Form 6-K PAINREFORM LTD. For: Jun 30

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

You should read the following selected financial data and discussion of our operating and financial condition and prospects in conjunction with the financial statements and the notes thereto included elsewhere in this Form 6-K. Our financial statements are prepared in accordance with U.S. GAAP, and reported in U.S. dollars. We maintain our accounting books and records in U.S. dollars and our functional currency is the U.S. dollar. Certain amounts presented herein may not sum due to rounding. Unless the context requires otherwise, references in this report to “PainReform,” the “Company,” “we,” “us” and “our” refer to PainReform Ltd, an Israeli company. “NIS” means New Israeli Shekel, and “$,” “US$,” “U.S. dollars” and “USD” mean United States dollars.

 

Forward Looking Statements

 

The following discussion contains “forward-looking statements,” including statements regarding expectations, beliefs, intentions or strategies for the future. These statements may identify important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of the Form 6-K to which this discussion is attached and are expressly qualified in their entirety by the cautionary statements included herein. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.

 

Overview

 

We are a clinical stage specialty pharmaceutical company focused on the reformulation of established therapeutics.  Our proprietary extended release drug-delivery system is designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration while reducing the potential need for the use of opiates.

 

Our strategy is to incorporate generic drugs with our proprietary extended release drug-delivery system in order to create extended release drug products and to take advantage of the 505(b)(2) regulatory pathway created by the Food and Drug Administration, or the FDA.  The 505(b) (2) new drug application, or NDA, process, provides for FDA approval of a new drug based in part on data that was developed by others, including published literature references and data previously reviewed by the FDA in its approval of a separate application.  PRF-110, our first product candidate, is based on the local anesthetic ropivacaine, targeting the post-operative pain relief market.  PRF-110 is an oil-based, viscous, clear solution that is deposited directly into the surgical wound bed prior to closure to provide localized and extended post-operative analgesia.

 

In a small, 15-patient Phase 2 proof-of-concept clinical study in hernia repair, PRF-110 provided substantial pain reduction for up to 72 hours post-operatively. A comparison of these results to historical data for ropivacaine alone suggests a substantial advantage to using PRF-110 over the local analgesic agent, ropivacaine, alone. As indicated in the FDA approved drug description, ropivacaine provides pain relief for only 2 to 6 hours. The surgeons that participated in the PRF-110 Phase 2 trial reported that it was easily integrated into the procedure and was non-disruptive of existing surgical techniques. Ropivacaine, the active drug used in PRF-110, is a safe and well-characterized local analgesic agent and the other components that make up the remainder of the PRF-110 formulation are classified as GRAS (Generally Regarded As Safe) by the FDA, mitigating many potential safety issues that are common in drug development.

 

We are currently preparing for the launch of our two Phase 3 clinical trials of PRF-110, one for the treatment of patients undergoing bunionectomy and the other for the treatment of hernia repair operations.

 

In 2021, we encountered delays with our former contract manufacturing organization, or CMO, in Israel in manufacturing clinical trial batches of product mainly due to regulatory failures in its facilities, Good Manufacturing Practices  issues and turnover of personnel. We put in place a plan and actions directed at shifting manufacturing and scale-up operations of PRF-110 to North America and engaged Pharmaceutics International, a U.S.-based CMO for the purpose of manufacturing our clinical trial batches. We have completed process validation to comply with FDA’s manufacturing standards and regulations. We intend to begin manufacturing PRF-110 batches for the first of two planned Phase 3 clinical trials soon. As a result, we expect to commence our first clinical trial in bunionectomy during the fourth quarter of 2022.

Since our inception in November 2007, we have devoted substantially all of our efforts to organizing and planning our business, building our management and technical team, developing our proprietary drug delivery system and PRF-110, and raising capital.

After successful completion of the first trial, we plan to initiate the hernia repair clinical trial. We believe that there is a great unmet need for effective, long-lasting, non-opiate treatments for post-operative pain. The current market in post-operative pain treatment is approximately $12 billion, which is expected to grow to over $45 billion by the end of 2026 (Persistence Market Research, 2018). These market projections are based on the current generation of post-operative pain products, which largely consist of systemically administered opiates. At present, most of the available analgesics are dosed every four to six hours, requiring nursing attention when in the hospital, or discharge of the patients with an excess of drugs to treat anticipated pain. This exposure to opiates is a significant risk factor leading to opiate abuse disorder (Hah, et al. Chronic Opioid Use After Surgery: Implications for Perioperative Management in the Face of the Opioid Epidemic. 2017). PRF-110 was created to prolong analgesia at the surgical site, thus facilitating early post-operative ambulation, speeding recovery and reducing time in hospital. In addition, it is anticipated that PRF-110 will reduce opiate exposure and thereby lessen the risk of opiate abuse disorder.

 

Every year, starting 2017, there are more than 50 million surgical procedures performed annually in the U.S. in both hospitals and in ambulatory surgery centers. We believe that many of these invasive and painful procedures should be eligible for treatment with extended-release ropivacaine through our product, PRF-110. As reported in Pharmacotherapy, 2013, 99% of all surgeries are treated with opiates. The extended release nature of PRF-110 is intended to reduce pain for up to 72 hours from the time of surgery, thereby obviating/diminishing the need for additional pain medications. There are currently available several extended release products, mainly Exparel with revenues of over $500M in 2021.

 

We believe that PRF-110 will significantly extend post-operative analgesia, will be significantly less costly to produce than the currently available extended release product and, unlike that product, will not require delicate handing. We plan to launch PRF-110 either by ourselves or with a strategic partner that is experienced in marketing products in surgical environments.

 

We expect to continue to incur significant expenses and increasing losses for next several years. Our net losses may fluctuate significantly from period to period, depending on the timing of our planned clinical trials and expenditures on our other research and development and commercial development activities. We expect our expenses will increase substantially over time as we:

 

 

 

 

 

 

 

 

 

Financial Operations Overview

 

Revenue

 

We have not generated any revenue and do not expect to generate any revenue unless or until we obtain regulatory approval of and commercialize one or more of our current or future drug candidates. In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone payments.

 

Research and Development Expenses

 

Research and development expenses consist primarily of costs incurred for our research activities, which include, among other things:

 

 

 

 

 

 

 

Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.

 

Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct. The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will depend on a variety of factors that include, but are not limited to, the following:

 

 

 

 

 

 

 

 

 

In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of employee-related expenses, including salaries, benefits and share-based compensation. Other general and administrative expenses include directors’ and officers’ liability insurance premiums, costs associated with being a publicly traded company, fees associated with investor relations, professional fees for consultants, tax and legal services and facility-related costs.

 

We expect that general and administrative expenses will increase in the future as we expand our operating activities and incur additional costs. In addition, if our current or future drug candidates are approved for sale, we expect that we would incur expenses associated with building our commercial and distribution infrastructure.

 

Financial Expenses, Net

 

Financial expenses, net, primarily consists from change in fair value of derivative warrant liability, bank management fees and commissions and exchange rate differences expenses.

 

Results of Operations

 

Research and development expenses. Research and development expenses were $1.4 million for the six months ended June 30, 2022 compared to $1.7 million for the six months ended June 30, 2021, a decrease of $0.3 million. The decrease was primarily due to a decrease in payment to subcontractors and clinical trials costs.

 

General and administrative expenses. General and administrative expenses were $2.1 for the six months ended June 30, 2022 compared to $2.0 million for the six months ended June 30, 2021. An increase in headcount related and regulation costs were offset with a decrease in insurance costs and certain professional services costs.

 

Financial expense, net. Financial expense, net was negligible for the six months ended June 30, 2022 compared to financial expenses, net of $ 43,000 for the six months ended June 30, 2021, a decrease of $43,000. The decrease was primarily due to changes in exchange rate costs.

 

Net loss. As a result of the foregoing, we incurred a net loss of $3.5 million for the six months ended June 30, 2022 compared to a net loss of $3.7 million for the six months ended June 30, 2021, a decrease of $0.2 million.

 

Liquidity and Capital Resources

 

Since our inception through June 30, 2022, we have funded our operations primarily through proceeds from our initial public offering and private placements. As of June 30, 2022, we had an accumulated deficit of approximately $27.2 million, cash and cash equivalents of $13.8 million and a positive working capital of $15.4 million.

 

On March 8, 2021, we entered into a definitive securities purchase agreement with certain institutional investors, or the Purchasers, for the purchase and sale of 1,304,346 ordinary shares, and warrants to purchase up to an aggregate of 652,173 ordinary shares at a combined purchase price of $4.60 per ordinary share and accompanying warrant. We received net proceeds of approximately $5.5 million from the private placement. The warrants are exercisable for a period of five and one half years from the date of issuance and have an exercise price of $4.60 per share, subject to adjustment as set forth in the warrants for share splits, share dividends, recapitalizations and similar events.  In July 2021, as a result of an exercise of warrants held by one of the Purchasers, we received gross proceeds of approximately $1.9 million.

 

In connection with the private placement, we also entered into a Registration Rights Agreement, dated as of March 8, 2021, with the Purchasers, or the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, we filed a registration statement, or the Registration Statement, with the U.S. Securities and Exchange Commission, or the SEC, to register the resale of the ordinary shares and the ordinary shares issuable upon exercise of the warrants. The Registration Statement was declared effective on April 9, 2021.

 

Developing drugs, conducting clinical trials and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. We believe our existing financial resources as of the date of issuance of this Form 6-K, will be sufficient to fund our operating expenses and capital expenditure requirements for at least the twelve months from the date of issuance of this Form 6-K. Our estimate as to how long we expect our funds to support our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:

 

 

 

 

 

 

 

 

 

 

 

 

We expect our expenses to increase in connection with our planned operations. Until such time, if ever, as we can generate substantial revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a shareholder. In addition, debt financing, if available, would result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, creating liens, redeeming shares or declaring dividends, that could adversely impact our ability to conduct our business. In addition, securing financing could require a substantial amount of time and attention from our management and may divert a disproportionate amount of their attention away from day-to-day activities, which may adversely affect our management’s ability to oversee the development of our product candidates.

 

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce and/or eliminate our product candidate development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

 

Cash Flows

 

The following table sets forth the major components of our statements of cash flows for the periods presented (U.S. dollars in thousands):

 

 

Net cash used in operating activities

 

For the six months ended June 30, 2022 and 2021, net cash used in operating activities was $2.7 million and $3.4 million, respectively. The decrease was mainly due to decrease of payments to consultants and clinical trials.

 

Net cash used in investing activities

 

For the six months ended June 30, 2022, net cash used in investing activities was $3,000, compared to $16,000 in the six months ended June 2021. The decrease was due to less investments in property in 2022.

 

Net cash provided by financing activities

 

 

Research and Development, Patents and Licenses.

 

Costs incurred in connection with research and development activities are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or other information provided to us by our vendors.

 

Research and development activities are and will continue to be central to our business model. We expect our research and development expenses to increase for the foreseeable future as we advance our current and future drug candidates through preclinical studies and clinical trials. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time-consuming. It is difficult to determine with certainty the duration and costs of any preclinical study or clinical trial that we may conduct. The duration, costs and timing of clinical trial programs and development of our current and future drug candidates will depend on a variety of factors that include, but are not limited to, the following:  

 

 

 

 

 

 

 

 

 

In addition, the probability of success for any of our current or future drug candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential. 

 

Trend Information.

 

We are a development stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research, development or commercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net sales or revenues, income from continuing operations, profitability, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are identified in the preceding subsections.

 

Off-Balance Sheet Arrangements.

 

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

 

Critical Accounting Policies and Judgments and Estimates

 

Our statements are prepared in accordance with GAAP. Some of the accounting methods and policies used in preparing our financial statements under GAAP are based on complex and subjective assessments by our management or on estimates based on past experience and assumptions deemed realistic and reasonable based on the circumstances concerned. The actual value of our assets, liabilities and shareholders’ equity and of our accumulated deficit could differ from the value derived from these estimates if conditions change and these changes had an impact on the assumptions adopted. See Note 2 to our audited financial statements and the related notes thereto for the years ended December 31, 2021, 2020 and 2019, included in our Form 20-F for the year ended December 31, 2021, for a description of our significant accounting policies.

 

OTHER INFORMATION

 

Material Weakness

 

 

Risk Factors

 

In addition to the other information set forth in this report, you should carefully consider the risk factors described in the section titled “Risk Factors” in our Annual Report on Form 20-F as filed with the SEC on March 16, 2022 (the “2021 Annual Report”).

 

There have been no material changes from the risk factors previously disclosed in our 2021 Annual Report, except as noted below.

 

We have identified a material weakness in our internal control over financial reporting as of June 30, 2022. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

 

We have identified a material weakness in our internal controls over financial reporting relating to our accounting controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

 

 

In response, we implemented certain changes to our internal control procedures with respect to payments to suppliers that seek to provide alternate bank account information to us. We have also updated our information technology procedures and hired the services of a cybersecurity consultant to assist with implementing a range of steps to enhance our security protections in order to prevent future cybersecurity incidents. In addition, we have enhanced our organizational awareness of cybersecurity, our information security and our vendor/payment validation procedures within our organization.

 

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Measures to remediate material weaknesses may be time-consuming and costly and there is no assurance that such initiatives will ultimately have the intended effects. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable share exchange listing requirements, investors may lose confidence in our financial reporting and adversely affect our business and operating results. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

 

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PainReform Provides Business Update for the Second Quarter of 2022

On track to commence Phase 3 clinical trial in bunionectomy in the fourth quarter of 2022

Completes tech transfer to CMO for manufacturing of clinical batches

 

Tel Aviv, Israel – August 15, 2022 – PainReform Ltd. (Nasdaq: PRFX) ("PainReform" or the "Company"), a clinical-stage specialty pharmaceutical company focused on the reformulation of established therapeutics, today provided a business update for the second quarter ended June 30, 2022.

 

Ilan Hadar, Chief Executive Officer of Pain Reform, stated, “We are pleased to report continued progress advancing PRF-110, our lead product, based on the local anesthetic ropivacaine, which is designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration, while reducing the potential need for the use of opiates. Importantly, the manufacturing tech transfer to our CMO, whom we engaged for manufacturing our clinical batches of PRF-110, was successful and we are in the process of manufacturing the clinical trial material. Towards this end, we remain on track to commence the Phase 3 U.S. clinical trial of PRF-110 in bunionectomy in the fourth quarter of 2022. In addition, we implemented process technology related steps that we believe will make manufacturing of PRF-110 much more efficient. As a result, manufacturing is progressing and we expect to complete manufacturing the clinical batch by the end of this month.”

“We remain highly encouraged by our prior data, which demonstrated a strong safety profile, suggesting a substantial advantage to using PRF-110 over the local anesthetic, ropivacaine. Moreover, upon completion of the bunionectomy trial, we plan to initiate the Phase 3 hernia trial. Overall, we are excited about the outlook for the balance of 2022 and look forward to a number of key upcoming milestones that we believe will further enhance shareholder value, including the start of enrolment and dosing of the first patients.  We have maintained a solid balance sheet and had $13.8 million of cash on hand and no debt as of June 30, 2022. As a result, we have more than sufficient capital to support our ongoing activities beyond initiation of our first Phase 3 trial.” concluded Mr. Hadar.

“Overall, we remain highly encouraged by the outlook for the business.  There are more than 50 million surgical procedures performed annually in the U.S. in both hospitals and in ambulatory surgery centers, with many of these invasive and painful procedures eligible for treatment with extended-release ropivacaine through our product, PRF-110. Given the fact an estimated 99% of current surgeries are treated with opiates, and that our proprietary extended-release drug-delivery system has broad potential across a wide range of surgeries, we believe we are well positioned within the $12 billion post-operative pain relief market.  Moreover, we believe that PRF-110 will significantly extend post-operative analgesia and will be significantly less costly to produce than current alternatives.”

 

Financial Results for the Six Months Ended June 30, 2022

 

Research and development expenses were $1.4 million for the six months ended June 30, 2022 compared  to $1.7 million for the six months ended June 30, 2021, a decrease of $0.3 million. The decrease was primarily due to a decrease in payment to subcontractors and clinical trials costs.

 

General and administrative expenses  were $2.1 for the six months ended June 30, 2022 compared  to $2.0 million for the six months ended June 30, 2021. An increase in headcount related and regulation costs were offset with a decrease in insurance costs and certain professional services costs.

 

Financial expense, net was net was negligible for the six months ended June 30, 2022 compared to financial expenses, net of $43,000 for the six months ended June 30, 2021, a decrease of $43,000. The decrease was primarily due to changes in exchange rate costs.

 

As a result of the foregoing, the Company incurred a net loss of $3.5 million for the six months ended June 30, 2022 compared to a net loss of $3.7 million for the six months ended June 30, 2021, a decrease of $0.2 million.

 

As of June 30, 2022, the Company had cash and cash equivalents of $13.8 million.

 

About PainReform

 

PainReform is a clinical-stage specialty pharmaceutical company focused on the reformulation of established therapeutics. PRF-110, the Company's lead product, is based on the local anesthetic ropivacaine, targeting the post-operative pain relief market. PRF-110 is an oil-based, viscous, clear solution that is deposited directly into the surgical wound bed prior to closure to provide localized and extended post-operative analgesia. The Company's proprietary extended-release drug-delivery system is designed to provide an extended period of post-surgical pain relief without the need for repeated dose administration while reducing the potential need for the use of opiates. For more information, please visit www.painreform.com.

 

Notice Regarding Forward-Looking Statements

This press release contains forward looking statements about our expectations, beliefs and intentions. Forward-looking statements can be identified by the use of forward-looking words such as "believe", "expect", "intend", "plan", "may", "should", "could", "might", "seek", "target", "will", "project", "forecast", "continue" or "anticipate" or their negatives or variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements are based on assumptions and assessments made in light of management's experience and perception of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking statements in this press release are made as of the date of this press release, and we undertake no duty to update or revise any such statements, whether as a result of new information, future events or otherwise. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward- looking statements, including, but not limited to, the following: our history of significant losses, our need to raise additional capital and our ability to obtain additional capital on acceptable terms, or at all; our dependence on the success of our initial product candidate, PRF-110; the outcomes of preclinical studies, clinical trials and other research regarding PRF-110 and future product candidates;  the impact of the COVID-19 pandemic on our operations; our limited experience managing clinical trials; our ability to retain key personnel and recruit additional employees; our reliance on third parties for the conduct of clinical trials, product manufacturing and development; the impact of competition and new technologies; our ability to comply with regulatory requirements relating to the development and marketing of our product candidates; commercial success and market acceptance of our product candidates; our ability to establish sales and marketing capabilities or enter into agreements with third parties and our reliance on third party distributors and resellers;  our ability to establish and maintain strategic partnerships and other corporate collaborations; the implementation of our business model and strategic plans for our business and product candidates; the scope of protection we are able to establish and maintain for intellectual property rights and our ability to operate our business without infringing the intellectual property rights of others; the overall global economic environment; our ability to develop an active trading market for our ordinary shares and whether the market price of our ordinary shares is volatile; and statements as to the impact of the political and security situation in Israel on our business. More detailed information about the risks and uncertainties affecting us is contained under the heading "Risk Factors" included in the Company's most recent Annual Report on Form 20-F and in other filings that we have made and may make with the Securities and Exchange Commission in the future.

Contact:

Crescendo Communications, LLC

Tel: 212-671-1021

Email: [email protected]

Ilan Hadar

Chief Executive Officer

PainReform Ltd.

Tel: +972-54-5331725

Email: [email protected]