0001144204-19-014455 | 10-Q/A | XBRL Viewer | Protalix Biotherapeutics INC

^[1]

(4,088)

(2,836)

(8,744)

(8,187)

LOSS FROM CHANGE IN FAIR VALUE OF CONVERTIBLE NOTES EMBEDDED DERIVATIVE

(3,741)

(7,765)

(15,636)

(24,935)

FINANCIAL EXPENSES

(1,811)

(3,680)

(5,824)

(8,809)

FINANCIAL INCOME

230

437

1,670

(38,061)

FINANCIAL EXPENSES, NET

(1,581)

(3,672)

(5,387)

(45,200)

NET LOSS FOR THE PERIOD

$ (5,322)

$ (11,437)

$ (21,023)

$ (70,135)

NET LOSS PER SHARE OF COMMON STOCK BASIC AND DILUTED

$ (0.04)

$ (0.09)

$ (0.14)

$ (0.55)

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING LOSS PER SHARE – BASIC AND DILUTED

148,187,513

132,549,001

146,752,355

128,223,722

Goods [Member]

REVENUES

$ 663

$ 7,526

$ 7,222

$ 16,773

License and R&D services [Member]

REVENUES

$ 11,672

$ 16,665

[1]	Includes share-based compensation

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation	$ 14	$ 43	$ 54	$ 163
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation	$ 8	$ 32	$ 42	$ 128

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY) - USD ($)
$ in Thousands

Total

Common Stock [Member]

Additional Paid-in Capital [Member]

Accumulated Deficit [Member]

Balance at Dec. 31, 2016

$ (9,957)

$ 124

$ 202,575

$ (212,656)

Balance (in shares) at Dec. 31, 2016

^[1]

124,134,085

Share-based compensation related to stock options

291

Reclassification of embedded derivative

43,634

Convertible notes conversions

8,781

$ 10

8,771

Convertible notes conversions (in shares)

^[1]

9,711,235

Conversion component related to convertible notes issuance

1,315

Net loss for the period

(70,135)

Balance at Sep. 30, 2017

(26,071)

$ 134

256,586

(282,791)

Balance (in shares) at Sep. 30, 2017

^[1]

133,845,320

Balance at Dec. 31, 2017

(29,457)

$ 144

266,495

(296,096)

Balance (in shares) at Dec. 31, 2017

^[1]

143,728,797

Share-based compensation related to stock options

Share-based compensation related to restricted stock award

^[2]

Share-based compensation related to restricted stock award (in shares)

^[1]

29,898

Convertible notes conversions

1,291

$ 2

1,289

Convertible notes conversions (in shares)

^[1]

1,928,907

Convertible notes exchange

1,150

$ 2

1,148

Convertible notes exchange (in shares)

^[1]

2,613,636

Net loss for the period

(21,023)

Balance at Sep. 30, 2018

$ (47,943)

$ 148

$ 269,028

$ (317,119)

Balance (in shares) at Sep. 30, 2018

^[1]

148,301,238

[1]	Common Stock, $0.001 par value; Authorized – as of September 30, 2018 and 2017 - 250,000,000.
[2]	Represents an amount less than $1.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (CAPITAL DEFICIENCY) [Parenthetical] - $ / shares	Sep. 30, 2018	Sep. 30, 2017
Common stock, par value per share	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (21,023)	$ (70,135)
Adjustments required to reconcile net loss to net cash used in operating activities:
Share based compensation	96	291
Depreciation	1,257	1,469
Financial (income) expenses, net (mainly exchange differences)	(37)	13
Changes in accrued liability for employee rights upon retirement	(86)	54
Gain on amounts funded in respect of employee rights upon retirement	(45)	(21)
Net loss in connection with conversions of convertible notes	204	587
Change in fair value of convertible notes embedded derivative		38,061
Amortization of debt issuance costs and debt discount	1,916	1,710
Issuance of shares for interest payment in connection with conversions of convertible notes	205	1,111
Changes in operating assets and liabilities:
Increase (decrease) in contracts liability (including non-current portion)	18,264	(837)
Increase in accounts receivable and other assets	(3,661)	(6,467)
Increase in inventories	(126)	(2,234)
Increase (decrease) in accounts payable and accruals	(1,805)	8,698
Increase in other long term liabilities	1,103
Net cash used in continuing operations	(3,738)	(27,700)
Net cash provided by discontinued operations		116
Net cash used in operating activities	(3,738)	(27,584)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(498)	(681)
Increase in restricted deposit	(247)	(336)
Amounts funded in respect of employee rights upon retirement, net	70	(68)
Net cash used in investing activities	(675)	(1,085)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment for convertible notes	(4,752)	(10,961)
Net proceeds from issuance of convertible notes		9,542
Net cash used in financing activities	(4,752)	(1,419)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(130)	289
NET DECREASE IN CASH AND CASH EQUIVALENTS	(9,295)	(29,799)
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	51,163	63,281
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD	41,868	33,482
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:
Purchase of property and equipment	237	666
Convertible notes conversions	2,236	7,668
SUPPLEMENTARY DISCLOSURE ON CASH FLOWS
Interest paid	$ 2,411	$ 2,613

SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

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 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 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.

On October 19, 2017, Protalix Ltd. and Chiesi Farmaceutici S.p.A. (“Chiesi”) entered into an Ex-US license agreement (the “Chiesi Ex-U.S. Agreement”) pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize pegunigalsidase alfa. On July 23, 2018, Protalix Ltd. entered into an Exclusive License and Supply Agreement with Chiesi (the “Chiesi U.S. Agreement”), with respect to the development and commercialization of pegunigalsidase alfa in the United States.

Under each of the Chiesi Ex-U.S. Agreement and the Chiesi U.S. Agreement, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the agreement. In addition, under the Chiesi Ex-U.S. Agreement, Protalix Ltd. is entitled to additional payments of up to $25.0 million in pegunigalsidase alfa development costs, capped at $10.0 million per year and to receive additional payments of up to $320.0 million, in the aggregate, in regulatory and commercial milestone payments. Under the Chiesi U.S. Agreement, Protalix Ltd.

is entitled to payments of up to a maximum of $20.0

million to cover development costs for pegunigalsidase alfa, subject to a maximum of $7.5

million per year, and to receive an additional up to a maximum of $760.0

million, in the aggregate, in regulatory and commercial milestone payments.

Under the terms of both of the Chiesi agreements, Protalix Ltd. will manufacture all of the pegunigalsidase alfa needed under the agreements, subject to certain exceptions, and Chiesi will purchase pegunigalsidase alfa from Protalix, subject to certain terms and conditions. Under the Chiesi Ex-U.S. Agreement, Chiesi is required to make tiered payments of 15% to 35% of its net sales, depending on the amount of annual sales outside of the United States, as consideration for product supply. Under the Chiesi U.S. Agreement, Chiesi is required to make tiered payments of 15% to 40% of its net sales, depending on the amount of annual sales outside of the United States, as consideration for product supply.

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer Inc. (“Pfizer”), in accordance with the exclusive license and supply agreement 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 with Pfizer (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 termination right, 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.

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 nine months ended September 30, 2018.

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 September 30, 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.

Basis of presentation

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 agreements with Chiesi. Previously, the Company had identified a single performance obligation with regard to its promises under each of the agreements. The Company subsequently concluded that there are two performance obligations under each of the agreements 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 obligations (the license and the research and development services) for the three and nine months ended September 30, 2018 for the satisfaction of the performance obligation that occurred during the three and nine months ended September 30, 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.

Impacts of restatement

The effects of the restatement on the line items within the Company’s condensed consolidated balance sheets as of September 30, 2018 are as follows:

	September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
CONTRACTS ASSET	$	1,450		$	(1,450	)	$	-
CURRENT LIABILITIES:
Contracts liability		-			9,786			9,786
Total current liabilities	$	14,551		$	9,786		$	24,337
LONG TERM LIABILITIES:
Contracts liability		61,780			(28,287	)		33,493
Total long term liabilities		117,640			(28,287	)		89,353
Total liabilities		132,191			(18,501	)		113,690
CAPITAL DEFICIENCY	$	(64,994	)	$	17,051		$	(47,943	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2018 are as follows:

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments			As restated			As originally reported			Adjustments			As restated
REVENUES FROM LICENSE AGREEMENTS	$	-		$	11,672		$	11,672		$	-		$	16,665		$	16,665
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	$	(2,638	)	$	(1,450	)	$	(4,088	)	$	(7,294	)	$	(1,450	)	$	(8,744	)
OPERATING LOSS	$	(13,963	)	$	10,222		$	(3,741	)	$	(30,851	)	$	15,215		$	(15,636	)
LOSS FOR THE PERIOD	$	(15,544	)	$	10,222		$	(5,322	)	$	(36,238	)	$	15,215		$	(21,023	)
Net loss per share of common stock-basic and diluted	$	(0.10	)	$	0.06		$	(0.04	)	$	(0.25	)	$	0.11		$	(0.14	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of changes in capital deficiency for the nine months ended September 30, 2018 are as follows:

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments		As restated
Net loss for the nine months ended September 30, 2018	$	(36,238	)	$	15,215	$	(21,023	)
Balances as of September 30, 2018
Accumulated deficit		(334,170	)		17,051		(317,119	)
Total capital deficiency	$	(64,994	)	$	17,051	$	(47,943	)

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 nine months ended September 30, 2018 are as follows:

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
Cash flows from operating activities:
Net loss	$	(36,238	)	$	15,215		$	(21,023	)
Increase in contracts liability		34,929			(16,665	)		18,264
Increase in contract asset		(1,450	)		1,450			-
Net cash used in operating activities	$	(3,738	)	$	-		$	(3,738	)

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

In addition, in connection with the Chiesi Ex-U.S. Agreement, 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.

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 76,195,921 and 73,310,911 shares of Common Stock underlying outstanding options and restricted shares of Common Stock and shares of Common Stock issuable upon conversion of the convertible notes for the nine months ended September 30, 2017 and 2018, respectively, and 80,696,070 and 73,280,977 shares of Common Stock for the three months ended September 30, 2017 and 2018, respectively, because the effect would be anti-dilutive.

Revenue recognition (as restated)

Revenue 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.

Revenue from Chiesi Agreements

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 each of the Chiesi agreements as follows: (1) the license and research and development services and (2) a contingent performance obligation regarding future manufacturing.

The Company determined that the licenses granted to Chiesi together with the research and development services should be combined into a single performance obligation under each agreement since Chiesi cannot benefit from a 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 accounted for the Chiesi U.S. agreement as a modification of the Chiesi Ex-U.S. Agreement. As such, the Company recorded revenue through a cumulative catch-up adjustment in the amount of $6.2 million.

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

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.

INVENTORIES

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 2 - INVENTORIES

The Company’s inventory at September 30, 2018 and December 31, 2017 consisted of the

following:

	September 30,		December 31,
(U.S. dollars in thousands)	2018		2017
Raw materials	$	3,201	$	3,838
Work in progress		276		485
Finished goods		4,482		3,510
Total inventory	$	7,959	$	7,833

FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

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 $58.0 million in aggregate principal amount of the Company’s outstanding 7.50%

secured convertible promissory notes due 2021 (the “2021 Notes”) is approximately $78.0 million, based on a Level 3

measurement.

The Company prepared a valuation of the fair value of the Company’s 2021 Notes (a Level 3 valuation) as of September 30, 2018. The value of these notes was estimated by implementing the binomial model. The liability component was valued based on the Income Approach. The following parameters were used:

	2021 Notes
Stock price (USD)	0.73
Expected term (years)	3.13
Risk free rate	2.87	%
Volatility	75.56	%
Yield	13.50	%

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

CONVERTIBLE NOTES

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

CONVERTIBLE NOTES

NOTE 4 – CONVERTIBLE NOTES

All of our 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 2021 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 2021 Notes are amortized using the effective interest rate.

During the nine months ended September 30, 2018, note holders converted $1.1 million aggregate principal amount of the 2021 Notes into a total of 1,456,354 shares of Common Stock, and cash payments of approximately $14,439, in the aggregate. An additional 14,860 shares of Common Stock were issued after September 30, 2018 in connection with the make-whole premium associated with certain of the converted notes that were converted during the third quarter of 2018. In addition, in June 2018, the Company exchanged $3.42 million aggregate principal amount of the Company’s outstanding 4.50% convertible promissory notes due 2018 (the “2018 Notes”) for 2,613,636 shares of Common Stock and approximately $2.2 million in cash and delivered the necessary funds under the indenture governing the 2018 Notes, which was $2.5 million. On September 15, 2018, the 2018 Notes matured and have been paid in full.

As of September 30, 2018, a total of $58.0 million aggregate principal amount of the 2021 Notes were outstanding. In addition, as of September 30, 2018, none of the 2018 Notes were outstanding.

REVENUES

9 Months Ended

Sep. 30, 2018

Income Statement [Abstract]

REVENUES

NOTE 5 – REVENUES (AS RESTATED)

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

	Nine Months Ended September 30,
(U.S. dollars in thousands)	2018		2017
Pfizer	$	4,649	$	10,198
Brazil	$	2,573	$	6,575
Total revenues from selling goods	$	7,222	$	16,773
Revenues from license and R&D services	$	16,665

STOCK TRANSACTIONS

9 Months Ended

Sep. 30, 2018

STOCK TRANSACTIONS

NOTE 6 – STOCK TRANSACTIONS

On September 13, 2018, the Company’s compensation committee approved the grant of 10-year options to purchase, in the aggregate, 6,360,000 shares of Common Stock, of which options to purchase 4,000,000 shares

of Common Stock

were granted to the Company’s executive officers and options to purchase 2,360,000 shares

of Common Stock

were granted to other employees with an exercise price equal to $0.56 per share and $0.51 per share, respectively, under the Company’s 2006 Employee Stock Incentive Plan, as amended (the “Plan”). The options vest over a four-year period in 16 equal quarterly increments. Vesting of the options granted to the executive officers is subject to acceleration in full upon a Corporate Transaction or a Change in Control, as those terms are defined in the Plan, and are subject to certain other terms and conditions. The Company estimated the fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $1.9 million based on the following weighted average

assumptions: share price equal to $0.51; dividend

yield of 0% for all years; expected volatility of 64.3%; risk-free interest rates of 2.9%; and expected life of six years.

SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

General

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;

is entitled to payments of up to a maximum of $20.0

million to cover development costs for pegunigalsidase alfa, subject to a maximum of $7.5

million per year, and to receive an additional up to a maximum of $760.0

million, in the aggregate, in regulatory and commercial milestone payments.

Basis of presentation

Restatement of previously issued condensed consolidated financial statements

Impacts of restatement

The effects of the restatement on the line items within the Company’s condensed consolidated balance sheets as of September 30, 2018 are as follows:

	September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
CONTRACTS ASSET	$	1,450		$	(1,450	)	$	-
CURRENT LIABILITIES:
Contracts liability		-			9,786			9,786
Total current liabilities	$	14,551		$	9,786		$	24,337
LONG TERM LIABILITIES:
Contracts liability		61,780			(28,287	)		33,493
Total long term liabilities		117,640			(28,287	)		89,353
Total liabilities		132,191			(18,501	)		113,690
CAPITAL DEFICIENCY	$	(64,994	)	$	17,051		$	(47,943	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2018 are as follows:

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments			As restated			As originally reported			Adjustments			As restated
REVENUES FROM LICENSE AGREEMENTS	$	-		$	11,672		$	11,672		$	-		$	16,665		$	16,665
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	$	(2,638	)	$	(1,450	)	$	(4,088	)	$	(7,294	)	$	(1,450	)	$	(8,744	)
OPERATING LOSS	$	(13,963	)	$	10,222		$	(3,741	)	$	(30,851	)	$	15,215		$	(15,636	)
LOSS FOR THE PERIOD	$	(15,544	)	$	10,222		$	(5,322	)	$	(36,238	)	$	15,215		$	(21,023	)
Net loss per share of common stock-basic and diluted	$	(0.10	)	$	0.06		$	(0.04	)	$	(0.25	)	$	0.11		$	(0.14	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of changes in capital deficiency for the nine months ended September 30, 2018 are as follows:

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments		As restated
Net loss for the nine months ended September 30, 2018	$	(36,238	)	$	15,215	$	(21,023	)
Balances as of September 30, 2018
Accumulated deficit		(334,170	)		17,051		(317,119	)
Total capital deficiency	$	(64,994	)	$	17,051	$	(47,943	)

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
Cash flows from operating activities:
Net loss	$	(36,238	)	$	15,215		$	(21,023	)
Increase in contracts liability		34,929			(16,665	)		18,264
Increase in contract asset		(1,450	)		1,450			-
Net cash used in operating activities	$	(3,738	)	$	-		$	(3,738	)

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

	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	)

Net loss per share

Revenue recognition

Revenue recognition (as restated)

Revenue 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.

Revenue from Chiesi Agreements

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.

Recently adopted standards

In May 2014, the

Financial Accounting Standards Board (“FASB”)

SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Schedule of Error Corrections and Prior Period Adjustments [Table Text Block]

The effects of the restatement on the line items within the Company’s condensed consolidated balance sheets as of September 30, 2018 are as follows:

	September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
CONTRACTS ASSET	$	1,450		$	(1,450	)	$	-
CURRENT LIABILITIES:
Contracts liability		-			9,786			9,786
Total current liabilities	$	14,551		$	9,786		$	24,337
LONG TERM LIABILITIES:
Contracts liability		61,780			(28,287	)		33,493
Total long term liabilities		117,640			(28,287	)		89,353
Total liabilities		132,191			(18,501	)		113,690
CAPITAL DEFICIENCY	$	(64,994	)	$	17,051		$	(47,943	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2018 are as follows:

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments			As restated			As originally reported			Adjustments			As restated
REVENUES FROM LICENSE AGREEMENTS	$	-		$	11,672		$	11,672		$	-		$	16,665		$	16,665
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	$	(2,638	)	$	(1,450	)	$	(4,088	)	$	(7,294	)	$	(1,450	)	$	(8,744	)
OPERATING LOSS	$	(13,963	)	$	10,222		$	(3,741	)	$	(30,851	)	$	15,215		$	(15,636	)
LOSS FOR THE PERIOD	$	(15,544	)	$	10,222		$	(5,322	)	$	(36,238	)	$	15,215		$	(21,023	)
Net loss per share of common stock-basic and diluted	$	(0.10	)	$	0.06		$	(0.04	)	$	(0.25	)	$	0.11		$	(0.14	)

The effects of the restatement on the line items within the Company’s condensed consolidated statements of changes in capital deficiency for the nine months ended September 30, 2018 are as follows:

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands, except per share data)	As originally reported			Adjustments		As restated
Net loss for the nine months ended September 30, 2018	$	(36,238	)	$	15,215	$	(21,023	)
Balances as of September 30, 2018
Accumulated deficit		(334,170	)		17,051		(317,119	)
Total capital deficiency	$	(64,994	)	$	17,051	$	(47,943	)

	Nine Months Ended September 30, 2018
( U.S. dollars in thousands)	As originally reported			Adjustments			As restated
Cash flows from operating activities:
Net loss	$	(36,238	)	$	15,215		$	(21,023	)
Increase in contracts liability		34,929			(16,665	)		18,264
Increase in contract asset		(1,450	)		1,450			-
Net cash used in operating activities	$	(3,738	)	$	-		$	(3,738	)

	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	)

INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2018

Inventory Disclosure [Abstract]

Schedule of Inventory

The Company’s inventory at September 30, 2018 and December 31, 2017 consisted of the

following:

	September 30,		December 31,
(U.S. dollars in thousands)	2018		2017
Raw materials	$	3,201	$	3,838
Work in progress		276		485
Finished goods		4,482		3,510
Total inventory	$	7,959	$	7,833

FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value Measurements, Recurring and Nonrecurring

The liability component was valued based on the Income Approach. The following parameters were used:

	2021 Notes
Stock price (USD)	0.73
Expected term (years)	3.13
Risk free rate	2.87	%
Volatility	75.56	%
Yield	13.50	%

REVENUES (Tables)

9 Months Ended

Sep. 30, 2018

Income Statement [Abstract]

Statements of operations

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

	Nine Months Ended September 30,
(U.S. dollars in thousands)	2018		2017
Pfizer	$	4,649	$	10,198
Brazil	$	2,573	$	6,575
Total revenues from selling goods	$	7,222	$	16,773
Revenues from license and R&D services	$	16,665

SIGNIFICANT ACCOUNTING POLICIES (condensed consolidated balance sheets) (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
CONTRACTS ASSET	$ 0
CURRENT LIABILITIES:
Contracts liability	9,786
Total current liabilities	24,337	22,752
LONG TERM LIABILITIES:
Contracts liability	33,493	25,015
Total long term liabilities	89,353	78,919
Total Liabilities	113,690	101,671
CAPITAL DEFICIENCY	(47,943)	(29,457)	$ (26,071)	$ (9,957)
Previously Reported [Member]
CURRENT ASSETS:
CONTRACTS ASSET	1,450
CURRENT LIABILITIES:
Contracts liability	0
Total current liabilities	14,551
LONG TERM LIABILITIES:
Contracts liability	61,780	26,851
Total long term liabilities	117,640
Total Liabilities	132,191
CAPITAL DEFICIENCY	(64,994)
Restatement Adjustment [Member]
CURRENT ASSETS:
CONTRACTS ASSET	(1,450)
CURRENT LIABILITIES:
Contracts liability	9,786
Total current liabilities	9,786
LONG TERM LIABILITIES:
Contracts liability	(28,287)	$ (1,836)
Total long term liabilities	(28,287)
Total Liabilities	(18,501)
CAPITAL DEFICIENCY	$ 17,051

SIGNIFICANT ACCOUNTING POLICIES (condensed consolidated income statement) (Details) - USD ($)
$ / shares in Units, $ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2018

Sep. 30, 2017

Sep. 30, 2018

Sep. 30, 2017

^[1]

$ (4,088)

$ (2,836)

$ (8,744)

$ (8,187)

Net loss per share of common stock-basic and diluted

(3,741)

(7,765)

(15,636)

(24,935)

LOSS FOR THE PERIOD

$ (5,322)

$ (11,437)

$ (21,023)

$ (70,135)

$ (0.04)

$ (0.09)

$ (0.14)

$ (0.55)

License and Service [Member]

REVENUES FROM LICENSE AGREEMENTS

$ 11,672

$ 16,665

Previously Reported [Member]

(2,638)

(7,294)

Net loss per share of common stock-basic and diluted

(13,963)

(30,851)

LOSS FOR THE PERIOD

$ (15,544)

$ (36,238)

$ (0.10)

$ (0.25)

Previously Reported [Member] | License and Service [Member]

REVENUES FROM LICENSE AGREEMENTS

$ 0

Restatement Adjustment [Member]

(1,450)

Net loss per share of common stock-basic and diluted

10,222

15,215

LOSS FOR THE PERIOD

$ 10,222

$ 15,215

$ 0.06

$ 0.11

Restatement Adjustment [Member] | License and Service [Member]

REVENUES FROM LICENSE AGREEMENTS

$ 11,672

$ 16,665

[1]	Includes share-based compensation

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

SIGNIFICANT ACCOUNTING POLICIES (condensed consolidated statements of changes in capital deficiency) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Significant Accounting Policies [Line Items]
Net loss for the nine months ended September 30, 2018	$ (5,322)	$ (11,437)	$ (21,023)	$ (70,135)
Total capital deficiency	(47,943)	(26,071)	(47,943)	(26,071)	$ (29,457)	$ (9,957)
Retained Earnings [Member]
Significant Accounting Policies [Line Items]
Net loss for the nine months ended September 30, 2018			(21,023)	(70,135)
Total capital deficiency	(317,119)	$ (282,791)	(317,119)	$ (282,791)	$ (296,096)	$ (212,656)
Previously Reported [Member]
Significant Accounting Policies [Line Items]
Net loss for the nine months ended September 30, 2018	(15,544)		(36,238)
Total capital deficiency	(64,994)		(64,994)
Previously Reported [Member] \| Retained Earnings [Member]
Significant Accounting Policies [Line Items]
Total capital deficiency	(334,170)		(334,170)
Restatement Adjustment [Member]
Significant Accounting Policies [Line Items]
Net loss for the nine months ended September 30, 2018	10,222		15,215
Total capital deficiency	17,051		17,051
Restatement Adjustment [Member] \| Retained Earnings [Member]
Significant Accounting Policies [Line Items]
Total capital deficiency	$ 17,051		$ 17,051

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

SIGNIFICANT ACCOUNTING POLICIES (condensed consolidated of cash flows) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Significant Accounting Policies [Line Items]
Net loss	$ (5,322)	$ (11,437)	$ (21,023)	$ (70,135)
Increase in contracts liability			18,264	(837)
Increase in contract asset			0
Net cash used in operating activities			(3,738)	$ (27,584)
Previously Reported [Member]
Significant Accounting Policies [Line Items]
Net loss	(15,544)		(36,238)
Increase in contracts liability			34,929
Increase in contract asset			(1,450)
Net cash used in operating activities			(3,738)
Restatement Adjustment [Member]
Significant Accounting Policies [Line Items]
Net loss	$ 10,222		15,215
Increase in contracts liability			(16,665)
Increase in contract asset			1,450
Net cash used in operating activities			$ 0

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.