU, No. 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. The guidance is effective for annual reporting periods beginning after December 15, 2017. The implementation of this ASU did not have a material impact on the Company’s consolidated financial statements.

 

10

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 - INVENTORIES

 

Inventory at March 31, 2018 and December 31, 2017 consisted of the following:

 

   March 31,   December 31, 
(U.S. dollars in thousands)  2018   2017 
Raw materials  $3,529   $3,838 
Work in progress   317    485 
Finished goods   3,173    3,510 
Total inventory  $7,019   $7,833 

 

NOTE 3 – FAIR VALUE MEASUREMENT

 

The Company measures fair value and discloses fair value measurements for financial assets and liabilities. Fair value is based on the price that would be received from the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

 

The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

 

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

 

Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.

 

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

 

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

 

The fair value of the financial instruments included in the working capital of the Company is usually identical or close to their carrying value.

 

The fair value of the convertible notes derivative is based on Level 3 measurement.

 

The fair value of the remaining $5.9 million in aggregate principal amount of the Company’s outstanding 4.50% convertible promissory notes due 2018 (the “2013 Notes”), and of the remaining $58.1 million in aggregate principal amount of the Company’s outstanding 7.50% secured convertible promissory notes due 2021 (the “2016 Notes”) is approximately $5.7 million and $69.3 million, respectively, based on a Level 3 measurement.

 

11

 

 

PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – FAIR VALUE MEASUREMENT (continued):

 

The Company prepared a valuation of the fair value of the 2013 Notes and the 2016 Notes (a Level 3 valuation) as of March 31, 2018. The values of these notes were estimated by implementing the binomial model. The liability component was valued based on the Income Approach. The following parameters were used:

 

   2013 Notes   2016 Notes 
Stock price (USD)   0.5399    0.5399 
Expected term (years)   0.46    3.63 
Risk free rate   1.88%   2.45%
Volatility   62.44%   70.96%
Yield   12.89%   12.44%

 

NOTE 4 – CONVERTIBLE NOTES

 

All of the Company’s outstanding convertible notes are accounted for using the guidance set forth in the FASB Accounting Standards Codification (ASC) 815 which requires that the Company determine whether the embedded conversion option must be separated and accounted for separately. ASC 470-20, regarding debt with conversion and other options, requires the issuer of a convertible debt instrument that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate.

 

The Company accounts for the 2013 Notes as a liability, on an aggregated basis, in their entirety. The 2016 Notes were accounted for partially as liability and equity components of the instrument and partially as a debt host contract with an embedded derivative resulting from the conversion feature. During the year ended December 31, 2017, the embedded derivative was reclassified to additional paid in capital.

 

Issuance costs regarding the issuance of the 2016 Notes are amortized using the effective interest rate.

 

The debt discount and debt issuance costs regarding the issuance of the 2013 Notes are deferred and amortized over the 2013 Notes period (5 years).

 

During the three months ended March 31, 2018, note holders converted $1.0 million aggregate principal amount of the 2016 Notes into a total of 1,338,707 shares of Common Stock, and cash payments of approximately $11,668, in the aggregate.

 

As of March 31, 2018, a total of $58.1 million aggregate principal amount of the 2016 Notes and $5.9 million aggregate principal amount of the 2013 Notes were outstanding.

 

NOTE 5 – REVENUES (AS RESTATED)

 

The following table summarizes the Company’s disaggregation of revenues:

 

   March 31, 
(U.S. dollars in thousands) 

2018

(as restated)

   2017 
Pfizer  $1,980   $1,646 
Brazil  $2,573   $1,243 
Total revenues from selling goods   $4,553   $2,889 
Revenues from license and R&D services   $2,161      

 

 

12

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

RESTATEMENT OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Explanatory Note

 

This Amendment amends and restates our unaudited condensed consolidated financial statements and related disclosures in Part I, Item 1. “Financial Statements” for the three months ended and as of March 31, 2018 to recognize certain revenue from a license agreement that was not recognized previously. Accordingly, the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth below reflects the effects of this restatement.  

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the consolidated financial statements and the related notes included elsewhere in this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2017. Some of the information contained in this discussion and analysis, particularly with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

We are a biopharmaceutical company focused on the development and commercialization of recombinant therapeutic proteins based on our proprietary ProCellEx® protein expression system. We developed our first commercial drug product, Elelyso®, using our ProCellEx system and we are now focused on utilizing the system to develop a pipeline of proprietary, clinically superior versions of recombinant therapeutic proteins that primarily target large, established pharmaceutical markets and that in most cases rely upon known biological mechanisms of action. With our experience to date, we believe ProCellEx will enable us to develop additional proprietary recombinant proteins that are therapeutically superior to existing recombinant proteins currently marketed for the same indications including applying the unique properties of our ProCellEx system for the oral delivery of therapeutic proteins.

 

On October 19, 2017, Protalix Ltd., our wholly-owned subsidiary, and Chiesi entered into the Chiesi Agreement pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize pegunigalsidase alfa. Pegunigalsidase alfa is our chemically modified version of the recombinant protein alpha-Galactosidase-A protein that is currently being evaluated in phase III clinical trials for the treatment of Fabry disease. Under the terms and conditions of the Chiesi Agreement, Protalix Ltd. retained the right to commercialize pegunigalsidase alfa in the United States. Under the Chiesi Agreement, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the agreement and Protalix Ltd. is entitled to additional payments of up to $25.0 million in development costs, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive an additional up to $320.0 million, in the aggregate, in regulatory and commercial milestone payments. Protalix Ltd. agreed to manufacture all of the PRX-102 needed for all purposes under the agreement, subject to certain exceptions, and Chiesi will purchase pegunigalsidase alfa from Protalix, subject to certain terms and conditions. Chiesi is required to make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales, as consideration for the supply of pegunigalsidase alfa.

 

In December 2017, the European Commission granted Orphan Drug Designation for pegunigalsidase alfa for the treatment of Fabry disease. The designation was granted after the European Medicine Agency’s Committee for Orphan Medicinal Products, or the COMP, issued a positive opinion supporting the designation noting that we had established that there was medically plausible evidence that pegunigalsidase alfa will provide a significant benefit over existing approved therapies in the European Union for the treatment of Fabry disease. The COMP cited clinical and non-clinical justifications we provided to establish the significant benefit of pegunigalsidase alfa, noting that the COMP considered the justifications to constitute a clinically relevant advantage. Orphan Drug Designation for pegunigalsidase alfa qualifies Protalix Ltd. for access to a centralized marketing authorization procedure, including applications for inspections and for protocol assistance. If the orphan drug designation is maintained at the time pegunigalsidase alfa is approved for marketing in the European Union, if at all, we expect that PRX-102 will benefit from 10 years of market exclusivity within the European Union. The market exclusivity will not have any effect on Fabry disease treatments already approved at that time.

 

13

 

 

In January 2018, the FDA granted Fast Track designation to PRX-102. Fast Track designation is a process designed to facilitate the development and expedite the review of drugs and vaccines for serious conditions that fill an unmet medical need.

 

On May 1, 2012, the FDA approved for sale our first commercial product, taliglucerase alfa for injection, an enzyme replacement therapy (ERT) for the long-term treatment of adult patients with a confirmed diagnosis of type 1 Gaucher disease. Subsequently, taliglucerase alfa was approved for marketing by the regulatory authorities of other countries. Taliglucerase alfa is marketed under the name alfataliglicerase in Brazil and certain other Latin American countries, and under the name Elelyso in other territories.

 

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer, as provided in the Pfizer Agreement. In October 2015, we entered into the Amended Pfizer Agreement which amends and restates the Pfizer Agreement in its entirety. Pursuant to the Amended Pfizer Agreement, we sold to Pfizer our share in the collaboration created under the initial Pfizer Agreement for the commercialization of Elelyso in exchange for a cash payment equal to $36.0 million. As part of the sale, we agreed to transfer our rights to Elelyso in Israel to Pfizer, while gaining full rights to Elelyso in Brazil. We will continue to manufacture drug substance for Pfizer, subject to certain terms and conditions. Under the Amended Pfizer Agreement, Pfizer is responsible for 100% of expenses, and entitled to all revenues globally for Elelyso, excluding Brazil, where we are responsible for all expenses and retain all revenues.

 

For the first 10-year period after the execution of the Amended Pfizer Agreement, we have agreed to sell drug substance to Pfizer for the production of Elelyso, and Pfizer maintains the right to extend the supply period for up to two additional 30-month periods subject to certain terms and conditions. Any failure to comply with our supply commitments may subject us to substantial financial penalties, which will have a material adverse effect on our business, results of operations and financial condition. The Amended Pfizer Agreement also includes customary provisions regarding cooperation for regulatory matters, patent enforcement, termination, indemnification and insurance requirements.

 

On June 18, 2013, we entered into the Brazil Agreement with Fiocruz, an arm of the Brazilian MoH, for taliglucerase alfa. In 2017, we received a purchase order from the Brazilian MoH for the purchase of approximately $24.3 million of alfataliglicerase for the treatment of Gaucher patients in Brazil. The purchase order consists of a number of shipments in increasing volumes. Shipments started in June 2017. Fiocruz’s purchases of alfataliglicerase to date have been significantly below certain agreed upon purchase milestones and, accordingly, we have the right to terminate the Brazil Agreement. Notwithstanding, we are, at this time, continuing to supply alfataliglicerase to Fiocruz under the Brazil Agreement, and patients continue to be treated with alfataliglicerase in Brazil. We are discussing with Fiocruz potential actions that Fiocruz may take to comply with its purchase obligations and, based on such discussions, we will determine what we believe to be the course of action that is in our best interest.

 

We are developing an innovative product pipeline using our ProCellEx protein expression system. Our product pipeline currently includes, among other candidates:

 

(1) pegunigalsidase alfa, or PRX-102, a therapeutic protein candidate for the treatment of Fabry disease, a rare, genetic lysosomal disorder in humans, currently in an ongoing phase III clinical trial.

 

(2) alidornase alfa, or PRX-110, a proprietary plant cell recombinant human Deoxyribonuclease 1 under development for the treatment of Cystic Fibrosis, or CF, to be administered by inhalation. We recently completed a phase IIa efficacy and safety study of alidornase alfa for the treatment of CF.

 

(3) OPRX-106, our oral antiTNF product candidate which is being developed as an orally-delivered anti-inflammatory treatment using plant cells as a natural capsule for the expressed protein. We released final data generated in our phase II clinical trial of OPRX-106 for the treatment of ulcerative colitis in March 2018.

 

14

 

 

Except for the rights to commercialize taliglucerase alfa worldwide (other than Brazil), which we licensed to Pfizer, and the rights to pegunigalsidase alfa Chiesi outside the United States, which we licensed to Chiesi, we hold the worldwide commercialization rights to all of our proprietary development candidates. In addition, we continuously evaluate potential strategic marketing partnerships as well as collaboration programs with biotechnology and pharmaceutical companies and academic research institutes.

 

Critical Accounting Policies

 

Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements appearing in this Quarterly Report. There have not been any changes to our significant accounting policies since we filed our Annual Report on Form 10-K for the year ended December 31, 2017, except for recognition of revenue from license agreements that was not recognized previously. The Company used a significant estimate in order to determine the cost expected to be incurred upon satisfying the identified performance obligation.

 

The discussion and analysis of our financial condition and results of operations is based on our financial statements, which we prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

Convertible Notes

 

All of our outstanding convertible notes are accounted for using the guidance set forth in FASB ASC 815 which requires that we determine whether the embedded conversion option must be separated and accounted for separately. ASC 470-20, regarding debt with conversion and other options, requires the issuer of a convertible debt instrument that may be settled in cash upon conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate.

 

We account for the 2013 Notes as a liability, on an aggregated basis, in their entirety. The 2016 Notes were accounted for partially as liability and equity components of the instrument and partially as a debt host contract with an embedded derivative resulting from the conversion feature. During the year ended December 31, 2017, the embedded derivative was reclassified to additional paid in capital.

 

Issuance costs regarding the issuance of the 2016 Notes are amortized using the effective interest rate.

 

The debt discount and debt issuance costs regarding the issuance of the 2013 Notes are deferred and amortized over the 2013 Notes period (5 years).

 

During the three months ended March 31, 2018, note holders converted $1.0 million aggregate principal amount of our 2016 Notes into a total of 1,338,707 shares of our common stock, and cash payments of approximately $11,668, in the aggregate.

 

As of March 31, 2018, a total of $58.1 million aggregate principal amount of the 2016 Notes and $5.9 million aggregate principal amount of the 2013 Notes were outstanding.

 

Results of Operations

 

Three months ended March 31, 2018 compared to the three months ended March 31, 2017

 

Revenues from Selling Goods

 

We recorded revenues of $4.6 million during the three months ended March 31, 2018, an increase of $1.7 million, or 58%, compared to revenues of $2.9 million for the three months ended March 31, 2017. The increase resulted primarily from an increase of $1.3 million in drug product sold in Brazil.

 

15

 

 

Revenues from License and R&D Services

 

We recorded revenues of $2.2 million for the three months ended March 31, 2018. Revenues from the license agreements represent the revenues we recognized in connection with the Chiesi Agreement.

 

Cost of Goods Sold

 

Cost of goods sold was $2.9 million for the three months ended March 31, 2018, an increase of $836,000 from cost of revenues of $2.1 million for the three months ended March 31, 2017. The increase resulted primarily from increased sales in Brazil.

 

Research and Development Expenses, Net

 

Research and development expenses were $6.4 million for the three months ended March 31, 2018, an increase of $1.8 million, or 39%, compared to $4.6 million of research and development expenses for the three months ended March 31, 2017. The increase resulted primarily from an increase of $1.6 million in clinical trial related costs.

 

We expect research and development expenses for our various development programs to continue to be our primary expense.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $2.5 million for the three months ended March 31, 2018 and for the three months ended March 31, 2017.

 

Financial Expenses, net

 

Financial expenses net were $2.1 million for the three months ended March 31, 2018 compared to financial expenses net of $52.8 million for the three months ended March 31, 2017. During the three months ended March 31, 2017, financial expenses included a charge of $52.3 million as a result of the re-measurement of the fair value of the 2016 Notes embedded derivative resulting mainly from the increase in the market value of our common stock during the three months ended March 31, 2017. In addition, financial expenses is composed primarily from interest expense on convertible notes of $1.2 million and $1.3 million for the three months ended March 31, 2018 and 2017, respectively.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

As a result of our significant research and development expenditures and the lack of significant revenue from sales of taliglucerase alfa, we have incurred operating losses from our continuing operations since our inception. To date, we have funded our operations primarily with proceeds equal to $31.3 million from the sale of shares of convertible preferred and ordinary shares of Protalix Ltd., and an additional $14.1 million in connection with the exercise of warrants issued in connection with the sale of such shares, through December 31, 2008. In addition, on October 25, 2007, we generated gross proceeds of $50.0 million in connection with an underwritten public offering of our common stock and on each of March 23, 2011 and February 22, 2012, we generated gross proceeds of $22.0 million and $27.2 million, respectively, in connection with underwritten public offerings of our common stock.

 

In addition to the foregoing, on September 18, 2013, we completed a private placement of $69.0 million in aggregate principal amount of 4.50% convertible notes due 2018, including $9.0 million aggregate principal amount of the of 4.50% convertible notes related to the offering’s initial purchaser’s over-allotment option, which was exercised in full. In December 2016, we completed a private placement of $22.5 million in aggregate principal amount of 7.50% convertible notes due 2021. Finally, on July 25, 2017, we completed a private placement of an additional $10.0 million in aggregate principal amount of 7.50% convertible notes due 2021.

 

16

 

 

Pfizer paid Protalix Ltd. $60.0 million as an upfront payment in connection with the execution of the Pfizer Agreement and subsequently paid to Protalix Ltd. an additional $5.0 million upon Protalix Ltd.’s meeting a milestone. Protalix Ltd. also received a milestone payment of $25.0 million in connection with the FDA’s approval of taliglucerase alfa in May 2012. Pfizer has also paid Protalix Ltd. $8.3 million in connection with the successful achievement of milestones under a clinical development agreement between Pfizer and Protalix Ltd. In connection with the execution of the Amended Pfizer Agreement, we received a $36.0 million payment from Pfizer, and Pfizer purchased 5,649,079 shares of our common stock for $10.0 million.

 

In the fourth quarter of 2017, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the Chiesi Agreement.

 

Cash Flows

 

Net cash used in operations was $9.4 million for the three months ended March 31, 2018. The net loss for the three months ended March 31, 2018 of $7.2 million was further increased by a $3.5 million increase in accounts receivable, and a decrease of $1.0 million in accounts payable and accruals, but was partially offset by a decrease in inventories of $814,000. Net cash used in investing activities for the three months ended March 31, 2018 was $328,000 and consisted primarily of purchases of property and equipment, and an increase in restricted deposit.

 

Net cash used in operations was $8.4 million for the three months ended March 31, 2017. The net loss for the three months ended March 31, 2017 of $59.1 million was further increased by an increase of $3.1 million in accounts receivable and an increase of $1.9 million in inventories, but was partially offset by change of $52.3 million in the fair value of convertible notes embedded derivative and increase of $2.4 million in accounts payable. Net cash used in investing activities for the three months ended March 31, 2017 was $283,000 and consisted primarily of purchases of property and equipment.

 

Future Funding Requirements

 

We expect to continue to incur significant expenditures in the near future, including significant research and development expenses related primarily to the clinical trials of pegunigalsidase alfa. We believe that our existing cash and cash equivalents will be sufficient for at least 12 months. We have based this estimate on assumptions that are subject to change and may prove to be wrong, and we may be required to use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials.

 

Our future capital requirements will depend on many other factors, including our progress in commercializing alfataliglicerase in Brazil, the progress and results of our clinical trials, the duration and cost of discovery and preclinical development and laboratory testing and clinical trials for our product candidates, conversions of our outstanding convertible notes from time to time, the timing and outcome of regulatory review of our product candidates, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the number and development requirements of other product candidates that we pursue and the costs of commercialization activities, including product marketing, sales and distribution.

 

We may need to finance our future cash needs through corporate collaboration, licensing or similar arrangements, public or private equity offerings or debt financings. We currently do not have any commitments for future external funding, except with respect to the development-related payments and milestone payments that may become payable under the Chiesi Agreement. We may need to raise additional funds more quickly if one or more of our assumptions prove to be incorrect or if we choose to expand our product development efforts more rapidly than we presently anticipate. We may also decide to raise additional funds even before we need them if the conditions for raising capital are favorable. Any sale of additional equity or debt securities will likely result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also result in covenants that would restrict our operations. Additional equity or debt financing, grants or corporate collaboration and licensing arrangements may not be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our planned commercialization efforts or obtain funds through arrangements with collaborators or others that may require us to relinquish rights to certain product candidates that we might otherwise seek to develop or commercialize independently.

 

17

 

 

Effects of Inflation and Currency Fluctuations

 

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the three months ended March 31, 2018 and March 31, 2017.

 

Currency fluctuations could affect us through increased or decreased acquisition costs for certain goods and services. We do not believe currency fluctuations have had a material effect on our results of operations during the three months ended March 31, 2018 and March 31, 2017.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements as of each of March 31, 2018 and March 31, 2017.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Currency Exchange Risk

 

The currency of the primary economic environment in which our operations are conducted is the U.S. dollar. We consider the currency of the primary economic environment to be the currency in which we generate revenues and expend cash. Most of our revenues are denominated in U.S. dollars, approximately 50% of our expenses and capital expenditures are incurred in U.S. dollars, and a significant source of our financing has been provided in U.S. dollars. Since the dollar is the functional currency, monetary items maintained in currencies other than the dollar are remeasured using the rate of exchange in effect at the balance sheet dates and non-monetary items are remeasured at historical exchange rates. Revenue and expense items are remeasured at the average rate of exchange in effect during the period in which they occur. Foreign currency translation gains or losses are recognized in the statement of operations.

 

A portion of our costs, including salaries, expenses and office expenses, are incurred in NIS. Inflation in Israel may have the effect of increasing the U.S. dollar cost of our operations in Israel. If the U.S. dollar declines in value in relation to the NIS, it will become more expensive for us to fund our operations in Israel. A devaluation of 1% of the NIS will affect our income before tax by less than 1%. The exchange rate of the U.S. dollar to the NIS, based on exchange rates published by the Bank of Israel, was as follows:

 

   Three Months Ended
March 31,
   Year Ended December 31, 
     2018     2017     2017 
Average rate for period   3.462    3.732    3.600 
Rate at period end   3.514    3.632    3.467 

 

To date, we have not engaged in hedging transactions. In the future, we may enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the U.S. dollar against the NIS. These measures, however, may not adequately protect us from material adverse effects due to the impact of inflation in Israel.

 

Interest Rate Risk

 

Our exposure to market risk is confined to our cash and cash equivalents. We consider all short term, highly liquid investments, which include short-term deposits with original maturities of three months or less from the date of purchase, that are not restricted as to withdrawal or use and are readily convertible to known amounts of cash, to be cash equivalents. The primary objective of our investment activities is to preserve principal while maximizing the interest income we receive from our investments, without increasing risk. We invest any cash balances primarily in bank deposits and investment grade interest-bearing instruments. We are exposed to market risks resulting from changes in interest rates. We do not use derivative financial instruments to limit exposure to interest rate risk. Our interest gains may decline in the future as a result of changes in the financial markets.

 

18

 

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, in the Original Filing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

 

Subsequent to the evaluation made in connection with the Original Filing, our Chief Executive Officer and Chief Financial Officer re-evaluated the effectiveness of the design and operation of our disclosure controls and procedures concluding that our disclosure controls and procedures were not effective as of March 31, 2018 because of the material weakness in our internal control over financial reporting which existed at that date and is discussed below.

 

Material Weakness in Internal Control over Financial Reporting

 

A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

 

In our Original Filing, we did not disclose the existence of any material weaknesses in internal control over financial reporting. Subsequent to that evaluation, we determined that a material weakness in our internal control over financial reporting existed as of March 31, 2018 in that we did not maintain effective internal controls related to accounting for complex revenue contracts. Specifically, we did not properly assess the performance obligations we had with regard to an out-licensing arrangement which became material to our company in 2018. The foregoing resulted in the restatement of our unaudited condensed consolidated financial statements for each of the fiscal quarters of 2018 and in a revision to 2017 figures.

 

The foregoing restatements were effected through our filing of this Amendment and the filing of an amended Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2018 and an amended Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2018. Our management has concluded that this deficiency constitutes a material weakness in our internal control over financial reporting as of March 31, 2018.

 

Remediation Plan

 

In response to the identified material weakness, our management, with the oversight of the Audit Committee of the Board of Directors, has updated our revenue recognition processes and controls with respect to out-licensing arrangements, and intends to continue to update our revenue recognition processes and controls and to implement additional control procedures, including retaining a globally recognized business and accounting advisory firm to assist us in improving our internal processes in connection with revenue recognition. While certain remedial actions have been completed in the first quarter of 2019, we intend to continue to implement additional control procedures as the need to do so is identified by our management. The remediation efforts are intended both to address the identified material weakness and to enhance our overall financial control environment.

 

Inherent Limitations on Effectiveness of Controls

 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

19

 

 

Changes in Internal Control over Financial Reporting

 

Except with respect to the material weakness described herein, there were no changes to our internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the Exchange Act) that occurred during the quarter ended March 31, 2018 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

 

20

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not involved in any material legal proceedings.

 

Item 1A. Risk Factors

 

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Unregistered Sales of Equity Securities

 

There were no unregistered sales of equity securities during the three months ended March 31, 2018.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

        Incorporated by Reference    
Exhibit
Number
  Exhibit Description   Form   File Number   Exhibit   Date   Filed or
Furnished

Herewith
3.1   Certificate of Incorporation of the Company   8-K   001-33357   3.1   April 1, 2016    
                         
3.2   Amendment to Certificate of Incorporation of the Company   Def 14A   001-33357   Appen. A   July 1, 2016    
                         
3.4   Bylaws of the Company   8-K   001-33357   3.2   April 1, 2016    
                         
4.1   Form of Restricted Stock Agreement/Notice   8-K   001-33357   4.1   July 18, 2012    
                         
4.2   Indenture, dated as of September 18, 2013, between Protalix BioTherapeutics, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee   8-K   001-33357   4.1   September 18, 2013    
                         
4.3   Form of 4.50% Convertible Note due 2018   8-K   001-33357   4.2   September 18, 2013    

 

21

 

 

4.4   Indenture, dated as of December 7, 2016, between Protalix BioTherapeutics, Inc. the guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and Wilmington Savings Fund Society, FSB, as collateral agent   8-K   001-33357   4.1   December 7, 2016    
                         
4.5   Form of 7.50% Convertible Note due 2021 (Issued in 2016 Financing)   8-K   001-33357   4.2   December 7, 2016    
                         
4.6   Form of 7.50% Convertible Note due 2021 (Issued in 2016 Exchange)   8-K   001-33357   4.3   December 7, 2016    
                         
4.7   First Supplemental Indenture, dated as of July 24, 2017, by and among Protalix BioTherapeutics, Inc., the guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee, and Wilmington Savings Fund Society, FSB, as collateral agent   8-K   001-33357   4.2   July 25, 2017    
                         
4.8   Second Supplemental Indenture, dated as of November 27, 2017, by and among Protalix BioTherapeutics, Inc., the guarantors party hereto and The Bank of New York Mellon Trust Company, N.A., as trustee, registrar, paying agent and conversion agent   8-K   001-33357   4.1   December 1, 2017    
                         
31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                   X
                         
31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                   X
                         
32.1   18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Certification of Chief Executive Officer                   X
                         
32.2   18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Certification of Chief Financial Officer                   X
                         
101.INS   XBRL INSTANCE FILE                   X

 

22

 

 

101.SCH   XBRL SHEMA FILE                   X
                         
101.CAL   XBRL CALCULATION FILE                   X
                         
101.DEF   XBRL DEFINITION FILE                   X
                         
101.LAB   XBRL LABEL FILE                   X
                         
101.PRE   XBRL PRESENTATION FILE                   X

 

23

 

 

SIGNATURES

 

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

 

    PROTALIX BIOTHERAPEUTICS, INC.
    (Registrant)
     
Date: March 18, 2019 By: /s/ Moshe Manor
    Moshe Manor
President and Chief Executive Officer
(Principal Executive Officer)
     
Date: March 18, 2019 By: /s/ Yossi Maimon
    Yossi Maimon
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)

 

24

 

 

EXHIBIT 31.1

 

CERTIFICATION

 

I, Moshe Manor, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q/A of Protalix BioTherapeutics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: March 18, 2019  
   
/s/ Moshe Manor  
Moshe Manor  
President and Chief Executive Officer  

 

 

 

EXHIBIT 31.2

 

CERTIFICATION

 

I, Yossi Maimon, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q/A of Protalix BioTherapeutics, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: March 18, 2019  
   
/s/ Yossi Maimon  
Yossi Maimon  
Chief Financial Officer, Treasurer  

 

 

 

EXHIBIT 32.1

 

PROTALIX BIOTHERAPEUTICS, INC.

 

CERTIFICATION

 

In connection with the quarterly report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-Q/A for the period ended March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Moshe Manor, President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

 

Date: March 18, 2019  
   
/s/ Moshe Manor  
Moshe Manor  
President and Chief Executive Officer  

 

 

 

EXHIBIT 32.2

 

PROTALIX BIOTHERAPEUTICS, INC.

 

CERTIFICATION

 

In connection with the quarterly report of Protalix BioTherapeutics, Inc. (the “Company”) on Form 10-Q/A for the period ended March 31, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Yossi Maimon, Vice President and Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for the purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

 

Date: March 18, 2019  
   
/s/ Yossi Maimon  
Yossi Maimon   
Vice President and Chief Financial Officer