0001558370-23-017664 | 10-Q | XBRL Viewer | Protalix Biotherapeutics INC

FAIR VALUE MEASUREMENT

9 Months Ended

Sep. 30, 2023

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.

Based on a Level 3 measurement, as of September 30, 2023, the fair value of the $20.4 million aggregate principal amount of the Company’s outstanding 2024 Notes is approximately $24.5 million. 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:


	2024 Notes
Stock price (USD)	1.66
Expected term	0.93
Risk free rate	5.34	%
Volatility	62.84	%
Yield	12.49	%

- Definition

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.

+ References + Details

STOCK TRANSACTIONS

9 Months Ended

Sep. 30, 2023

STOCK TRANSACTIONS

STOCK TRANSACTIONS

NOTE 5 – STOCK TRANSACTIONS

(a)

Authorized Capital

On June 28, 2023, the Company held its 2023 Annual Meeting of Stockholders, which was adjourned and reconvened on July 13, 2023 (the “Annual Meeting”). At the Annual Meeting, the Company’s stockholders, among other matters, approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the number of shares of Common Stock authorized for issuance from 144,000,000 to 185,000,000 (the “Charter Amendment”). The Charter Amendment was filed with the Secretary of State of the State of Delaware on July 25, 2023.

(b)

At-the-Market (ATM) Offering

During the nine months ended September 30, 2023, the Company sold, in the aggregate, 12,560,150 shares of Common Stock under the 2023 Sales Agreement. The Company generated aggregate gross proceeds equal to approximately $24.9 million in connection with such sales. All such sales were completed during the quarters ended March 31, 2023 and June 30, 2023. No sales were completed during the three-months ended September 30, 2023.

(c)Exercise of Warrants

On May 8, 2023, the Company issued 301,810 shares of Common Stock in connection with the cash exercise of a warrant issued on March 18, 2020, as part of the Company’s private placement of Common Stock and warrants. The Company generated net proceeds equal to $0.7 million from the exercise of the warrant.

On May 10, 2023, the Company issued 237,012 shares of Common Stock in connection with the cashless exercise of a warrant to purchase 845,000 shares of Common Stock issued on March 18, 2020, as part of the Company’s private placement of Common Stock and warrants. The Company did not generate any proceeds from the cashless exercise.

No warrants were exercised during the three months ended September 30, 2023.

(d)Conversion of 2024 Notes

During the nine months ended September 30, 2023, the Company issued, in the aggregate, 4,691,623 shares of Common Stock in connection with the conversions of 2024 Notes. In connection with such conversions, during the nine months ended September 30, 2023, the Company paid to the converting holders $0.9 million representing cash payments due to accrued but unpaid interest, make-whole interest payments and payments in lieu of fractional shares. As a result of the conversions, the total principal amount of the 2024 Notes decreased by approximately $8.3 million.

No 2024 Notes were converted during the three months ended September 30, 2023.

(e)Stock based compensation

On June 28, 2023, at the Annual Meeting, the Company’s stockholders, among other matters, adopted amendments to the Company’s Amended and Restated 2006 Employee Stock Incentive Plan, as amended (the “Plan”) to increase the number of shares of Common Stock available under Plan from 8,475,171 shares to 12,475,171 shares and to amend certain other terms of the Plan.

On August 15, 2023, the Company granted, with the approval of the Company’s compensation committee, 1,371,362 shares of restricted Common Stock, in the aggregate, to certain of the Company’s officers under the Plan. Of such grants, 200,000 shares of restricted Common Stock vested upon grant, 600,000 shares of restricted Common Stock vest over a two-year period in eight equal quarterly increments and the remaining 571,362 shares of restricted Common Stock vest over a three-year period in 12 equal quarterly increments. The Company estimated the fair value of the restricted stock on the date of grant to be approximately $2.7 million.

On August 15, 2023, the Company granted, with the approval of the Company’s compensation committee, 10-year options to purchase 1,056,315 shares of Common Stock, in the aggregate, to certain of the Company’s officers and other employees under the Plan. The options have an exercise price equal to $1.99 per share and vest over a three-year period in 12 equal quarterly increments. Vesting of the options granted to executive officers is subject to automatic 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 aggregate fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $1.5 million.

On September 14, 2023, the Company granted, with the approval of the Company’s compensation committee, 10-year options to purchase 85,715 shares of Common Stock, in the aggregate, to the new Chairman of the Company’s Board of Directors under the Plan. The options have an exercise price equal to $1.75 per share and vest over a three-year period in 12 equal quarterly increments. Vesting of the options is subject to automatic 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 aggregate fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $0.1 million.

On September 29, 2023, the Company granted, with the approval of the Company’s compensation committee, 10-year options to purchase 308,380 shares of Common Stock, in the aggregate, to the non-executive directors of the Company’s Board of Directors, other than the Chairman, under the Plan. The options have an exercise price equal to $1.66 per share and vest over a three-year period in 12 equal quarterly increments. Vesting of the options is subject to automatic 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 aggregate fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $0.4 million.

The fair value of each option granted during the three-month period ended September 30, 2023 is estimated at the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were applied in determining the fair value of the options described in this Note 5(e)(3) on their respective grant dates:


Weighted average grants date fair value (USD)	1.34
Exercise price (USD)	1.91
Risk free rate	4.40	%
Volatility	79.40	%
Dividend yield	0	%
Expected life (Years)	5.75

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

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+ Details

INVENTORIES

9 Months Ended

Sep. 30, 2023

INVENTORIES

INVENTORIES

NOTE 2 - INVENTORIES

Inventories at September 30, 2023 and December 31, 2022 consisted of the following:


	September 30,		December 31,
(U.S. dollars in thousands)	2023		2022
Raw materials	$	4,198	$	3,508
Work in progress		9,116		2,678
Finished goods		8,269		10,618
Total inventory	$	21,583	$	16,804

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY) (Parenthetical) - $ / shares	Sep. 30, 2023	Jul. 25, 2023	Jul. 24, 2023	Dec. 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CAPITAL DEFICIENCY)
Common Stock, Par or Stated Value Per Share	$ 0.001			$ 0.001
Common Stock, Shares Authorized	185,000,000	185,000,000	144,000,000	144,000,000

REVENUES

9 Months Ended

Sep. 30, 2023

REVENUES

REVENUES

NOTE 4 – REVENUES

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2023		2022		2023		2022
Pfizer	$	2,304	$	4,541	$	7,972	$	11,279
Brazil	$	2,320	$	1,708	$	5,120	$	7,162
Chiesi	$	5,544	$	2,563	$	17,217	$	2,781
Total revenues from selling goods	$	10,168	$	8,812	$	30,309	$	21,222
Revenues from license and R&D services	$	177	$	5,371	$	24,699	$	17,799

EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2023

EARNINGS (LOSS) PER SHARE

EARNINGS (LOSS) PER SHARE

NOTE 6 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of Common Stock outstanding during each period.

Diluted earnings per share is calculated by dividing the net income by the weighted-average number of shares of Common Stock outstanding during each period increased to include the number of additional shares of Common Stock that would have been outstanding if the potentially dilutive shares had been issued.

In computing diluted earnings per share, basic earnings per share are adjusted to take into account the potential dilution that could occur upon: (i) the exercise of options granted under employee stock compensation plans using the treasury stock method; (ii) the exercise of warrants using the treasury stock method; and (iii) the conversion of the convertible notes using the “if-converted” method.

Basic and diluted net earnings (loss) per share attributable to common stockholders were calculated as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except share data)		2023		2022		2023		2022
Numerator:
Net income (loss)	$	(1,852)	$	(3,567)	$	14,356	$	(11,187)
Add:
Financial expenses of 2024 Notes*	$	(1,766)		—	$	(1,610)		—
Net income (loss) for diluted calculation	$	(3,618)	$	(3,567)	$	12,746	$	(11,187)
Denominator:
Weighted average shares of Common Stock outstanding for basic calculation		72,281,681		49,498,105		65,811,506		47,582,733
Weighted average dilutive effect of 2024 Notes		11,500,998		—		13,981,660		—
Weighted average dilutive effect of stock options		—		—		1,247,115		—
Weighted average shares of Common Stock outstanding for diluted calculation		83,782,679		49,498,105		81,040,281		47,582,733

* Financial expenses on 2024 Notes consists of add back of financial expense incurred during the period and inclusion of make-whole interest payments that will be incurred upon conversion.

Diluted earnings (loss) per share do not include 19,429,910 and 18,399,260 shares of Common Stock underlying outstanding stock options and warrants of the Company for the three and nine months ended September 30, 2023, respectively, because the effect would be anti-dilutive.

Diluted earnings (loss) per share do not include 33,922,624 and 33,295,154 shares of Common Stock underlying outstanding stock options, warrants and the 2024 Notes for the three and nine months ended September 30, 2022, respectively, because the effect would be anti-dilutive.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2023

Sep. 30, 2022

Sep. 30, 2023

Sep. 30, 2022

TOTAL REVENUE

$ 10,345

$ 14,183

$ 55,008

$ 39,021

COST OF GOODS SOLD

^[1]

(4,893)

(7,074)

(14,126)

(17,195)

RESEARCH AND DEVELOPMENT EXPENSES

^[2]

(3,669)

(7,386)

(13,991)

(23,732)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

^[3]

(3,670)

(2,848)

(10,816)

(8,613)

OPERATING INCOME (LOSS)

(1,887)

(3,125)

16,075

(10,519)

FINANCIAL EXPENSES

(460)

(639)

(2,406)

(1,879)

FINANCIAL INCOME

628

197

1,323

1,211

FINANCIAL INCOME (EXPENSES), NET

168

(442)

(1,083)

(668)

INCOME (LOSS) BEFORE TAXES ON INCOME

(1,719)

(3,567)

14,992

(11,187)

TAXES ON INCOME

(133)

(636)

NET INCOME (LOSS) FOR THE PERIOD

$ (1,852)

$ (3,567)

$ 14,356

$ (11,187)

EARNINGS (LOSS) PER SHARE OF COMMON STOCK - BASIC

$ (0.03)

$ (0.07)

$ 0.22

$ (0.24)

EARNINGS (LOSS) PER SHARE OF COMMON STOCK - DILUTED

$ (0.04)

$ (0.07)

$ 0.16

$ (0.24)

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING EARNINGS (LOSS) PER SHARE- BASIC

72,281,681

49,498,105

65,811,506

47,582,733

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED IN COMPUTING EARNINGS (LOSS) PER SHARE- DILUTED

83,782,679

49,498,105

81,040,281

47,582,733

Goods

TOTAL REVENUE

$ 10,168

$ 8,812

$ 30,309

$ 21,222

License and R&D Services

TOTAL REVENUE

$ 177

$ 5,371

$ 24,699

$ 17,799

[1]	(1) Includes share-based compensation
[2]	(2) Includes share-based compensation
[3]	(3) Includes share-based compensation

STOCK TRANSACTIONS (Details) - USD ($) $ in Thousands				3 Months Ended	9 Months Ended
STOCK TRANSACTIONS (Details) - USD ($) $ in Thousands	May 10, 2023	May 08, 2023	Jul. 02, 2021	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	Jul. 25, 2023	Jul. 24, 2023	Jun. 28, 2023	Jun. 27, 2023	Dec. 31, 2022
Class of Stock [Line Items]
Common Stock, Shares Authorized				185,000,000	185,000,000		185,000,000	144,000,000			144,000,000
Exercise of warrants (in shares)	237,012			0
Exercise of warrants					$ 712	$ 2
Exercise of warrants		$ 700			712	2
Warrants issued to purchase common stock	845,000
Stock issuance proceeds					$ 23,954	$ 4,161
2006 Employee Stock Incentive Plan
Class of Stock [Line Items]
Number of shares authorized for issuance under share-based payment arrangement									12,475,171	8,475,171
2024 Notes
Class of Stock [Line Items]
Converted instrument, shares issued				0	4,691,623
Paid to the converting holders					$ 900
Decrease in principal amount					$ 8,300
ATM Equity Offering Sales Agreement
Class of Stock [Line Items]
Number of shares issued (in shares)			3,296,123	0	12,560,150
Stock issuance proceeds			$ 13,800		$ 24,900
Private Placement
Class of Stock [Line Items]
Exercise of warrants (in shares)		301,810

EARNINGS (LOSS) PER SHARE (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Numerator:
Net income (loss)	$ (1,852)	$ (3,567)	$ 14,356	$ (11,187)
Financial expenses of 2024 Notes	(1,766)		(1,610)
Net income (loss) for diluted calculation	$ (3,618)	$ (3,567)	$ 12,746	$ (11,187)
Denominator:
Weighted average shares of Common Stock outstanding for basic calculation	72,281,681	49,498,105	65,811,506	47,582,733
Weighted average dilutive effect of 2024 Notes	11,500,998		13,981,660
Weighted average dilutive effect of stock options			1,247,115
Weighted average shares of Common Stock outstanding for diluted calculation	83,782,679	49,498,105	81,040,281	47,582,733
Outstanding Stock Options And Warrants
Denominator:
Antidilutive securities excluded from computation of earnings per share, amount	19,429,910		18,399,260
Outstanding Stock Options Warrants And 2024 Notes
Denominator:
Antidilutive securities excluded from computation of earnings per share, amount		33,922,624		33,295,154

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 14,356	$ (11,187)
Adjustments required to reconcile net income (loss) to net cash used in operating activities:
Share-based compensation	2,081	1,546
Depreciation	878	811
Financial income, net (mainly exchange differences)	(511)	(1,083)
Changes in accrued liability for employee rights upon retirement	(50)	(391)
Changes in deferred tax asset	(3,092)
Loss (gain) on amounts funded in respect of employee rights upon retirement	(49)	6
Gain on conversions of convertible notes	(421)
Amortization of debt issuance costs and debt discount	208	224
Changes in operating assets and liabilities:
Decrease in contracts liability	(13,178)	(5,547)
Increase in accounts receivable-trade and other assets	(4,188)	(5,692)
Changes in operating lease right of use assets, net	12	(30)
Decrease (increase) in inventories	(4,779)	3,392
Increase (decrease) in accounts payable and accruals	3,820	(4,438)
Net cash used in operating activities	(4,913)	(22,389)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in bank deposits	(20,420)	(16,000)
Proceeds from sale of short-term deposits	5,000	6,000
Purchase of property and equipment	(899)	(415)
Amounts paid (funded) in respect of employee rights upon retirement, net	(50)	427
Net cash used in investing activities	(16,369)	(9,988)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under the Sales Agreement, net	23,954	4,161
Exercise of warrants	712	2
Net cash provided by financing activities	24,666	4,163
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(87)	(51)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	3,297	(28,265)
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	17,111	38,985
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF PERIOD	20,408	10,720
SUPPLEMENTARY INFORMATION ON INVESTING AND FINANCING ACTIVITIES NOT INVOLVING CASH FLOWS:
Purchase of property and equipment	253	205
Operating lease right of use assets obtained in exchange for new operating lease liabilities	1,395	396
Convertible notes conversions	7,783
SUPPLEMENTARY DISCLOSURE ON CASH FLOWS
Interest paid	2,743	2,198
Interest received	$ 303	$ 136

SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2023

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

On October 4, 2023 the Company collected approximately $6.4 million from sales to Chiesi.

On October 15, 2023, the Company granted, with the approval of the Company’s compensation committee, 10-year options to purchase 250,000 shares of Common Stock to a new officer of the Company under the Plan. The options have an exercise price equal to $1.48 per share and vest over a three-year period in 12 equal quarterly increments. The Company estimated the aggregate fair value of the options on the date of grant using the Black-Scholes option-pricing model to be approximately $0.26 million.

Because the Company's operations are conducted in the State of Israel, the business and operations may be directly affected by economic, political, geopolitical and military conditions in Israel. In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel attacking a number of civilian and military targets while simultaneously launching extensive rocket attacks on the Israeli population and industrial centers. At the same time, clashes between Israel and Hezbollah in Lebanon have increased. In response, Israel’s security cabinet declared war against the Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover, the attacks by Hamas and Hezbollah, and Israel’s defensive measures, may result in a greater regional conflict. It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing conflict is rapidly evolving and developing, and could disrupt certain of our business and operations, among others.

STOCK TRANSACTIONS - Stock based compensation (Details) $ / shares in Units, $ in Millions				3 Months Ended
	Sep. 29, 2023 USD ($) item $ / shares shares	Sep. 14, 2023 USD ($) item $ / shares shares	Aug. 15, 2023 USD ($) item $ / shares shares	Sep. 30, 2023 $ / shares	Jun. 28, 2023 shares	Jun. 27, 2023 shares
Options
Class of Stock [Line Items]
Exercise price \| $ / shares				$ 1.34
2006 Employee Stock Incentive Plan
Class of Stock [Line Items]
Number of shares authorized for issuance under share-based payment arrangement					12,475,171	8,475,171
2006 Employee Stock Incentive Plan \| Shares of restricted Common Stock
Class of Stock [Line Items]
Number of shares granted			1,371,362
Estimated fair value on date of grant \| $			$ 2.7
2006 Employee Stock Incentive Plan \| Shares of restricted Common Stock \| Upon grant
Class of Stock [Line Items]
Number of shares granted			200,000
2006 Employee Stock Incentive Plan \| Shares of restricted Common Stock \| Over a two-year period
Class of Stock [Line Items]
Number of shares granted			600,000
Vesting period			2 years
Vesting in number of quarterly increments \| item			8
2006 Employee Stock Incentive Plan \| Shares of restricted Common Stock \| Over a three-year period
Class of Stock [Line Items]
Number of shares granted			571,362
Vesting period			3 years
Vesting in number of quarterly increments \| item			12
2006 Employee Stock Incentive Plan \| Options \| Officers and other employees
Class of Stock [Line Items]
Vesting period			3 years
Vesting in number of quarterly increments \| item			12
Estimated fair value on date of grant \| $			$ 1.5
Term of award			10 years
Number of options to purchase shares			1,056,315
Exercise price \| $ / shares			$ 1.99
2006 Employee Stock Incentive Plan \| Options \| Chairman, Board of Directors
Class of Stock [Line Items]
Vesting period		3 years
Vesting in number of quarterly increments \| item		12
Estimated fair value on date of grant \| $		$ 0.1
Term of award		10 years
Number of options to purchase shares		85,715
Exercise price \| $ / shares		$ 1.75
2006 Employee Stock Incentive Plan \| Options \| Non-executive directors other than Chairman
Class of Stock [Line Items]
Vesting period	3 years
Vesting in number of quarterly increments \| item	12
Estimated fair value on date of grant \| $	$ 0.4
Term of award	10 years
Number of options to purchase shares	308,380
Exercise price \| $ / shares	$ 1.66

TAXES ON INCOME (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
TAXES ON INCOME (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2023	Sep. 30, 2022	May 31, 2023
TAXES ON INCOME
Current taxes on income	$ 95	$ 3,728
Deferred taxes on income	38	(3,092)
Total taxes on income	133	$ 636
Effective income tax rate (as a percent)		4.00%	0.00%
Statutory income tax rate		21.00%
Milestone Payments to regulatory approvals				$ 20,000
Valuation allowance related to deferred tax assets	$ 3,100

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2023	Nov. 01, 2023
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Entity File Number	001-33357
Entity Registrant Name	PROTALIX BIOTHERAPEUTICS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	65-0643773
Entity Address, Address Line One	2 University Plaza
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Hackensack
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07601
City Area Code	201
Local Phone Number	696-9345
Title of 12(b) Security	Common stock, $0.001 par value
Trading Symbol	PLX
Security Exchange Name	NYSEAMER
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		72,952,124
Entity Central Index Key	0001006281
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

TAXES ON INCOME (Tables)

9 Months Ended

Sep. 30, 2023

TAXES ON INCOME

Schedule of components of Income Tax Expense (Benefit)


	Three Months Ended		Nine Months Ended
(U.S. dollars in thousands)	September 30, 2023		September 30, 2023
Current taxes on income	$	95	$	3,728
Deferred taxes on income		38		(3,092)
Total taxes on income	$	133	$	636

SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2023

SIGNIFICANT ACCOUNTING POLICIES

General

Protalix BioTherapeutics, Inc. (collectively with its subsidiaries, the “Company”) and its wholly-owned subsidiaries, Protalix Ltd. and Protalix B.V. (collectively, 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”). The Company’s current focus is to facilitate the commercialization efforts of Chiesi Farmaceutici S.p.A. (“Chiesi”), the Company’s development and commercialization partner for pegunigalsidase alfa, or Elfabrio^® (which the Company referred to as PRX-102 during its development stage), for the treatment of Fabry disease, a rare, genetic lysosomal disorder. To date, the Company has successfully developed taliglucerase alfa (marketed under the name Elelyso^® except in Brazil where it is marketed as BioManguinhos alfataliglicerase), an enzyme replacement therapy for the treatment of Gaucher disease that has been approved for marketing in the United States, Brazil, Israel and other markets.

The Company’s strategy is to develop proprietary recombinant proteins designed to address high, unmet needs in the rare disease space that are therapeutically superior to existing recombinant proteins currently marketed for the same indications. Consistent with this strategy, the Company has a number of product candidates in varying stages of the clinical development process.

On May 5, 2023, the European Commission (“EC”) announced that it had approved the Marketing Authorization Application (“MAA”) for Elfabrio and on May 9, 2023, the U.S. Food and Drug Administration (“FDA”) announced that it had approved the Biologics License Application (“BLA”) for Elfabrio, each for adult patients with Fabry disease. Both approvals cover the 1 mg/kg every two weeks dosage. The European Medicines Agency (“EMA”) approval followed the February 2023 adoption of a positive opinion and recommendation of marketing authorization for Elfabrio by the EMA’s Committee for Medicinal Products for Human Use the (“CHMP”). Elfabrio was approved by the FDA with a boxed warning for hypersensitivity reactions/anaphylaxis, consistent with Enzyme Replacement Therapy (ERT) class labeling, and Warnings/Precautions providing guidance on the signs and symptoms of hypersensitivity and infusion-associated reactions seen in the clinical studies as well as treatments to manage such events should they occur. The Warnings/Precautions for membranoproliferative glomerulonephritis (MPGN) alert prescribers to the possibility of MPGN and provide guidance for appropriate patient management. Overall, the FDA review team concluded that in the context of Fabry disease as a rare, serious disease with limited therapeutic options that may not be suitable to all individual patients, the benefit-risk of Elfabrio is favorable for the treatment of adults with confirmed Fabry disease.

In August and September of 2023, Elfabrio was approved in Great Britain and Switzerland, respectively, for long-term enzyme replacement therapy in adult patients with a confirmed diagnosis of Fabry disease.

The Company has entered into two exclusive global licensing and supply agreements for Elfabrio with its development and commercialization partner for PRX-102, Chiesi Farmaceutici S.p.A. (“Chiesi”). On October 19, 2017, Protalix Ltd., the Company’s wholly-owned subsidiary, entered into an Exclusive License and Supply Agreement with Chiesi (the “Chiesi Ex-US Agreement”), pursuant to which Chiesi was granted an exclusive license for all markets outside of the United States to commercialize Elfabrio. On July 23, 2018, Protalix Ltd. entered into an Exclusive License and Supply Agreement with Chiesi (the Chiesi US Agreement, with respect to the commercialization of Elfabrio in the United States.

Elfabrio, an enzyme replacement therapy, or ERT, was the subject of a phase III clinical program studying the drug as a treatment of patients with Fabry disease, a rare, genetic lysosomal disorder. The phase III clinical program included three separate studies, which are referred to as the BALANCE study, the BRIDGE study and the BRIGHT study. The phase III clinical program analyzed two potential dosing regimens: 1 mg/kg every two weeks and 2 mg/kg every four weeks. In addition, the phase III clinical program included two extension studies in which subjects that participated in our phase I/II clinical trials and phase III clinical trials had the opportunity to enroll and continue to be treated with PRX-102. As of March 1, 2023, sponsorship of the two open-label extension studies was transferred to Chiesi, which is now administering the extension studies. Over time, and as Elfabrio is approved for marketing in different jurisdictions,

participants withdraw from the open-label extension studies. Some of the withdrawals transfer to a commercial setting, others withdraw for other reasons.

The BLA for Elfabrio for the treatment of adult patients with Fabry disease was resubmitted to the FDA on November 9, 2022. An initial BLA for Elfabrio was submitted to the FDA on May 27, 2020 under the FDA’s Accelerated Approval pathway, but resulted in a Complete Response Letter (“CRL”).

The MAA was submitted to the EMA on February 7, 2022, after the October 8, 2021 meeting we held, together with Chiesi, with the Rapporteur and Co-Rapporteur of the EMA regarding PRX-102.

The FDA publicly released the internal review documents for Elfabrio (pegunigalsidase alfa-iwxj) injection BLA 761161. These documents provide previously unavailable additional information regarding the basis for the FDA’s May 2023 approval decision. In particular, the FDA determined that substantial evidence of effectiveness for Elfabrio in Fabry patients was established with one adequate and well-controlled study (Study PB-102-F01/02) with confirmatory evidence provided by the BALANCE study (also referred to as Study PB-102-F20). The FDA review team also concluded that the BALANCE study met its primary efficacy endpoint, which assessed the annualized rate of change in eGFR (estimated glomerular filtration rate) over 104 weeks. However, the FDA also determined that the results from the BALANCE study did not support a non-inferiority claim to the comparator product due to the lack of data to support a non-inferiority margin.

The Company has licensed the rights to commercialize taliglucerase alfa worldwide (other than Brazil) to Pfizer Inc. (“Pfizer”), and in Brazil to Fundação Oswaldo Cruz (“Fiocruz”), an arm of the Brazilian Ministry of Health (the “Brazilian MoH”). Otherwise, except with respect to taliglucerase alfa and Elfabrio, the Company holds the worldwide commercialization rights to its other proprietary development candidates. In addition, the Company continuously evaluates potential strategic marketing partnerships as well as collaboration programs with biotechnology and pharmaceutical companies and academic research institutions.

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

(1)PRX-115, the Company’s plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a chemically modified enzyme to treat severe gout; and

(2)PRX-119, the Company’s plant cell-expressed PEGylated recombinant human DNase I product candidate being designed to elongate half-life in the circulation for NETs-related diseases.

On March 21, 2023, the first patient was dosed in the Company’s phase I First-in-Human (“FIH”) clinical trial of PRX-115. As of September 30, 2023, 32 patients have been dosed in this trial.

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, and demonstrate the safety and efficacy of its product candidates. The Company cannot reasonably predict the outcome of these activities.

On July 2, 2021, the Company entered into an At The Market Offering Agreement (the “2021 Sales Agreement”) with H.C. Wainwright & Co., LLC, as the Company’s sales agent (the “Agent”) which was amended on May 2, 2022. Pursuant to the terms of the 2021 Sales Agreement, the Company was able to sell, from time to time through the Agent, shares of its common stock, par value $0.001 per share (the “Common Stock”), having an aggregate offering price of up to $20.0 million (the “ATM Shares”). Upon execution of the 2021 Sales Agreement, the Company terminated the ATM Equity Offering^SM Sales Agreement it had entered into on October 1, 2020 with BofA Securities, Inc. (“BofA Securities”). During the term of the sales agreement with BofA Securities, the Company sold a total of 3,296,123 shares of Common Stock for total gross proceeds of approximately $13.8 million.

During the term of the 2021 Sales Agreement which ended during the quarter ended March 31, 2023, the Company sold a total of 13,980,060 ATM Shares for total gross proceeds of approximately $20.0 million under the 2021 Sales Agreement, thereby completing the ATM program under said agreement.

On February 27, 2023, the Company entered into an At The Market Offering Agreement (the “2023 Sales Agreement”) with the Agent. Pursuant to the terms of the 2023 Sales Agreement, the Company may sell, from time to time through the Agent, ATM Shares having an aggregate offering price of up to $20.0 million. As of September 30, 2023, shares of Common Stock for total gross proceeds of approximately $6.4 million remain available to be sold under the 2023 Sales Agreement.

Under each of the Chiesi Ex-US Agreement and the Chiesi US Agreement (collectively, the “Chiesi Agreements”), Chiesi made an upfront payment to Protalix Ltd. of $25.0 million in connection with the execution of each agreement. In addition, under the Chiesi Ex-US Agreement, Protalix Ltd. is entitled to additional payments of up to $25.0 million in pegunigalsidase alfa development costs and to receive additional payments of up to $320.0 million, in the aggregate, in regulatory and commercial milestone payments. Under the Chiesi US Agreement, Protalix Ltd. is entitled to payments of up to a maximum of $20.0 million to cover development costs for pegunigalsidase alfa and to receive additional payments of up to a maximum of $760.0 million, in the aggregate, in regulatory and commercial milestone payments. To date, Protalix Ltd. has received the complete amount of development costs to which it is entitled under the Chiesi Agreements. In addition, following the approval of Elfabrio by the FDA, the Company received a milestone payment equal to $20.0 million.

Under the terms of both of the Chiesi Agreements, Protalix Ltd. is required to manufacture all of the Elfabrio drug substance needed under the agreements, subject to certain exceptions, and Chiesi will purchase Elfabrio drug product from Protalix, subject to certain terms and conditions. The consideration for Protalix Ltd. is based on the drug product supplied to Chiesi and the average selling price of the drug product in the relevant territory multiplied by tiered payments as described in the relevant agreement. Under the Chiesi Ex-US Agreement, Chiesi is required to make tiered payments for drug product purchased from Protalix of 15% to 35%, depending on the amount of annual net sales outside of the United States, and under the Chiesi US Agreement, Chiesi is required to make tiered payments for drug product purchased from Protalix of 15% to 40%, depending on the amount of annual net sales in the United States.

On August 29, 2022, the Company entered into a Fill/Finish Agreement (the “F/F Agreement”) and a Letter Agreement (the “Letter Agreement”), in each case with Chiesi. The Company agreed to supply Chiesi with drug substance for PRX-102 and, following relevant technology and technical information transfer activities, Chiesi has agreed, among other things, to provide the Company with commercial fill/finish services for PRX-102, including to support the anticipated global launch of PRX-102. The F/F Agreement shall continue in force until December 31, 2025, unless terminated earlier in accordance with the terms of the F/F Agreement and the term may be extended by mutual agreement for an additional period of seven years upon mutual written agreement prior to expiration of the initial term.

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

Since its approval by the FDA, taliglucerase alfa has been marketed by Pfizer in accordance with the exclusive license and supply agreement entered into between Protalix Ltd. and Pfizer, which is referred to herein as the Pfizer Agreement. In October 2015, Protalix Ltd. and Pfizer entered into an amended exclusive license and supply agreement, which is referred to herein as the Amended Pfizer Agreement, pursuant to which the Company sold to Pfizer its share in the collaboration created under the Pfizer Agreement for the commercialization of Elelyso. 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 with Fiocruz (the “Brazil Agreement”) for taliglucerase alfa. Fiocruz’s purchases of BioManguinhos 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

BioManguinhos alfataliglicerase to Fiocruz and patients continue to be treated with BioManguinhos alfataliglicerase in Brazil.

The Company expects to continue to incur significant expenditures in the near future due to research and developments efforts with respect to the product candidates. Under the terms of the Company’s outstanding 7.50% Senior Secured Convertible Notes due 2024 (the “2024 Notes”), the Company is required to comply with certain financial covenants, including the maintenance of a minimum cash balance of at least $7.5 million. As of September 30, 2023, the Company is in compliance with all such covenants. The Company believes that its cash and cash equivalents as of September 30, 2023, are sufficient to satisfy the Company’s capital needs for at least 12 months from the date that these financial statements are issued.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles 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, 2022, filed by the Company with the U.S. Securities and Exchange Commission (the “Commission”). The comparative balance sheet at December 31, 2022 has been derived from the audited financial statements at that date. There have been no material changes in our significant accounting policies as described in our consolidated financial statements for the year ended December 31, 2022.

Revenue recognition

The Company accounts for revenue pursuant to Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, a contract with a customer exists only when: the parties to the contract have approved it and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer.

1. Revenues from selling products

The Company recognizes revenues from selling goods at a point in time when control over the product is transferred to customers (upon delivery), at the net selling price, which reflects reserves for variable consideration, potential discounts and allowances.

The transaction price is the consideration to which the Company expects to be entitled from the customer. The consideration promised in a contract with the Company’s customers may include fixed amounts and variable amounts. The Company estimates the variable consideration and includes it in the transaction price using the most likely outcome method, and only to the extent it is highly probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Prior to recognizing revenue from variable consideration, the Company uses significant judgment to determine the probability of significant reversal of such revenue.

Revenues from Chiesi Agreements

The Company has identified two performance obligations in the Chiesi Agreements as follows: (i) the license and research and development services and (ii) the contingent performance obligation regarding future manufacturing.

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

The manufacturing was 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, research and development services. Following the regulatory approvals for Elfabrio received in May 2023, the Company started recognizing revenue from manufacturing, see also revenue from selling products above.

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. Prior to recognizing revenue from variable consideration, the Company uses significant judgment to determine the probability of significant reversal of such revenue. Following the approval of Elfabrio by the FDA, the Company received a milestone payment equal to $20.0 million (see also note 4).

Since the customer benefits from the research and development services as the entity performs the service, revenue from granting the license and the research and development services was recognized over time using the cost-to-cost method.

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

Revenue from R&D services

Revenue from the research and development services was recognized over time using the cost-to-cost method since the customer benefits from the research and development services as the entity performs the services.

FAIR VALUE MEASUREMENT (Tables)

9 Months Ended

Sep. 30, 2023

2024 Notes

Schedule of Fair Value Assumptions


	2024 Notes
Stock price (USD)	1.66
Expected term	0.93
Risk free rate	5.34	%
Volatility	62.84	%
Yield	12.49	%

STOCK TRANSACTIONS - Schedule of Weighted average assumptions (Details) - Options	3 Months Ended
	Sep. 30, 2023 $ / shares
Class of Stock [Line Items]
Weighted average grants date fair value (USD)	$ 1.34
Exercise price (USD)	$ 1.91
Risk free rate	4.40%
Volatility	79.40%
Dividend yield	0.00%
Expected life (Years)	5 years 9 months

SIGNIFICANT ACCOUNTING POLICIES (Details) $ / shares in Units, $ in Thousands							1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 27, 2023 USD ($)	Aug. 29, 2022	Jul. 02, 2021 USD ($) $ / shares shares	May 13, 2021 USD ($)	Jul. 23, 2018 USD ($)	Oct. 19, 2017 USD ($)	Oct. 31, 2015	Sep. 30, 2023 USD ($) agreement $ / shares shares	Mar. 31, 2023 USD ($) shares	Sep. 30, 2023 USD ($) agreement $ / shares shares	Sep. 30, 2022 USD ($)	Mar. 21, 2023 item	Dec. 31, 2022 $ / shares
Significant Accounting Policies [Line Items]
Number of global licensing and supply agreements \| agreement								2		2
Number of patients dosed \| item												32
Common Stock, Par or Stated Value Per Share \| $ / shares								$ 0.001		$ 0.001			$ 0.001
Stock issuance proceeds										$ 23,954	$ 4,161
Convertible Debt, Current								$ 20,192		20,192
ATM Shares
Significant Accounting Policies [Line Items]
Number of shares issued (in shares) \| shares									13,980,060
Common Stock, Par or Stated Value Per Share \| $ / shares			$ 0.001
Sale of stock, maximum offering price	$ 20,000		$ 20,000							$ 6,400
Stock issuance proceeds									$ 20,000
ATM Equity Offering Sales Agreement
Significant Accounting Policies [Line Items]
Number of shares issued (in shares) \| shares			3,296,123					0		12,560,150
Stock issuance proceeds			$ 13,800							$ 24,900
2024 Notes
Significant Accounting Policies [Line Items]
Interest rate (as a percent)								7.50%		7.50%
Maintain of Minimum Cash Balance								$ 7,500		$ 7,500
Amended Pfizer Agreement \| Protalix Bio Therapeutics Incorporation \| Brazil
Significant Accounting Policies [Line Items]
Collaborative Arrangement Revenues and Expenses Sharing Percentage							100.00%
Chiesi Agreements
Significant Accounting Policies [Line Items]
Amount of milestone payment received										$ 20,000
Revenue, Performance Obligation, Number \| agreement								2		2
Chiesi US Agreement
Significant Accounting Policies [Line Items]
Additional Amounts Payable To Cover Development Costs					$ 20,000
Additional Amount Payable For Achievement Of Regulatory And Commercial Milestones					$ 760,000
Chiesi US Agreement \| Minimum
Significant Accounting Policies [Line Items]
Payment On Net Sales Percentage					15.00%
Chiesi US Agreement \| Maximum
Significant Accounting Policies [Line Items]
Payment On Net Sales Percentage					40.00%
Chiesi Ex-US Agreement
Significant Accounting Policies [Line Items]
Additional Amounts Payable To Cover Development Costs						$ 25,000
Agreement Amendment Payment Receivable				$ 10,000
Change In Amount Receivable For Achievement Of Regulatory And Commercial Milestones				$ 25,000
Additional Amount Payable For Achievement Of Regulatory And Commercial Milestones						$ 320,000
Chiesi Ex-US Agreement \| Minimum
Significant Accounting Policies [Line Items]
Payment On Net Sales Percentage						15.00%
Chiesi Ex-US Agreement \| Maximum
Significant Accounting Policies [Line Items]
Payment On Net Sales Percentage						35.00%
Fill/Finish Agreement
Significant Accounting Policies [Line Items]
Extended term of agreement		7 years
Chiesi US Agreement and Chiesi Ex-US Agreement
Significant Accounting Policies [Line Items]
Non-refundable Payment Receivable					$ 25,000	$ 25,000

INVENTORIES (Schedule of Inventory) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
INVENTORIES
Raw materials	$ 4,198	$ 3,508
Work in progress	9,116	2,678
Finished goods (drug substance and drug product)	8,269	10,618
Total inventory	$ 21,583	$ 16,804

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

9 Months Ended

Sep. 30, 2023

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

NOTE 8 – SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Balance sheets:


	September 30,		December 31,
(U.S. dollars in thousands)	2023		2022
Accounts payable and accruals – other:
Payroll and related expenses	$	1,239	$	1,216
Interest Payable		123		719
Provision for vacation		1,471		1,404
Accrued expenses		9,249		7,478
Royalties payable		332		781
Income tax payable		3,257		530
Reserve for deductions from revenue		2,816		—
Property and equipment suppliers		253		143
	$	18,740	$	12,271

SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2023

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

General

participants withdraw from the open-label extension studies. Some of the withdrawals transfer to a commercial setting, others withdraw for other reasons.

The MAA was submitted to the EMA on February 7, 2022, after the October 8, 2021 meeting we held, together with Chiesi, with the Rapporteur and Co-Rapporteur of the EMA regarding PRX-102.

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

(1)PRX-115, the Company’s plant cell-expressed recombinant PEGylated uricase (urate oxidase) – a chemically modified enzyme to treat severe gout; and

(2)PRX-119, the Company’s plant cell-expressed PEGylated recombinant human DNase I product candidate being designed to elongate half-life in the circulation for NETs-related diseases.

On March 21, 2023, the first patient was dosed in the Company’s phase I First-in-Human (“FIH”) clinical trial of PRX-115. As of September 30, 2023, 32 patients have been dosed in this trial.

BioManguinhos alfataliglicerase to Fiocruz and patients continue to be treated with BioManguinhos alfataliglicerase in Brazil.

Basis of presentation

Revenue recognition

Revenues are recorded in the amount of consideration to which the Company expects to be entitled in exchange for performance obligations upon transfer of control to the customer.

1. Revenues from selling products

Revenues from Chiesi Agreements

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

Revenue from R&D services

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
CURRENT ASSETS:
Cash and cash equivalents	$ 20,408	$ 17,111
Short-term bank deposits	20,567	5,069
Accounts receivable - Trade	8,935	4,586
Other assets	1,125	1,310
Inventories	21,583	16,804
Total current assets	72,618	44,880
NON-CURRENT ASSETS:
Funds in respect of employee rights upon retirement	1,260	1,267
Property and equipment, net	4,684	4,553
Deferred income tax asset	3,092
Operating lease right of use assets	5,915	5,087
Total assets	87,569	55,787
Accounts payable and accruals:
Trade	3,114	5,862
Other	18,740	12,271
Operating lease liabilities	1,313	1,118
Contracts liability		13,178
Convertible notes	20,192
Total current liabilities	43,359	32,429
LONG TERM LIABILITIES:
Convertible notes		28,187
Liability for employee rights upon retirement	1,461	1,642
Operating lease liabilities	4,502	4,169
Total long term liabilities	5,963	33,998
Total liabilities	49,322	66,427
COMMITMENTS
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)	38,247	(10,640)
Total liabilities and stockholders' equity (net of capital deficiency)	$ 87,569	$ 55,787

STOCK TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2023

STOCK TRANSACTIONS

Schedule of Stock Option Valuation Assumptions


Weighted average grants date fair value (USD)	1.34
Exercise price (USD)	1.91
Risk free rate	4.40	%
Volatility	79.40	%
Dividend yield	0	%
Expected life (Years)	5.75

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

Common Stock

Additional Paid-in Capital

Accumulated Deficit

Total

Beginning balance at Dec. 31, 2021

$ 46

$ 368,852

$ (374,934)

$ (6,036)

Beginning balance (in shares) at Dec. 31, 2021

^[1]

45,556,647

Issuance of common stock under the Sales Agreement, net

$ 4

4,157

4,161

Issuance of common stock under the Sales Agreement, net (in shares)

^[1]

3,841,479

Share-based compensation related to stock options

592

Share-based compensation related to restricted stock awards

954

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

^[1]

759,482

Exercise of warrants

Exercise of warrants (in shares)

^[1]

1,000

Net income (loss) for the period

(11,187)

Ending balance at Sep. 30, 2022

$ 50

374,557

(386,121)

(11,514)

Ending balance (in shares) at Sep. 30, 2022

^[1]

50,158,608

Beginning balance at Jun. 30, 2022

$ 49

372,616

(382,554)

(9,889)

Beginning balance (in shares) at Jun. 30, 2022

^[1]

48,712,952

Issuance of common stock under the Sales Agreement, net

$ 1

1,519

1,520

Issuance of common stock under the Sales Agreement, net (in shares)

^[1]

1,445,656

Share-based compensation related to stock options

298

Share-based compensation related to restricted stock awards

124

Net income (loss) for the period

(3,567)

Ending balance at Sep. 30, 2022

$ 50

374,557

(386,121)

(11,514)

Ending balance (in shares) at Sep. 30, 2022

^[1]

50,158,608

Beginning balance at Dec. 31, 2022

$ 54

379,167

(389,861)

(10,640)

Beginning balance (in shares) at Dec. 31, 2022

^[1]

53,790,167

Issuance of common stock under the Sales Agreement, net

$ 13

23,941

23,954

Issuance of common stock under the Sales Agreement, net (in shares)

^[1]

12,560,150

Convertible notes conversions

$ 5

7,778

7,783

Convertible notes conversions (in shares)

^[1]

4,691,623

Share-based compensation related to stock options

1,195

Share-based compensation related to restricted stock awards

$ 1

886

887

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

^[1]

1,371,362

Exercise of warrants

712

Exercise of warrants (in shares)

^[1]

538,822

Net income (loss) for the period

14,356

Ending balance at Sep. 30, 2023

$ 73

413,679

(375,505)

38,247

Ending balance (in shares) at Sep. 30, 2023

^[1]

72,952,124

Beginning balance at Jun. 30, 2023

$ 72

412,582

(373,653)

39,001

Beginning balance (in shares) at Jun. 30, 2023

^[1]

71,580,762

Share-based compensation related to stock options

383

Share-based compensation related to restricted stock awards

$ 1

714

$ 715

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

^[1]

1,371,362

Exercise of warrants (in shares)

Net income (loss) for the period

(1,852)

$ (1,852)

Ending balance at Sep. 30, 2023

$ 73

$ 413,679

$ (375,505)

$ 38,247

Ending balance (in shares) at Sep. 30, 2023

^[1]

72,952,124

[1]	Common stock, $0.001 par value; Authorized – as of September 30, 2023 and December 31, 2022 – 185,000,000 and 144,000,000 shares, respectively.

REVENUES (Tables)

9 Months Ended

Sep. 30, 2023

REVENUES

Schedule of Company's Disaggregation of Revenues


	Three Months Ended September 30,				Nine Months Ended September 30,
(U.S. dollars in thousands)	2023		2022		2023		2022
Pfizer	$	2,304	$	4,541	$	7,972	$	11,279
Brazil	$	2,320	$	1,708	$	5,120	$	7,162
Chiesi	$	5,544	$	2,563	$	17,217	$	2,781
Total revenues from selling goods	$	10,168	$	8,812	$	30,309	$	21,222
Revenues from license and R&D services	$	177	$	5,371	$	24,699	$	17,799

EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2023

EARNINGS (LOSS) PER SHARE

Schedule of Basic and Diluted Net Earnings (Loss) Per Share


		Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except share data)		2023		2022		2023		2022
Numerator:
Net income (loss)	$	(1,852)	$	(3,567)	$	14,356	$	(11,187)
Add:
Financial expenses of 2024 Notes*	$	(1,766)		—	$	(1,610)		—
Net income (loss) for diluted calculation	$	(3,618)	$	(3,567)	$	12,746	$	(11,187)
Denominator:
Weighted average shares of Common Stock outstanding for basic calculation		72,281,681		49,498,105		65,811,506		47,582,733
Weighted average dilutive effect of 2024 Notes		11,500,998		—		13,981,660		—
Weighted average dilutive effect of stock options		—		—		1,247,115		—
Weighted average shares of Common Stock outstanding for diluted calculation		83,782,679		49,498,105		81,040,281		47,582,733

* Financial expenses on 2024 Notes consists of add back of financial expense incurred during the period and inclusion of make-whole interest payments that will be incurred upon conversion.

REVENUES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
REVENUES (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Revenues	$ 10,345	$ 14,183	$ 55,008	$ 39,021
Goods
Revenues	10,168	8,812	30,309	21,222
Goods \| Pfizer
Revenues	2,304	4,541	7,972	11,279
Goods \| Brazil
Revenues	2,320	1,708	5,120	7,162
Goods \| Chiesi
Revenues	5,544	2,563	17,217	2,781
License and R&D Services
Revenues	$ 177	$ 5,371	$ 24,699	$ 17,799

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

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+ Details

INVENTORIES (Tables)

9 Months Ended

Sep. 30, 2023

INVENTORIES

Schedule of Inventory


	September 30,		December 31,
(U.S. dollars in thousands)	2023		2022
Raw materials	$	4,198	$	3,508
Work in progress		9,116		2,678
Finished goods		8,269		10,618
Total inventory	$	21,583	$	16,804

FAIR VALUE MEASUREMENT (Schedule of Fair Value Assumptions) (Details) - 2024 Notes - Level 3	Sep. 30, 2023 $ / shares Y
Share Price.
Debt Instrument, Measurement Input \| $ / shares	1.66
Expected term
Debt Instrument, Measurement Input \| Y	0.93
Risk free rate
Debt Instrument, Measurement Input	5.34
Volatility
Debt Instrument, Measurement Input	62.84
Yield
Debt Instrument, Measurement Input	12.49

FAIR VALUE MEASUREMENT (Additional Information) (Details) - Level 3 - 2024 Notes $ in Thousands	Sep. 30, 2023 USD ($)
Debt Instrument Carrying Amount	$ 20,400
Debt Instrument Fair Value	$ 24,500

SUBSEQUENT EVENTS (Details) $ / shares in Units, $ in Thousands			3 Months Ended
	Oct. 15, 2023 USD ($) item $ / shares shares	Oct. 04, 2023 USD ($)	Sep. 30, 2023 $ / shares
Stock Options
Subsequent Event [Line Items]
Exercise price \| $ / shares			$ 1.34
Subsequent Event \| Chiesi Agreements
Subsequent Event [Line Items]
Proceeds From Sale Of Products \| $		$ 6,400
Subsequent Event \| Stock Options \| New officer \| 2006 Employee Stock Incentive Plan
Subsequent Event [Line Items]
Term of award	10 years
Number of options to purchase shares \| shares	250,000
Exercise price \| $ / shares	$ 1.48
Vesting period	3 years
Vesting in number of quarterly increments \| item	12
Estimated fair value on date of grant \| $	$ 260

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (Tables)

9 Months Ended

Sep. 30, 2023

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

Supplemental Information, Balance Sheets


	September 30,		December 31,
(U.S. dollars in thousands)	2023		2022
Accounts payable and accruals – other:
Payroll and related expenses	$	1,239	$	1,216
Interest Payable		123		719
Provision for vacation		1,471		1,404
Accrued expenses		9,249		7,478
Royalties payable		332		781
Income tax payable		3,257		530
Reserve for deductions from revenue		2,816		—
Property and equipment suppliers		253		143
	$	18,740	$	12,271

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Cost of goods sold
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation	$ 195	$ 36	$ 299	$ 58
Research and development expenses
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation	182	114	506	275
Selling, general and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-based compensation	$ 720	$ 272	$ 1,276	$ 1,213

TAXES ON INCOME

9 Months Ended

Sep. 30, 2023

TAXES ON INCOME

TAXES ON INCOME

NOTE 7 – TAXES ON INCOME

The following table summarizes the Company’s taxes on income:


	Three Months Ended		Nine Months Ended
(U.S. dollars in thousands)	September 30, 2023		September 30, 2023
Current taxes on income	$	95	$	3,728
Deferred taxes on income		38		(3,092)
Total taxes on income	$	133	$	636

The Company had an effective tax rate of 4% for the nine months ended September 30, 2023, compared to an effective tax rate of 0% for the nine months ended September 30, 2022. For the nine months ended September 30, 2023, the difference between the Company’s effective tax rate and the U.S. federal statutory rate of 21% was the result of the provision for current taxes on income mainly derived from U.S. taxable GILTI income mainly in respect of milestone payments and Section 174 of the U.S. Tax Cuts and Jobs Act, which was enacted in December 2017 (the “TCJA”), partially offset by the release of the valuation allowance on net operating losses (NOLs) in the United States.

Following the regulatory approvals for Elfabrio in May 2023, the receipt of the $20.0 million milestone payment and the launch of Elfabrio in the United States, the Company released valuation allowance previously recorded on deferred tax assets in respect of its NOLs in the United States resulting in a net tax benefit of $3.1 million. The Company concluded that, based upon the preponderance of positive evidence over negative evidence and the anticipated ability to use the deferred tax assets, it was more likely than not that these deferred tax assets would be realizable due to forecasted profits. The Company considered the following: (i) cumulative profits for tax over the previous 12 quarters in its U.S. operations; (ii) the impact of

Section 174 of the TCJA which requires the Company to capitalize and amortize its research and development expenses over 15 years; and (iii) its forecasted profits in the United States following the regulatory approvals of Elfabrio.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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+ Details

SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (Accounts Payable and Accruals - Other) (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accounts payable and accruals - other:
Payroll and related expenses	$ 1,239	$ 1,216
Interest Payable	123	719
Provision for vacation	1,471	1,404
Accrued expenses	9,249	7,478
Royalties payable	332	781
Income tax payable	3,257	530
Reserve for deductions from revenue	2,816
Property and equipment suppliers	253	143
Accounts payable and accruals - other	$ 18,740	$ 12,271