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fFFAS

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q

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(Mark One)

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

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For the quarterly period ended June 30, 2021

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OR

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

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For the transition period from                          to                        

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001-33357

(Commission file number)

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PROTALIX BIOTHERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

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(201)-696-9345

(Registrant’s telephone number, including area code)

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N/A

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

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Securities registered pursuant to Section 12(b) of the Act:

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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  ⌧  No  ◻

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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 ⌧  No  ◻

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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:

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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. ◻

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

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On August 1, 2021, approximately 45,556,647 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

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FORM 10-Q

TABLE OF CONTENTS

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

(Unaudited)

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

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PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. dollars in thousands, except share and per share data)

(Unaudited)

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

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PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY)

(U.S. dollars in thousands, except share data)

(Unaudited)

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*Represents an amount equal to less than $1.

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(1) Common stock, $0.001 par value; Authorized – as of June 30, 2021 and 2020 - 120,000,000 shares.

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

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PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

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

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PROTALIX BIOTHERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

(Unaudited)

(Continued) – 2

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

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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PROTALIX BIOTHERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS SUMMARY

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, 2020. 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 within the meanings of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or 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 our company 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 as a result of several factors including those set forth under “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

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

●risks related to the timing and progress of the preparation of an updated BLA addressing the CRL for PRX-102;

●risks relating to our ability to manage our relationship with our collaborators, distributors or partners;

●risks relating to changes to interim, topline or preliminary data from clinical trials that we announce or publish;

●risks related to any transactions we may effect in the public or private equity markets to raise capital to finance future research and development activities, general and administrative expenses and working capital;

●risk of significant lawsuits, including stockholder litigation, which is common in the life sciences sector;

●our dependence on performance by third-party providers of services and supplies;

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

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●risks related to our supply of drug product to Pfizer;

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

●risks relating to the compliance by Fiocruz, an arm of 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;

●potential product liability risks, and risks of securing adequate levels of related insurance coverage;

●the possibility of infringing a third-party’s patents or other intellectual property rights and the uncertainty of obtaining patents covering our products and processes and 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.

Recent Company Developments

We continue to actively advance all our clinical programs. We are in close contact with our principal investigators and clinical sites and our clinical research organizations, which are primarily located in the United States and Europe, and to date, our clinical trials have not been materially adversely affected by COVID-19. In light of recent developments relating to the COVID-19 pandemic, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the FDA’s updated industry guidance for conducting clinical trials issued on March 18, 2020, we and our contract research organizations have made certain adjustments to the operation of our clinical trials in an effort to ensure the monitoring and safety of patients and minimize risk to trial integrity during the pandemic and generally, and we may need to make further adjustments in the future.

In response to the local spread of COVID-19 at the end of March 2020, and with local directives issued in response thereof, we restructured the work day within our facilities to consist of two shifts thereby reducing the number of employees present in the facilities at any time and facilitating their ability to practice social distancing. Employees that were able to work from home were instructed to do so. Such efforts resulted in minor delays in the performance of administrative activities outside of the clinical programs.

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In June 2020, after local directives allowed more flexibility with respect to social interactions, we returned to a regular work day. Since then, as the pandemic’s effect locally continued to change, and local Israeli directives continued to evolve to address the changing effects, we returned temporarily to the two-shift work day schedule and to again encourage employees that are able to work from home to do so for parts of September 2020. Our facility currently operates on a regular schedule with adherence to local guidelines.

We will continue to evaluate the impact of the COVID-19 pandemic and its variants on our business as we learn more and the impact of COVID-19 on our industry becomes more clear. We intend to continuously assess the impact of COVID-19 on our trials, expected timelines and costs.

ProCellEx: Our Proprietary Protein Expression System

Plant Cell Production Advantages

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Plant Cell in Suspension Expression System for Therapeutic Proteins Development and Industrial Production: Executive Summary

Product Pipeline

Pegunigalsidase Alfa (PRX-102) for the Treatment of Fabry Disease

PRX-102 is our lead product candidate and we expect it to be the primary subject of our development efforts in the short-term. It is our proprietary, investigational, plant cell culture expressed enzyme, and a chemically modified stabilized version of, the recombinant α-Galactosidase-A protein, a lysosomal enzyme, under development for the treatment of Fabry disease. Fabry disease is a serious life-threatening rare genetic disorder. Fabry patients lack α-galactosidase-A resulting in the progressive accumulation of abnormal deposits of a fatty substance called globotriaosylceramide, or Gb₃, in blood vessel walls throughout their body. The abnormal storage of Gb₃ increases with time and, as a result, Gb₃ accumulates, primarily in the blood and in the blood vessel walls. The accumulation leads to a narrowing of the blood vessels, which in turn leads to decreased blood flow and tissue nourishment. The ultimate consequences of Gb₃ deposition range from episodes of pain and impaired peripheral sensation to end-organ failure, particularly of the kidneys, but also of the heart and the cerebrovascular system. Fabry disease occurs in one person per 40,000 to 60,000 males. The global market for Fabry disease is forecasted to be approximately $1.9 billion in 2021 (Global Data) and to continue to grow at a CAGR of approximately 9.5% (Global Data).

A BLA for PRX-102 for the treatment of adult patients with Fabry disease was submitted to the FDA on May 27, 2020 under the FDA’s Accelerated Approval pathway, which was subsequently accepted by the FDA and granted Priority Review designation. The BLA submission includes a comprehensive set of preclinical, clinical and manufacturing data compiled from our completed phase I/II

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clinical trial of PRX-102, including the related extension study succeeding our phase I/II clinical trial, interim clinical data from our phase III BRIDGE switch-over study and safety data from our on-going clinical studies of PRX-102 in patients receiving 1 mg/kg every other week.

As discussed above, on April 28, 2021, we, together with Chiesi, announced the receipt of a CRL from the FDA regarding the BLA. The CRL did not report any concerns relating to the potential safety or efficacy of PRX-102 in the submitted data package. In the CRL, the FDA noted that an inspection of Protalix’s manufacturing facility in Carmiel, Israel, including a subsequent assessment of any related FDA findings, is required before the FDA can approve a resubmitted BLA. Due to travel restrictions, the FDA was unable to conduct the required inspection during the review cycle. The FDA explained in the letter that it will continue to monitor the public health situation as well as travel restrictions, and is actively working to define an approach for scheduling outstanding inspections. With respect to the third-party facility in Europe at which fill and finish processes are performed for PRX-102, due to COVID-19, the FDA reviewed records under Section 704(a)(4) of the FFDCA in lieu of a pre-licensing inspection. In the CRL, the FDA stated that it will communicate remaining issues to the facility in order to seek prompt resolution of any pending items.

In addition to the foregoing, in the CRL, the FDA noted that Fabrazyme, a therapy used to treat Fabry patients, was recently converted to full approval and is now an “available therapy,” which must be addressed in the context of any potential resubmission of a BLA for PRX-102. We intend to work collaboratively with the agency to identify the most expeditious pathway to approval, and are confident that we will be able to work with the FDA to resolve these issues and provide a new, alternative drug to Fabry patients.

On August 2, 2021, we announced that a Type A Meeting request has been submitted to the FDA to discuss the CRL. The FDA has scheduled the Type A meeting for September 9, 2021; however, we cannot anticipate the additional steps that may be required in connection with any potential resubmission. We intend to provide further updates on next steps after the meeting.

Based on the interim analysis of the 12-month data generated from the BALANCE study, which are described below, and in combination with previously reported positive data from the BRIGHT and BRIDGE studies, Protalix and Chiesi intend to submit an MAA to the EMA for the review of PRX-102 for the proposed treatment of Fabry disease.

In December 2017, the European Commission granted Orphan Drug Designation for PRX-102 for the treatment of Fabry disease. Orphan Drug Designation for PRX-102 qualifies Chiesi 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 PRX-102 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.

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.

Key Trials and Design

Our phase III clinical program of PRX-102 for the treatment of Fabry disease includes three individual studies; the BALANCE study, the BRIDGE study and the BRIGHT study. Enrollment has been completed in all three studies. In 2015, we completed a phase I/II clinical trial of PRX-102. In the phase III clinical program, we are studying two alternative doses and regimens for PRX-102; 1 mg/kg every two weeks, with the potential for improved efficacy and safety offering a potential alternative to existing enzyme replacement therapies, and 2 mg/kg every four weeks, which has the potential to lower treatment burden versus existing treatments and potentially provide a better quality of life for a subset of Fabry patients. Final results from the BRIDGE study were released in December 2020 and topline results from the BRIGHT study were released in February 2021. Interim one-year data from the BALANCE study was released in June 2021.

Patients that completed the phase I/II clinical trial were offered, and patients that complete the BALANCE, BRIDGE and BRIGHT studies are offered, the opportunity to continue PRX-102 treatment as part of a long-term extension study.

In February 2020, we, together with Chiesi, announced an agreement with the FDA for the Initial Pediatric Study Plan (iPSP) for PRX-102. The joint announcement was made after completion of discussions with the FDA and receipt of confirmation from the FDA in an official “Agreement Letter” which outlines an agreed-upon approach to evaluate the safety and efficacy of PRX-102 in pediatric Fabry patients in a clinical trial to be performed by Chiesi with our collaborative efforts.

Phase III BALANCE Study

The BALANCE study is a 24-month, randomized, double blind, active control study of PRX-102 in Fabry patients with impaired renal function. We have completed enrollment of 78 patients in the trial, which is designed to evaluate the safety and efficacy of PRX-102

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compared to agalsidase beta (Fabrazyme) on renal function in Fabry patients with progressing kidney disease previously treated with Fabrazyme infused once every two weeks. Patients previously treated with Fabrazyme for approximately one year and on a stable dose for at least six months were screened and then randomized on a 2:1 ratio to 1 mg/kg of PRX-102 or 1 mg/kg of Fabrazyme. Randomization is being stratified by urinary protein to creatinine ratio (UPCR) of < or ≥ 1 g/g by spot urine sample. The study was designed such that no more than 50% of the patients enrolled in the study would be female. Approximately 40% of the enrolled patients were female.

The primary endpoint of the BALANCE study is the comparison in the annualized rate of decline of eGFR slope between Fabrazyme and PRX-102. eGFR is considered a reliable and accepted test to measure the level of kidney function and stage of kidney disease. Additional parameters being evaluated include: cardiac assessment, Lyso-Gb₃ (a biomarker for monitoring Fabry patients during therapy), pain, quality of life, immunogenicity, Fabry clinical events and pharmacokinetic and other parameters. The study also evaluates the safety and tolerability of PRX-102.

In June 2021, we, together with Chiesi, announced topline results from an interim analysis of the BALANCE study. The primary endpoint of the interim analysis is the comparison of mean annualized changes (slope) of the eGFR_(CKD-EPI) after completion of at least 12 months of treatment between the two treatment arms (Fabrazyme and PRX-102). The interim efficacy analysis was conducted on two pre-defined analysis sets: Intention to Treat (ITT), consisting of all randomized patients who received at least one dose (77 patients), considered as the primary analysis for this interim review; and the Per Protocol (PP), consisting of all patients who completed at least 12 months of treatment with no major protocol violations (74 patients). The patient population (ITT analysis set) of the study is comprised of 47 males (61%) and 30 females (39%) with a mean age of 44.3 years.

The initial top-line results show that the lower boundary of the confidence interval for the mean difference between the two treatments was below the non-inferiority margin pre-specified for this interim analysis in the ITT analysis set and above such limit in the PP analysis set. At the time of this analysis, two patients discontinued participation due to treatment emergent adverse events (TEAEs). Of these two patients, one discontinued participation due to a related adverse event. No deaths were registered. Overall, safety data appears favorable and consistent with what was observed in previous clinical studies with PRX-102. Unblinded final data is anticipated to be released in the second quarter of 2022 after all remaining patients have completed the 24-month treatment period.

Based on the interim analysis of the 12-month data generated from the BALANCE study, and in combination with previously reported positive data from the BRIGHT and BRIDGE studies, Protalix and Chiesi intend to submit an MAA to the EMA for the review of PRX-102 for the proposed treatment of Fabry disease.

Patients enrolled in the BALANCE study will continue to be treated for a total of 24 months, at which point the data will be analyzed to test for superiority.

Phase III BRIDGE Study

The BRIDGE study was a 12-month open-label, single arm switch-over study evaluating the safety and efficacy of pegunigalsidase alfa, 1 mg/kg infused every two weeks, in up to 22 Fabry patients. The trial, which is was completed in December 2019, enrolled patients then being treated with agalsidase alfa, marketed by Takeda Pharmaceutical Company Limited (acquired Shire Plc) as Replagal^®, for at least two years and on a stable dose for at least six months. Patients were screened and evaluated over three months while continuing Replagal treatment. Following the screening period, each patient was enrolled and switched from Replagal treatment to receive intravenous (IV) infusions of PRX-102 1 mg/kg every two weeks for 12 months.

Final results of the data generated in the study showed substantial improvement in renal function as measured by mean annualized estimated Glomerular Filtration Rate, or eGFR, slope in both male and female patients who were switched from agalsidase alfa to PRX-102. Twenty of 22 patients completed the 12-month treatment duration. Eighteen of the patients who completed the study opted to roll over to a long-term extension study and continue to be treated with PRX-102. In the study, the mean annualized eGFR slope of the study participants improved from -5.90 mL/min/1.73m²/year while on agalsidase alfa to -1.19 mL/min/1.73m²/year on PRX-102 in all patients. Male patients improved from -6.36 mL/min/1.73m²/year to -1.73 mL/min/1.73m²/year and female patients improved from -5.03 mL/min/1.73m²/year to -0.21 mL/min/1.73m²/year. Following the switch to PRX-102, there was a decrease in patients with progressing or fast progressing kidney disease, and most patients achieved a stable status post-switch.

PRX-102 was well-tolerated in the study, with all adverse events being transient in nature without sequelae. Of the 22 patients enrolled in the BRIDGE study, the majority of treatment emergent adverse events were mild or moderate in severity, with two patients (9.1%) withdrawing from the therapy due to hypersensitivity reaction that was resolved. The most common moderate treatment emergent adverse events were nasopharyngitis, headache and dyspnea.

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An immunogenicity assessment indicated that four out of 20 patients (20%) developed persistent antidrug antibodies over the course of the study, of which two had neutralizing activity.

Baseline characteristics of the 20 patients that completed the study, ranging from ages 28 to 60 years, were as follows: mean eGFR 75.87 mL/min/1.73m² in males, and 86.14 mL/min/1.73m² in females and plasma lyso-Gb₃ were 51.81 nM and 13.81 nM in males and females, respectively. While lyso-Gb₃ levels remain slightly high, particularly within the male cohort, continuous reduction in lyso-Gb₃ levels was observed of 19.55 nM (32.35%) in males and 4.57 nM (29.81%) in females.

Data from the interim analysis of the BRIDGE study, which were first announced in February 2020, were used to support the PRX-102 BLA filing with the FDA, and we anticipate that the final analysis will be used to support a Marketing Authorization Application, or MAA, with the EMA.

Phase III BRIGHT Study

The phase III BRIGHT clinical trial of PRX-102 for the treatment of Fabry disease, or the BRIGHT study, was a 12-month, open-label, switch-over study designed to evaluate the safety, efficacy and pharmacokinetics of PRX-102 via IV infusions of 2 mg/kg administered every 4 weeks. The trial, which was completed in June 2020, enrolled up to 30 patients with Fabry disease previously treated with a commercially available ERT (Fabrazyme or Replagal), for at least three years and on a stable dose administered every two weeks. To determine eligibility for participation in the study, candidates were screened to identify and select Fabry patients with stable kidney disease. Patients who matched the criteria were enrolled in the study and switched from their current treatment of IV infusions every 2 weeks to 2 mg/kg of PRX-102 every 4 weeks for 12 months. Patients participating in the study were evaluated, among other disease parameters, to determine if their kidney disease had not further deteriorated while being treated with the 4-week dosing regimen as measured by eGFR and Lyso-Gb₃, as well as other parameters. In addition, participating patients were evaluated to assess the safety and tolerability of PRX-102.

We announced topline results in February 2021. The topline results indicate that 2 mg/kg of PRX-102 administered by intravenous infusion every four weeks was found to be well tolerated among treated patients, and stable clinical presentation was maintained in adult Fabry patients. No new patients developed treatment-induced anti-drug antibodies, or ADA, following the switch to PRX-102 treatment.

The BRIGHT study enrolled 24 adult males and 6 adult females. The most common Fabry disease symptoms were acroparesthesia, heat intolerance, angiokeratomas and hypohydrosis. All 30 patients received at least one dose of PRX-102, and 29 patients (mean [SD] age was 40.5 [11.3] years, ranging from 19 to 58 years) completed the 12-month study. Of these 29 patients, 28 received the intended regimen of 2 mg/kg every four weeks throughout the study, while one patient was switched to PRX-102 1 mg/kg every two weeks per protocol. One patient withdrew from the study after the first infusion due to a traffic accident.

Following screening, patients were enrolled and switched from their then current ERT to IV infusions of 2 mg/kg of PRX-102 every four weeks for 52 weeks (a total of 14 infusions). First infusions of PRX-102 were administered under controlled conditions at the investigation site. Based on the protocol-specified criteria, patients were able to receive their PRX-102 infusions at a home care setup once the Investigator and Sponsor Medical Monitor agreed that it was safe to do so. Safety and efficacy exploratory endpoints were assessed throughout the 52-week study.

Study outcome measures showed plasma lyso-Gb₃ concentrations remained stable during the study with a mean change of 3.01 nM from baseline (19.36 nM) to Week 52 (22.23 nM). Mean absolute change of eGFR values were stable during the 52-week treatment period, with a mean change from baseline of -1.27 mL/min/1.73m².

Following a survey of participants using the Quality of Life EQ-5D-5L questionnaire, responses indicate that patient perception of their own health remained high and stable throughout the 52-week study duration, with overall health mean (SE) scores of 78.3 (3.1) and 82.1 (2.9) at baseline and Week 52, respectively, in a 0 to 100 scale. Using the short-form Brief Pain Inventory, or BPI, questionnaire, approximately 75% of study participants had an improvement or no change in average pain severity at Week 52 (compared to baseline). The short-form BPI interference items also remained stable during the study. Pain-related results indicate that there was no increase and/or relapse in pain. No Fabry clinical events were reported during the study.

To date, substantially all of the patients who completed the study opted, with the advice of the treating physician, to continue treatment under the 4-week dosing regimen in a long-term extension study.

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COVID-19 Impact on PRX-102 Clinical Trials

To date, the COVID-19 pandemic has had a minimal effect on the performance of the phase III clinical trials of PRX-102 as many of the patients were already treated in home care settings. In a minimal amount of cases, patients that completed a trial were not able to be transferred into an extension study due to the pandemic restrictions, and, accordingly, the main trial was prolonged for the patients to permit the continuation of treatment.

Phase I/II Study

Our phase I/II clinical trial of PRX-102, which we completed in 2015, was a worldwide, multi-center, open-label, dose ranging study designed to evaluate the safety, tolerability, pharmacokinetics, immunogenicity and efficacy parameters of PRX-102 in adult Fabry patients. Sixteen adult, naïve Fabry patients (9 male and 7 female) completed the trial, each in one of three dosing groups, 0.2 mg/kg, 1 mg/kg and 2 mg/kg. Each patient received IV infusions of PRX-102 every two weeks for 12 weeks, with efficacy follow-up after six-month and twelve-month periods. A majority of the patients who completed the trial opted to continue receiving PRX-102 in an open-label, 60-month extension study under which all patients were switched to receive 1 mg/kg of the drug, the selected dose for our BALANCE and BRIDGE studies of PRX-102.

The adult symptomatic, ERT-naïve Fabry disease patients enrolled in the phase I/II study were evaluated for Gb₃ levels in kidney biopsies and for plasma Lyso-Gb₃ concentration by the quantitative BLISS methodology. Biopsies were available from 14 patients. The outcome of ≥ 50% reduction in the average number of Gb₃ inclusions per kidney PTC from baseline to Month 6 was demonstrated in 11 of 14 (78.6%) of the patients treated with PRX-102. The overall results demonstrate that PRX-102 reaches the affected tissue and reduces kidney Gb₃ inclusions burden and Lyso-Gb₃ in the circulation. A high correlation was found between the two Fabry disease biomarkers, reduction of kidney Gb₃ inclusions and the reduction of plasma Lyso-Gb₃ over six months of treatment.

Data was recorded at 24 months from 11 patients who completed 12 months of the long-term open-label extension trial that succeeded the phase I/II study. Patients who did not continue in the extension trial included: female patients who became or planned to become pregnant and therefore were unable to continue in accordance with the study protocol; and patients who relocated to a location where treatment was not available under the clinical study.

Results show that Lyso-Gb₃ levels decreased approximately 90% from baseline. Renal function remained stable with mean eGRF levels of 108.02 and 107.20 at baseline and 24 months, respectively, with a modest annual eGFR slope of -2.1. An improvement across all the gastrointestinal symptoms evaluated, including severity and frequency of abdominal pain and frequency of diarrhea, was noted. Cardiac parameters, including LVM, LVMI and EF, remained stable with no cardiac fibrosis development detected. In conclusion, an improvement of over 40% in disease severity was shown as measured by the Mainz Severity Score Index, or MSSI, a score compiling the different elements of the disease severity including neurological, renal and cardiovascular parameters. In addition, an improvement was noted in each of the individual parameters of the MSSI.

The majority of adverse events were mild-to-moderate in severity, and transient in nature. During the first 12 months of treatment, only three of 16 patients (less than 19%) formed anti-drug antibodies (ADA), of which two of these patients (less than 13%) had neutralizing antibodies. Importantly, however, the ADAs turned negative for all three of these patients following 12 months of treatment. The ADA positivity effect had no observed impact on the safety, efficacy or continuous biomarker reduction of PRX-102.

Commercialization Agreements with Chiesi Farmaceutici

We have entered into two exclusive global licensing and supply agreements for PRX-102 for the treatment of Fabry disease with Chiesi. The agreements have significant revenue potential for Protalix. Under the agreements, Protalix Ltd. has received $50.0 million in upfront payments and was entitled to development cost reimbursements of up to $45.0 million, up to more than $1.0 billion in potential milestone payments and tiered royalties of 15% - 35% (ex-US) and 15% - 40% (US). To date, Protalix Ltd. has received the complete amount of development costs to which it is entitled under the two Agreements.

On October 19, 2017, Protalix Ltd. and Chiesi entered into the Chiesi Ex-US Agreement pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize PRX-102. Under the Chiesi Ex-US Agreement, Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of the agreement, and Protalix Ltd. was entitled to additional payments of up to $25.0 million in development costs in the aggregate, capped at $10.0 million per year. Protalix Ltd. is also eligible to receive additional payments of up to a maximum of $320.0 million 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 PRX-102 from Protalix Ltd., 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 PRX-102.

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On July 23, 2018, Protalix Ltd. entered into the Chiesi US Agreement with respect to the development and commercialization of PRX-102 in the United States. Protalix Ltd. received an upfront, non-refundable, non-creditable payment of $25.0 million from Chiesi and was entitled to additional payments of up to a maximum of $20.0 million to cover development costs for PRX-102, subject to a maximum of $7.5 million per year. Protalix Ltd. is also eligible to receive additional payments of up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. Chiesi is also required to make tiered payments of 15% to 40% of its net sales under the Chiesi US Agreement to Protalix Ltd., depending on the amount of annual sales, subject to certain terms and conditions, as consideration for product supply.

On May 13, 2021, we signed a binding term sheet with Chiesi pursuant to which we amended the Chiesi Agreements in order to provide us with near-term capital. Chiesi agreed to make a $10.0 million milestone payment to us before the end of the second quarter in exchange for a $25.0 million reduction in a longer term regulatory milestone payment in the Chiesi EX-US Agreement. All other regulatory and commercial milestone payments remain unchanged. We also agreed to negotiate certain manufacturing related matters.

Elelyso^® for the Treatment of Gaucher Disease

Elelyso (taliglucerase alfa), our first commercial product, was approved by the FDA in 2012 for injection as an enzyme replacement therapy (ERT) for the long-term treatment of adult patients with a confirmed diagnosis of type 1 Gaucher disease. In August 2014, the FDA approved Elelyso for injection for pediatric patients. Elelyso is the first plant cell derived recombinant protein to be approved by the FDA for the treatment of Gaucher disease and is now approved in over 20 markets.

Gaucher disease, also known as glucocerebrosidase, or GCD, deficiency, is a rare genetic autosomal recessive disorder and one of the most common Lysosomal Storage Disorders, or LSD, in the world. It is one of a group of disorders that affect specific enzymes that normally break down fatty substances for reuse in the cells. If the enzymes are missing or do not work properly, the substances can build up and become toxic. Gaucher disease occurs when a lipid called glucosylceramide accumulates in the cells of the bone marrow, lungs, spleen, liver, and sometimes the brain. Gaucher disease symptoms can include fatigue, anemia, easy bruising and bleeding, severe bone pain and easily broken bones, and distended stomach due to an enlarged spleen and thrombocytopenia. Epidemiology of Gaucher disease varies; recent literature provides that prevalence of Gaucher disease ranges from 0.70 to 1.75 per 100,000 in the general population. In people of Ashkenazi Jewish heritage, estimates of occurrence vary from approximately 1 in 400 to 1 in 850 people.

Gaucher disease is a $1.5 billion global annual therapeutic market that includes Sanofi’s Cerezyme^®, Shire’s (acquired by Takeda Pharmaceutical Company Limited) Vpriv^® and Sanofi’s Cerdelga^®.

Commercialization Agreements for Elelyso

We have licensed to Pfizer the global rights to Elelyso in all markets excluding Brazil. Pfizer retains 100% of revenue and reimburses 100% of direct costs. We manufacture drug substance for Pfizer, subject to certain terms and conditions.

For the first 10-year period after the execution of our 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. In a subsequent amendment, we agreed that after the completion of the first 10-year supply period, the supply term would automatically extend for a five-year period.

We maintain distribution rights to Elelyso in Brazil (marketed as BioManguinhos alfataliglicerase) through a supply and technology transfer agreement with Fiocruz, an arm of the Brazilian MoH. In 2020, we generated $8.0 million from sales of BioManguinhos alfataliglicerase to the Brazilian MoH.

Alidornase Alfa (PRX-110)

Alidornase alfa is our chemically-modified plant cell expressed recombinant human DNase I, administered via inhalation. Recombinant human DNase I enzymatically cleaves DNA but its activity is inhibited by actin, which is present in the blood and other target organs. PRX-110 is designed to be less susceptible to actin inhibition and have higher affinity to DNA, thus enhancing enzymatic activity. In-vitro studies have shown PRX-110 to have a highly improved catalytic efficiency and affinity to DNA, compared to dornase alfa (Pulmozyme^®, currently the only commercially available DNase therapy), even more so in the presence of actin.

On February 10, 2021, we entered into an exclusive worldwide license agreement with SarcoMed with respect to PRX-110 for use in the treatment of any human respiratory disease or condition including, but not limited to, sarcoidosis, pulmonary fibrosis, and other related diseases via inhaled delivery.

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On July 21, 2020, the FDA granted Orphan Drug Designation for alidornase alfa for the treatment of sarcoidosis.

PRX-115

PRX-115 is our plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a chemically modified enzyme under development for the potential treatment of refractory gout. Gout is the most common inflammatory arthritis in the United States, affecting an estimated 9.2 million adults. Gout is caused by factors that elevate serum uric acid, or sUA, levels, which may include diet or genetic predisposition and environmental factors leading to hyperuricemia and tissue deposition of monosodium urate crystals, tophi, in joints and soft tissues, causing acute and chronic inflammation, and is characterized by recurrent flares. Gout flares lead to substantial morbidity by causing severe pain, reduced quality of life, decreased physical function, increased healthcare costs, and lost economic productivity. Furthermore, gout is strongly associated with metabolic syndrome, and may contribute to myocardial infarction, type 2 diabetes mellitus, chronic kidney disease, or CKD, and premature mortality.

Currently available urate-lowering therapies, or ULTs, can be effective in treating gout. Refractory gout patients are those whom, despite treatment with existing ULTs, have high flare frequency, consistent tophi, and the inability to maintain therapeutic goals of urate levels. An estimated approximately 2% of the gout population is considered to have chronic refractory disease and are in need of other therapeutic options. One option may be a therapeutic use of the uricase enzyme which converts uric acid to allantoin, which is easily eliminated through urine. The uricase enzyme does not exist naturally in humans. To date, two variants of recombinant uricases are approved for marketing: (i) Krystexxa^® for treatment of chronic gout refractory to conventional therapy (no longer approved in the European Union) and (ii) Elitek^®, indicated for the treatment of tumor lysis syndrome but not gout. Both have a black box warning for anaphylaxis, induce strong immunogenic reactions and have other major side-effects. We use ProCellEx to express an optimized recombinant uricase enzyme under development for the potential treatment of refractory gout which we are designing to have an improved half-life, reduced immunogenicity and potentially longer term efficacy.

PRX-119

PRX-119 is our plant cell-expressed PEGylated recombinant human DNase I product candidate being designed to elongate half-life in the circulation for NETs-related diseases. NETs, Neutrophil extracellular traps, are web-like structures, released by activated neutrophils that trap and kill a variety of microorganisms. NETs are composed of DNA, histones, antimicrobial and pro-inflammatory proteins. Excessive formation or ineffective clearance of NETs can cause different pathological effects. NETs formation has been observed in various autoimmune, inflammatory and fibrotic conditions, diverse forms of thrombosis, cancer and metastasis. According to scientific literature, animal studies have demonstrated that DNase treatment reduces NETs toxicity. Our proprietary modified DNase I design for long and customized systemically circulating in the bloodstream, may potentially enable effective treatment of acute and chronic conditions.

Intellectual Property

A key element of our overall strategy is to establish a broad portfolio of patents to protect our proprietary technology, proprietary product and product candidates and their methods of use. As of June 30, 2021, we hold a broad portfolio of over 90 patents in Europe, the United States, Israel and additional countries worldwide, as well as over 30 pending patent applications.

Scientific Presentations

Dr. Camilla Tøndel, a principal investigator in our phase III clinical program of PRX-102 for the treatment of Fabry disease, delivered a mini oral presentation entitled “A subgroup analysis of female patients in a phase 3 open-label study to assess the safety and efficacy of pegunigalsidase alfa in patients with Fabry disease previously treated with agalsidase alfa” at the 58th ERA-EDTA Virtual Congress (European Renal Association - European Dialysis and Transplant Association). The Congress took place virtually from June 5 through June 8, 2021.

Research & Development

We continuously work on the further development of our ProCellEx plant cell expression technology and bioreactor system. In addition, we are working on the development of new products, each in different initial stages of development, for specific products for which there are unmet needs in terms of efficacy and safety. Our development strategy focuses on the utilization of different modification approaches and development improvements, customized for each protein product, in all stages of expression and development.

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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 been no material changes to our critical accounting policies since we filed our Annual Report on Form 10-K for the year ended December 31, 2020.

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.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our financial condition, liquidity, or results of operations will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and its variants and the actions taken to contain or treat COVID-19 and its variants, as well as the economic impact on local, regional, national and international customers and markets.

Results of Operations

Three months ended June 30, 2021 compared to the three months ended June 30, 2020

Revenues from Selling Goods

We recorded revenues from selling goods of $3.2 million during the three months ended June 30, 2021, a decrease of $0.4 million, or 11%, compared to revenues of $3.6 million for the three months ended June 30, 2020. The decrease of $2.0 million in sales to Brazil, resulting from timing differences, was partially offset by an increase of $1.6 million in sales to Pfizer.

Revenues from License and R&D Services

We recorded revenues from license and R&D services of $3.2 million for the three months ended June 30, 2021, a decrease of $4.1 million, or 56%, compared to revenues of $7.3 million for the three months ended June 30, 2020. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi Agreements. The decrease resulted primarily from an updated costs estimation throughout the trials until completion in the amount of $4.1 million and from revenues recognized in connection with the progress of our clinical trials that have been completed during 2020.

Cost of Goods Sold

Cost of goods sold was $4.7 million for the three months ended June 30, 2021, an increase of $2.9 million, or 161%, from cost of goods sold of $1.8 million for the three months ended June 30, 2020. The increase in cost of goods sold was primarily the result of certain one-time manufacturing costs incurred while preparing for the then anticipated FDA approval of the PRX-102 BLA.

Research and Development Expenses

Research and development expenses were $7.7 million for the three months ended June 30, 2021, a decrease of $1.5 million, or 16%, compared to $9.2 million of research and development expenses for the three months ended June 30, 2020. The decrease is primarily the result of the completion of two out of the three phase III clinical trials of PRX-102 and reduced costs related to the BALANCE study.

We expect research and development expenses to continue to be our primary expense as we enter into a more advanced stage of preclinical and clinical trials for certain of our product candidates.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $3.2 million for the three months ended June 30, 2021, an increase of $1.0 million, or 45%, compared to $2.2 million for the three months ended June 30, 2020. The increase resulted primarily from an increase in corporate costs related insurance and funding.

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Financial Expenses, Net

Financial expenses net were $2.1 million for the three months ended June 30, 2021 and $1.9 million for the three months ended June 30, 2020. The increase resulted primarily from an increase in amortization of debt issuance costs and debt discount.

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Revenues from Selling Goods

We recorded revenues from selling goods of $7.8 million during the six months ended June 30, 2021, a decrease of $0.9 million, or 10%, compared to revenues of $8.7 million for the six months ended June 30, 2020. The decrease of $5.0 million in sales to Brazil, resulting from timing differences, was partially offset by an increase of $4.1 million in sales to Pfizer.

Revenues from License and R&D Services

We recorded revenues from license and R&D services of $10.0 million for the six months ended June 30, 2021, a decrease of $13.9 million, or 58%, compared to revenues of $23.9 million for the six months ended June 30, 2020. Revenues from license and R&D services are comprised primarily of revenues we recognized in connection with the Chiesi Agreements. The decrease resulted primarily from an updated costs estimation throughout the trials until completion in the amount of $4.1 million and from revenues recognized in connection with the progress of our clinical trials that have been completed during 2020.

Cost of Goods Sold

Cost of goods sold was $9.5 million for the six months ended June30, 2021, an increase of $4.2 million, or 79%, from cost of goods sold of $5.3 million for the six months ended June 30, 2020. The increase in cost of goods sold was primarily the result of certain one-time manufacturing costs incurred while preparing for the then anticipated FDA approval of the PRX-102 BLA.

Research and Development Expenses

Research and development expenses were $14.8 million for the six months ended June 30, 2021, a decrease of $4.7 million, or 24%, compared to $19.5 million of research and development expenses for the six months ended June 30, 2020. The decrease is primarily the result of the completion of two out of the three phase III clinical trials of PRX-102 and reduced costs related to the BALANCE study.

We expect research and development expenses to continue to be our primary expense as we enter into a more advanced stage of preclinical and clinical trials for certain of our product candidates.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $6.3 million for the six months ended June 30, 2021, an increase of $0.9 million, or 17%, compared to $5.4 million for the six months ended June 30, 2020. The increase resulted primarily from an increase in corporate costs related mainly to insurance and funding.

Financial Expenses, Net

Financial expenses net were $3.9 million for the six months ended June 30, 2021, a decrease of $1.0 million, or 20%, compared to financial expenses net of $4.9 million for the six months ended June 30, 2020. The decrease resulted primarily from a decrease in expenses related to our outstanding convertible notes equal to $1.3 million.

Liquidity and Capital Resources

Our sources of liquidity include our cash balances and bank deposits. At June 30, 2021, we had $33.9 million in cash and cash equivalents and $43.1 million in short-term bank deposits. We have primarily financed our operations through equity and debt financings, business collaborations, and grants funding.

During the six months ended June 30, 2021, we raised gross proceeds equal to approximately $8.8 million from sales of common stock under our ATM program through the sale of 1,867,552 shares of our common stock. In addition, we raised gross proceeds of approximately $40.2 million from a public offering of our common stock before deducting the underwriting discount and estimated expenses of the offering. In connection with the offering, we issued 8,749,999 shares of our common stock at a purchase price per share of $4.60.

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We believe that our cash and cash equivalents and bank deposits as of June 30, 2021 are sufficient to satisfy our capital needs for at least 12 months from the date that these financial statements are issued.

In addition, as of June 30, 2021, we have outstanding 2021 Notes amounting to $57.9 million which are due on November 15, 2021, unless the notes are refinanced, restructured or converted before that date.

On August 12, 2021, we entered into definitive agreements relating to the Exchanges of an aggregate of $54.65 million principal amount of our 2021 Notes for an aggregate of $28.75 million principal amount of 2024 Notes, $25.90 million in cash, and accrued and unpaid interest through the issue date. The Exchanges are expected to close as soon as practicable, subject to satisfaction of certain closing conditions. The initial conversion rate for the 2024 Notes is 563.2216 shares of our Common Stock for each $1,000 principal amount of 2014 Notes (equivalent to an initial conversion price of approximately $1.7755 per share of our Common Stock, subject to adjustment in some events, which is based on a 32.5% premium to the closing price of our Common Stock on the NYSE American at the close of trading on August 13, 2021, the exchange date.

The 2024 Notes will be issued pursuant to an indenture to be entered into between us, 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. Interest on the Notes will be paid semi-annually at a rate of 7.50% per annum. The 2024 Notes will mature three years after the issuance thereof, unless earlier purchased, converted, exchanged or redeemed and will be guaranteed by our subsidiaries. The 2024 Notes will be secured by perfected liens on all of our assets, including those of our subsidiaries.

Cash Flows

Net cash used in operations was $3.3 million for the six months ended June 30, 2021. In response to the COVID-19 pandemic, a higher number of subjects in our ongoing clinical trials opted for home care treatments over in-site treatments which resulted in an immaterial amount of additional expenses. The net loss for the six months ended June 30, 2021 of $16.7 million was increased by a $1.6 million increase in accounts receivable and other assets, and was partially offset by a $12.3 million increase in contracts liability, a $1.9 million of amortization of debt issuance costs and debt discount and $1.4 million in share-based compensation. Net cash used in investing activities for the six months ended June 30, 2021 was $23.1 million and consisted primarily of a net increase in bank deposits. Net cash provided by financing activities was $42.1 million resulting from the sale of common stock under our former ATM program and from our public offering of common stock, net of the promissory note payment.

Net cash used in operations was $15.0 million for the six months ended June 30, 2020. In response to the COVID-19 pandemic, a higher number of subjects in our ongoing clinical trials opted for home care treatments over in-site treatments which resulted in an immaterial amount of additional expenses. The net loss for the six months ended June 30, 2020 of $2.5 million was increased by a $10.8 million decrease in contracts liability, a $1.6 million increase in accounts receivable and other assets and a $2.9 million increase in inventories, partially offset by an increase of $0.3 million in accounts payable and accruals, and $1.7 million amortization of debt issuance costs and debt discount. Net cash used in investing activities for the six months ended June 30, 2020 was $35.3 million and consisted primarily of an increase in bank deposits. Net cash provided by financing activities was $37.3 million resulting from our issuance of common stock and warrants on March 18, 2020.

Future Funding Requirements

As a result of our significant research and development expenditures and the lack of significant revenue from sales of taliglucerase alfa, we have generated operating losses from our continuing operations since our inception. Our outstanding 2021 Notes are secured by a perfected lien on all of our assets. Under the terms of the indenture governing the 2021 Notes, and the indenture to be entered into in connection with the proposed issuance of the 2024 Notes, we are required to maintain a minimum cash balance of at least $7.5 million.

We expect to continue to incur significant expenditures in the near future as we increase our research and developments efforts with respect to our product candidates given the receipt of the CRL from the FDA discussed above, we expect to incur additional expenses in connection with any resubmission. We cannot anticipate the costs or the timing of the occurrence of such costs. In addition, to the extent we need to obtain additional financing in connection with this process or with any additional clinical testing that may be required, it may be more difficult for us to do so given the volatility of the price of our common stock. Our material cash needs for the next 24 months will include, among other expenses, (i) costs of preclinical and clinical trials, (ii) employee salaries, (iii) payments for rent and operation of our manufacturing facilities, (iv) fees to our consultants and legal advisors, patents and fees for service providers in connection with our research and development efforts and (v) payment of principal and interest on the 2021 Notes that remain outstanding and on the 2024 Notes we anticipate issuing in August 2021, and other debt. We believe that the funds currently available to us are sufficient to satisfy our capital needs for at least 12 months.

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As discussed above, we may be required to raise additional capital to develop our product candidates and continue research and development activities. Our ability to raise capital, and the amounts of necessary capital, will depend on many other factors, including:

We expect to finance our future cash needs through corporate collaborations, licensing or similar arrangements, public or private equity offerings and/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 Agreements and under our agreement with SarcoMed. On July 2, 2021, we entered into the Sales Agreement in connection with a new ATM program pursuant to which we may sell from time to time through the Agent ATM Shares having an aggregate offering price of up to $20.0 million. On the same date, we terminated our former ATM program.

Effects of Currency Fluctuations

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 six months ended June 30, 2021 and June 30, 2020.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements as of each of June 30, 2021 and June 30, 2020.

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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. Most of our revenues and approximately 52% of our expenses and capital expenditures are incurred in 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.

Approximately 43% 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 revaluation of 1% of the NIS will affect our loss 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:

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