Partnership payments lift Compugen (NASDAQ: CGEN) to 2025 profit
Filing Impact
Filing Sentiment
Form Type
20-F
Rhea-AI Filing Summary
Compugen Ltd., an Israel-based immuno-oncology company, reports a 2025 net profit of
Revenue from collaborations reached roughly
The company’s near-term outlook rests on four clinical-stage programs—COM701, COM902, GS-0321 and AstraZeneca’s rilvegostomig—and on its Unigen AI/ML discovery platform. The report highlights extensive risks around clinical trial outcomes, patient enrollment, dependence on a small number of partners, manufacturing, competition from advanced modalities such as ADCs and T cell engagers, and the unproven nature of its AI-driven target discovery approach.
Positive
- None.
Negative
- None.
Insights
2025 profit is partnership-driven, with high pipeline and partner risk.
Compugen reached a 2025 net profit of
The company estimates its cash, deposits and marketable securities can fund operations into
Risk disclosures emphasize dependence on AstraZeneca and Gilead, potential termination of these agreements, challenges enrolling patients in COM701 and GS-0321 studies, manufacturing fragility, and intense competition from other immuno-oncology and AI/ML players. Subsequent filings may provide more clarity as pivotal data from rilvegostomig and internal programs emerge.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31 , 2025
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report -----------------------------
For the transition period from ____________ to ____________
Commission file number: 000-30902
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(Exact name of Registrant as specified in its charter)
____________________________________
(Translation of Registrant’s name into English)
___________________________________________________________________
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
________________________________________________
Phone: +972 -3-765-8585 , Fax: +972-3-765-8555
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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The
(The Nasdaq Capital Market)
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 94,553,191 Ordinary Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒ No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statement. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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International Financial Reporting Standards as issued
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Other ☐
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by the International Accounting Standards Board ☐
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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
TABLE OF CONTENTS
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS |
(iii) |
PART I.
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ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
1 |
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ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
1 |
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ITEM 3. |
KEY INFORMATION |
1 |
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ITEM 4. |
INFORMATION ON THE COMPANY |
49 |
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ITEM 4A. |
UNRESOLVED STAFF COMMENTS |
65 |
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ITEM 5. |
OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
65 |
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ITEM 6. |
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
77 |
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ITEM 7. |
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
100 |
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ITEM 8. |
FINANCIAL INFORMATION |
100 |
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ITEM 9. |
THE OFFER AND LISTING |
101 |
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ITEM 10. |
ADDITIONAL INFORMATION |
101 |
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ITEM 11. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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110 |
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ITEM 12. |
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
110 |
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PART II. |
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ITEM 13. |
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
110 |
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ITEM 14. |
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS |
110 |
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ITEM 15. |
CONTROLS AND PROCEDURES |
110 |
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ITEM 16. |
RESERVED |
111 |
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ITEM 16A. |
AUDIT COMMITTEE FINANCIAL EXPERT |
111 |
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ITEM 16B |
CODE OF ETHICS |
111 |
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ITEM 16C. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
112 |
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ITEM 16D. |
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
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112 |
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ITEM 16E. |
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
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112 |
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ITEM 16F. |
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT |
112 |
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ITEM 16G. |
CORPORATE GOVERNANCE |
112 |
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ITEM 16H. |
MINE SAFETY DISCLOSURE |
113 |
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ITEM 16I. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
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113 |
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ITEM 16J |
INSIDER TRADING POLICIES |
114 |
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ITEM 16K. |
CYBERSECURITY |
114 |
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PART III |
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ITEM 17. |
FINANCIAL STATEMENTS |
115 |
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ITEM 18. |
FINANCIAL STATEMENTS |
115 |
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ITEM 19. |
EXHIBITS |
116 |
(i)
CERTAIN DEFINED TERMS
All references in this Annual Report on Form 20-F to “Compugen,” the “Company,”
“we,” “us,” “our,” or similar references refer to Compugen Ltd. and our wholly owned subsidiary Compugen
USA, Inc., except where the context otherwise requires or as otherwise indicated.
‑‑‑‑‑‑‑‑‑‑‑‑
We have prepared our consolidated financial statements in United States dollars and
in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. All references herein to “dollars”
or “$” or “USD” are to United States dollars, and all references to “Shekels” or “NIS”
are to New Israeli Shekels.
(ii)
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F, or the Annual Report, includes “forward-looking
statements” within the meaning of the Securities Act of 1933, as amended, or the Securities Act, the Securities Exchange Act of
1934, as amended, or the Exchange Act, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are based on our current beliefs, expectations and assumptions. Forward-looking statements can be identified by the use of
terminology such as “will,” “may,” “assume,” “expect,” “anticipate,” “could,”
“project,” “estimate,” “possible,” “potential,” “believe,” “suggest,”
“plan,” and “intend,” and similar expressions that are intended to identify forward-looking statements, although
not all forward-looking statements contain these identifying words. These forward-looking statements involve known and unknown risks and
uncertainties that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially
from those projected in the forward-looking statements include, without limitation, the risk factors set forth under “Item 3. Key
Information - D. Risk Factors,” the information about us set forth under “Item 4. Information on the Company” and information
related to our financial condition under “Item 5. Operating and Financial Review and Prospects.” Any forward-looking statements
represent our views only as of the date hereof and should not be relied upon as representing our views as of any subsequent date. We do
not assume any obligation to update any forward-looking statements unless required by law.
(iii)
PART I.
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY
INFORMATION
A. [RESERVED]
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
An investment in our ordinary shares involves a high
degree of risk and many factors could affect our results, financial condition, cash flows and results of operations. You should carefully
consider the following risk factors, as well as the other information in this Annual Report. If we do not, or cannot, successfully address
the risks to which we are subject, we could experience a material adverse effect on our business, results of operations and financial
condition, which could include the need to limit or even discontinue our business operations, and accordingly our share price may decline,
and you could lose all or part of your investment. We can give no assurance that we will successfully address any of these risks. The
principal risks we face are described below.
Summary Risk Factors
Our business is subject to a number of risks of which you should
be aware of before making an investment decision. These risks are discussed more fully under the caption “Item 3. Key Information
- D. Risk Factors” section of this Annual Report. These risks include, but are not limited to, the following:
| • |
We have a history of losses and we expect to incur future losses and may never achieve or sustain profitability. |
| • |
We expect to raise additional funds in the future, and if we are unable to raise such additional funds, we may need to limit, curtail
or cease operations. To the extent any such funding is based on the sale of equity, our existing shareholders would experience dilution
of their shareholdings. |
| • |
We cannot provide assurance that our business model will succeed in generating substantial revenues. |
| • |
Our dependence on collaboration agreements with third parties presents a number of risks. |
| • |
In the near-term, we are highly dependent on the success of COM701, COM902, GS-0321 (previously COM503) and rilvegostomig.
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| • |
Clinical trials of any product candidates that we, or any current or future collaborators may conduct, may fail to satisfactorily
demonstrate safety and/or efficacy, and we, or any collaborator, may incur additional costs or experience delays in completing, or ultimately
be unable to complete the development and commercialization of these product candidates. |
| • |
Clinical development involves a lengthy and expensive process, with an uncertain outcome. We may encounter substantial delays or
even an inability to begin clinical trials for any specific product or may not be able to conduct or complete our trials on the timelines
we expect. |
| • |
From time to time, we publicly disclose preliminary data from our ongoing clinical trials. As more patient data become available,
the data and the interpretation of the data may change. |
| • |
We rely and expect to continue to rely on third parties to conduct our clinical trials. These third parties may not successfully
or professionally carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, and we may experience
significant delays in the conduct of our clinical trials as well as significant increased expenditures. |
1
| • |
Serious adverse events or undesirable side effects or lack of efficacy, may emerge in clinical trials conducted by other companies
running clinical trials investigating the same target as us, which could adversely affect our development programs or our capability to
enroll patients or partner the program for further development and commercialization. |
| • |
We are subject to certain manufacturing risks, any of which could either result in additional costs or delays in completing, or ultimately
make us unable to complete, the development and commercialization of our product candidates. |
| • |
There are risks that are inherent in the development and commercialization of novel therapeutic products. |
| • |
Our approach to the discovery of therapeutic products is based on Unigen™, our AI/ML powered computational discovery platform,
that is not yet fully proven clinically, and we do not know whether we will be able to discover and develop additional potential product
candidates or products of commercial value. |
| • |
We are focusing our discovery and therapeutic development activities on therapeutic product candidates for use in immuno-oncology.
Our current candidates may fail, and we may fail to continue to discover and develop therapeutic product candidates of industry interest
in this field. |
| • |
We depend significantly on third parties (including partners) to carry out the research, development and commercialization of our
therapeutic product candidates. If we are unable to maintain our existing agreements or to enter into additional agreements with such
third parties, mainly collaborators, in the future, our business will likely be materially harmed. |
| • |
We rely on and expect to continue to rely on third parties to conduct our clinical trials. These third parties may not successfully
or professionally carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, and we may experience
significant delays in the conduct of our clinical trials as well as significant increased expenditures. |
| • |
We rely on and expect to continue to rely completely on third parties to manufacture and supply our preclinical and clinical drug
supplies. Our business could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to
do so at acceptable quality and quantity levels, prices or timelines. |
| • |
Our reliance on third parties to conduct our clinical trials and other key development activities, which heightens the risks faced
by our business. |
| • |
We operate in a highly competitive and rapidly changing industry which may result in others discovering, developing or commercializing
competing products ahead of us or more successfully than we do. |
| • |
Our information technology systems, or those of the third parties upon whom we rely, including our cloud and SaaS providers, CROs
or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption to our business,
as well as to regulatory investigations or actions; litigation; fines and penalties; reputational harm; loss of revenue and other adverse
consequences. |
| • |
We are subject to stringent and changing obligations related to data privacy and security. Failure or perceived failure to comply
with current or future obligations could lead to government enforcement actions (which could include civil or criminal penalties), private
litigation, and/or adverse publicity and could negatively affect our operating results and business. |
| • |
If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability
to prevent our competitors from commercializing similar or identical product candidates would be adversely affected. |
| • |
We may need to obtain additional licenses of third-party technology or other rights that may not be available to us or are available
only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that
was not anticipated. |
| • |
We, or potential collaborators and licensees, may infringe third-party rights and may become involved in litigation, which may materially
harm our business. |
2
| • |
We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time
consuming and unsuccessful. |
| • |
Conditions in Israel and in the Middle East may adversely affect our operations. |
| • |
Our results of operations may be adversely affected by the exchange rate fluctuations between the dollar and the New Israeli Shekel.
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| • |
Future sales of our ordinary shares or securities convertible or exchangeable for our ordinary shares may depress our share price.
|
| • |
If we sell ordinary shares in future financings, shareholders may experience immediate dilution and, as a result, our share price
may decline. |
| • |
Our share price and trading volume have been volatile and may be volatile in the future and that could limit investors’ ability
to sell our shares at a profit and could limit our ability to successfully raise funds. |
| • |
If we are a passive foreign investment company, or PFIC, our U.S. shareholders may be subject to adverse U.S. federal income tax
consequences. |
Risks Related to our Business, Financial Results and Financing Needs
We have a history of losses and we expect to
incur future losses and may never achieve or sustain profitability.
As of December 31, 2025, we had an accumulated deficit of approximately $453.4 million.
Although we generated a net profit of approximately $35.3 million in 2025, we have incurred approximately $14.2 million and $18.8 million,
for the years ended December 31, 2024 and December 31, 2023, respectively, in large part due to the expenditures associated with our ongoing
research and development and limited revenues received to date. In addition, we expect to continue to incur net losses in the future due
to our anticipated costs and expenses, primarily associated with our research and development and preclinical and clinical activities.
We currently have two therapeutic program-based partnership agreements in effect, one with AstraZeneca plc, or AstraZeneca, and the second
with Gilead Sciences, Inc., or Gilead. In 2025, we received $65 million as an additional upfront payment from AstraZeneca in connection
with an amendment to our previously existing exclusive license agreement with MedImmune Limited, the global biologics research and development
arm of AstraZeneca. In 2024, we received an aggregate of $76.5 million from upfront and milestone payments from Gilead (after $13.5 million
tax withheld at source) and $5 million as milestone payments from AstraZeneca. We cannot be certain that we will receive additional revenues
under any of these partnership agreements or that we will enter into additional arrangements for any of our current or any future therapeutic
pipeline programs or with respect to Unigen, our AI/ML powered computational discovery platform, or that such additional arrangements,
if any, will provide sufficient revenues to achieve profitability.
We expect to raise additional funds in the
future, and if we are unable to raise such additional funds, we may need to limit, curtail or cease operations. To the extent any such
funding is based on the sale of equity, our existing shareholders would experience dilution of their shareholdings.
We believe that our current existing cash and cash equivalents, short-term bank deposits
and investment in marketable securities will be sufficient to fund operations into 2029, based on our current plans without considering
the possible receipt of any additional funds, such as proceeds from existing or additional licensing and/or collaborative agreements,
or from financings. However, if our plans change or if our burn-rate increases, our cash balances may only be sufficient for a shorter
period of time. We cannot predict with any degree of certainty when, or even if, we will generate significant revenues or achieve profitability,
and therefore we expect to need additional funds in the future to continue financing our operations. We may seek additional capital for
various reasons, including for our ongoing operations or strategic considerations, even if we believe we have sufficient funds for our
current and future operating plans. Additional funds, including proceeds from license or collaborative agreements, or from other financings,
may not be available to us on acceptable terms, or at all. In addition, the terms of any financing may adversely affect the holdings or
the rights of our existing shareholders. For example, if we raise additional funds by issuing equity securities, our existing shareholders
will experience dilution of their shareholdings. Debt financing, if available, may involve restrictive covenants that could limit our
flexibility in conducting future business activities.
Any failure to raise funds as and when needed would materially harm our business,
financial condition and results of operations, and may result in us having to significantly reduce our operations and thereby limiting
our ability to pursue some or all of our research and development and clinical therapeutic product candidates.
3
We cannot provide assurance that our business
model will succeed in generating substantial revenues.
Our business model is primarily based on expected future revenues in various forms,
including upfront fees, research funding, in-kind funding, milestone payments, license fees, royalties on product sales and other revenue
sharing payments from development and commercialization of products by third parties, pursuant to various forms of collaborations for
our novel targets and related drug product candidates at various stages of research and development. Our primary focus in immuno-oncology
utilizes our Unigen platform to identify novel drug targets and develop innovative therapeutics in the field of cancer immunotherapy.
Drug target candidates discovered by our Unigen platform undergo initial target validation studies and, in selected cases, are advanced
to the discovery and development of the therapeutic product candidate. Such drug target candidates and their related therapeutic product
candidates may serve as the basis for licensing and other forms of third-party collaborations, though there can be no guarantee that we
enter into any collaborations following the identification of such drug target candidates or that our Unigen platform will yield any additional
drug target candidates or therapeutic product candidates. While we currently have two collaborations in effect, one with AstraZeneca and
the second with Gilead, the termination of either or both existing collaborations or any future collaboration agreements may have varying
impacts on our financial position and, specifically, our ability to generate revenue. For example, the termination of our agreement with
Bristol Myers Squibb in 2022 had different effects on our operations and caused us to lose free access to PD-1 immune checkpoint inhibitor,
which has an adverse impact on our expenditure thereby requiring us to purchase PD-1 inhibitor for our clinical studies. The main effect
of the termination of the collaboration agreement with Bayer in 2023 was extinguishing our potential to achieve future revenues from such
collaboration. The inability to derive adequate revenues, or any, from our business model would materially harm our business, financial
condition and results of operations and could result in the need to limit or even discontinue our business operations.
We have a limited operating
history with respect to the partnering and commercialization aspects of our business model upon which investors can base an investment
decision or upon which to predict future revenues.
Our ability to generate revenues from partnerships for our novel drug targets and
related therapeutic product candidates at various stages of research and development has been limited. To date, we have entered into four
partnership agreements with respect to our therapeutic pipeline programs (of which we currently have two collaborations in effect) under
which we have received a total amount of $247.2 million (after $13.5 million withholding taxes), of which $32.0 million was in the form
of an equity investment. We recognized revenue of approximately $72.8 million in 2025, approximately $27.9 million in 2024 and approximately
$33.5 million in 2023 from our partnerships. There can be no guarantee that we will achieve the same level of revenue in the future.
We cannot be certain that our focus on discovery, research and drug development in
the field of immuno-oncology, will generate a stable or significant revenue stream. Additionally, financial terms for agreements by other
companies, to the degree disclosed, vary greatly and therefore financial terms that may be available for our candidates at the various
R&D stages may vary greatly. The inability to derive adequate revenues from our specific drug targets or product candidates would
materially harm our business, financial condition and results of operations and could result in the need to limit or even discontinue
our business operations. Moreover, our operating history with respect to the partnering and commercialization aspects of our model provides
a limited basis to assess our ability to generate significant fees, research revenues, milestone payments, royalties or other revenue
sharing payments from the licensing, development and anticipated future commercialization of our programs based on our existing and future
novel drug targets and related therapeutic products and any future product candidates.
Our dependence on collaboration agreements
with third parties presents a number of risks.
The risks that we face in connection with our existing collaborations
and other business alliances as well as those that we may enter into in the future include, among others, the following:
| • |
we may be unable to reach mutually agreeable terms and conditions with respect to potential new collaborations; |
4
| • |
we or our current and/or future collaborators may be unable to comply or fully comply with the obligations under collaboration agreements
to which we are (or will become) a party, and as a result, we may not generate milestone payments or royalties from such agreements, and
our ability to enter into additional agreements may be harmed; |
| • |
our obligations under existing or future collaboration agreements may harm our ability to enter into additional collaboration agreements;
|
| • |
collaborators generally have significant discretion in electing whether to pursue any of the planned activities and the manner in
which it will be done, including the amount and nature of the resources to be devoted to the development and commercialization of our
product candidates; |
| • |
collaborators generally have significant discretion in terminating the collaborations or exercise different rights for scientific,
clinical, financial, business or other reasons; |
| • |
if our current and/or future collaborators breach or terminate an agreement with us, the development and commercialization of our
therapeutic product candidates could be adversely affected because at such time we may not have sufficient financial or other resources
or capabilities or access to the other partner’s data and drug(s) to successfully develop and commercialize these therapeutics on
our own or find other partners or enforce our rights under breached or terminated agreement; |
| • |
our current and/or future collaborators may require us to change or adopt the trial design to fit their business priorities, standards
and other objectives; |
| • |
changes in a collaborator’s business strategy may negatively affect its willingness or ability to complete its obligations
under its arrangement or to continue with its collaboration with us; |
| • |
our current and/or future collaborators may terminate the program or the agreement and then compete against us in the development
or commercialization of similar therapeutics; |
| • |
disagreements between us and our current and/or future collaborators may lead to delays in, or termination of, the collaboration;
|
| • |
our current and/or future collaborations may face internal competition by their internal pipelines; |
| • |
prospective collaborators may hesitate to pursue collaborations on novel target candidates that lack robust validation to serve as
a basis for the development of therapeutics; and |
| • |
our current and/or future collaborators may be acquired by, acquire, or merge with, another company, and the resulting entity may
have different priorities or competitive products to the collaboration product being developed previously by these collaborators.
|
If any of these risks should materialize, our business, financial condition and results of operations may
be materially harmed.
Our existing partnership agreement with AstraZeneca
is subject to many risks.
In March 2018, we entered into an exclusive license agreement with MedImmune Limited,
the global biologics research and development arm of AstraZeneca, which is currently part of AstraZeneca. Under the terms of the license
agreement, as amended (including most recently as December 16, 2025), we provided an exclusive license to AstraZeneca to use our monospecific
antibodies that bind to TIGIT, including COM902, for the development of bi-specific and multi-specific antibody products, excluding such
bi-specific and multi-specific antibodies that also bind to PVRIG, PVRL2 and/or TIGIT. In connection with such license agreement, AstraZeneca
developed rilvegostomig, a PD-1/TIGIT bi-specific antibody with a TIGIT component that is derived from our COM902.
Subject to termination rights for material breach, bankruptcy or by us for patent
challenge by AstraZeneca, the term of the license agreement continues until the expiration of the last royalty term in the territory as
further specified in the license agreement. In addition, AstraZeneca may terminate the agreement for convenience upon prior written notice.
While rilvegostomig is currently being evaluated in multiple Phase 3, Phase 2 and
Phase 1 clinical trials, recent failures in the TIGIT field, including that of Arcus Biosciences, or Arcus, and Gilead, which disclosed
that their Phase 3 STAR-221 study evaluating a domvanalimab-based combination in upper gastrointestinal cancers will be discontinued due
to futility, may be reflected in the rilvegostomig trials.
Therefore, if significant adverse unforeseen safety events occur in rilvegostomig
trials or lack of efficacy is observed or the collaboration with AstraZeneca is terminated for whatever reason, particularly prior to
our signing additional collaboration agreements at that scale, our business and financial condition may be materially harmed.
5
Our existing partnership agreement with Gilead
is subject to many risks.
In December 2023, we entered into an exclusive license agreement with Gilead. Under
the terms of the license agreement, we granted Gilead an exclusive license under our preclinical antibody program against IL-18 binding
protein and all intellectual property rights subsisting therein, to use, research, develop, manufacture and commercialize products, including
GS-0321 (previously COM503), and additional products that may be so developed by Gilead, together with GS-0321 (previously COM503), or
the Licensed Products.
Pursuant to the License Agreement, we are responsible for conducting a Phase 1 clinical
trial for GS-0321 (previously COM503), including handling the regulatory matters in connection therewith, and will bear the costs of such
trial (including the GS-0321 (previously COM503) drug supply), with Gilead having the obligation to provide zimberelimab antibody for
such trial. Nevertheless, in certain circumstances, Gilead may require us to transfer to them the role of conducting the Phase 1 clinical
trial, before the Phase 1 clinical trial is completed. In such case our business and financial condition may be harmed.
Gilead may terminate the agreement for material breach, bankruptcy and even for convenience.
If this agreement is terminated, particularly prior to our signing additional collaboration agreement at that scale, our business and
financial condition may be materially harmed.
While the Phase 1 clinical trial of GS-0321 (previously COM503) is ongoing, if significant
adverse unforeseen events occur in the trial or lack of efficacy is observed or the collaboration is terminated for whatever reason, our
business and financial condition may be materially harmed.
Our failure to establish
and maintain effective internal control over financial reporting could result in material misstatements in our financial statements or
a failure to meet our reporting obligations. This may cause investors to lose confidence in our reported financial information, which
could result in the trading price of our shares to decline.
Our management is responsible for establishing and maintaining adequate internal control
over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation
of our management, including the Chief Executive Officer and the Chief Financial Officer, we carried out an evaluation of the effectiveness
of our internal control over financial reporting as of December 31, 2025, using the criteria established in “Internal Control
- Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO
criteria). Based on our assessment under that framework and the criteria established therein, our management concluded that the Company’s
internal control over financial reporting was effective as of December 31, 2025, in providing reasonable assurance regarding the reliability
of the Company’s financial reporting.
However, if we conclude in the future that our internal controls over financial reporting
are not effective, we may fail to meet our future reporting obligations on a timely basis, our financial statements may contain material
misstatements, our operating results may be negatively impacted, and we may be subject to litigation and regulatory actions, causing investor
perceptions to be adversely affected and potentially resulting in a decline in the market price of our shares. Even if we conclude that
our internal controls over financial reporting are adequate, any internal control or procedure, no matter how well designed and operated,
can only provide reasonable assurance of achieving desired control objectives and cannot prevent all mistakes or intentional misconduct
or fraud.
Risks Related to Development, Manufacturing, Clinical Trials and Government Regulation
In the near-term, we are
highly dependent on the success of COM701, COM902, GS-0321 (previously COM503) and rilvegostomig.
Our pipeline currently consists of four clinical-stage programs, which are at various
stages of clinical development - rilvegostomig, COM701, COM902 and GS-0321 (previously COM503).
We currently have no products approved for commercialization and are investing a significant
portion of our efforts and financial resources into the clinical development of COM701 and GS-0321 (previously COM503) (which is licensed
to Gilead). Our near-term prospects are substantially dependent on our ability, or that of any existing and future partners, as applicable,
to manufacture, develop, obtain marketing approval for and successfully commercialize any of COM701, COM902, rilvegostomig, and GS-0321
(previously COM503).
6
With respect to COM701, we have reported favorable safety and toxicity profile and
preliminary signals of antitumor activity in our Phase 1 clinical trials with COM701 monotherapy, COM701 combination with nivolumab, and
in the triplet combination of COM701, nivolumab and BMS-986207 (anti-TIGIT antibody) and with triple combination of COM701, COM902 and
pembrolizumab and we are currently conducting a blinded randomized ovarian cancer platform trial evaluating COM701 as a single agent in
maintenance therapy in relapsed platinum sensitive ovarian cancer (named MAIA-ovarian trial). The preliminary clinical results on COM701
reported to date may not predict the final results of our on-going MAIA-ovarian clinical trial or future clinical trials or otherwise
be sufficient to attract a partner or support further development or a future path to registration or drug approval. Even if our clinical
trials results are successful, regulatory authorities may require additional preclinical studies or clinical trials, which could be costly
and time-consuming, or may ultimately decline to approve our product candidates altogether. Many companies in the pharmaceutical, biopharmaceutical
and biotechnology industries have suffered significant setbacks or failures in clinical trials after achieving positive results, and we
cannot be certain that we will not face similar setbacks or failures. See “- From time to time, we publicly disclose preliminary
data from our ongoing clinical trials. As more patient data become available, the data and the interpretation of the data may change.
While we have reported preliminary signals of antitumor activity from our Phase 1
dose escalation monotherapy trial of COM902 with a best response of stable disease, based on recent negative data in the TIGIT field,
including the announcement by Arcus and Gilead on December 12, 2025 that the Phase 3 STAR-221 study evaluating a domvanalimab-based combination
in upper gastrointestinal cancers will be discontinued due to futility, we currently believe that COM902 has a limited potential to create
near-term value to us. We therefore do not plan to initiate new clinical trials with COM902. This decision may be revisited pending further
data disclosure regarding TIGIT by other companies.
Rilvegostomig is currently being evaluated by our collaborator, AstraZeneca,in multiple
Phase 3, Phase 2 and Phase 1 clinical trials.
GS-0321 (previously COM503), which we licensed to Gilead, is currently being evaluated
in a Phase 1 clinical trial that we sponsor and are conducting.
If we advance our programs throughout the different clinical development phases (where
with respect to GS-0321 (previously COM503), we are only responsible for Phase 1 clinical development), we will need to expand our personnel
and operational capabilities to support these activities. We expect to need to raise additional capital in such event. In part because
of our limited infrastructure, limited experience in conducting clinical trials and limited experience in interacting with regulatory
authorities, we cannot be certain that our planned clinical trials will be initiated on time, that our clinical trials will be completed
on time, if at all, that our planned development programs and development path forward will be designed well or would be acceptable to
the U.S. Food and Drug Administration, or FDA, or other comparable foreign regulatory authorities, or that, even if approval is obtained,
such products can be successfully commercialized.
The success of each of COM701, COM902 and GS-0321 (previously COM503) (for which we
are only responsible for Phase 1 clinical development) and rilvegostomig which is developed by AstraZeneca, is dependent upon several
factors, including the following:
| • |
the successful clinical trial design (and implementation thereof) and results; |
|
• |
ability to fund clinical trials designed to obtain regulatory approval and to become
commercially successful; |
|
• |
ability to design trials required to allow for a path for registration or obtain regulatory
approval; |
|
• |
the success of trials designed to support for a path for registration/approval by
regulatory authorities; |
|
• |
selected regulatory strategy; |
|
• |
timely initiation, enrollment and completion of clinical trials; |
|
• |
the enrolled patient population’s demographics, prior therapy/ies and other
patients characteristics, even if they meet the inclusion/exclusion enrollment criteria; |
|
• |
the availability of the patient population selected for enrollment; |
7
|
• |
the safety, tolerability and efficacy profile, alone or in combination with other
approved or investigational products, that is satisfactory for receiving marketing approval by the FDA or comparable foreign regulatory
authorities; |
|
• |
the safety, tolerability and efficacy profile, alone or in combination with other
approved or investigational products, that fits the competitive treatment landscape/ unmet patients’ need; |
|
• |
adequate selection of drug dosing; |
|
• |
adequate selection of indications; |
|
• |
adequate selection of patient populations and patients’ eligibility within such
populations; |
|
• |
adequate selection of comparator trial arm(s); |
|
• |
adequate selection of drug(s) for combinations; |
|
• |
access to drugs required for combination studies or approval; |
|
• |
successful identification of biomarkers, including for patient selection; |
|
• |
timely receipt of marketing approvals from applicable regulatory authorities;
|
|
• |
the performance of our current and future collaborators, if any; |
|
• |
the extent of any required post-marketing approval commitments to applicable regulatory
authorities; |
|
• |
establishment, management and monitoring of CRO arrangements and processes with third-party
service providers for conducting the clinical trial; |
|
• |
ability to convince clinical investigators in the potential of our clinical drug candidates
and their interest in enrolling patients to our studies, pace of opening sites and actual enrollment; |
|
• |
establishment and monitoring of manufacturing arrangements and processes with third-party
service providers and clinical manufacturing organizations for manufacturing drug substance and drug product; |
|
• |
establishment and monitoring of arrangements with third-party suppliers of raw materials
and service for fill-finish, packaging and labeling; |
|
• |
adequate stability of our drug substance and drug products; |
|
• |
supply of our drugs in sufficient quantities and quality for our clinical trials;
|
|
• |
establishment of arrangements with third-party manufacturers and processes monitoring
to obtain commercial quality drug product that is appropriately packaged for sale; |
|
• |
adequate ongoing availability of raw materials and drug product for clinical development
and any commercial sales; |
|
• |
protection of our rights in our intellectual property portfolio; |
|
• |
successful launch of commercial sales following any marketing approval and the size
of the potential patient population; |
|
• |
a continued acceptable safety profile following any marketing approval; |
|
• |
commercial acceptance by patients, the medical community and third-party payors; and
|
|
• |
the success or failure of other anti-PVRIG, anti-TIGIT and anti-IL-18 binding protein
pathway molecules. |
Many of these factors are beyond our or our partners’ control, including clinical
development by us, our partners and our competitors, the regulatory submission and review process, potential threats to intellectual property
rights and the manufacturing, marketing and sales efforts of any current and future third party. If we are unable to develop, receive
marketing approval for and successfully commercialize COM701, COM902 and GS-0321 (previously COM503), on our own or with any collaborator,
or AstraZeneca is unable to do so with respect to rilvegostomig or experience delays as a result of any of these factors or otherwise,
our business could be substantially harmed.
8
We depend on enrollment
of patients in our clinical trials in order to continue development of our product candidates.
We are currently enrolling patients for our MAIA-ovarian trial and expect an interim
analysis from this trial in the first quarter of 2027. In addition, we are enrolling patients for our Phase 1 clinical trial to assess
the safety and tolerability of GS-0321 (previously COM503) as monotherapy and in combination with zimberelimab in participants with advanced
solid tumors. Our anticipated time to data in these trials is subject to our ability to enroll a sufficient number of patients that meet
our inclusion and exclusion criteria,that such number of eligible patients is sufficient for observing clinical activity, if at all and
the time needed to observe events and clinical activity. There can be no assurance that we will complete enrollment or have data from
the trial when we anticipate or at all or that our data will support the further development of our potential product candidates.
We may experience difficulties in patient enrollment in our clinical trials for a
variety of reasons. Patient enrollment is affected by many factors including the size and nature of the patient population, the eligibility
criteria for the trial, the design of the clinical trial (including being a randomized trial), the complexity in managing a large number
of sites in different geographies, the size of the patient population required for analysis of the trial’s primary endpoints, the
proximity of patients to clinical trial sites, our ability to recruit clinical trial investigators with the appropriate competencies and
experience, the number of enrolling clinical sites and time to activate the sites, our ability to obtain and maintain patient consents,
the risk that patients enrolled in clinical trials will drop out of the trials before completion or even before any/sufficient imaging
assessment, the willingness of patients to participate in our study or attend clinic visits for various reasons, including epidemic and
pandemic concerns, and competing clinical trials (including other clinical trials that we are conducting or will conduct in the future)
and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available
therapies, or competing drugs against the same target as well as a changing treatment landscape, including any new drugs that may be approved
for the indications we are investigating and any other changes in the regulatory landscape in the indications of interest to us. For example,
several pharmaceutical companies are conducting clinical trials with some or all of the arms in the same patient population as in our
MAIA-ovarian clinical trial and their molecules might have better clinical efficacy and/or a superior safety profile in such trials. Examples
of such studies are Abbvie’s Phase 3 clinical trial of mirvetuximab + bevacizumab (GLORIOSA), Merck’s Phase 3 trial of sacituzumab
tirumotecan maintenance treatment with or without bevacizumab (TroFuse-022/ENGOT-ov84/GOG-3103), and Genmab’s Phase 3 trial of Rina-S
Plus Standard of Care (RAINFOL-04). Also, after the successful results of Antibody-Drug Conjugates (ADCs), in the platinum resistant ovarian
patient population and of pembrolizumab in the KEYNOTE-B96 trial, some of the companies with these agents might also start clinical studies
in the maintenance setting in platinum sensitive ovarian patients.
Many pharmaceutical companies are conducting clinical trials in
patients with the disease indications that COM701, COM902, GS-0321 (previously COM503) and our future potential drug products may target.
Additionally, other pharmaceutical companies are already clinically investigating their own therapeutic candidates against PVRIG, the
target of COM701, or against TIGIT, the target of COM902, and the IL-18 pathway, which GS-0321 (previously COM503) is targeting, which
may hamper the enrollment of patients in our trials for COM701, or GS-0321 (previously COM503) and may present a higher bar for success.
For example, in the case of COM701, there are currently several PVRIG antibodies in clinical studies and several in Phase 1 clinical
trials, such as Biotheus’s (now BioNTech) PM-1009, a PVRIG/TIGIT bi-specific, Simcere’s SIM0348 a TIGIT/PVRIG bispecific antibody,
and Hefei TG ImmunoPharma’s NM1F anti PVRIG Ab.
In the IL-18 pathway field, the programs that are more advanced than GS-0321 (previously
COM503) and are in clinical-stage as of 2025 include Simcha Therapeutics’ ST-067 (DR-18), a decoy-resistant IL-18 cytokine in Phase
1/2 trials for solid and hematologic malignancies; Bright Peak Therapeutics’ BPT-567, a bifunctional PD-1/IL-18 immunocytokine in
Phase 1/2a for solid tumors; and four IL-18–armored CAR-T therapies: TmCD19-IL18 by the University of Pennsylvania in collaboration
with Kite/Gilead (Phase 1 for CD19⁺ cancers), EU-307, a GPC3-targeted IL-18–secreting CAR-T by Eutilex (Phase 1 for hepatocellular
carcinoma), huCART19-IL18 (also known as 19-28z/IL-18 CAR T cells) by the University of Pennsylvania (Phase 1 completed in B-cell lymphomas),
and CD371-YSNVZ-IL18 by Memorial Sloan Kettering Cancer Center (Phase 1 for relapsed/refractory AML).
As a result, we must compete with these competitors for clinical sites, clinicians’
interest and the limited number of patients who fulfill the stringent requirements for participation in clinical trials in general as
well as on the clinical value of our data. Our clinical trials may be delayed or terminated due to the inability to enroll enough patients
or lack of successful drug performance. The delay or inability to meet planned patient enrollment or successful results may result in
increased costs and delay or termination of our trials, which could have a harmful effect on our ability to develop products and would
materially harm our business, financial condition and results of operations and could result in the need to limit or even discontinue
our business operations.
9
Clinical trials of any product
candidates that we, or any current or future collaborators may conduct, may fail to satisfactorily demonstrate safety and/or efficacy,
and we, or any collaborator, may incur additional costs or experience delays in completing, or ultimately be unable to complete the development
and commercialization of these product candidates.
We, and any current or future collaborators, are not permitted to commercialize, market,
promote or sell any therapeutic product candidate in any jurisdiction without obtaining marketing approval from the relevant regulatory
authority, such as the FDA in case of the United States. We, and any collaborators, must complete clinical trials to demonstrate the safety
and efficacy of our therapeutic product candidates in humans before we will be able to obtain these approvals.
Clinical testing is expensive, difficult to design and implement, can take many years
to complete and is inherently uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed
on schedule, if at all. The clinical development of our therapeutic product candidates is susceptible to the risk of failure inherent
at any stage of product development, including failure to demonstrate efficacy in a clinical trial or across population of patients, the
occurrence of adverse events that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable
regulatory requirements and determination by the FDA that a therapeutic product candidate may not continue development or is not approvable.
The outcome of preclinical studies and early clinical trials may not predict the success of later clinical trials and interim results
of a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biotechnology industries
have suffered significant setbacks in advanced clinical trials due to lack of efficacy or unacceptable safety profiles, notwithstanding
promising results in earlier trials. Despite the preliminary safety and anti-tumor activity results reported to date from our ongoing
Phase 1 clinical trials for COM701 and COM902, we do not know whether the clinical trials we or our partners may conduct will demonstrate
adequate efficacy and safety to result in the further advancement of clinical development or regulatory approval to market COM701 and/or
COM902, or any other of our product candidates when they reach the clinic, in any particular jurisdiction or jurisdictions. The same applies
to GS-0321 (previously COM503), which entered the clinic in the beginning of 2025 and to rilvegostomig which is in multiple Phase 3, Phase
2 and Phase 1 clinical trials. It is also possible that, even if one or more of our therapeutic product candidates has a beneficial effect,
that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, patient
population, duration, design, measurements, conduct or analysis of our clinical trials, patient monitoring, the dosing we choose and other
factors.
Any inability to successfully complete clinical development could result in additional
costs to us, or any collaborators, and impair our ability to generate revenues from product sales, development, regulatory and commercialization
milestones and royalties. Moreover, if we, or any collaborators, are required to conduct additional clinical trials or repeat clinical
trials or other testing of our product candidates beyond the trials and testing that we or they contemplate, or if we, or they, are unable
to successfully complete clinical trials of our product candidates or other testing, or the results of these trials or tests are unfavorable,
uncertain or are only modestly favorable, or there are unacceptable safety concerns associated with our product candidates, we, or any
collaborators, may, among others:
|
• |
cease the development of the product candidates; |
|
• |
incur additional unplanned costs; |
|
• |
terminate or amend the respective collaboration, if applicable; |
|
• |
not obtain approval to proceed to next development phase; |
|
• |
be delayed in obtaining marketing approval for our product candidates; |
|
• |
not obtain marketing approval at all; |
|
• |
obtain approval for indications or patient populations that are not as broad as intended
or desired; |
|
• |
obtain approval with labeling that includes significant use or distribution restrictions
or significant safety warnings, including boxed warnings; |
|
• |
be subject to additional post-marketing testing or other requirements; or |
|
• |
be required to remove the product from the market after obtaining marketing approval.
|
Our failure or failure of any of our collaborators, to successfully initiate and complete
clinical trials of our product candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market
any of our product candidates or those of our collaborators, and to successfully market these products, if approved, would significantly
harm our business, could further result in significant harm to our financial position and results of operations and could result in the
need to limit or even discontinue our business operations.
10
Clinical development involves a lengthy and
expensive process, with an uncertain outcome. We may encounter substantial delays or even an inability to begin clinical trials for any
specific product or may not be able to conduct or complete our trials on the timelines we expect.
Obtaining marketing approval from regulatory authorities for the
sale of any therapeutic product requires substantial preclinical development and then extensive human clinical trials to demonstrate the
safety and efficacy of such product candidates. It is impossible to predict when or if any of our programs or those of our collaborators
based on our target discoveries will yield products that will be approved for human testing, or if such testing is proven sufficiently
safe and effective for further development or to receive regulatory approval for marketing. Preclinical and clinical testing are expensive,
time consuming, and subject to uncertainty and require significant financial and management resources. As a company, we have limited experience
in conducting clinical trials and have never progressed a product candidate through to regulatory approval. In part because of this lack
of experience, our clinical trials may require more time and incur greater costs than we anticipate. We cannot guarantee that any of our
therapeutic drug candidates from our pipeline will be advanced into clinical trials or that our clinical trials will be conducted as planned
or completed on schedule, if at all. The outcome of preclinical testing and early clinical trials may not be predictive of the success
of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. Moreover, preclinical and
clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates
performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to continue to achieve such successes at later
stages of the clinical studies or to obtain marketing approval for such products.
There can be no assurance that our clinical trials will begin at
any predicted date or will be completed on schedule, if at all. We are also conducting clinical trials in additional jurisdictions outside
the United States, currently in Israel and France. The FDA or other regulatory authorities could require us to conduct additional preclinical
studies or added clinical evaluation under any IND, clinical trial application or similar regulatory filing, which may lead to delays
and increase the costs of our preclinical and clinical development programs. There may be unforeseen cultural, legal, and operational
issues that could arise in clinical trials outside of the United States impacting the timely and successful completion of our clinical
trials in new territories. These factors could lead to increased costs or delays, or even the inability to complete our clinical trials
as planned, which could adversely affect our development timelines and could cause us material harm. Moreover, even if these clinical
trials begin on time, issues may arise that could result in the suspension of or termination of such clinical trials. A failure of one
or more clinical trials can occur at any stage of testing. Events that may prevent successful or timely commencement and completion of
clinical development include:
| • |
inability to generate sufficient preclinical, toxicology, or other data to support the initiation of clinical trials; |
| • |
lack of authorization from regulators or institutional review boards, or IRBs, or ethics committees to allow us or our investigators
to amend a clinical trial or commence a clinical trial or conduct a clinical trial at a prospective trial site or continue such clinical
trial; |
| • |
delays in sufficiently developing, characterizing, or controlling a manufacturing process suitable for clinical trials; |
| • |
inability to generate sufficient quantities or quality of our drug substance or drug product to support the initiation or continuation
of clinical trials; |
| • |
delays in reaching a consensus with collaborators or regulatory agencies on trial design or trial amendment; |
| • |
delays in reaching agreement on acceptable terms with prospective CROs, and clinical trial sites, the terms of which can be subject
to extensive negotiation and may vary significantly among different CROs and clinical trial sites; |
| • |
significantly increased spendings required by our CROs as compared to our forecasts/projected spendings; |
11
| • |
imposition of a temporary or permanent clinical hold by the FDA, or a similar delay imposed by foreign regulatory agencies for a
number of reasons, including after review of an IND, other application or amendment; (i) as a result of a new safety finding that presents
unreasonable risk to clinical trial participants; (ii) a negative finding from an inspection of our clinical trial operations or trial
sites; (iii) developments on trials conducted by competitors for related technology that raises FDA concerns about risk to patients of
the technology broadly; or (iv) if FDA finds that the investigational protocol or plan is clearly deficient to meet its stated objectives;
|
| • |
failure of clinical trials of any product candidates to show safety or efficacy, which may result in additional preclinical studies
or clinical trials or abandonment of product candidates development programs; |
| • |
difficulty collaborating with patient groups and investigators; |
| • |
failure by our CROs, other third parties, or us to adhere to clinical trial and related regulatory requirements; |
| • |
failure to perform in accordance with the FDA’s Good Clinical Practice, or GCP, requirements, or similar applicable regulatory
guidelines in other countries; |
| • |
failure to perform in accordance with the FDA’s Good Manufacturing Practice, or GMP, requirements, or similar applicable regulatory
guidelines in other countries; |
| • |
the number of patients required for clinical trials of any product candidates may be larger than we anticipate or can financially
support, site activation or enrollment in these clinical trials may be more time consuming than we anticipate, or participants may drop
out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate; |
| • |
delays in having patients complete their participation in a trial or return for post-treatment follow-up; |
| • |
occurrence of adverse events associated with the product candidate that are viewed to outweigh its potential benefits; |
| • |
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; |
| • |
changes in the standard of care or in the regulatory landscape on which a clinical development plan was based, which may require
new or additional trials; |
| • |
the cost of clinical trials of our product candidates being greater than we anticipate; |
| • |
clinical trials of our product candidates producing negative or inconclusive results, or early results that will not be repeated
in larger or future cohorts or randomized studies, which may result in our decision, or regulators requiring us, to conduct additional
clinical trials or abandon product development programs; |
| • |
choosing the wrong dosing regimen and/or wrong drug combination and/or wrong patient population; |
| • |
delays or failure to secure supply agreements with suitable reagent suppliers, or any failures by suppliers to meet our quantity
or quality requirements for necessary reagents; and |
| • |
delays in manufacturing, testing, releasing, validating, or importing/exporting sufficient stable quantities of our product candidates
for use in clinical trials or the inability to do any of the foregoing. |
Any delays in our preclinical or clinical development programs may harm our business,
financial condition and prospects significantly.
From time to time, we publicly disclose preliminary
data from our ongoing clinical trials. As more patient data become available, the data and the interpretation of the data may change.
From time to time, we publish preliminary or interim investigator assessed data from
our ongoing clinical trials. Preliminary data remain subject to audit confirmation and verification procedures that may result in the
final data being materially different from the preliminary data we previously published. Preliminary data are also subject to the risk
that one or more of the clinical outcomes may materially change as time goes by and cutoff date changes, patient enrollment continues
and with further patient monitoring where more patient data become available. As a result, preliminary data should be viewed with caution
until clinical trial completion where the final data are available. Also, data may also change upon further assessment in additional studies.
Material adverse changes in the data along the clinical development process could significantly harm our business prospects, financial
condition and results of operations.
12
Serious adverse events or undesirable side
effects or lack of efficacy may emerge in clinical trials conducted by other companies running clinical trials investigating the same
drug target as us, which could adversely affect our development programs or our capability to enroll patients or partner the program for
further development and commercialization.
We initiated a Phase 1 clinical trial for COM902, which targets TIGIT, in March 2020
at the time that additional companies had programs targeting TIGIT in advanced clinical trials, such as Roche and BeiGene (both closed
their TIGIT programs, since then) Gilead/Arcus and AstraZeneca. We have no control over their clinical trials or development programs,
and lack of or insufficient efficacy such as recently reported by Arcus and Gilead for their Phase 3 STAR-221 study evaluating a domvanalimab-based
combination in upper gastrointestinal cancers, which will be discontinued due to futility, has impact on the potential development of
COM902 and its potential to be partnered for further development and commercialization and generate revenues for us.The negative outcomes
of TIGIT trials in the recent years affects the potential development of COM902 and its potential to be partnered for further development
and commercialization and generate revenues for us.
The same risk applies to COM701 and GS-0321 (previously COM503),
both of which are in the clinic, and could also apply to any future product candidates that we may seek to develop. For a list of companies
that have programs targeting PVRIG and IL-18/IL-18BP see “Item 3. Key Information - D. Risk Factors – Risks Related to Development,
Manufacturing, Clinical Trials and Government Regulation - We depend on enrollment of patients in our clinical trials in order to continue
development of our product candidates.”
We are subject to certain manufacturing risks,
any of which could either result in additional costs or delays in completing, or ultimately make us unable to complete, the development
and commercialization of our product candidates.
The process of manufacturing biologics, in addition to the shipment and storage thereof,
is susceptible to product loss or unavailability due to contamination, degradation, instability, equipment failure, lack of critical reagents
or disposables, improper installation or operation of equipment, vendor or operator error leading to process deviations or any other factor.
Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply
disruptions up to supply termination. If microbial, viral or other contaminations are discovered in our products or in the manufacturing
facilities in which our products are made, the products may need to be manufactured again and/or such manufacturing facilities may need
to be closed for an extended time to investigate and remediate the contamination. In addition, the product manufactured may be determined
at a later stage to be insufficiently stable or qualified as a therapeutic agent, even following treatment.
We have not contracted with alternate suppliers to support us in the event we experience
any problems with our current manufacturers and we believe that even if we purchase an insurance to cover financial loss, such insurance
may not suffice and even if such insurance would cover the financial loss, the result of such events may have an adverse effect which
is beyond our financial loss. If we are unable to arrange for alternative third-party manufacturing sources or are unable to reserve another
manufacturing slot with our current manufacturers or are unable to do so on commercially reasonable terms or in a timely manner, or are
unable to provide backup drug, we may incur additional costs or be delayed in the development or delivery of our current and future product
candidates, and even fail to supply drug to patients on trial treatment on time or at all, or meet other obligations, each event of which
can cause us material harm.
It may be difficult to manufacture therapeutic products addressing
our drug target candidates.
Our clinical-stage pipeline is focused mainly on therapeutic antibodies,
generated against our discovered targets. These types of therapeutics can be difficult to manufacture in the quantity and quality needed
for preclinical, clinical and commercial use. The production of therapeutic antibodies must be conducted pursuant to a well-controlled
and reproducible process and the resulting product testing must conform to defined quality standards. Should it prove to be difficult
to manufacture or repeat manufacturing, of any therapeutics addressing our drug candidates in sufficient quantities or commercial scale,
meeting the required quality standards or in an economical manner to conduct clinical trials and to commercialize any approved therapeutic
candidate, our business, financial condition and results of operations would be materially harmed.
13
We or any of our collaborators, or third-party
manufacturers, may fail to comply with regulatory and legal requirements, and we or they could be subject to enforcement or other regulatory
actions.
If we or any of our collaborators or third-party manufacturers
with whom we work or with whom we may enter into agreements in the future fail to comply with applicable federal, state or foreign laws
or regulations, or other legal obligations we or they could be subject to enforcement or other regulatory actions. These actions may include:
| • |
warning letters; |
|
• |
clinical trial holds; |
| • |
recalls, product seizures or medical product safety alerts; |
| • |
data lock or order to destroy or not use personal data; |
| • |
restrictions on, or prohibitions against, marketing such products; |
| • |
restrictions on importation of such products; |
| • |
suspension of review or refusal to accept or approve new or pending applications; |
| • |
withdrawal of product approvals; |
| • |
injunctions; |
| • |
civil and criminal penalties and fines; or |
| • |
debarment or other exclusions from government programs. |
If we or our collaborators become subject to such enforcement actions, these enforcement
actions could affect the ability to successfully develop, market and sell therapeutic products based on our discoveries and could significantly
harm our financial status and/or reputation and lead to reduced acceptance of such products by the market. In addition, we may be
subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement or imprisonment.
We may require companion or complementary diagnostics
and/or biomarkers for our clinical trials, or a portion of our clinical trials, and may be required to have such in order to obtain marketing
approval or commercialization of our therapeutic programs. Failure to successfully discover, develop, validate and obtain regulatory clearance
or approval for such tests could harm our patients’ selection strategy and may harm our clinical outcome.
Companion or complementary diagnostics are subject to regulation by the FDA and comparable
foreign regulatory authorities and may require separate regulatory authorization prior to commercialization. We may require for our clinical
trials or for certain portions of our clinical programs, companion diagnostics and/or biomarkers to correctly identify the right patients
for treatment. We rely on access to patient clinical and demographics data, tumor, blood samples for analysis of protein, DNA, and RNA
biomarkers. We may rely on third parties for the tumor and blood samples’ handling, processing, and analysis, discovery, development,
and validation of these potential biomarker candidates, biomarkers and/or companion diagnostics, as well as the application for and receipt
of any required regulatory authorization. If we, or the third parties we engage for this purpose, are unable to successfully discover,
validate and/or develop the required companion diagnostics and/or biomarkers for our clinical programs, or experience delays in doing
so, the development of our clinical candidates may be adversely affected and this can harm our patient selection and our clinical outcome,
as well as obtaining marketing authorization for these product candidates.
From time to time, we may also publish preliminary
biomarker data from our ongoing clinical trials. As more patient data become available, the data and the interpretation of the data may
change.
Preliminary biomarker data are subject to the risk that it may materially change as
patient enrollment continues, as assay or reagents conditions change, as selected signal cutoff changes and it remains subject to audit
confirmation and verification procedures that may result in the final data being materially different from the preliminary data we previously
published. As a result, preliminary data should be viewed with caution. Material adverse changes in the biomarker data along the clinical
development process could modify or harm our patient selection strategies, the success of our studies and could cause other damages and
could eventually significantly harm our business prospects, financial condition and results of operations.
14
Risks Related to our Discovery and Development Activities
There are risks that are inherent in the development
and commercialization of novel therapeutic products.
We and our collaborators face a number of risks of failure that are inherent in the
lengthy and costly process of developing and commercializing novel therapeutic products. These risks, which typically result in very high
failure rates even for successful biopharmaceutical companies, include, among others, the possibility that:
| • |
we will not be able to discover additional drug targets; |
| • |
our novel target candidates will prove to be inappropriate for treatment of cancer; |
| • |
our novel target candidates will prove to be inappropriate for therapeutic product candidates; |
| • |
our novel target candidates will prove to be inappropriate for immunotherapy; |
|
• |
we will not succeed in selecting the appropriate tumor type, indication or patient
population for the therapeutic product candidate; |
|
• |
we will not succeed in developing or choosing the appropriate monoclonal antibody,
or mAb, for these targets, or the appropriate mAb isotype, or the appropriate therapeutic lead; |
|
• |
we will not succeed in identifying, validating or developing a biomarker or companion
diagnostic for our therapeutic product candidates; |
| • |
we will not succeed in choosing or developing the appropriate drug modality for these targets or we will not have the expertise to
do so; |
| • |
our therapeutic product candidates will fail to progress to preclinical studies or clinical trials; |
| • |
our therapeutic product candidates will be found to be therapeutically ineffective; |
|
• |
we will not choose or have access to the right drug combination for our therapeutic
product candidates; |
|
• |
we will not select or find the appropriate dosing regimen; |
| • |
our therapeutic product candidates will be found to be toxic or to have other unacceptable side effects or negative consequences;
|
| • |
our therapeutic product candidates will be inferior, or not show added value, compared to competing products or the standard of care;
|
| • |
our products covered by our collaborations may face internal competition from our partners’ internal pipeline; |
| • |
we or our collaborators will fail to receive required regulatory approvals; |
| • |
the discovery of drug targets and the discovery, development or commercialization of our therapeutic product candidates will infringe
third-party intellectual property rights; |
| • |
the development, marketing or sale of our therapeutic product candidates will fail because of our inability or failure to protect
or maintain our own intellectual property rights; |
| • |
once a product is commercially available, there will be little or no demand for it for a number of possible reasons, including lack
of acceptance by the medical community or by patients, a very small patient population size, lack of or insufficient coverage and payment
by third-party payors, inefficient or insufficient marketing and sales activities or as a result of there being more attractive, less
risky or less expensive, products available for the same use; and |
|
• |
the product will be withdrawn from the market, or sales limited due to side effects
observed in clinical practice. |
If one or more of these risks or any similar risks should materialize, our business,
financial condition and results of operations may be materially harmed.
15
Our computational drug target discovery activities
are primarily focused on the discovery of novel drug target candidates and our therapeutic pipeline is based on our discovered targets.
While we believe that our drug target programs represent a compelling and unique opportunity
to generate innovative therapeutics in the field of cancer immunotherapy, they require significant investment in the research and validation
of the drug target candidate and in the discovery and development of the respective therapeutic product candidate and bear high risk.
Our Unigen platform is a source for the development of innovative therapeutics in the field of cancer immunotherapy, but the inherent
lack of sufficient published scientific and clinical data to support the potential of these novel drug targets candidates to serve as
therapeutic opportunities, increases the risk of failure. Although we have built AI/ML powered computational discovery platform, branded
as Unigen, that we believe is required to scientifically validate our novel drug targets and to later translate them into therapeutic
antibody development programs, we cannot be assured that our investment in such novel discoveries will result in validated drug targets
that will enable the development of effective cancer immunotherapies, nor that we will realize success in product development or our ability
to partner and commercialize such opportunities and generate revenues.
Our approach to the discovery of therapeutic
products is based on Unigen, our AI/ML powered computational discovery platform, that is not yet fully proven clinically, and we do not
know whether we will be able to discover and develop additional potential product candidates or products of commercial value.
We utilize Unigen, our AI/ML powered computational discovery platform to identity
potential novel drug targets. It involves first identifying unmet needs in the field of cancer immunotherapy, where we believe its capabilities
would be relevant or could be developed to be relevant. We focus on the discovery of drug targets that could serve as the basis for the
development of possible treatments for patients non-responsive, refractory or relapsing to existing cancer immunotherapies. In this field,
we apply our computational discovery capabilities, or develop new capabilities, to identify novel drug targets for addressing such unmet
patient need.
While we believe that using Unigen to identify novel drug targets may potentially
enable the development of innovative therapeutics in the field of cancer immunotherapy, Unigen is not yet fully proven clinically and
our efforts may not result in the discovery and development of therapeutic products, or commercially viable or successful therapeutic
products. Moreover, AI/ML powered models may provide biased decisions, errors, or security weaknesses, create issues related to model
drift and explainability and could negatively affect Unigen and its output (and perspective by potential collaborators). Although our
approach has resulted in the discovery of several novel drug targets and their related potential first-in-class or best-in-class therapeutic
product candidates in the field of cancer immunotherapy, they are in early stages of research and development or in clinical-stage. Our
approach may not result in time savings, higher success rates or reduced costs, or clinically meaningful programs and if not, we may not
attract collaborators or develop new drugs as quickly or cost effectively or at all and therefore we may not be able to partner and commercialize
our products as expected.
We are focusing our discovery and therapeutic
development activities on therapeutic product candidates for use in immuno-oncology. Our current candidates may fail, and we may fail
to continue to discover and develop therapeutic product candidates of industry interest in this field.
The focus of our discovery and therapeutic development activities is on therapeutics
antibodies in the field of immuno-oncology for treatment of cancer. As a result, we are not undertaking internal discovery and development
activities in other therapeutic areas, and presently we only pursue activities in our area of focus. If our current candidates fail, or
if the interest in this field continue to decrease, or if the pharma interest in immuno-oncology shifts, or if the pharma interest in
drug modalities that we are not developing increases, or if we fail to continue to discover and develop therapeutic product candidates
of clinical value and medical interest in this field, or if we fail to discover therapeutic product candidates in a timely manner and
generate a sustainable clinical-stage pipeline, or if we are unable to discover drug targets, our business will likely be materially harmed.
16
There can be no assurance that our therapeutic product candidates or our earlier stage
immuno-oncology target candidates in our pipeline will provide clinical advantages or interest, that no long-term adverse effects will
be seen, or that other classes of targets or other products or modalities will not be discovered and developed with comparable or superior
attributes or clinical activity. In the event of any of these occurrences, the actual and/or perceived value of our pipeline would likely
be reduced in which case our business may be materially harmed. To date, we have signed four partnership agreements involving our therapeutic
product candidates, two of which, one with AstraZeneca and one with Gilead, are in effect. There is no assurance that we will be able
to enter into additional collaborations or agreements on reasonable terms, if at all. In addition, if we fail to continue to discover
and validate drug targets or develop product candidates of industry interest in our field of focus, our business will likely be materially
harmed. There are many risks associated with our decision to focus on immuno-oncology that include, among others:
| • |
industry interest in this area or in specific classes/families of drug targets within this area of focus would decrease over time;
|
| • |
the continued fatigue impacting the checkpoint inhibitors field; |
| • |
other modalities, such as ADCs, will continue to show beneficial clinical results in indications in which checkpoint inhibitors have
failed; |
| • |
not being able to discover novel drug targets in this field; |
|
• |
our full scope of target discovery capabilities may not be adequate; |
| • |
having chosen a therapeutic area with a very high degree of competition; |
| • |
having chosen a therapeutic area of great biological complexity and with very high failure rates in product development; |
| • |
long development time to meet endpoints; |
| • |
not choosing the appropriate drug modality; and |
| • |
not having sufficient knowledge, expertise, personnel or capabilities in our chosen therapeutic area to identify the right unmet
medical needs, or drug targets or drug candidates, or to timely, properly and efficiently validate the targets and/or select the appropriate
therapeutic antibody for further development as therapeutic product candidates, or to timely, properly or efficiently further them in
development. |
In each case, our failure could be due to lack of experience and expertise, delays
in our internal research programs or applying the wrong criteria or experimental systems and procedures, or selecting an inappropriate
drug modality, or unanticipated scientific, safety, activity or efficacy issues with our selected drug targets or product candidates,
with the possible result that none of our product candidates result in licensed or marketable products. If any of these risks should materialize,
our business, financial condition and results of operations would be materially harmed.
Risks Related to Our Dependence on Third Parties
We rely and expect to continue to rely on third
parties to conduct our clinical trials. These third parties may not successfully or professionally carry out their contractual duties,
comply with regulatory requirements or meet expected deadlines, and we may experience significant delays in the conduct of our clinical
trials as well as significant increased expenditures.
We do not have the ability to independently conduct clinical trials. We rely and will
continue to rely on medical institutions, clinical investigators, contract manufacturing research organizations, contract laboratories,
outsourced preclinical and clinical service providers and other third party vendors, such as CROs and advisors, to conduct or otherwise
support our clinical trials. We rely heavily and will continue to rely heavily on these parties for execution of clinical trials for COM701
and COM902, GS-0321 (previously COM503) and any other future product candidates we may take to the clinic, and we control only certain
aspects of their activities. Nevertheless, we are responsible for ensuring that each of the clinical trials we pursue is conducted in
accordance with the applicable protocol, legal and regulatory requirements and scientific standards, and our reliance on these third parties,
including our CROs, will not relieve us of our regulatory and sponsor responsibilities. For any violations of laws and regulations during
the conduct of our clinical trials, we could be subject to untitled and warning letters or enforcement action that may include civil penalties
up to and including criminal prosecution.
We believe that our financial results and the commercial prospects for COM701, COM902,
GS-0321 (previously COM503) and any other future therapeutic product candidates we may take to the clinic, would be harmed, our costs
could materially increase and our ability to conduct our clinical trials and generate revenue could be significantly adversely impacted,
if our clinical investigators, CROs or other third parties providing us services fail to successfully carry out their contractual duties
or obligations diligently and in a professional manner or fail to meet their expected deadlines.
17
We depend significantly on third parties (including
partners) to carry out the research, development and commercialization of our therapeutic product candidates. If we are unable to maintain
our existing agreements or to enter into additional agreements with such third parties, mainly collaborators, in the future, our business
will likely be materially harmed.
Our primary strategy for the development and commercialization
of products based on our drug targets and therapeutic product candidates depends on third parties to carry out and/or finance, the research,
development and commercialization of such products, principally by pharmaceutical and biotechnology companies and other healthcare related
organizations and CROs, either on their own or in collaboration with us. To date, we have entered into four partnership agreements with
respect to our drug target candidates, two of which, one with AstraZeneca and one with Gilead, are in effect. We cannot be sure that the
partnership agreements with AstraZeneca or Gilead will result in the successful development or commercialization of any product. Further,
we cannot provide assurance that we will succeed in identifying additional suitable parties or entering into any other additional agreements
on satisfactory terms or at all for the discovery, research, development and/or commercialization of our drug target or therapeutic product
candidates. If we are unable to identify such additional suitable parties or enter into new agreements on satisfactory terms, or at all,
our business will likely be materially harmed.
We rely on and expect to continue to rely completely
on third parties to manufacture and supply our preclinical and clinical drug supplies. Our business could be harmed if those third parties
fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality and quantity levels, prices or timelines.
We do not currently have, nor do we plan to acquire, the infrastructure or capability
internally to manufacture our preclinical and clinical drug supplies for use in the conduct of preclinical testing and our clinical trials,
and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. In order
to develop products, apply for regulatory approvals and commercialize our products, we need to develop, contract for, or otherwise arrange
for access to the necessary manufacturing capabilities. We rely on and expect to continue to rely on contract manufacturing organizations,
or CMOs, and other third-party contractors to manufacture formulations and produce larger scale amounts and/or commercial scale of drug
substance and drug products required for any clinical trials that we initiate and other related services. Such third parties may not be
able to deliver in a timely manner, or at all, or may fail to comply with the FDA’s current Good Manufacturing Practice, or cGMP,
to manufacture our drugs in the required quality or quantity. We have entered into manufacturing and supply agreements with third parties
for the manufacturing and respective analytics of each of COM701, COM902 and GS-0321 (previously COM503).
If we are unable to obtain or maintain adequate manufacturing sources for these product
candidates, or to do so on commercially reasonable terms and adequate timeline, quality and quantity, we may not be able to successfully
develop and commercialize our products.
We are also dependent upon these third parties with respect to critical reagents supply,
supplies required for our manufacturing and quality control, packaging, labelling, storage and others. The failure of a third-party manufacturer
or supplier to perform its obligations as expected could adversely affect our business.
If a third-party manufacturer or supplier with whom we contract fails to perform its
obligations, we may be forced to manufacture or otherwise obtain the materials ourselves, for which we do not currently and may not in
the future have the capabilities or resources, or identify and qualify a different third-party manufacturer, which we may not be able
to do timely or on reasonable terms, if at all. In some cases, the technical skills or processes required to manufacture our product may
be unique to the original manufacturer, or specific to a certain manufacturing site of the same manufacturer, and we may have difficulty
transferring such skills or processes to a back-up or alternate manufacturer or supplier, or we may be unable to transfer such skills
or processes at all. In addition, if we are required to change manufacturers for any reason, we will be required to verify that the new
manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines.
We will also be required to demonstrate that the newly manufactured material is similar to the previously manufactured material, or we
may need to repeat clinical trials with the newly manufactured material. The delays associated with the verification of a new manufacturer,
or the inability to repeat the manufacturing process, could negatively affect our ability to develop product candidates or commercialize
approved products in a timely manner or within budget. Furthermore, a manufacturer may possess technology related to the manufacture of
our product candidate that such manufacturer owns independently, which would increase our reliance on such manufacturer or require us
to obtain a license from such manufacturer in order to have another third-party manufacture our products.
18
Our reliance on third parties to conduct our
clinical trials and other key development activities, which heightens the risks faced by our business.
We outsource many of our clinical trials activities and other key development activities
to third parties, including major preclinical activities, clinical activities, drug development activities, research, validation, discovery,
data analytics, quality assurance and others. We do not control the third parties to whom we outsourced these functions and have limited
internal expertise to appropriately manage their activities, however, we are materially dependent on them to undertake these activities
and provide services. These third parties are not our employees and we have limited control over the amount of time and resources that
they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors,
which may draw time and resources from our programs. The third parties with which we may contract might not be diligent, careful or timely
in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.
In addition, we may contract with third parties outside the United States, which parties may be impacted by among other things, war, political
unrest or unstable economic conditions where activities are conducted by such third parties. If these third parties fail to properly or
timely perform these activities or provide us with incorrect or incomplete services, this could lead to significant delays in the program
or even program failure, along with significant additional costs and damage. In addition, should any of these third parties fail to comply
with the applicable laws and regulations and/or research and development or manufacturing accepted standards in the course of their performance
of services for us, there is a risk that we could be held responsible for such violations of law as well. Any such failures by third parties
could have a material adverse effect on our business, financial condition or results of operations.
Moreover, we rely on vendors with whom we engage to verify the results obtained by
such third parties and in some cases, primarily with respect to clinical data, we have to rely upon the data provided by the third parties.
If we fail to identify and obtain accurate and quality data, services and/or technologies from such third parties, or if the contractual
demands of such third parties become unreasonable and we are not able to reach satisfactory agreements with such third parties, we may
lose our investment in these services, fail to receive the expected benefits from our discoveries, and our validation and development
capabilities, clinical trials or other activities or our final products, may be significantly harmed, delayed or terminated.
We may need to obtain third-party drugs for
combination with our clinical programs that may not be available to us or are available only on commercially unreasonable terms or may
not serve us as well as other drugs.
We may need to obtain certain drugs from third parties or to acquire
marketed drugs to further develop our drug candidates to work in combinations with other drugs for selected indications. If we fail
to obtain these drugs or license thereof, our drug candidates may not be sufficiently efficient, and we may not be able to pursue them
through development. We will also need to obtain certain drugs from third parties to register and commercialize our drug
candidates. If we fail to enter into collaboration with the marketing authorization holder, we may not be able to pursue our combination
drugs through registration and commercialization. Furthermore, if we pursue clinical trials with third parties to further develop our
drug candidates to work in combinations with such other drugs for selected indications and those third parties’ drugs have not received
regulatory approval for an indication of interest to us, such clinical trials may not provide us a path for registration and therefore
may not serve us best as other drug(s) in the relevant indication.
Risks Related to Competition and Commercialization
Our business model is challenging to implement
and to date has not yielded significant revenues.
Our discovery and development capabilities are designed to identify and develop novel
products in the field of immuno-oncology and enter into collaborations with potential partners with respect to such novel products in
different stages of development. Our objective under our current and any potential future collaborations is that under these collaborations,
we will have the right to receive various forms of revenues from such products or product candidates. To date, we have entered into four
collaboration agreements with respect to our pipeline programs, only two of which are currently in effect. There can be no assurance that
our current or any future agreements for novel targets based on our discoveries and associated product candidates will be successful and
thus provide significant revenues to us, nor can there be any assurance that we will be able to enter into additional future agreements.
If we are unable to succeed in securing additional license agreements or other collaboration arrangements related to our discoveries and
product candidates, our business may be materially harmed.
Currently we have an ongoing collaboration with AstraZeneca, pursuant to which rilvegostomig,
a PD-1/TIGIT bispecific antibody with a TIGIT component that is derived from our COM902 program, is currently in multiple Phase 3, Phase
2 and Phase 1 clinical trials, and a collaboration with Gilead, pursuant to which we granted Gilead an exclusive license under our preclinical
antibody program against IL-18 binding protein and all intellectual property rights subsisting therein, to use, research, develop, manufacture
and commercialize products, including our GS-0321 (previously COM503) product candidate, which is currently in a Phase 1 clinical trial,
and additional products that may be so developed by Gilead. In addition, we have two clinical programs fully owned by us, COM701 and COM902,
that are available for partnering arrangements.
19
There can be no assurance that we will be able to establish collaborations for COM701
or COM902 or any collaboration for our early-stage programs or maintain our existing collaborations. Failure to enter into new collaborations
may materially harm our business. The research and validation data generated to date for our early-stage pipeline and the clinical data
generated for COM701 and COM902 (together with additional data generated by others with respect to PVRIG and TIGIT immune checkpoints),
may fail to draw interest of potential partners or may even harm our efforts with negative data. Furthermore, our drug target candidates
or therapeutic product candidates may not fit potential partners’ corporate or clinical strategy or may present an insufficient
market competitive edge, or not at all. These companies may require more data, including their independent testing of our early-stage
therapeutic product candidate, before considering a collaboration. We are therefore dependent on the potential fit of our programs with
individual pharmaceutical company strategies and there can be no assurance that we will be able to identify additional partners interested
in our programs at their current stages. This may adversely affect our ability to enter into additional agreements for the research, development,
license or other form of collaborative arrangements of our therapeutic product candidates, and as a result may harm our business.
We operate in a highly competitive and rapidly
changing industry which may result in others discovering, developing or commercializing competing products ahead of us or more successfully
than we do.
The biotechnology and biopharmaceutical industries are highly competitive, characterized
by rapid and significant technological advancements. Our success is highly dependent upon our ability to identify, research and develop
innovative therapeutic products based on novel drug targets. In doing so, we face and will continue to face intense competition from a
variety of businesses, including large, fully integrated, well-established pharmaceutical companies, specialty pharmaceutical and biopharmaceutical
companies, biotech companies, academic institutions, government agencies and other private and public companies and research institutions.
Many of the companies against which we are competing or against which we may compete
in the future have significantly greater resources and expertise in research and development, manufacturing, preclinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing approved drugs than we do. These competitors and others may develop competing
products targeting the same mechanisms, the same drug targets and pathways as our products, or the same therapeutic indications and they
can leverage their resources or use different approaches than we do to receive marketing approval before our products.
While in the cancer immunotherapies space there have been positive clinical results
reported by others resulting in some products obtaining approval from the FDA, such as clinical results reported for other drug modalities,
specifically ADCs there have been several failures recently, such as Roche’s TIGIT failures in SKYSCRAPER‑06/07/03/14, Merck’s
TIGIT failures in Keyvibe-008/010/002, Arcus/Gilead’s TIGIT failure in STAR‑221, and pembrolizumab failure in KEYNOTE-867.
This contrasts with some of the positive clinical results reported for other drug modalities, specifically ADCs.
These third parties also compete with us in recruiting and retaining qualified scientific,
drug development and management personnel and advisors, establishing clinical trial sites and patient enrollment for clinical trials,
as well as in acquiring technologies complementary to, or necessary for, our programs. Mergers and acquisitions in the biopharmaceutical
industry could result in even more resources being concentrated among a small number of our competitors or a change in potential acquirers’
preferences.
In addition to the competition we face in the drug target space, we also face competition
in the drug modality field. Technological breakthroughs in new modalities will be a key driver of growth for the biopharma industry
over the next decade. Drug discovery and development have undergone an impressive transformation over recent years driven by the emergence
of new drug modalities. This expansion in innovative drug modalities has provided an impressive drug modality toolbox to enhance the drug
effectiveness and also allow to enhance the potential from such targets that the efficacy of a naked antibody targeting these drug targets
has been limited. Such drug modalities include, among others, bi-specifics and tri-specifics antibodies, T cell engagers (TCE), cell therapies,
antibody drug conjugates (ADCs), small molecules such as protein degraders, molecular glues, and oligonucleotides based mRNA therapeutics.
An example of a drug modality gaining a lot of interest and attention are the ADCs, with fifteen (15) FDA approvals as of 2025 and more
than 100 ADCs drugs at different stages of clinical trials. Another field which has gained a lot of pharma interest is the T cell Engagers
(TCE) field, following the FDA approval for tarlatamab, a DDL3 TCE, for extensive-stage small cell lung cancer in May 2024.
20
Competition may further increase as a result of advances in the commercial applicability
of computational technologies similar to Unigen, our AI/ML powered computational discovery platform, and greater availability of capital
for investment in these AI/ML based industries. Over the last several years, there has been an increase in the interest of pharmaceutical
companies, the healthcare community and the investment community in applying computational advanced methodologies, mostly Artificial Intelligence
(AI) and Machine Learning (ML) algorithms, to the field of drug discovery, drug design, drug development, precision medicine, manufacturing,
clinical trials and digital health. This interest may be seen in the increase in the number of companies within the pharmaceutical and
biotech industries which focus on this area, including by establishing internal AI and/or ML capabilities or receiving investments or
entering into partnerships or acquisitions in furtherance thereof. Several companies that utilize AI/ML for target discovery in the field
of immuno-oncology/cancer and have done recent deals over the past 2 years on target discovery include Cartography, Caris Life Sciences,
TrexBio, OBT, AITIA, InSilico Medicine, Disco Pharmaceuticals, InduPro Therapeutics, and Noetik. Our competitors may succeed in discovering
targets and therefore also develop product candidates that are competitive with ours either with or without the use of advanced technologies
such as AI and ML, which could have a material adverse impact on our business, operations and financial results.
In addition, China’s biotech sector has emerged as a significant competitive
force in our industry, as a source of innovation, a hub for clinical trials, and a partner in global deals. This reflects a pivotal shift
(first seen in 2023) whereby China’s biotechs increasingly license out drug candidates, underscoring China’s role as a growing
source of novel therapies. At the same time, China has become a major hub for clinical trials. Global drug developers are increasingly
conducting trials in China to tap into its large patient populations, faster enrollment, and cost efficiencies. Furthermore, Chinese biotechs
have become indispensable partners in global biotech collaborations and deals. The total number of biopharma deals involving Chinese companies
reached 142 in 2025 (slightly above 2024’s volume), and the cumulative value of these China-related partnerships is increasing.
Notably, recent years saw multiple high-profile alliances, for instance, Pfizer’s $1.25 billion licensing of a cancer antibody
from China’s 3SBio, and a collaboration between GSK and Hengrui Pharmaceuticals valued up to $12 billion, demonstrating that
China is now a key player in advancing new therapeutics. This intensifying innovation output from, and engagement with, China’s
biotech industry heightens the competitive pressures we face.
In addition, there is a trend towards mergers and acquisitions in the pharmaceutical,
diagnostic and biotechnology industry, which may result in the remaining companies having greater financial resources and discovery and
technological capabilities, thus intensifying competition in our industry. Although overall deal volume declined in 2025, the total
value of pharma and life sciences M&A surged. In 2025, the number of M&A transactions fell by about 12% compared to 2024, but
total deal value climbed roughly by 81% (to around $240 billion globally) as companies pursued fewer but larger acquisitions.
Moreover, it is possible that because of adverse or volatile capital market conditions,
companies may be willing to enter into mergers and acquisition transactions or other sale of asset transactions on terms more favorable
to acquirer and thereby further intensify competition. This trend together with the surge in China based out-licensing deals as specified
above may also result in fewer potential collaborators or licensees for our therapeutic product candidates. Also, if a consolidating company
is already doing business with our competitors, we may lose existing or potential licensees or collaborators as a result of such consolidation.
Additionally, if a consolidating company is already doing business with us, we may lose the interest of the consolidating parties in partnering
with us as a result of a modified strategy, new priorities, competition and revised capabilities or portfolio of such consolidated entity.
This trend may adversely affect our ability to enter into agreements for the development and commercialization of our therapeutic product
candidates or to keep current collaboration in place or on-track and as a result may harm our business.
21
Established biopharmaceutical companies may invest heavily to accelerate discovery
and development of novel drug targets or therapeutic products or to in-license novel drug targets or therapeutic products that could make
our product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate compelling
advantages in efficacy, compliance regimen, tolerability, safety and more in order to overcome price competition and to be commercially
successful. Accordingly, our competitors may succeed in obtaining patent protection, discovering, developing, receiving FDA approval for
or commercializing drugs before we do, which would have an adverse impact on our business and results of operations.
Potential collaborators, including major pharmaceutical
companies, might be hesitant to pursue target validation and preclinical and clinical development programs based on novel targets lacking
robust experimental scientific support, particularly those discovered through a computational discovery approach.
There is a need for new drug targets generating new treatment options for patients
who are non-responsive or refractory to current immunotherapies. Our business model includes selectively entering into collaborations
for novel targets and related therapeutic product candidates at various stages of research and development under various revenue-sharing
arrangements. Entering into collaborations with product candidates and targets at an early validation stage or drug discovery stage is
significantly more challenging than identifying partnerships for later-stage products that would have a more complete data package to
support their clinical, business and commercial potential. In addition, although we have demonstrated success in validating our computational
discovery capabilities with product candidates in human clinical trials, major pharmaceutical companies may be hesitant to enter into
early-stage collaborations based on novel discovered targets, more so if discovered by computer prediction and has no or limited published
scientific support, as opposed to drug targets backed with human clinical trial data, or product candidates with significant published
experimental validation and scientific support. Therefore, we cannot assure that our business model to enter into partnering arrangements
for our early-stage novel targets and product candidates will be successful.
The process relating to entering
into potential collaboration agreements is complex and long to implement and, if we are not able to establish collaborations on commercially
reasonable terms, we may expend substantial funds and management resources with no assurance of success.
In general, each potential license agreement or other form of collaboration we may
enter into will require negotiating with our potential collaborator, a large number of scientific, legal and business terms and conditions
that can vary significantly in each instance due to the specific drug target or therapeutic product candidate or candidates involved,
the program stage, the potential market opportunity, the potential collaborator’s licensing, development and business operations
and strategy, and competition in the partnering and business development space. The accommodation of these requirements mandates thorough
consideration of both the scientific and business aspects of each transaction.
Whether we reach a definitive agreement for new collaborations will depend, among
other things, upon our assessment of the collaborator’s resources, capabilities and expertise, the terms and conditions of the proposed
collaboration, the proposed collaborator’s evaluation of our business, drug targets and therapeutic product candidates, and the
competition in the business development space. We may not be successful in our efforts to establish a collaboration or other alternative
arrangements for future product candidates because they may be deemed to be at too early of a stage of development for collaborative effort
and third parties may not view them as having the requisite potential to demonstrate safety and efficacy or may find any other development
hurdles and challenges as a limiting factor. If we are unable to do so, we will need to expend substantial funds and substantial key personnel
time and other effort into these business development activities (including pursuing further development) with no assurance of successfully
entering into agreements with potential collaborators and this could harm our business.
We rely on our computational discovery capabilities
to identify drug targets. Our competitive position could be materially harmed if our competitors develop capabilities similar to ours
and identify and develop rival drug targets and product candidates.
We rely on know-how and other proprietary computational processes, data and tools
to maintain our competitive computational discovery position. We consider know-how to be our primary intellectual property with respect
to our computational discovery capabilities. Know-how can be difficult to protect and enforce. In particular, we anticipate that with
respect to our capabilities, this know-how may over time be disseminated within the industry through independent development and the movement
of skilled personnel.
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We cannot rule out that our competitors may have or obtain the knowledge necessary
to identify and develop therapeutic products based on drug targets that could compete with the drug targets we identify. Our competitors
may have significantly greater experience in artificial intelligence, computer sciences, algorithmic tool development and alike to identify
targets and greater experience in using translational science to develop product candidates and may also have significantly greater financial,
product development, scientific, technical and human resources than we do to discover novel drug targets and develop product candidates.
We may not be able to prohibit our competitors from using methods to identify and
develop product candidates, including such methods that are the same as or similar to our own. Since our competitors develop products
that compete with COM701, COM902 or GS-0321 (previously COM503) or any future product candidates we develop, it may affect our ability
to develop and commercialize these product candidates substantially, which could have a material adverse effect on our business prospects,
financial condition, and results of operations.
The biotechnology and pharmaceutical industries
are highly competitive, and we may be unable to compete effectively.
The biotechnology and pharmaceutical industries in general, and the immuno-oncology
field in particular, are highly competitive. Numerous entities in the United States, Europe, China and elsewhere compete with our efforts
to discover, validate, develop and partner with licensees and/or collaborators to commercialize drug target and therapeutic products candidates.
Clinical trial failures of novel agents in the immuno-oncology field may adversely impact our ability to sign collaborations, and as a
result we may be required to advance our programs into clinical development and show clinical proof of concept before we may attract potential
collaborators, or we will need to discontinue the programs development. Our competitors include pharmaceutical and biotechnology companies,
academic and research institutions and governmental and other publicly funded agencies. We face, for COM701, COM902, and GS-0321 (previously
COM503), and expect to continue to face for our future therapeutic product candidates, competition from these entities to the extent they
develop products that have a function similar or identical to or competing with the function of our therapeutic product candidates in
the field of immuno-oncology that may attract our potential collaborators or that may reach the market sooner. We also face, and expect
to continue to face, competition from entities that seek to develop technologies that enable the discovery of novel targets and therapeutic
agents in the field of immuno-oncology. These competitors include traditional pharmaceutical and biotechnology companies and additionally,
an increasing number of new entities looking to apply computer science, bioinformatics, AI or ML technologies to the field of target discovery.
We also expect to face increasing competition from entities that develop new therapeutic modalities addressing the same drug targets or
clinical needs. Many of our competitors have one or more of the following:
| • |
much greater financial, technical and human resources than we have at every stage of the discovery, development, manufacture and
commercialization process; |
| • |
more extensive experience in computational discovery, preclinical testing, conducting clinical trials, obtaining regulatory approvals,
and in manufacturing and marketing therapeutics; |
| • |
more extensive experience in oncology and immuno-oncology and in the fields of therapeutic antibodies; |
|
• |
accessibility to enhanced technologies that may result in better products; |
| • |
access to and experience in the development of therapeutic modalities that are competitive to mAb therapeutics; |
| • |
more extensive experience in oncology and immuno-oncology and in the field of target discovery; |
| • |
more extensive experience in the research and development of biological or genetic markers to determine response of or responders
to therapeutic agents or for patient selection; |
| • |
greater accessibility to data and proprietary data from patients; |
| • |
access to internally developed, proprietary technologies for the discovery, research, development, or manufacturing of therapeutic
agents; |
| • |
greater resources and means to compete with us on target discovery and as well as in acquiring or generating technologies complementary
to, or necessary for, our programs as well as in recruiting and retaining qualified scientific and management personnel and establishing
clinical trial sites; |
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| • |
products that have been approved or are in late stages of development and in many cases, PD-1 or PDL-1 inhibitors that are serving
or will be serving as the backbone of cancer immunotherapy; |
| • |
reduced reliance on collaborations or partnerships with third parties in order to further develop and commercialize competitive therapeutic
products; and |
| • |
collaborative arrangements in our target markets with leading companies and research institutions. |
Since we are a small company with limited human and financial resources, we are not
able to work with a large number of collaborators in parallel and/or advance a large number of drug targets or therapeutic product candidates
in parallel. Our competitors may develop or commercialize products with significant advantages over any therapeutic products we, our collaborators
or third-party licensees, may develop. They may also obtain patents and other intellectual property rights before us, or broader than
ours, and thereby prevent us from pursuing the development and commercialization of our discoveries. They may also develop products faster
than us and therefore limit our market share. Our competitors may therefore be more successful in developing and/or commercializing products
than we, our collaborators, or third-party licensees are, which could adversely affect our competitive position and business. If we are
unable to compete successfully against existing or potential competitors, our financial results and business may be materially harmed.
Healthcare policy is volatile and changes in
healthcare policy could increase our expenses, decrease our revenues and impact sales of, and reimbursement for, our products.
Our ability to commercialize our future therapeutic product candidates successfully,
alone or with collaborators, will depend in part on the extent to which coverage and reimbursement for these product candidates will be
available from government health programs, such as Medicare and Medicaid in the United States, private health insurers and other third-party
payors. At present, significant changes in healthcare policy, in particular the continuing efforts of the U.S. and other governments,
insurance companies, managed care organizations and other payors to contain or reduce health care costs are being discussed, considered
and proposed. Drug prices in particular are under significant scrutiny and continue to be subject to intense political and societal
pressures, which we anticipate will continue and escalate on a global basis.
For example, in the United States, there have been several initiatives implemented
to achieve these aims. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation
Act, or collectively, the ACA, represents the biggest regulatory overhaul to the health care system in decades and substantially changes
the way health care is financed by both governmental and private insurers. Since its enactment, there have been congressional, judicial,
and executive challenges and amendments to the ACA, which have resulted in delays in the implementation of, and action taken to repeal
or replace, certain aspects of the ACA. For example, on July 4, 2025, the One Big Beautiful Bill Act, or the OBBBA, was signed into law,
which narrowed access to ACA marketplace exchange enrollment and declined to extend the ACA enhanced advanced premium tax credits that
expired at the end of 2025, which, among other provisions in the law, are anticipated to reduce the number of Americans with health insurance.
The OBBBA also is expected to reduce Medicaid spending and enrollment by implementing work requirements for some beneficiaries, capping
state-directed payments, reducing federal funding, and limiting provider taxes used to fund the program. Congress is considering proposed
legislation intended to further reduce healthcare costs with alternatives to replace the expired ACA subsidies. It is possible that the
ACA will be subject to judicial or congressional challenges or additional health reform measures of the Trump administration will impact
the ACA and our business.
The current administration is pursuing policies to reduce regulations and expenditures
across government agencies including at the U.S. Department of Health and Human Services, or HHS, the FDA, the Centers for Medicare &
Medicaid Services, and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management
and Budget, may propose policy changes that create additional uncertainty for our business. For example, the current administration has
announced agreements with several pharmaceutical companies that require the drug manufacturers to offer, through a direct-to-consumer
platform (TrumpRx), U.S. patients and Medicaid programs prescription drug Most-Favored Nation pricing equal to or lower than those paid
in other developed nations, with additional mandates for direct-to-patient discounts and repatriation of foreign revenues. Other recent
actions, for example, include (1) directing agencies to reduce agency workforce and cut programs; (2) directing HHS and other agencies
to lower prescription drug costs through a variety of initiatives; (3) imposing tariffs on imported pharmaceutical products; and (4) as
part of the Make America Healthy Again (MAHA) Commission’s Strategy Report released in September 2025, working across government
agencies to increase enforcement on direct-to-consumer pharmaceutical advertising. Additionally, the current administration recently called
on Congress to enact “The Great Healthcare Plan,” to codify and expand Most-Favored Nation pricing, lower government subsidies
to private insurance companies, increase healthcare price transparency, expand pharmaceutical drugs available for over-the-counter purchase,
and enact restrictions on pharmacy benefit manager (PBM) payment methodologies, among other things. These actions and policies may significantly
reduce U.S. drug prices, potentially impacting manufacturers’ global pricing strategies and profitability, while increasing their
operational costs and compliance risks. In June 2024, the U.S. Supreme Court’s Loper Bright decision greatly reduced judicial deference
to regulatory agencies, which could increase successful legal challenges to federal regulations affecting our operations. Congress may
introduce and ultimately pass health care related legislation that could impact the drug approval process.
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At the state level, legislatures have increasingly passed legislation and implemented
regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts,
and restrictions on certain product access. In some cases, such legislation and regulations have been designed to encourage importation
from other countries and bulk purchasing.
We expect that any other healthcare reform measures that may be adopted in the future,
may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies
and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or
other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures
or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates,
if approved.
We also conduct clinical trials in France and Israel. Recent regulatory and policy
developments in these countries, such as the implementation of the EU Clinical Trials and Health Technology Assessment Regulations in
France, and Israel’s accelerated drug registration framework and evolving reimbursement criteria, may impact our clinical development
timelines, increase compliance costs, and affect pricing and market access for our products.
In addition, our current and future business operations, including, among other things,
our clinical research activities and our business and financial arrangements and relationships with healthcare providers, physicians and
other parties through which we may market, sell and distribute our products, once approved, may be subject to extensive U.S. federal,
U.S. state, Israel, France and foreign healthcare fraud and abuse, transparency, manufacturer/distributor licensing, and data privacy
and security laws. If we are found to be in violation of any of these laws, we could be subject to significant civil, criminal and administrative
penalties, including damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, additional
integrity oversight and reporting obligations, contractual damages, reputational harm and the curtailment or restructuring of our operations.
The commercial success of our products depends
on the availability and sufficiency of third-party payor coverage and reimbursement.
Market acceptance of drug products is dependent on the extent to which coverage and
reimbursement is available from third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any
products for which we may obtain regulatory approval. Coverage decisions may not favor new products when more established or lower cost
therapeutic alternatives are already available. Even if we obtain coverage for a given product, the associated reimbursement rate may
not be adequate to cover our costs, including research, development, intellectual property, manufacture, sale and distribution expenses,
or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless reimbursement is adequate
to cover all or a significant portion of the cost of our products.
Coverage and reimbursement policies for products can differ significantly from payor
to payor as there is no uniform policy of coverage and reimbursement for products among third-party payors in the United States. There
may be significant delays in obtaining coverage and reimbursement as the process of determining coverage and reimbursement is often time
consuming and costly which will require us to provide scientific and clinical support for the use of our products to each payor separately,
with no assurance that coverage or adequate reimbursement will be obtained. It is difficult to predict at this time what government authorities
and third-party payors will decide with respect to coverage and reimbursement for our drug products. Further, coverage policies and third-party
payor reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for a product for which
we receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
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Additionally, the containment of healthcare costs has become a priority of federal
and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments
have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and
requirements for substitution of generic drugs. For example, HHS imposes rebates on many Medicare Part B and Medicare Part D products
to penalize price increases that outpace inflation on an annual basis. In addition, HHS has been empowered to negotiate the price to negotiate
the price of certain single-source biologics that have been on the market for at least eleven (11) years covered under Medicare as part
of the Medicare Drug Price Negotiation Program. Each year up to twenty (20) products will be selected by HHS for the Medicare Drug Price
Negotiation Program. Products subject to the Medicare Drug Price Negotiation Program are expected to experience a significant reduction
in reimbursement from the Medicare program on a per unit basis.
Additionally, we or our collaborators may develop companion diagnostic tests for use
with our product candidates. We, or our collaborators, will be required to obtain coverage and reimbursement for these tests, separate
and apart from the coverage and reimbursement we seek for our product candidates, once approved. While we have not yet developed any companion
diagnostic test for our product candidates, if we or our collaborators do, there is significant uncertainty regarding our ability to obtain
coverage and adequate reimbursement for the same reasons applicable to our product candidates.
Risks Related to our Operations
Given our level of managerial, operational,
financial and other resources, our current activities and future growth may be limited.
We manage our operations, including research and development, clinical trials and
preclinical development activities with a limited workforce, which is spread globally, and by using third parties to provide us with services
that we do not possess in-house. Our personnel, systems and facilities currently in place may not be adequate to support our current activities
or future growth.
If we are unable to maintain or expand our managerial, operational, financial and
other resources to the extent required to manage our current and planned activities, our business may be materially adversely affected.
We may be unable to hire or retain key personnel
or sufficiently qualified management, clinical and scientific personnel.
Our business is highly dependent upon the continued services of our senior management
and key scientific and clinical personnel. While members of our senior management and other key personnel have entered into employment
or consulting agreements and non-competition and non-disclosure agreements with us, they can terminate these agreements at any time without
cause. We cannot be sure that these key personnel and others will not leave us or compete with us, which could harm our business activities
and operations.
It can also be difficult for us to find employees with appropriate experience for
our business, which difficulty is further heightened when seeking experienced personnel in Israel and particularly considering the current
instability and heightened tensions in Israel and the Middle East. We require a multidisciplinary approach and some of our researchers
require an understanding of both exact and biological sciences. In addition, we require experience in drug and clinical development and
immuno-oncology, for which there is significant competition for highly qualified personnel in these fields. As a result, and taking into
consideration the ongoing situation in Israel and the middle East and the effect thereof outside of Israel, we may face higher than average
employee turnover or challenges in hiring due to such competition.
The competition for qualified personnel in the pharmaceutical and biotech industry
is intense. The loss of service of any of our key personnel could harm our business. Due to our limited resources, we may not be able
to effectively retain our existing key personnel or attract and recruit additional qualified key personnel.
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Our information technology systems, or those
of the third parties upon whom we rely, including our cloud and SaaS providers, CROs or other contractors or consultants, may fail or
suffer security breaches, which could result in a material disruption to our business, as well as to regulatory investigations or actions;
litigation; fines and penalties; reputational harm; loss of revenue and other adverse consequences.
We, and the third parties upon whom we rely, process, collect,
receive, store, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process)
proprietary, confidential, and sensitive data, including personal data (such as health-related data and clinical trial data), intellectual
property, trade secrets and other sensitive data (collectively, sensitive information). Our business is increasingly dependent on critical,
complex and interdependent information technology systems to support business processes as well as internal and external communications.
Despite the implementation of security measures, our information technology systems, cloud-based computers and those of the third parties
upon whom we rely, including without limitation our CROs and other contractors and consultants, are vulnerable to damage.
Cyber-attacks, malicious internet-based activity, online and offline fraud, and other
similar activities threaten the confidentiality, integrity, and availability of our sensitive information and information technology systems,
and those of the third parties upon which we rely. Such threats are prevalent and continue to rise, are increasingly difficult to detect,
and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized
criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors. Some
actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical
reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, including the
current situation in Israel, we or the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including
retaliatory cyber-attacks, that could materially disrupt our systems and operations. For example, we have operations in Israel, where
businesses have experienced an increase in cyberattacks in relation to the Israel/Hamas, Hezbollah and Iran conflict.
Our information technology systems, and those of the third parties upon which we rely,
are vulnerable to a variety of evolving threats including, but are not limited to, social-engineering attacks (including through deep
fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses), malware,
denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain
attacks, server malfunctions, software or hardware failures, attacks enhanced or facilitated by artificial intelligence, or other disruptive
events including but not limited to natural disasters such as fire, storm, flood, power loss, earthquakes, telecommunications failures,
physical or software break-ins or similar events.
In particular, severe ransomware attacks are becoming increasingly prevalent and can
lead to significant interruptions in our operations, loss of sensitive information, reputational harm, and diversion of funds. Extortion
payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for
example, applicable laws or regulations prohibiting such payments.
Remote work has increased risks to our information technology systems and sensitive
information, as more of our employees utilize network connections, computers and devices outside our premises or network, including working
at home, while in transit and in public locations.
We rely on certain third parties, including service providers, vendors, and partners,
and their technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without
limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email and other communication
functions, and other functions, and to provide other services necessary to operate our business, including our CROs and to keep our financial
and corporate records. Our ability to monitor these third parties’ information security practices is limited, and these third parties
may not have adequate information security measures in place. If the third parties upon which we rely experience a security incident or
other interruption, which has occurred in the past, we could experience adverse consequences. While we may be entitled to damages if the
third parties upon which we rely fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to
cover our damages, or we may be unable to recover such award. In addition, supply-chain attacks have increased in frequency and severity,
and we cannot guarantee that third parties’ infrastructure in our supply chain or the third parties’ upon whom we rely supply
chains have not been or will not be compromised.
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It may be difficult or costly to detect, investigate, mitigate, contain, and remediate
a security incident. Our efforts to do so may not be successful. Actions taken by us or the third parties upon whom we rely to detect,
investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business.
Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.
Any of the previously identified or similar threats have in the past and may in the
future cause a security incident or other interruption that have in the past and may in the future result in unauthorized, unlawful, or
accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our data or data held by
us or the third parties upon whom we rely (including personally identifiable information, personal data, other confidential information,
or other sensitive information). For example, we have been the target of phishing attacks in the past, and expect such attacks will continue
in the future. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to continue
our operations.
While we have implemented security measures designed to protect against security incidents,
there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate, and remediate vulnerabilities
in our information systems (such as our hardware and/or software, including that of third parties with whom we work). We have not and
may not in the future, however, detect and remediate all such vulnerabilities, including on a timely basis. Further, we may experience
delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could
be exploited and result in a security incident.
We may expend significant resources or modify our activities to try to protect against
security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures
or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. Applicable
data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected
individuals, customers, regulators, and investors, of security incidents, or take other actions. Such disclosures are costly, and the
disclosure or the failure to comply with applicable requirements could lead to adverse consequences.
If we or the third parties upon whom we rely experience (or are perceived to have
experienced) a security breach or other incident or disruption, which has occurred in the past, we may experience material adverse consequences,
including but not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, and inspections), federal,
state and/or foreign data breach notification obligations, additional reporting requirements and/or oversight, restrictions on processing
data (including clinical trial data and other personal data), litigation, indemnification obligations, loss of data (including clinical
trial data and other sensitive information) or damage to the integrity of that data, negative publicity, reputational harm, monetary fund
diversions, interruptions in our operations, financial loss, and other similar harms. Such attendant consequences may interrupt our clinical
trials, reduce demand for our product candidates, and delay or negatively impact the development and commercialization of our product
candidates and ability to grow and operate our business. For example, the loss of clinical trial data from the clinical trials of our
therapeutic product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover
or reproduce the data. Furthermore, our contracts may not contain limitations of liability, and even where they do, there can be no assurances
that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy
and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate
liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable
terms or at all, or that such coverage will pay future claims.
We are subject to stringent and changing obligations
related to data privacy and security. Failure or perceived failure to comply with current or future obligations could lead to government
enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively
affect our operating results and business.
We and the third parties upon whom we rely process sensitive information and are subject
to numerous data privacy and security obligations, such as various federal, state, local and foreign data laws, regulations, guidance,
industry standards, external and internal privacy and security policies, contracts, and other obligations that govern the processing of
personal data by us and on our behalf. In addition to existing privacy regulations, the emergence of new regulatory frameworks, such as
those addressing artificial intelligence, increasingly intersect with privacy and data protection requirements. These regulations may
impose additional compliance obligations related to using, storing, and processing personally identifiable information.
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In the United States, numerous federal, state, and local laws and regulations, including
federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state
consumer protection laws, that govern the collection, use, disclosure and protection of health-related and other personal data may apply
to our operations or the operations of the third parties upon which we rely. For example, the federal Health Insurance Portability and
Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH,
imposes specific requirements relating to privacy, security, and transmission of individually identifiable health information. As another
example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM imposes specific requirements
on our correspondence with subscribers for email communication.
Numerous U.S. states have enacted comprehensive privacy laws that impose certain obligations
on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning
their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out
of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights
may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing
certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for
statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018, or CCPA, applies to personal data of consumers,
business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy
notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines and allows private litigants
affected by certain data breaches to recover significant statutory damages. The CCPA and other comprehensive U.S. state privacy laws exempt
some data processed in the context of clinical trials, but these developments may further complicate compliance efforts, and increase
legal risk and compliance costs for us and the third parties with whom we work. Similar laws are being considered in several other states,
as well as at the federal and local levels, and we expect more states to pass similar laws in the future.
Additionally, an increasing number of foreign data protection laws may also apply
to health-related and other personal data obtained from individuals outside of the United States. For example, the European Union’s
General Data Protection Regulation, or EU GDPR, imposes strict introduced new data protection requirements across the EU, including potential
fines for noncompliant companies of up to the greater of €20 million or 4% of annual global revenue, temporary or definitive bans
on data processing, and other corrective actions. Additionally, private litigation related to processing of personal data can be brought
under the EU GDPR by classes of data subjects or consumer protection organizations authorized by law to represent their interests. In
addition, the Israeli Privacy Protection Law 5741-1981, as amended, and the regulations promulgated thereunder, or the PPL,
impose obligations with respect to the manner personal data is processed, maintained, transferred, disclosed, accessed and secured, as
well as severe fines and penalties, stringent notice requirements, and mandatory appointments of certain privacy and information security-related
roles. In August 2025, a comprehensive amendment to the PPL entered into effect. This amendment enhanced the enforcement powers of the
Israeli Privacy Protection Authority, granting it significant authority to impose administrative fines for non-compliance. The amendment
also introduced broader oversight capabilities and mechanisms for monitoring adherence to privacy guidelines, thereby increasing the compliance
requirements for organizations handling personal data in Israel. As a result, there has been a noticeable increase in enforcement activity
by the Privacy Protection Authority in this area.
Furthermore, Europe and other jurisdictions have enacted data localization laws and
cross-border personal data transfer laws, which could make it more difficult to transfer information across jurisdictions (such as transferring
or receiving personal data that originates in the European Economic Area). Other jurisdictions may adopt or have already adopted similarly
stringent data localization and cross-border data transfer laws. In particular, the European Economic Area (EEA) and the United Kingdom
(UK) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally
believes are inadequate. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK
to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer
Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based
organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there
is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no
lawful manner for us to transfer personal data from the EEA, the UK or other jurisdictions to the United States, or if the requirements
for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation
of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe)
at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and
work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary
to operate our business. Additionally, companies that transfer personal data out of the EEA and UK to other jurisdictions, particularly
to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators
have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s
cross-border data transfer limitations.
29
Additionally, the U.S. Department of Justice issued a rule entitled the Preventing
Access to U.S. Sensitive Personal Data and Government-Related Data by Countries of Concern or Covered Persons, which places additional
restriction on certain data transactions involving countries of concern (e.g., China, Russia, Iran) and covered persons (i.e., individuals
and entities who are designated as such by the U.S. Attorney General or considered “foreign persons” and are majority owned
by, organized under the laws of, a primary resident in, or a contractor of, a covered person or country of concern, as applicable) that
may impact certain business activities such as vendor engagements, sale or sharing of data, employment of certain individuals, and investor
agreements. Violations of the rule could lead to significant civil and criminal fines and penalties. The rule applies regardless of whether
data is anonymized, key-coded, pseudonymized, de-identified or encrypted, which presents particular challenges for companies like ours
and may impact our ability to engage in certain transactions or agreements.
Conducting clinical operations in Israel and France have increased our exposure and
heightened regulatory scrutiny.
We are also exposed to the risk that employees, independent contractors, consultants,
and vendors may fail to comply with applicable privacy and data protection laws. Such misconduct or negligence could result in unauthorized
access, misuse, or disclosure of sensitive information, leading to regulatory penalties, lawsuits, and reputational harm. Despite our
efforts to implement preventive measures, we cannot guarantee full compliance at all times, which could adversely impact our business
operations.
We maintain privacy policies and other statements regarding data privacy and security.
Regulators in the United States, Europe Israel and other territories are increasingly scrutinizing these statements. If these policies
or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices,
we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
Our obligations related to privacy and security are quickly changing in an increasingly
stringent fashion, creating some uncertainty as to the effective future legal framework. Additionally, these obligations may be subject
to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparing for and complying
with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).
These obligations may necessitate changes to our practices and to those of any third parties upon whom we rely. In addition, these obligations
may require us to change our business model. Compliance with privacy and security obligations could require us to take on more onerous
obligations in our contracts, restrict our ability to collect, use and disclose sensitive information, or in some cases, impact our ability
to operate in certain jurisdictions. Failure or perceived failure by us or the third parties upon whom we rely to comply with U.S., European,
Israel and foreign data privacy or security obligations could result in government enforcement actions (which could include civil or criminal
penalties), private litigation or mass arbitration demands, bans on processing personal data, additional reporting requirements or oversight,
orders to destroy or not use personal data, and/or adverse publicity and could negatively affect our operating results and business. Claims
that we have violated individuals’ privacy rights or failed to comply with privacy or security obligations, even if we are not found
liable, could be expensive and time consuming to defend, could result in adverse publicity and could have a material adverse effect on
our business, financial condition, results of operations and prospects.
We are exposed to risks associated with integrating
artificial intelligence tools into our operations.
We use machine learning and artificial intelligence, including generative AI, automated
decision-making technologies, or AI/ML, in certain aspects of our organizational operations. For example, our employees and personnel
use AI/ML to perform certain tasks in their work. The integration of AI/ML introduces inherent risks such as data privacy, intellectual
property disputes, cybersecurity vulnerabilities, confidentiality concerns, and regulatory non-compliance that may arise from the deployment
or misuse of AI/ML systems.
30
The disclosure and use of personal data in AI/ML technologies is subject to various
privacy laws and obligations, as well as increasing regulation and scrutiny. Several jurisdictions around the globe have proposed, enacted,
or are considering laws governing AI/ML technologies, such as the EU’s AI Act. Additionally, certain privacy laws extend rights
to individuals (such as the right to delete certain personal data) and regulate automated decision making involving certain personal data,
which may be incompatible with certain of our uses of AI/ML technologies. These obligations may make it harder for us to operate our business,
lead to regulatory fines or penalties, prevent or limit our use of AI/ML technologies, or otherwise harm our business. For example, the
Federal Trade Commission has required other companies to turn over (or disgorge) valuable insights or trainings generated through the
use of AI/ML technologies where they allege the company has violated privacy and consumer protection laws. If we cannot use AI/ML technologies
or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage.
Additionally, the complexity and opacity of AI/ML algorithms can lead to unintended
consequences or outcomes. Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/ML technologies, the model could be
biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their
rights, employment, and ability to obtain certain pricing, products, services, or benefits.
Our use of AI/ML technologies models hosted or developed by third party providers
also presents certain information security risks. For example, any sensitive information that we input into such AI/ML technology platforms
could be leaked or disclosed to others, including if sensitive information is used to train third party AI/ML technologies. Where AI/ML
technologies ingest sensitive information and make connections using such data, those technologies may reveal other sensitive information
generated by the model. AI/ML technologies may create flawed, incomplete, or inaccurate outputs, some of which may appear correct. This
may happen if the inputs that the model relied on were inaccurate, incomplete or flawed (including if a bad actor “poisons”
the AI/ML technologies with bad inputs or logic), or if the logic of the AI/ML technologies is flawed (a so-called “hallucination”).
Adopting and maintaining AI/ML technologies may increase operational costs due to
computing demands and specialized expertise requirements, and even if we are successful in maintaining such technologies, our competitors
or other third parties may incorporate AI/ML technologies into their businesses more quickly or more successfully than us, which could
impair our ability to compete effectively and adversely affect our results of operations. If our technologies (including those of our
vendors and subcontractors) fail to perform as intended, our business, financial condition, and results of operations could be adversely
affected.
Changes in legal or regulatory frameworks surrounding AI/ML usage may further pose
compliance risks or limit the development and application of these technologies. For example, many U.S. federal and state and foreign
government bodies and agencies have introduced and/or are currently considering additional laws and regulations governing the use of AI/ML
technologies. Any such changes could require us to expend significant resources to modify our products, services, or operations to
ensure compliance or remain competitive.
If a successful liability claim or other claim
for damages or series of claims is brought against us for uninsured liabilities or in excess of insured liabilities, we could be forced
to pay substantial damage awards.
The use of any of our therapeutic product candidates in clinical trials might expose
us to liability. We have obtained clinical trial insurance coverage in amounts that we believe are reasonable and customary in our industry
based on the size and design of our clinical trials. However, there can be no assurance that such insurance coverage will fully protect
us against some or all of the claims to which we might become subject. We might not be able to maintain adequate insurance coverage at
a reasonable cost or in sufficient amounts or scope to protect us against potential losses. For example, we will need to increase our
insurance coverage if we conduct clinical trials in additional countries or of additional product candidates or if we commence commercialization
of any product candidates. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable
cost or at an amount adequate to satisfy any liability that may arise. In the event a claim is brought against us, we might be required
to pay legal and other expenses to defend the claim, as well as uncovered damage awards resulting from a claim brought successfully against
us and retention amounts. Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required
to direct financial and managerial resources to such defense and be subject to adverse publicity, all of which could harm our business.
31
If we fail to comply with laws regulating the
protection of the environment and health and human safety, our business could be adversely affected.
Our research and development activities involve the use of hazardous materials and
chemicals, and we maintain quantities of microbial agents, various flammable and toxic chemicals in our facilities. Although we believe
our safety and other procedures for storing, handling and disposing these materials in our facilities comply with applicable governmental
and local regulations and guidelines, the risk to our employees or others of accidental contamination or injury from these materials cannot
be eliminated. If an accident occurs, we could be held liable for resulting damages, which may exceed our financial resources and may
seriously harm our business. We are also subject to numerous environmental, health and workplace safety laws and regulations, including
those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials. We may be subject
to liability and may be required to comply with new or existing laws and regulations regulating pharmaceuticals or be subject to substantial
fines or penalties if we violate any of these laws or regulations.
Risks Related to Intellectual Property.
If the scope of any patent protection we obtain
is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar
or identical product candidates would be adversely affected.
We have applied for patents covering proteins, therapeutic and diagnostic product
candidates and their method of use, and the success of our business depends, to a large extent, on our ability to obtain and maintain
such patents and any additional patents covering our future product candidates. We design our patent strategy to fit the business competitive
landscape and continual legislative changes. In addition, we periodically analyze and examine our patent portfolio to align it with our
pipeline strategy and business needs. We have issued patents and pending patent applications that are related to our product candidates
in the U.S., Europe, and other territories. We plan to continue to apply for patent protection for our therapeutic and diagnostic inventions,
but we cannot be sure that any of our patent applications will be accepted, or that they will be accepted to the extent that we seek or
that they will not be challenged. Additionally, we file for patent protection in selected countries and not in all countries of the world.
Therefore, we are exposed to competition in those countries in which we have no patent protection. Also, due to our early-stage pipeline
and various business considerations, we may be required to seek patent protection at a very early-stage. This may cause us to file with
insufficient supportive data, possibly making it difficult to obtain patents in jurisdictions that do not accept post filing evidence
to support the claims, and thus enabling others to compete with us. This may also cause issuance of a patent at an earlier stage, creating
a shorter commercialization period under patent protection, possibly enabling others to compete with us. Delays in filing patents may
preclude us from obtaining protection on some or all of our product candidates due to others filing ahead of us. Patent applications filed
before us, but yet unpublished, may cause us to spend significant resources in areas that due to these previously filed patents or applications
we will not be able to obtain patent protection, practice the claimed invention without infringing upon such earlier patents (if granted),
or will only be able to obtain a narrower scope of protection than contemplated.
Because the patent position of biopharmaceutical companies involves complex legal
and factual questions, we cannot predict the validity, scope or enforceability of patents with certainty. The issuance of a patent is
not conclusive as to its inventorship, scope, validity or enforceability and our patents may be subject to a third party pre issuance
submission of prior art to the patent authorities or become involved in opposition, derivation, revocation, reexamination, post-grant
and inter partes review, or other similar proceedings challenging our patent rights in the United
States and other jurisdictions which may result in such patents being narrowed, invalidated, or held unenforceable, and thus could limit
our ability to stop competitors from marketing related products or limit the length of the term of patent protection that we may have
for our product candidates. Such proceedings may also result in substantial cost and require our pending patent applications, and those
we may file in the future may not result in patents being issued. Furthermore, even if our patents do issue, and even if they are unchallenged,
our patents may not adequately protect all our intellectual property or prevent others from designing their products in a way to avoid
being covered by our claims. If the breadth or strength of protection provided by the patents we hold is threatened, this could dissuade
companies from collaborating with us to develop and could threaten our ability to commercialize product candidates and expose us to unexpected
competition that could have a material adverse impact on our business. For example, in October 2020, two parties, one being GSK (following
an assignment), filed oppositions in the European Patent Office, or EPO, requesting revocation of our granted European patent relating
to anti-PVRIG antibodies and following different proceedings, on July 11, 2023 in an oral proceedings hearing, the opposition division
of the European Patent Office ruled in favor of maintaining the broad claims in the patent as granted to us. The opposition division’s
written decision was received on January 18, 2024, and thereafter, on March 18, 2024, the opponents filed an appeal. Statement of grounds
of appeal was filed on May 17, 2024 and we filed a response to the appeal on September 26, 2024. An oral hearing before the board of appeal
of the EPO is planned to take place on May 28, 2026. In January 2023, another opposition was filed by GSK, requesting revocation of our
granted European patent relating to method of screening for inhibitors of the binding association of PVRIG polypeptide with PVRL2. Following
different proceedings, on January 14, 2025, in an oral proceedings hearing, the opposition division of the European Patent Office
ruled in favor of maintaining the patent in its amended form, with the amended patent recites method of screening for anti-PVRIG antibodies
that are inhibitors of the binding association of PVRIG polypeptide with PVRL2. Since the time for appeal has passed, this decision is
final. In May 2023, two other European oppositions were filed by GSK and another party, with respect to anti-PVRIG antibodies competing
with COM701. The summons to attend oral proceedings in these oppositions and preliminary opinion by the opposition division were received
on October 21, 2024. On October 2, 2025, we filed a written response to the preliminary opinion and on the same date one of the opponents
filed its response with respect to the preliminary opinion issued by the opposition division. Since that time, GSK withdrew from the opposition.
At the oral proceedings that took place between December 3 to December 5, 2025, the opposition division of the EPO upheld the patent in
an amended form. The amended claims of the patent now cover the portion of anti-PVRIG antibodies competing with COM701, which are functional
monoclonal anti-PVRIG antibodies for cancer treatment. The opponent may appeal this decision. There can be no guarantee that we will be
successful with this or any other opposition proceeding.
32
Furthermore, changes in either the patent laws or interpretation of the patent laws
in the United States or other jurisdictions could weaken our ability to obtain new patents or to enforce our existing patents and patents
that we might obtain in the future and increase the uncertainties and costs surrounding the prosecution of patent applications, and the
enforcement or defense of our issued patents. Such changes could diminish the value of our patents and applications, thereby impairing
our ability to protect our product candidates, and could have a material adverse effect on our business, financial condition, results
of operations and prospects. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the
scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In October
2017, in Amgen v. Sanofi, the Federal Circuit overturned the “newly characterized antigen”
test, which permitted patentees to claim a genus of antibodies by describing the structure of a corresponding antigen, on the grounds
that it failed to satisfy the requirements found in Section 112 of the Patent Act, 35 U.S.C. § 112. In doing so, the Federal Circuit
called into question the validity of numerous existing patents. On May 18, 2023, the United States Supreme Court affirmed the Federal
Circuit’s judgement in Amgen v. Sanofi, holding that a functionally-claimed genus was invalid
for failing to comply with the enablement requirement of the Patent Act. Thus, in the current IP environment in the U.S., we may not be
able to obtain or defend broad patent protection on our antibody inventions. In addition, recent U.S. court decisions raise questions
regarding the award of patent term adjustment (PTA) for patents in families where related patents have issued without PTA. Thus, it cannot
be said without certainty how PTA will/will not be viewed in the future and whether patent expiration dates may be impacted. Similarly,
changes in patent law and regulations in other countries or jurisdictions or changes in the governmental bodies that enforce them or changes
in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce
patents. For example, the complexity and uncertainty of European patent laws have increased in recent years. In Europe, a new unitary
patent system took effect June 1, 2023, which will significantly impact European patents, including those granted before introduction
of the system. Under the unitary patent system, European applications have the option, upon receipt of a patent, of becoming a Unitary
Patent subject to the jurisdictions of the Unitary Patent Court (UPC). As the UPC is a new court system, there is no precedent for the
court, increasing the uncertainty of any litigation. Patents granted before implementation of the UPC have the option of opting out of
the jurisdiction of the UPC and remaining as national patents in the UPC countries. Patents that remain under jurisdiction of the UPC
will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries
who are signatories to the UPC. All our patents and patent applications for which a request for opt out was available in the sunrise period
were opted out. We cannot predict with certainty the long-term effects of any potential changes.
Moreover, because of the extensive time required for development, testing and regulatory
review of a potential product, it is possible that, before any particular product candidate can be commercialized, any related patent
may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent protection.
33
The process of obtaining patents for inventions that cover our products is uncertain
for a number of reasons, including but not limited to:
| • |
the patenting of inventions involves complex legal issues relating to intellectual property laws, prosecution and enforcement of
patent claims across a number or patent jurisdictions, many of which have not yet been settled; |
| • |
legislative and judicial changes, or changes in the examination guidelines of governmental patent offices may negatively affect our
ability to obtain patent claims to certain biological molecules- and/or use of certain therapeutic targets; |
| • |
if we are not the first to file a patent application on one of our inventions, we may not be able to obtain a patent on our invention,
and may not be able to protect one or more of our therapeutic product candidates; |
| • |
competition from other biotechnology and pharmaceutical companies who have already sought patent protection relating to proteins
and protein based products, as well as therapeutic antibodies or other modulators specifically binding these proteins, and their utility
based discoveries that we may intend to develop and commercialize; such prior patents may negatively affect our ability to obtain patent
claims on antibodies or certain proteins or other biologic modulators, or may hinder our ability to obtain sufficiently broad patent claims
for our inventions, and/or may limit our freedom to operate; |
| • |
publication of data on gene products or proteins by non-commercial and commercial entities may hinder our ability to obtain sufficiently
broad patent claims for our inventions; |
| • |
even if we succeed in obtaining patent protection, such protection may not be sufficient to prevent third parties from circumventing
our patent claims; |
| • |
even if we succeed in obtaining patent protection, we may face freedom to operate issues; |
| • |
even if we succeed in obtaining patent claims protecting our inventions and product candidates, our patents could be subject to challenge
and litigation by our competitors, and may be partially or wholly invalidated as a result of such legal/judicial challenges and in connection
with such challenges; |
| • |
significant costs that may need to be incurred in registering and filing patents; |
| • |
insufficient data to support our claims and/or may support others in strengthening their patents; |
| • |
seeking patent protection at an early stage may prevent us from providing comprehensive data supporting the patent claims and may
prevent allowance of certain patent claims or limit the scope of patent claim coverage; |
| • |
we may not be able to supply sufficient data to support our claims, within the legally prescribed time following our initial filing
in order to support our patent claims and this may harm our ability to get appropriate patent protection or protection at all; |
| • |
our claims may be too broad and not have sufficient enablement, in which case such claims might be rejected by patent offices or
invalidated in court; and |
| • |
we might fail to demonstrate a unique technical feature for our antibodies as compared to existing prior art, in which case our claims
might be rejected by the respective patent office, requiring superiority over prior art. |
If we fail in obtaining patent protection for our inventions (should it be discoveries,
drug targets candidates and product candidates) to the fullest extent for which we seek protection, or if we fail to select the best inventions
to seek such protection, our business and financial results could be materially harmed.
We may not be able to protect
our intellectual property rights throughout the world.
Patents are of national or regional effect, and filing, prosecuting and defending
patents on all of our investigational products throughout the world would be extremely expensive. Thus, we may not be able to prevent
third parties from practicing or from selling or importing products made using our inventions in all countries. Further, the legal systems
of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property
protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation
of our proprietary rights generally. In addition, certain countries have compulsory licensing laws under which a patent owner may be compelled
to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if
we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This
could limit our potential revenues. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate
to obtain a significant commercial advantage from the intellectual property that we develop or license.
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The existence of third-party
intellectual property rights may prevent us from developing our discoveries and/or discoveries we licensed to partners or require us to
expend financial and other resources to be able to continue to do so.
In selecting a drug target or a therapeutic product candidate for
development, we consider, among other considerations, the existence of third-party intellectual property rights that may hinder our right
to develop and commercialize that product candidate. To our knowledge, third parties, including our competitors, have been filing patent
applications covering an increasing portion of the human proteome or antibodies directed thereto. As a result of the existence of third-party
intellectual property rights, we may be further required to:
| • |
forgo the research, development and commercialization of certain drug target candidates and product candidates that we discover,
notwithstanding their promising scientific and commercial merits; or |
| • |
invest substantial management and financial resources to either challenge or in-license such third-party intellectual property, and
we cannot be sure that we will succeed in doing so on commercially reasonable terms, if at all. |
We do not always have available to us, in a timely manner, information
of the existence of third-party intellectual property rights related to our own discoveries. The content of U.S. and other patent applications
remains unavailable to the public for a period of approximately 18 months from the filing date and therefore we cannot be certain that
we were the first to file any patent application related to our product candidate. In some instances, the content of U.S. patent applications
remains unavailable to the public until the patents are issued. Moreover, when patents ultimately are issued, the claims may be substantially
different from those that were originally published and may vary from country to country. Furthermore, there may be issued patents or
pending patent applications that we are aware of, but that we believe are irrelevant to our therapeutic product candidates, but which
may ultimately be found to be infringed by the manufacture, sale, or use of such product candidates. As a result, we can never be certain
that programs that we commence will be free of third-party intellectual property rights. If we become aware of the existence of third-party
intellectual property rights only after we have commenced a particular program, we may have to forgo such project after having invested
substantial resources in it or, to the extent such third-party right has not expired, obtain a license which may involve substantial financial
resources.
We may need to obtain additional
licenses of third-party technology or other rights that may not be available to us or are available only on commercially unreasonable
terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated.
We may be required to license technology or other rights from third
parties to further develop or commercialize our investigational products. Should we be required to obtain licenses for any third-party
technology, such licenses may not be available to us on commercially reasonable terms, or at all. The inability to obtain any third-party
license required to develop or commercialize any of our products could cause us to abandon any related efforts, which could seriously
harm our business and operations.
We, or potential collaborators
and licensees, may infringe third-party rights and may become involved in litigation, which may materially harm our business.
If a third-party accuses us, our collaborators or a potential collaborator
and licensee of infringing its intellectual property rights or if a third-party commences litigation against us, our collaborators or
a potential collaborator and licensee for the infringement of patent or other intellectual property rights, we may incur significant costs
in obtaining a license or defending such action, whether or not we ultimately prevail. We are aware of U.S. and foreign issued patents
and pending patent applications controlled by third parties that may relate to the areas in which we are developing therapeutic products.
Because all issued patents are entitled to a presumption of validity in many countries, including the United States and many European
countries, issued patents held by others with claims related to products, may limit our freedom to operate unless and until these patents
expire or are declared invalid or unenforceable in a court of applicable jurisdiction, if we do not obtain a license or other right to
practice the claimed inventions. Typically, patent litigation in the pharmaceutical and biotechnology industry is expensive and prolonged.
Some claimants may have substantially greater resources than we do and may be able to sustain the costs of complex intellectual property
litigation to a greater degree and for longer periods of time than we could. Costs that we may incur in defending third-party infringement
actions would also result in the diversion of management’s and technical personnel’s time. In addition, parties making claims
against us may be able to obtain injunctive or other equitable relief that could prevent us or our collaborators and licensees from further
developing our discoveries or commercializing our products.
35
In the event of a successful claim of infringement against us or
a potential collaborator and licensee, we may be required to pay damages, including treble damages and attorney’s fees if we are
found to be willfully infringing a third-party’s patent, or obtain one or more licenses from the prevailing third-party (if not
obtained prior to such litigation), which may not be available to us on commercially reasonable terms, if at all. Even if we were able
to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. If we
are not able to obtain such a license or not able to obtain such a license at a reasonable cost, we could be prevented from commercializing
a product until the relevant patents expired, or we could be forced to redesign our products, or to cease some aspect of our business
operations, and we could encounter delays in product introductions and loss of substantial resources while we attempt to develop alternative
products. Defense of any lawsuit or failure to obtain any such license could prevent us or our partners from commercializing available
products and could cause us to incur substantial expenditures and would divert management’s attention from our core business.
We may become involved in
lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time consuming and unsuccessful.
Competitors may infringe, misappropriate or otherwise violate our
patents, trademarks, copyrights or other intellectual property, or those of our licensors. To counter infringement, misappropriation,
unauthorized use or other violations, we may be required to file legal claims, which can be expensive and time consuming and divert the
time and attention of our management and scientific personnel.
Additionally, after a patent is granted, it can be annulled, or
its scope of protection restricted through an appeal, revocation or invalidation procedure. Such procedures are lengthy, expensive and
time consuming, and may have an adverse effect on us.
We may not be able to prevent, alone or with our licensees or any
future licensees, infringement, misappropriation or other violations of our intellectual property rights, particularly in countries where
the laws may not protect those rights as fully as in the United States. Any claims we assert against perceived infringers could provoke
these parties to assert counterclaims against us, alleging that we infringe their patents. In addition, in a patent infringement or opposition
proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that
we do not have the right to stop the other party from using the invention at issue. In this respect, as stated above, we are currently
facing an appeal before the boards of appeal of the EPO with respect to our granted European broad patent relating to anti-PVRIG antibodies.
There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly
or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patents do not
cover the invention. An adverse outcome in litigation or proceeding involving our patents could limit our ability to assert our patents
against those parties or other competitors and may curtail or preclude our ability to exclude third parties from making and selling similar
or competitive products. Any of these occurrences could adversely affect our competitive business position, business prospects and financial
condition. Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or
unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question. In
this case, we could ultimately be forced to cease using such trademarks.
In any infringement, misappropriation or other intellectual property
litigation, any award of monetary damages we receive may not be commercially valuable. Even if we establish infringement, the court may
decide not to grant an injunction against further infringing activity and instead award only monetary damages, which may or may not be
an adequate remedy. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation,
there is a risk that some of our confidential information could be compromised by disclosure during litigation. The results of hearings,
motions or other interim proceedings or developments are public. If securities analysts or investors perceive these results to be negative,
it could have an adverse effect on our share price. Moreover, there can be no assurance that we will have sufficient financial or other
resources to file and pursue such infringement claims, which typically last for years before they are concluded. Even if we ultimately
prevail in such claims, the monetary cost of such litigation and the diversion of the attention of our management and scientific personnel
could outweigh any benefit we receive as a result of the proceedings.
36
Increased progress in our scientific and technological
environment may reduce our chances of obtaining a patent.
In order to obtain a patent to protect one of our therapeutic product candidates,
we must show that the underlying invention (that is, the product candidate itself or its use) is inventive. As an increasing amount of
scientific knowledge is becoming available regarding genes, proteins, biological mechanisms, and the relevance of the genes and proteins
to various clinical indications, the bar is increasingly raised to show sufficient inventiveness, as inventiveness is judged against all
publicly available information available prior to filing of the patent application (the exact date may vary by country or due to other
circumstances). As an increasing amount of scientific knowledge is becoming available for various proteins and their potential use as
drug targets, with time we may be limited or may not be able to obtain patents for our product candidates due to the increased information
published in this area. Our own published patent applications and other publications also serve as prior art against our new inventions
and patent applications and may prevent us from obtaining new patents.
We may become subject to claims for remuneration or royalties for
assigned service invention rights by our employees, which could result in litigation and adversely affect our business.
We enter into assignment of invention agreements with our employees pursuant to which
such individuals agree to assign to us all rights to any inventions created in the scope of their employment or engagement with us. A
significant portion of our intellectual property has been developed by our employees in the course of their employment for us. Under the
Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee due to and during his or her employment with a company
are regarded as “service inventions”, which belong to the employer, unless the employee and employer have entered into a specific
agreement stating otherwise, except if the employer waived the service invention within six months of receipt of a notice by the employee
regarding the creation of the service invention (in accordance with provisions of the Patent Law). The Patent Law also provides that if
there is no agreement with respect to whether the employee is entitled to remuneration for his or her service invention, to what extent
and under what conditions, such entitlement and terms shall be determined by the Israeli Compensation and Royalties Committee, or the
Committee, a body constituted under the Patent Law. Decisions by the Committee and Israeli courts have created some uncertainty in this
area. Although our employees have agreed to assign to us service invention rights and have waived any rights for additional compensation
for such service inventions, we may still face claims demanding remuneration in consideration for assigned service inventions. As a consequence
of such claims, we could be required to pay additional remuneration or royalties to our current and/or former employees, or be forced
to litigate such claims, which could negatively affect our business.
Obtaining and maintaining our patent protection
depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO and various foreign patent agencies require compliance with a number of
procedural, documentary, fee payment and other provisions to maintain patent applications and issued patents. Noncompliance with these
requirements can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the
case.
We may be subject to claims that we or our
employees or consultants have infringed, misappropriated or otherwise violated the intellectual property of a third-party, or claiming
ownership of what we regard as our own intellectual property.
We may be subject to claims that we or our employees or consultants have inadvertently
or otherwise used or disclosed confidential information of former employers, competitors or other third-parties. We may be further subject
to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing
our product candidates, resulting, among others, in disputes regarding ownership interest in our patents or other intellectual property.
Although we have implemented reasonable measures to ensure that our employees and consultants do not use the intellectual property of
others in their work for us, we may become subject to claims that we caused an employee or consultant to breach, among others, the terms
of his or her non-competition, or that we or these individuals have, inadvertently or otherwise, used or disclosed the alleged proprietary
information of a former employer, competitor or other third-party.
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While we may litigate to defend ourselves against these claims, even if we are successful,
litigation could result in substantial costs and could distract the attention of our management. If our defenses against these claims
fail, in addition to requiring us to pay monetary damages, a court could deprive our rights in such technologies or features that are
essential to our investigational products, if such technologies or features are found to incorporate or be derived from the proprietary
information of third parties and prohibit us from using them. Moreover, any such litigation may adversely affect our ability to form strategic
alliances, engage with scientific advisors or hire employees or consultants.
In addition, while we typically require our employees, consultants and contractors
who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may
be unsuccessful in executing such an agreement with each party who in fact develops intellectual property. To the extent that we fail
to obtain such assignments, or such assignments do not contain a self-executing assignment of intellectual property rights, or such assignments
are breached, we may be forced to bring claims against third parties, or defend claims they may bring against us, to determine the ownership
of what we regard as our intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights. Such intellectual property rights could be awarded to a third party, and we
could be required to obtain a license from such third-party to commercialize our technology or products. Such a license may not be available
on commercially reasonable terms or at all. Even if we are successful in prosecuting or defending against such claims, litigation could
result in substantial costs and be a distraction to our management and scientific personnel.
We may become subject to claims challenging
the inventorship or ownership of our patents.
We may be subject to claims that former employees, collaborators or other third parties
have an interest in our patents as co-inventors. The failure to name the proper inventors on a patent application can result in the patents
issuing thereon being unenforceable. Inventorship disputes may arise from conflicting views regarding the contributions of different individuals,
the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations
of third parties involved or as a result of questions regarding co-ownership of potential joint inventions. Litigation may be necessary
to resolve claims challenging inventorship and/or ownership. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such
an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to management and other employees.
Patent terms may be inadequate to protect our
competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are
timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions
may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates
are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars.
Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such
candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio
may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours and may cause a
significant reduction to our potential future revenues.
We may rely on trade secrets and proprietary
know-how which can be difficult to trace and enforce.
In addition to seeking patent protection for some of our technology and investigational
products, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our
competitive position. Trade secrets and know-how can be difficult to protect. Any disclosure, either intentional or unintentional, by
our employees or third-party consultants and vendors that we engage to perform research, clinical trials or manufacturing activities,
or misappropriation by third parties (such as through a security breach) of our trade secrets or proprietary information could enable
competitors to duplicate or surpass our technological achievements, thus eroding our competitive position in our market.
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We require our employees to enter into written employment agreements containing provisions
of confidentiality and obligations to assign to us any inventions generated in the course of their employment. We further seek to protect
our potential trade secrets and proprietary know-how by entering into non-disclosure and confidentiality agreements with any third parties
who are given access to them, including our collaborators, contract manufacturers, consultants, advisors and other third parties. With
our consultants, contractors, and collaborators, these agreements typically include invention assignment obligations. Despite these efforts,
any of these parties may breach the agreements and disclose our proprietary information or assign our inventions to third parties, which
may be difficult to trace, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally
disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
If we are unable to adequately protect our proprietary know-how and trade secrets,
competitors may be able to develop technologies and resulting discoveries and inventions that are identical, similar to or better than
our own discoveries and inventions, which could materially harm our business, financial condition and results of operations. Costly and
time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to maintain trade
secret protection could adversely affect our competitive business position. In addition, others may independently discover or develop
our trade secrets and proprietary information, and the existence of our own trade secrets affords no protection against such independent
discovery.
Risks Related to Operations in Israel
Conditions in Israel and in the Middle East may adversely affect
our operations.
Our headquarters and research and development facilities are located in Israel. Accordingly,
we are directly influenced by the political, economic and military conditions affecting Israel.
Since the establishment of the State of Israel in 1948 and in recent years, armed
conflicts between Israel and its neighboring countries and terrorist organizations active in the region have involved missile strikes,
hostile infiltrations, and terrorism against civilian targets in various parts of Israel.
On October 7, 2023, the “Swords of Iron” war broke between Israel and
the terrorist organizations in the Gaza Strip, following a surprise attack on Israel led by certain armed groups in the Gaza Strip that
included massacres, terrorism and crimes against humanity. As of the date hereof, the broader regional security environment remains unstable,
with periodic exchanges of fire involving Iran-backed groups in Lebanon, Syria, Iraq and Yemen, elevated threats against Israeli and U.S.
targets, and episodic direct strikes between Israel and Iran during 2024 and 2025 that have not resolved underlying tensions. In June
2025, Israel and Iran engaged in direct hostilities, including Iranian launches of drones and ballistic missiles against Israel and Israeli
operations against Iranian air defenses and missile production sites with the United States also carrying out strikes on Iranian nuclear
facilities before a ceasefire took effect. On February 28, 2026, Israel and the United States commenced a joint operation
against Iran, which has led Iran to launch ballistic missiles and drones against Israel and other countries in the region, including the
United Arab Emirates, Bahrain and Qatar, as well as against U.S. targets in the Middle East. In addition, Iran may close the Strait of
Hormuz, leading to disruption of the global supply chain, including in oil and gas, which could potentially destabilize the Israeli and
global economies. As of the date of this Annual Report, this operation is undergoing and its outcome and the effect that it may have are
uncertain.
Hostilities and threats connected to Iran’s regional network, comprising Hezbollah
in Lebanon, militias in Syria and Iraq, and the Houthis in Yemen, have included attacks affecting Israel and disruptions to regional maritime
routes.
In addition, since late 2025 and into 2026, Iran has faced renewed domestic protests;
in parallel, U.S. and European sanctions actions and enforcement have intensified. These factors can influence regional escalation, with
potential impacts on Israel’s security and the operating environment for companies based in Israel.
Our headquarters and research and development facilities are located in Holon, which is about 50 kilometers
from the Gaza Strip and about 150 kilometers from the western border with Lebanon. As of the date hereof, the situation in Israel
and in the region does not have a material effect on our operations and business and our facilities did not sustain any damage. We monitor
closely the directives of the Israeli National Emergency Management Authority and where needed, make required adjustments to our operations
in accordance with such directives, including by instructing our workforce to work remotely.
All of the above raise a concern as to the stability in the region which may affect the security, social,
economic and political landscape in Israel and therefore could adversely affect our business, financial condition and results of operations,
especially since we conduct clinical trials in Israel.
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Furthermore, certain countries, primarily in the Middle East but also in Malaysia
and Indonesia, as well as certain companies and organizations in different parts of the world, continue to participate in a boycott of
Israeli brands and others doing business with Israel and Israeli companies. Further deterioration of Israel’s relationship with
the Palestinians or countries in the Middle East could expand the disruption of international trading activities in Israel, may materially
and negatively affect our business conditions, could harm our results of operation and adversely affect the share price of our Company.
The foregoing efforts by countries, activists and organizations, particularly if they become more widespread, and other international
tribunals, may adversely impact our ability to cooperate with research institutions and collaborate with other third parties.
Our business may also be disturbed by the obligation of personnel to perform military
service. Our employees who are Israeli citizens are generally subject to a periodic obligation to perform reserve military service, until
they reach the age of 40 (or 41, in some cases, or older, for reservists with certain occupations), but during military conflicts, these
employees may be called to active duty for long periods of time. In case of further regional instability such employees, who may include
one or more of our key employees, may be absent for extended periods of time, which may materially adversely affect our business.
In addition, ongoing political and civil actions in Israel which began in early 2023,
resulting from, among other things, proposed changes to certain Israeli constitutional legislation, have had and may continue to have
an adverse effect on the Israeli social, economic and political landscape and in turn, on us. However, it is difficult to predict at this
time what the effect of such actions will be, if any.
Moreover, after several credit rating downgrades in recent years, on November 7, 2025,
S&P Global Ratings revised its outlook on Israel to “stable” from “negative”, while affirming the “A”
rating and on January 30, 2026, Moody’s also revised its outlook on Israel to “stable” from “negative, while affirming
Israel’s Baa1 long-term local and foreign-currency issuer ratings. Despite this stabilization in outlook by S&P, and Moody’s,
other agencies, Fitch Ratings, continued to maintain a negative outlook as of early 2026, citing persistent exposure to geopolitical risks
and a polarized political system.
We can give no assurance that the political, economic and security situation in Israel
will not have a material adverse impact on our business in the future.
Furthermore, our insurance does not cover any loss arising from events related to
the security situation in the Middle East. While the Israeli government generally covers the reinstatement value of direct damages caused
by acts of war or terror attacks, we cannot be certain that such coverage will be maintained or that it will sufficiently cover our damages.
Our results of operations may be adversely
affected by the exchange rate fluctuations between the dollar and the New Israeli Shekel.
We hold most of our cash, cash equivalents and short-term and long-term bank deposits
in dollars but incur a significant portion of our expenses, principally salaries and related personnel expenses and administrative expenses
for our Israeli based operations, in NIS. As a result, we are exposed to exchange rate fluctuations between the dollar and the NIS, which
may have a material adverse effect on our financial condition. For example, if the dollar significantly devaluates against the NIS, then
the dollar cost of our operations in Israel would increase and our results of operations would be adversely affected. In 2025 the
dollar depreciated against the NIS by 12.5%, and in 2024 and 2023 the dollar appreciated against the NIS by 0.6% and 3.1%, respectively.
As a result of these fluctuations, our NIS denominated expenses were affected. Since a considerable portion of our expenses is in NIS,
depreciation in the dollar against the NIS has an adverse effect on us.
The dollar cost of our operations in Israel
will increase to the extent increases in the rate of inflation in Israel are not offset by a devaluation of the NIS in relation to the
dollar, which would harm our results of operations.
Inflation in Israel, was 2.6% and 3.2% in 2025 and 2024, respectively,
and has affected us by increasing the costs of materials and labor needed to operate our business and could continue to adversely affect
us in future periods. Additionally, since a considerable portion of our expenses such as employees’ salaries are linked to an extent
to the rate of inflation in Israel, the dollar cost of our operations is influenced by the extent to which any increase in the rate of
inflation in Israel is or is not offset by the depreciation of the NIS in relation to the dollar. As a result, we are exposed to the risk
that the NIS, after adjustment for inflation in Israel, will appreciate in relation to the dollar. In that event, the dollar cost of our
operations in Israel will increase and our dollar-measured results of operations will be adversely affected. We cannot predict whether
the NIS will appreciate against the dollar or vice versa in the future, though during 2025 it appreciated at a rate of 14.3%. Any increase
in the rate of inflation in Israel, unless the increase is offset on a timely basis by a devaluation of the NIS in relation to the dollar,
will increase labor and other costs, which will increase the dollar cost of our operations in Israel and harm our results of operations.
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We may not be entitled to certain Israeli tax
benefits.
In the future, we may be entitled to benefit from certain Israeli government programs
and enjoy certain tax benefits resulting from the ‘Preferred Enterprise’ status, or Preferred Enterprise, we are entitled
to under the Israel Law for Encouragement of Capital Investments, 1959, or the Investment Law. The availability of these tax benefits,
however, is subject to us meeting certain conditions under the Investment Law. The tax benefits that we anticipate receiving under the
Preferred Enterprise program may not be continued in the future at their current levels or at all. To date, we have not actually received
any such tax benefits because we have not yet generated any taxable income.
It may be difficult to enforce certain U.S.
judgments against us, or our officers and directors or to assert U.S. Securities law claims in Israel.
We are incorporated under the laws of the State of Israel. Service of process upon
our directors and officers, the majority of whom reside outside the United States, may be difficult to obtain within the United States.
Furthermore, because the majority of our assets and investments, and a majority of our directors and officers are located outside the
United States, any judgment obtained in the United States against us or any of them may not be collectible within the United States.
Furthermore, it may be difficult for an investor, or any other person or entity, to
assert U.S. securities law claims in original actions instituted in Israel or obtain a judgment based on the civil liability provisions
of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws
against us or our officers and directors reasoning that Israel is not the most appropriate forum to bring such a claim. In addition, even
if an Israeli court agrees to hear such a claim, it is not certain whether Israeli law or U.S. law will be applicable to the claim. If
U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact, which can be a time consuming and costly
process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses
the matters described above. Under certain circumstances, Israeli courts might not enforce judgments rendered outside Israel, which may
make it difficult to collect on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court will not enforce a non-Israeli judgment if it was given
in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases), if its enforcement
is likely to prejudice the sovereignty or security of the State of Israel, if it was obtained by fraud or in the absence of due process,
if it is at variance with another valid judgment that was given in the same matter between the same parties, or if a suit in the same
matter between the same parties was pending before a court or tribunal in Israel at the time the foreign action was brought.
Our amended and restated Articles of Association
provide that unless we consent to an alternative forum, the federal district courts of the United States shall be the exclusive forum
of resolution of any claims arising under the Securities Act which may impose additional litigation costs on our shareholders.
Our amended and restated Articles of Association, or Articles, provide that unless
we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive
forum for the resolution of any complaint asserting a cause or causes of action, or a claim or claims arising under the Securities Act,
including all causes of action or claims asserted against any defendant to such complaint and that such provision may be enforced by us,
our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional or entity whose
profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying
the offering. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities
Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to entertain such claims. This choice of forum provision
may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,
officers or other employees and may increase the costs associated with such lawsuits, which may discourage such lawsuits against us and
our directors, officers and employees. Alternatively, if a court were to find these provisions of our Articles inapplicable to, or unenforceable
in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such
matters in other jurisdictions, which could adversely affect our business and financial condition. Any person or entity purchasing or
otherwise acquiring any interest in our share capital shall be deemed to have a notice of and to have consented to the choice of forum
provisions of our Articles described above. This provision does not apply to causes of action arising under the Exchange Act.
41
Our Articles of Association provide that unless
the Company consents otherwise, the competent courts of Tel Aviv, Israel shall be the sole and exclusive forum for substantially all disputes
between the Company and its shareholders under the Companies Law and the Israeli Securities Law, which could limit its shareholders ability
to bring claims and proceedings against, as well as obtain favorable judicial forum for disputes with the Company, its directors, officers
and other employees.
Our Articles provide that unless we consent in writing to the selection of an alternative
forum, the competent courts of Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf
of the Company, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Company
to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies
Law, 5759-1999, as amended together with all regulations promulgated thereunder, or the Companies Law, or the Securities Law, 5728-1968,
as amended and the regulations promulgated thereunder, or the Israeli Securities Law. Such exclusive forum provision in our Articles will
not relieve the Company of its duties to comply with federal securities laws and the rules and regulations thereunder, and shareholders
of the Company will not be deemed to have waived the Company’s compliance with these laws, rules and regulations. Any person or
entity purchasing or otherwise acquiring any interest in our share capital shall be deemed to have a notice of and to have consented to
the choice of forum provisions of our Articles described above. This exclusive forum provision may limit a shareholder’s ability
to bring a claim in a judicial forum of its choosing for disputes with the Company or its directors or other employees which may discourage
lawsuits against the Company, its directors, officers and employees.
Provisions of Israeli law may delay, prevent
or make undesirable an acquisition of all or a significant portion of our shares or assets.
Israeli corporate law regulates mergers and acquisitions and requires that a tender
offer be affected when certain thresholds of percentage ownership of voting power in a company are exceeded (subject to certain conditions),
which may have the effect of delaying, preventing or making more difficult a merger with, or acquisition of, us. See “Item 10. Additional
Information – B. Memorandum and Articles of Association.” Further, Israeli tax considerations may make potential transactions
undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty with Israel granting tax relief
to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes
the deferral contingent on the fulfillment of numerous conditions, including a holding period of two years from the date of the transaction
during which certain sales and dispositions of shares of the participating companies are restricted. Moreover, with respect to certain
share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no actual disposition
of the shares has occurred. See “Item 10. Additional Information – E. Taxation – Israeli Taxation.”
In addition, in accordance with the Restrictive Trade Practices Law, 1988 and under
the Israeli Law for the Encouragement of Industrial Research and Development of 1984 and regulations promulgated thereunder, together,
the R&D Law, approvals regarding a change in control (such as a merger or similar transaction) may be required in certain circumstances.
For more information regarding such required approvals please see “Item 5. Operating and Financial Review and Prospects - C. Research
and Development, Patents and Licenses – The Israel Innovation Authority.” In addition, as a corporation incorporated under
the laws of the State of Israel, we are subject to the Israeli Economic Competition Law, 1988 and the regulations promulgated thereunder
(formerly known as the Israeli Antitrust Law, 1988), under which we may be required in certain circumstances to obtain the approval of
the Israel Competition Authority (formerly known as the Israel Antitrust Authority) in order to consummate a merger or a sale of all or
substantially all of our assets.
These provisions of Israeli law could have the effect of delaying
or preventing a change in control and may make it more difficult for a third-party to acquire us, even if doing so would be beneficial
to our shareholders and may limit the price that investors may be willing to pay in the future for our ordinary shares.
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We received grants from the IIA that may require
us to pay royalties and restrict the transfer of know-how that we develop.
We have received governmental grants from the Israeli Innovation
Authority, or the IIA, for the financing of certain activities within the framework of our research and development expenditures. Accordingly,
we are obligated to repay the grants by way of royalty payments from revenues generated by the sale of products and/or services developed
in the framework of the approved R&D program using financing from such grants, or Financed Know-How or as otherwise designated by
the applicable IIA programs, approvals and the R&D Law. Such royalties are payable until 100% of the amount of the grant (as adjusted
for fluctuation in the USD/NIS exchange rate) is repaid with applicable interest (as long as we do not grant licenses thereunder nor transfer
production or development outside of the State of Israel). Even following full repayment of any IIA grants (together with the applicable
interest), and unless agreed otherwise by the applicable authority of the IIA, we must continue to comply with the requirements of the
R&D Law with respect to the Financed Know-How. In addition to the obligation to pay royalties to the IIA, the R&D Law requires
that products which incorporate Financed Know-How be manufactured in Israel and prohibits the transfer of the Financed Know-How and any
right derived therefrom to third parties, unless otherwise approved in advance by the IIA; Such prior approval, to the extent given by
the IIA, can be conditioned upon the payment of increased royalties and an increase in the overall repayment obligation. Failure to comply
with the requirements under the R&D Law may subject us to financial sanctions, to mandatory repayment of grants received by us (together
with interest and penalties), as well as expose us to criminal proceedings. Although such restrictions do not apply to the export from
Israel of Company’s products developed with such Financed Know-How, they may prevent us, unless preapproval is obtained as detailed
above, from engaging in transactions involving the sale, licensing, outsourcing of development activities, transfer, the grant of access
rights and the like, with respect to such Financed Know-How or of manufacturing activities with respect to any product or technology based
on Financed Know-How, outside of Israel, which might otherwise be beneficial to us. Furthermore, the consideration received, and if applicable,
available to our shareholders in a transaction involving the transfer outside of Israel of Financed Know-How (such as a merger or similar
transaction) may be reduced by any amounts that we are required to pay to the IIA up to six times the amount of the grant (as adjusted
for fluctuation in the USD/NIS exchange rate) with applicable interest. Moreover, the government of Israel may, from time to time, audit
sales of products which it claims incorporate Financed Know-How and this may lead to royalties being payable on additional products, and
may subject such products to the restrictions and obligations specified hereunder. During 2025 we received a grant from the IIA under
a specific “Maagad” in the amount of approximately 58% of a total budget of approximately $130 thousands. While the terms
of the royalty payments to the IIA do not apply to such grant, all other terms of the R&D Law do apply to it. For more information
regarding such restrictions please see “Item 5. Operating and Financial Review and Prospects - C. Research and Development, Patents
and Licenses - The Israel Innovation Authority.”
Being a foreign private issuer exempts us from
certain SEC requirements and Nasdaq rules, which may result in less protection that is afforded to investors under rules applicable to
domestic issuers.
We are a “foreign private issuer” within the meaning of rules promulgated
by the SEC. As such, we are exempt from certain provisions under the Exchange Act, applicable
to U.S. domestic public companies, including:
| • |
the rules under the Exchange Act requiring the filing with the SEC of annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K; |
| • |
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act, including extensive disclosure of compensation paid or payable to certain of our highly compensated executives
as well as disclosure of the compensation determination process; |
| • |
the provisions of Regulation FD aimed at preventing issuers from making selective disclosures of material information; and
|
| • |
the sections of the Exchange Act establishing insider liability for profits realized from any “short-swing” trading transaction
(a purchase and sale, or sale and purchase, of the issuer’s equity securities within less than six months). |
In addition, we may follow home country corporate governance practices
and law instead of those rules and practices otherwise required by Nasdaq for domestic issuers. For instance, we have relied on the foreign
private issuer exemption with respect to shareholder approval requirements for equity-based incentive plans for our employees. For the
list of specific exemptions that we chose to adopt, please see “Item 16G – Corporate Governance.”
Following our home country corporate governance practices as opposed
to the requirements that would otherwise apply to a U.S. company listed on Nasdaq may provide less protection to investors than is afforded
to investors under the Nasdaq Listing Rules applicable to domestic issuers.
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We may lose our status as
a foreign private issuer, which would increase our compliance costs and could negatively impact our operations results.
We may lose our foreign private issuer status if (a) a majority
of our outstanding voting securities are either directly or indirectly owned of record by residents of the United States and (b)(i) a
majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United
States or (iii) our business is administered principally in the United States. If we were to no longer qualify as a foreign private issuer,
we would be required to file periodic reports and registration statements on domestic issuer forms with the SEC, which are more extensive
than the forms available to a foreign private issuer. We would also be required to follow U.S. proxy disclosure requirements, including
the requirement to disclose, under U.S. law, more detailed information about the compensation of our senior executive officers on an individual
basis. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic
issuers. Such conversion and modifications would involve increased costs. In addition, we would lose our ability to rely upon exemptions
from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers, as described in
the previous risk factor above. Additionally, the SEC is currently considering changes to the foreign private issuer reporting regime,
and such changes could either (i) cause us to lose our foreign private issuer status sooner than we otherwise would or (ii) result in
additional reporting obligations, either of which would result in increased compliance costs.
Our shareholders rights
and responsibilities are governed by Israeli law which differs in some material respects from the rights and responsibilities of shareholders
of U.S. companies.
Because we are incorporated under Israeli law, the rights and responsibilities of
our shareholders are governed by our Articles and Israeli law. These rights and responsibilities differ in some respects from the rights
and responsibilities of shareholders in U.S.-based corporations. In particular, a shareholder of an Israeli company has a duty to act
in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders
and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders
on certain matters, such as an amendment to a company’s articles of association, an increase of a company’s authorized share
capital, a merger of a company and approval of interested party transactions that require shareholder approval. A shareholder also has
a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder or a shareholder who
knows that it possesses the power to determine the outcome of a shareholders’ vote or to appoint or prevent the appointment of an
office holder in a company or has another power with respect to a company, has a duty to act in fairness towards such company. Israeli
law does not define the substance of this duty of fairness and there is limited case law available to assist us in understanding the nature
of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities
on our shareholders that are not typically imposed on shareholders of U.S. corporations.
Risks Related to our Ordinary Shares
We may not be able to meet
the continued listing standards of Nasdaq, which require a minimum closing bid price of $1.00 per share, which could result in our delisting
and negatively impact the price of our ordinary shares and our ability to access the capital markets.
Our ordinary shares are listed on The Nasdaq Capital Market. The
Nasdaq Stock Market LLC, or the Nasdaq, provides various continued listing requirements that a company must meet in order for its shares
to continue trading on the exchange. Among these requirements is the requirement that our shares trade at a minimum bid price of $1.00
per share.
While currently we are in compliance with the applicable Nasdaq minimum bid price
rules, there is no assurance that our share price will trade at or above a minimum bid price of $1.00 per share and if we fail to
meet minimum listing requirements, there can be no assurance that we will be able to regain compliance with the applicable minimum
bid price rules or will otherwise be in compliance with other Nasdaq listing criteria. Any such delisting could adversely affect our ability
to obtain financing for the continuation of our operations and could result in the loss of confidence of investors, collaborators and
employees.
44
Future sales of our ordinary
shares or securities convertible or exchangeable for our ordinary shares may depress our share price.
If our existing shareholders or holders of our options sell, or indicate an intention
to sell, substantial amounts of our ordinary shares on the public market, the trading price of our ordinary shares could decline. The
perception in the market that these sales may occur could also cause the trading price of our ordinary shares to decline. As of December
31, 2025, we had a total of 94,553,191 ordinary shares outstanding.
Based on the number of shares subject to awards under our 2010 Share Incentive Plan,
as amended, or 2010 Plan, as of December 31, 2025, 9,915,124 ordinary shares that are subject to outstanding options and RSUs or reserved
for future issuance under our 2010 Plan were eligible for sale in the public market (with none under our 2021 Employee Shares Purchase
Plan, or ESPP), subject to vesting, and in the case of shares issued to directors, executive officers and other affiliates, the volume
limitations under Rule 144 under the Securities Act. If these additional ordinary shares are sold, or if it is perceived that they will
be sold, on the public market, the trading price of our ordinary shares could decline.
In addition, our directors, executive officers and other affiliates may establish,
and certain executive officers and directors have established, programmed selling plans under Rule 10b5-1 of the Exchange Act, for the
purpose of effecting sales of our ordinary shares. Any sales of securities by these shareholders, or the perception that those sales may
occur, including the entry into such programmed selling plans, could have a material adverse effect on the trading price of our ordinary
shares.
If we sell ordinary shares
in future financings, shareholders may experience immediate dilution and, as a result, our share price may decline.
In order to raise additional capital, we may at any time offer additional ordinary
shares or other securities convertible into or exchangeable for our ordinary shares, through our “at the market offering”
(ATM) facility pursuant to a sales agreement entered with Leerink Partners LLC, or Leerink, on January 31, 2023 or other manners, at prices
that may not be the same as the price paid for our ordinary shares by our shareholders. The price per share at which we sell additional
ordinary shares, or securities convertible or exchangeable into ordinary shares, in future transactions may be higher or lower than the
price per share paid by our existing shareholders. If we issue ordinary shares or securities convertible into ordinary shares, our shareholders
will experience additional dilution and, as a result, our share price may decline.
In addition, as opportunities present themselves, we may enter into financing or similar
arrangements in the future, including the issuance of debt securities or ordinary shares with or without additional securities convertible
or exchangeable into ordinary shares. Whether or not we issue additional shares at a discount, any issuance of ordinary shares will, and
any issuance of other equity securities or of options, warrants or other rights to purchase ordinary shares may result in additional dilution
of the percentage ownership of our shareholders and could cause our share price to decline. New investors could also gain rights, preferences
and privileges senior to those of our shareholders, which could cause the price of our ordinary shares to decline. Debt securities may
also contain covenants that restrict our operational flexibility or impose liens or other restrictions on our assets, which could also
cause the price of our ordinary shares to decline.
Our share price and trading
volume have been volatile and may be volatile in the future and that could limit investors’ ability to sell our shares at a profit
and could limit our ability to successfully raise funds.
During the 2025 calendar year, our closing share price on Nasdaq ranged from a low
of $1.18 to a high of $2.57 and trading volume was volatile. The volatile price of our shares and periodic volatile trading volume may
make it difficult for investors to predict the value of their investment, to sell shares at a profit at any given time, or to plan purchases
and sales in advance. A variety of factors may affect the market price of our ordinary shares, including:
| • |
global or regional macroeconomic developments; |
| • |
general market, political and economic conditions in the countries in which Compugen operates, including Israel, outbreak of disease,
boycotts, curtailment of trade and other business restrictions and implementation of tariffs and the different effects of the evolving
nature of global or regional events, including the current instability in Israel and the Middle East; |
| • |
clinical data disclosed by us, our collaborators or our competitors; |
| • |
massive purchase or sell of our shares by a large shareholder; |
45
| • |
our success (or lack thereof) in entering into collaboration agreements and achieving certain research and developmental milestones
thereunder; |
| • |
our need to raise additional capital and our success or failure in doing so; |
| • |
achievement or denial of regulatory approvals by us, our collaborators or our competitors; |
| • |
announcements of technological innovations or new commercial products by our competitors; |
|
• |
trends in share price of companies in our field or industry; |
|
• |
announcement of corporate transactions, merger and acquisition activities or other
similar events by companies in our field or industry; |
|
• |
changes and developments effecting our field or industry; |
| • |
developments concerning our existing or new collaborations; |
| • |
regulatory developments in the United States, Israel and other countries; |
| • |
changes in the structure of healthcare payment systems; |
| • |
delay or failure by us or our collaborators in initiating, completing or analyzing preclinical or clinical trials or the unsatisfactory
design or results of such trials; |
| • |
period to period fluctuations in our results of operations; |
| • |
changes in estimates by securities analysts; |
| • |
changes in senior management or the board of directors or changes in the size or structure of the company; |
| • |
our ability (or lack thereof) to disclose the commercial terms of, or progress under, our collaborations; and |
| • |
transactions with respect to our ordinary shares by insiders or institutional investors. |
We are not able to control many of these factors, and we believe that period-to-period
comparisons of our financial results will not necessarily be indicative of our future performance.
In addition, the stock market in general, and the market for biotechnology
companies in particular, may experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating
performance of individual companies. These broad market and industry factors may seriously harm the market price of our ordinary shares,
regardless of our operating performance.
Furthermore, the market prices of equity securities of companies
that have a significant presence in Israel may also be affected by the current and changing security situation in the Middle East and
particularly in Israel and the effect of the evolving nature of the current instability in Israel and the Middle East and the general
situation in the area. As a result, these companies may experience volatility in their stock prices and/or difficulties in raising additional
financing required to effectively operate and grow their businesses. Thus, market and industry-wide fluctuations and political, economic
and military conditions in the Middle East, but also in the United States and worldwide may adversely affect the trading price of our
ordinary shares, regardless of our actual operating performance.
As a result of the volatility of our share price, in addition to
other potential adverse effect on us, we could be subject to securities litigation, which could result in substantial costs and divert
management’s attention and company resources from our business.
Because we do not intend to declare cash dividends
on our ordinary shares in the foreseeable future, shareholders must rely on appreciation of the value of our ordinary shares for any return
on their investment and may not receive any funds without selling their ordinary shares.
We have never declared or paid cash dividends on our ordinary shares
and do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, the terms of any future debt agreements
may preclude us from paying dividends. As a result, we expect that only appreciation of the price of our ordinary shares, if any, could
provide a return to investors in the foreseeable future. In addition, because we do not intend to declare cash dividends on our ordinary
shares in the foreseeable future, if our shareholders want to receive funds in respect of our ordinary shares, they must sell their ordinary
shares to do so.
46
Our ordinary shares are traded in more than one market and this
may result in price variations.
In addition to being traded on The Nasdaq Capital Market, our ordinary shares are
also traded on the Tel Aviv Stock Exchange, or TASE. Trading in our ordinary shares on these markets take place in different currencies
(dollars on Nasdaq and NIS on the TASE), and at different times (resulting from different time zones, trading days due to public holidays
in the United States and Israel, even though the TASE recently moved to Monday through Friday trading days, instead on Sunday through
Thursday). The trading prices of our ordinary shares on these two markets may differ due to these and other factors. Any decrease in the
price of our ordinary shares on one market could cause a decrease in the trading price of our ordinary shares on the other market.
If we are a passive foreign investment company,
or PFIC, our U.S. shareholders may be subject to adverse U.S. federal income tax consequences.
For U.S. federal income tax purposes, we generally will be classified
as a PFIC for any taxable year in which, after the application of certain look-through rules with respect to our subsidiaries, either:
(i) 75% or more of our gross income is passive income or (ii) at least 50% of the average value (determined on the basis of a weighted
quarterly average) of our total assets for the taxable year produce or are held for the production of passive income. For purposes of
these tests, passive income includes, among other things, dividends, interest, and gains from the sale or exchange of investment property
and certain rents or royalties (excluding rents and royalties that are received from unrelated parties in connection with the active conduct
of a trade or business). Assets that produce or are held for the production of passive income may include cash (unless held in a non-interest
bearing account for short term working capital needs), marketable securities, and other assets that may produce passive income. Generally,
in determining whether a non-U.S. corporation is a PFIC, a non-U.S. corporation that directly or indirectly owns at least 25% by value
of the shares of another corporation is treated as holding and receiving directly its proportionate share of assets and income of such
corporation.
Based on our analysis of our estimated income, estimated assets,
activities and market capitalization, we believe that we were a PFIC for the taxable year ended December 31, 2025. However, the determination
of whether or not we are a PFIC is a fact-intensive determination made on an annual basis and because the applicable law is subject to
varying interpretations, we cannot provide any assurance regarding our PFIC status, and our U.S. counsel expresses no opinion with respect
to our PFIC status for any taxable year. If we are classified as a PFIC for any taxable year during which a U.S. shareholder holds our
ordinary shares, U.S. investors could be subject to adverse tax consequences regardless of whether we continue to qualify as a PFIC, including
the treatment of gains realized on the sale of our ordinary shares as ordinary income, rather than as capital gain, the loss of the preferential
rate applicable to dividends received on our ordinary shares by individuals who are U.S. holders (as defined in “Item 10. Additional
Information - E. Taxation - Certain Material U.S. Federal Income Tax Considerations to U.S. Holders”), the addition of interest
charges on certain taxes treated as deferred taxes, and additional reporting requirements. A U.S. shareholder of a PFIC generally may
mitigate these adverse U.S. federal income tax consequences by making a “qualified electing fund” election, or QEF election,
or, in some circumstances, a “mark to market” election. A U.S. holder can only make a QEF election with respect to our ordinary
shares if we agree to furnish such U.S. holder with certain tax information annually. For any taxable year in which we determine that
we are a PFIC, we intend to make available to U.S. holders, upon request and in accordance with applicable procedures, a PFIC Annual Information
Statement with respect to such taxable year. There can be no assurance, however, that we will have timely knowledge of our status as a
PFIC in the future or that we will timely provide such information for such years.
For further discussion of the PFIC rules and the adverse U.S. federal
income tax consequences in the event we are classified as a PFIC, as well as certain elections that may be available to U.S. holders,
see “Item 10. Additional Information - E. Taxation - Certain Material U.S. Federal Income Tax Considerations to U.S. Holders –
Passive Foreign Investment Company Rules”.
Shareholder activism can negatively affect our business.
In recent years, shareholder activists have become involved in
numerous public companies. Shareholder activists could propose involving themselves in the governance, strategic direction and operations
of a company. In general, shareholder activism, including potential proxy contests, diverts management’s and board of directors’
attention and resources from the company’s business, could give rise to perceived uncertainties as to the company’s future
direction and could result in the loss of potential business opportunities and make it more difficult to attract and retain qualified
personnel for positions in both management and on the board level and to raise funds. If nominees advanced by activist shareholders are
elected or appointed to our board of directors with a specific agenda, it may adversely affect our ability to effectively and timely implement
our strategic plans or to realize long-term value from our assets. Also, we may be required to incur significant expenses including legal
fees related to activist shareholder matters. Further, our share price could be subject to significant fluctuations or otherwise be adversely
affected by the events, risks and uncertainties of any shareholder activism.
47
General Risks
Unfavorable global political or economic conditions could adversely
affect our business, financial condition or results of operations.
The global economy continues to experience significant volatility,
and the economic environment may continue to be, or become, less favorable than that of past years. Higher costs for goods and services,
inflation, deflation, trade tensions, global geopolitical tensions, the imposition of tariffs or other measures that create barriers to
or increase the costs associated with international trade, overall economic slowdown or recession and other economic factors affecting
Israel, the United States or any other markets in which we operate could adversely affect our operations and operating results. A severe
or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including inability
to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our CDMOs and CROs,
possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which
the current economic climate and financial market conditions could adversely impact our business.
Furthermore, although to date we have not been directly impacted
by global conflicts, such as the recent developments between the U.S. and Venezuela, the conflict between Russia and Ukraine, and the
inner tensions in Iran and their potential global impact, these conflicts, or any expansion thereof, could disrupt or otherwise adversely
impact our operations and those of third parties upon which we rely. Related sanctions, export controls or other actions have been or
may in the future be initiated by nations including the United States, the European Union, China or Russia (e.g., potential cyberattacks,
disruption of energy flows, etc.), which could adversely affect our business and/or our supply chain, our CROs, CMOs and other third parties
with whom we conduct business. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current
economic climate and financial market conditions could adversely impact our business.
Environmental, social and governance matters may impact our business
and reputation.
In addition to financial performance, companies are frequently
judged on an environmental, social and governance, or ESG, matters, which some investors consider in assessing the long-term sustainability
of companies’ performance.
Investing in funds emphasizing ESG performance has grown, and some
institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions. Topics in these assessments
may include, climate change, human rights, ethics and compliance with the law, and board oversight of sustainability issues. In the
healthcare industry, public access to a company’s medicines is also considered.
There can be no certainty that we will manage such issues successfully,
or meet society’s or investor’s expectations. Actual or perceived failures in our ESG matters performance could adversely
affect our brand and reputation, employees’ engagement, and the willingness of our partners to do business with us.
We are subject to U.S. and
certain foreign import and export controls, trade sanctions, tariffs, anti-corruption laws, and anti-money laundering laws and regulations.
Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal
liability and other serious consequences for violations, which can harm our business.
We are subject to export control and import laws and regulations,
including the U.S. Export Administration Regulations, U.S. Customs regulations, various economic and trade sanctions regulations administered
by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Foreign Corrupt Practices Act of 1977, as amended,
or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and other state
and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities. Anti-corruption laws are interpreted
broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering,
or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector. We may
engage third parties to conduct clinical trials, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory
approvals. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals,
universities, and other organizations. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors
and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities. Any violations of the laws
and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or
import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
48
There is inherent risk, based on the complex relationships among
the United States and the countries in which we conduct our business, that among other factors, political, diplomatic, and national security
factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business
and operations, such as the imposition of tariffs. The United States and other countries have imposed and may continue to impose new trade
restrictions and export regulations, have levied tariffs and taxes on certain goods, and could significantly increase tariffs on a broad
array of goods. While pharmaceutical products have customarily been granted exemptions from tariffs, recent proposals do not contemplate
such exemptions. Trade restrictions and export regulations, or increases in tariffs and additional taxes, including any retaliatory measures,
can negatively impact demand, increase our supply chain complexity and our manufacturing costs, decrease margins, reduce the competitiveness
of our products, or restrict our ability to sell products, provide services or purchase necessary equipment and supplies, any or all of
which could have a material and adverse effect on our business, results of operations, or financial condition.
Climate change, or
legal or regulatory measures to address climate change, may negatively affect us.
Climate change may increase the frequency or severity of extreme
weather events and could adversely affect our facilities, operations, or those of our vendors or collaborators. Extreme temperatures or
other weather-related events could disrupt our operations or supply chain or increase operating costs. In addition, evolving legal, regulatory,
or compliance requirements related to climate change may increase costs or require additional investments, which could adversely affect
our business or expected cash runway.
ITEM 4. INFORMATION ON THE
COMPANY
A. HISTORY AND DEVELOPMENT OF THE COMPANY
History
Our legal and commercial name is Compugen Ltd. We were incorporated on February 10,
1993, as an Israeli corporation and operate under the Companies Law. Our principal offices are located at 26 Harokmim Street, Holon 5885849,
Israel, and our telephone number is +972-3-765-8585. Our web address is www.cgen.com. Information
contained on our website does not constitute a part of this Annual Report. The SEC maintains an internet site, http://www.sec.gov that
contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Neither
such internet addresses are a part of this Annual Report.
Our agent for service of process in the United States is Compugen USA, Inc., our wholly
owned U.S. subsidiary located at 101 Montgomery Street, San Francisco, CA 94104, which was incorporated in Delaware in March 1997 and
is qualified to do business in California. This subsidiary did not have any significant operations from 2008 to March 2012.
Principal Capital Expenditures
In the years ended December 31, 2025, 2024 and 2023, our capital expenditures were
$0.3 million, $0.1 million and $0.2 million, respectively. As of December 31, 2025, we had no significant commitments for capital expenditures.
B. BUSINESS OVERVIEW
Summary
We are a clinical-stage therapeutic discovery and development company utilizing Unigen™,
our AI/ML powered computational discovery platform, to identify novel drug targets and to develop therapeutics in the field of cancer
immunotherapy. Our innovative immuno-oncology pipeline consists of four clinical-stage programs: COM701, COM902, rilvegostomig and GS-0321
(previously COM503). COM701, a potential first-in-class anti-PVRIG antibody, and COM902, a potential best-in-class therapeutic anti-TIGIT
antibody, have been evaluated for the treatment of solid tumors as monotherapy and in combinations of dual (PVRIG/PD-1, PVRIG/TIGIT) and
triple (PVRIG/PD-1/TIGIT) blockade. The last patient in the clinical trial evaluating the triple combination treatment of COM701, COM902
and pembrolizumab (initiated in 2023), received the last dose in January 2026. Currently, the only clinical trial we sponsor and are conducting
is a blinded randomized ovarian cancer platform trial evaluating COM701 as a single agent in maintenance therapy in relapsed platinum
sensitive ovarian cancer (named MAIA-ovarian trial) and we expect an interim analysis from this trial in the first quarter of 2027. Rilvegostomig, a
PD-1/TIGIT bispecific antibody with a TIGIT component that is derived from our COM902 program, is being developed by AstraZeneca pursuant
to an exclusive license agreement between us and AstraZeneca and is being evaluated in multiple Phase 3, Phase 2 and Phase 1 clinical
trials. GS-0321 (previously COM503) our potential first-in-class high affinity antibody, which blocks the interaction between IL-18 binding
protein and IL-18, is licensed to Gilead and is being evaluated in a Phase 1 clinical trial that we sponsor and are conducting by us.
In addition, we have an early-stage immuno-oncology therapeutic pipeline that consists of research programs aiming to address various
mechanisms to enhance anti-cancer immunity.
49
Our business model is to selectively enter into collaborations for our novel targets
and drug product candidates at various stages of research and development under various revenue-sharing arrangements. Integrating cutting
edge computational capabilities with ground-breaking immuno-oncology research and drug development expertise is our differentiator and
has enabled us to advance drug targets from computer prediction through successful preclinical studies to the clinic. Therefore, we believe
that we are uniquely positioned to discover and develop innovative treatment options for cancer patients.
Our Strategy
We aim to transform patient lives by developing innovative therapeutics in the field
of cancer immunotherapy based on Unigen, our AI/ML powered computational discovery platform. We employ and leverage our key differentiator,
the integration of cutting edge computational capabilities with groundbreaking immuno-oncology research and drug development expertise,
in the competitive landscape of immuno-oncology to build our pipeline with innovative drugs:
| • |
We discover novel drug targets with the potential to address the unmet need of patients non-responsive to current cancer immunotherapies
|
| • |
We harness our Unigen capabilities to inform our target experimental validation and drug development process; and |
| • |
We apply our capabilities to inform on the program’s mechanism of action, relevant indication/patient population, drug combinations
and potential biomarker that may fit for future patient selection. |
We believe that the totality of these capabilities uniquely positions us in the discovery
and the development of innovative drugs for cancer immunotherapy.
In our clinical therapeutic pipeline, our most advanced programs are:
| • |
COM701 is our internal lead immuno-oncology pipeline program. COM701 is a humanized antibody
that binds with high affinity to PVRIG, a novel immune checkpoint target candidate discovered by us that blocks the interaction with its
ligand, PVRL2. Our data suggest that PVRIG has a unique biology, differentiated from other checkpoints. PVRIG is dominantly expressed
in stem-like memory T cells (TSCM) and PVRL2 is expressed in dendritic cells as well as tumor cells. Therefore, PVRIG blockade might induce
potent induction of T cell numbers in tumors and unleash antitumor immunity also in indications less responsive to other checkpoint inhibitors,
such as ovarian cancer. Phase 1 clinical trials for COM701 were initiated in September 2018. In 2025 we initiated a blinded randomized
ovarian cancer platform trial evaluating COM701 as a single agent in maintenance therapy in relapsed platinum sensitive ovarian cancer
(named MAIA-ovarian trial). We expect an interim analysis from this trial in the first quarter of 2027. |
| • |
COM902 is a high affinity, fully human antibody developed by us, targeting TIGIT, an immune
checkpoint discovered computationally by us. COM902 blocks the interaction of TIGIT with PVR, its ligand. COM902 is potential best-in-class
antibody with a non-active Fc tail. COM902 prevents depletion of major TIGIT+
expressing lymphocytes (NK, CD4 and CD8 T cells), supporting rationale for selecting a high affinity anti-TIGIT antibody with an IgG4
backbone and low Fc effector function. Phase 1 clinical trials for COM902 were initiated in March 2020. While we have reported preliminary
signals of antitumor activity from our Phase 1 dose escalation monotherapy trial of COM902 with a best response of stable disease, based
on recent negative data in the TIGIT field, including the announcement by Arcus and Gilead on December 12, 2025 that the Phase 3 STAR-221
study evaluating a domvanalimab-based combination in upper gastrointestinal cancers will be discontinued due to futility, we currently
believe that COM902 has a limited potential to create near-term value to us and we therefore do not plan to initiate new clinical trials
with COM902. This decision may be revisited pending further data disclosure regarding TIGIT by other companies. |
50
| • |
Rilvegostomig is a PD-1/TIGIT bispecific antibody with a TIGIT component that is derived
from COM902 and is being developed by AstraZeneca pursuant to an exclusive license agreement with AstraZeneca. AstraZeneca initiated its
first Phase 3 clinical trial at the end of 2023, dosing its first patient in December 2023 and rilvegostomig is currently being evaluated
in multiple Phase 3, Phase 2 and Phase 1 clinical trials. |
| • |
GS-0321 (previously COM503) is a potential first-in-class high affinity antibody, which blocks
the interaction between interleukin-18 binding protein (IL18BP) and interleukin-18 (IL-18). The inflammasome-induced pro-inflammatory
cytokine, IL-18, is present at high levels in the tumor microenvironment, where it is expected to naturally activate anti-tumor effector
cells, such as T and NK cells. Nevertheless, IL-18 is one of the rare cytokines that is naturally blocked by an endogenous high affinity
inhibitor, called IL-18BP. GS-0321 (previously COM503) was designed to free natural IL-18 activity in the tumor microenvironment by releasing
it from IL-18BP, thereby increasing the local concentrations of IL-18 within the tumor where it can potentiate anti-tumor immune responses,
potentially overcoming the limitations of systemically administered cytokines. GS-0321 (previously COM503) is licensed to Gilead and is
being developed by us in a Phase 1 clinical trial. The Phase 1 clinical trial is designed to assess the safety and tolerability of GS-0321
(previously COM503) as monotherapy and in combination with zimberelimab in participants with advanced solid tumors. |
Research Focus - Immuno-Oncology
Our research and development efforts focus on identifying novel drug targets and developing
innovative therapeutics in the field of cancer immunotherapy.
Cancer immunotherapies continue to represent a rapidly expanding commercial market.
According to Precedence Research, the global immune checkpoint inhibitors market size is estimated at $58.53 billion in 2025 and is projected
to reach approximately $229.60 billion by 2034, reflecting a compound annual growth rate (CAGR) of 16.40% from 2025 to 2034.
The immune system is naturally programmed to seek out and destroy abnormal cells.
Cancer is believed to thrive, in part, because of a number of cellular mechanisms that aid in the evasion of immune response. Such mechanisms
of immune system evasion include masking or reducing the expression of tumor antigens to avoid detection, recruiting T-cell suppressor
cells or expressing inhibitory molecules that suppress immune activation, inducing conditions in the tumor microenvironment that promote
tumor cell proliferation and survival, and a number of other factors. Immuno-oncology therapies that overcome immune suppression by stimulating
responses directed to cancer cells have emerged as a powerful means of counteracting the cellular mechanisms that enable the growth and
spread of tumors. Immuno-oncology agents are expanding as a potential path to durable and long-lasting responses in certain patients.
Our discovery strategy is focused on the discovery of novel drug targets which may
provide new cancer immunotherapies for enhancing anti-tumor immune responses in cancer patients.
51
Therapeutic Pipeline
| • |
COM701 - a therapeutic antibody targeting PVRIG |
Pathway expression and preclinical data
COM701 is a potentially first-in-class humanized antibody that
binds with high affinity to PVRIG, a novel immune checkpoint target candidate discovered by us, blocking the interaction with its ligand,
PVRL2. Blockade of PVRIG by COM701 has demonstrated potent, reproducible enhancement of T cell activation, consistent with the desired
mechanism of action of activating T cells in the tumor microenvironment to generate anti-tumor immune responses. In addition, COM701 combined
with PD-1 pathway blockers have demonstrated synergistic effects in enhancing human T cell stimulation and inhibiting tumor growth in
murine models, supporting the suggested intersection of the PVRIG and PD-1 inhibitory pathways and the potential of these combinations
to further enhance immune response against tumors.
Furthermore, our data show that PVRIG is expressed in stem-like
memory T cells (TSCM) and PVRL2 is expressed in dendritic cells, as well as in PD-L1 low less inflamed tumors. Therefore, this unique
expression pattern and resulting biology might enable PVRIG blockade to be active in patients with less inflamed tumors, such as ovarian
cancer. In addition, expression studies showed that PVRIG and its ligand, PVRL2, are expressed in a broad variety of tumor types, with
ovarian cancer having one of the highest expressions of the pathway. We are currently conducting a blinded randomized ovarian cancer platform
trial evaluating COM701 as a single agent as maintenance therapy in relapsed platinum sensitive ovarian cancer (named MAIA-ovarian trial).
We expect an interim analysis for the MAIA-ovarian trial in the first quarter of 2027.
COM701 Clinical Programs
In September 2018, we dosed our first patient in the Phase 1 clinical
trial of COM701 and through December 31, 2025, we conducted multiple Phase 1 studies across tumor types, patient populations and combinations.
Below is a table showing key COM701 expansion cohorts efficacy data as monotherapy and in combinations disclosed in scientific conferences.
|
Tumor |
Treatment |
Median prior lines |
Best Response |
Description |
Reference |
|
Platinum resistant ovarian cancer |
COM701 |
6 across indications |
1/6 ORR (16.6%)
4/6 DCR (66%) |
1 PR >18 months~* in immune desert TME |
ASCO 2021 |
|
COM701 + nivolumab |
6 |
2/20 ORR (10%)
9/20 DCR (45%) |
1 PR in patient refractory to nivolumab |
ESMO IO 2022 | |
|
COM701 + nivolumab + BMS-986207 |
4 |
4/20 ORR (20%)
9/20 DCR (45%) |
3 PR >16 months* |
ESMO IO 2022
SITC 2023 | |
|
COM701 + pembrolizumab +COM902 |
4 |
4/24 ORR (17%)
11/24 DCR (46%) |
5 patients on treatment for >200 days |
SITC 2024 | |
|
MSS CRC with liver metastases |
COM701 + nivolumab |
4 |
2/17 ORR (12%)
4/17 DCR (24%) |
1 PR in patient with immune desert TME
1 PR >11 months |
SITC 2022 |
|
COM701+ COM902+ pembrolizumab |
3 |
1/15 ORR (7%)
6/15 DCR (40%) |
1 PR > 9 months* in patient who had PD on chemo + bev (post data cut patient reassessed
as non- target liver lesion of uncertain etiology at baseline)
2 SD >7 months* |
ASCO 2024 | |
|
ICI experienced NSCLC |
COM701 ± nivolumab |
6, ≥ 2 prior ICI |
5/7 DCR (71%) |
3 SD on COM701 monotherapy |
ESMO IO 2022 |
|
Recurrent metastatic MSS endometrial cancer |
COM701 + nivolumab + BMS-986207 |
2, 33% prior PD1x |
2/9 ORR (22%)
4/9 DCR (44%) |
1 PR in patient refractory to lenvatinib/ pembrolizumab |
ASCO 2023 |
|
Metastatic breast cancer |
COM701 + nivolumab |
5 |
2/17 ORR (12%)
5/17 DCR (30%) |
1 CR > 21 months*, low immunogenic HER2 negative tumor |
SITC 2023 |
In connection with the table above, BMS-986207 is Bristol Myers
Squibb anti-TIGIT; ICI is Immune checkpoint inhibitor; CR is Complete Response; PR is Partial Response; SD is Stable Disease; PD is Progressed
Disease; ORR is Overall Response Rate; DCR is Disease Control Rate. *Ongoing at time of data cut-off; ~ means that patient had primary
peritoneal cancer.
52
Clinical data disclose
from COM701 related studies in 2025 (covered in the table above as well):
On October 18, 2025, at the European Society of Medical Oncology
(ESMO) in Berlin, Germany, we presented a poster of pooled analysis of previously presented data reflected in the table above (with an
additional year of follow-up), supporting the anti-tumor activity and safety profile of COM701 in heavily pre-treated patients with platinum
resistant ovarian cancer (PROC).
Conclusions from the poster provided that:
| • |
The pooled analysis demonstrates that COM701 was well tolerated and showed consistent, durable responses in patients with heavily
pretreated platinum-resistant ovarian cancer - particularly in those without liver metastases, representing patients with lower disease
burden and potentially less immunosuppressive tumor microenvironment. |
| • |
The results of the analysis support the rationale for evaluating COM701 as maintenance therapy in earlier lines of treatment.
|
| • |
COM902 - a therapeutic antibody targeting TIGIT |
Pathway expression and preclinical data
COM902 is a high affinity, fully human and a potentially best-in-class
antibody targeting TIGIT with a non-active Fc tail. COM902 was shown to have superior binding affinity to T cells with similar and or
greater in vitro function compared to several clinical anti-TIGIT antibodies. COM902 is a mouse-cross reactive Ab and inhibited tumor
growth and increased survival when combined with anti-PVRIG or anti-PD-L1 antibodies in in-vivo studies. Preclinical data demonstrated
that TIGIT inhibition, either alone or in combination with other checkpoint inhibitors, can enhance T cell activation and increase
anti-tumor immune responses. In preclinical studies, parallel inhibition of TIGIT and PVRIG, two coinhibitory arms of the DNAM-1 axis,
resulted in synergistic effects on effector T cell function and tumor growth inhibition in various model systems that can be further
increased with the addition of PD-1 blockade. Based on preclinical data these combinations may be clinically important for enhancing anti-tumor
immune response and expanding the patient population responsive to checkpoint inhibition.
We discovered TIGIT in 2009 with our immune checkpoint computational
discovery capabilities through which PVRIG was also discovered. The TIGIT discovery was published by us in October 2009 in the Proceedings
of the National Academy of Sciences (PNAS).
53
Clinical Development
In March 2020, we dosed our first patient in the Phase 1 clinical
trial of COM902. COM902 was primarily evaluated in combination with COM701.
For information regarding the evaluation of COM902 in combination
with COM701, see “COM701 Clinical Programs” above.
While we have reported preliminary signals of antitumor activity
from our Phase 1 dose escalation monotherapy trial of COM902 with a best response of stable disease, based on recent negative data in
the TIGIT field, including the announcement by Arcus and Gilead on December 12, 2025 that the Phase 3 STAR-221 study evaluating a domvanalimab-based
combination in upper gastrointestinal cancers will be discontinued due to futility, we currently believe that COM902 has a limited potential
to create near-term value to us and we therefore do not plan to initiate new clinical trials with COM902. This decision may be revisited
pending further data disclosure regarding TIGIT by other companies.
| • |
Rilvegostomig - a therapeutic PD-1/TIGIT bi-specific antibody with a TIGIT component
that is derived from our COM902 |
Rilvegostomig is a PD-1/TIGIT bi-specific antibody with a TIGIT
component that is derived from our COM902 being developed by AstraZeneca pursuant to an exclusive license between us and AstraZeneca.
In March 2018, we entered into an exclusive license agreement with
AstraZeneca, pursuant to which, we granted to AstraZeneca an exclusive license to use our monospecific antibodies that bind to TIGIT,
including COM902, for the development of bi-specific and multi-specific antibody products, excluding such bi-specific and multi-specific
antibodies that also bind to PVRIG, PVRL2 and/or TIGIT.
Rilvegostomig is currently being evaluated by AstraZeneca in multiple
Phase 3, Phase 2 and Phase 1 clinical trials, with the first patient dosed in the first Phase 3 clinical trial in December 2023.
| • |
GS-0321 (previously COM503) - a therapeutic
antibody targeting IL-18 binding protein |
GS-0321 (previously COM503) is a potential first-in-class high
affinity antibody, which blocks the interaction between interleukin-18 binding protein (IL18BP) and interleukin 18 (IL-18). The inflammasome-induced
pro-inflammatory cytokine, IL-18, is present at high levels in the tumor microenvironment, where it is expected to naturally activate
anti-tumor effector cells, such as T and NK cells. Nevertheless, IL-18 is one of the rare cytokines that is naturally blocked by an endogenous
high affinity inhibitor, called IL-18BP. GS-0321 (previously COM503) was designed to free natural IL-18 activity in the tumor microenvironment
by releasing it from IL-18BP, where it can potentiate anti-tumor immune responses, potentially overcoming the limitations of systemically
administered cytokines. GS-0321 (previously COM503) is licensed to Gilead and is being developed by us in a Phase 1 clinical trial.
In January 2025, we dosed the first patient in the dose escalation
monotherapy cohort of the Phase 1 clinical trial, which is expected to enroll up to 200 participants, to evaluate GS-0321 (previously
COM503) as monotherapy and in combination with zimberelimab in patients with advanced solid tumors.
On November 7, 2025, at the Annual Meeting of the Society for Immunotherapy
of Cancer (SITC), in National Harbor, Maryland, USA, we presented a trial in progress poster of the first in human clinical trial to assess
the anti-IL18BP antibody, COM503 (GS-0321) in participants with advanced solid malignancies.
Biomarker Driven Strategy
We recognize that one of the major limitations of current immunotherapy approaches
is the lack of tools to help predict patient responses. By applying the integration of Unigen with our ground-breaking immuno-oncology
research and drug development expertise, we aim to identify biomarkers that can help us predict which patients are most likely to respond
to our novel therapies. This long-term approach also seeks to improve the probability of success of our clinical studies.
We currently apply these capabilities in three different areas.
54
Firstly, we are computationally analyzing omics data using our Unigen platform to
identify tumor indications in which the pathway of our target plays a role. This analysis is thereafter validated experimentally, and
the validated data is used for indication selection for our clinical trials.
Secondly, the identification of potential biomarkers for future patient selection.
In this approach, we are using various cutting-edge technologies and methodologies on both biopsies, liquid biopsies, and blood samples.
The different technologies may include immunohistochemistry, transcriptomic, genomic and proteomic analysis. The generated data is added
to the Unigen platform databases and then analyzed
computationally to identify potential biomarkers for patient selection and used in discovery projects aimed at uncovering potential novel
drug targets.
Thirdly, we apply a pharmacodynamic biomarker approach where we measure immune modulation
induced by our drug candidates in peripheral and tumor patient samples obtained before and during treatment in our clinical trials. In
this analysis we may measure both protein and sequence analytics, such as cytokine analysis, immune phenotyping, proteomic changes, transcriptomics
analysis, and TCR clonality. This again may serve for the identification of potential biomarkers and may also inform us on the suggested
mechanism of action of our drug candidates.
Early-Stage Pipeline
Immuno-oncology had made a breakthrough in the treatment of cancer, and biological
drugs blocking immune checkpoint targets or directly activating immune cells have resulted in long-term patient survival in certain cancer
types. Despite their potential, current immuno-oncology agents are limited to a few targets and are only effective in certain patients
and in certain cancers. We believe that the identification of novel drug targets with a unique and differentiated mechanism of action
has the potential to broaden the reach of cancer immunotherapies to more types of cancer and many more patients.
Our early-stage research programs are supported by our Unigen platform and consist
of drug targets which may provide new cancer immunotherapies for patients.
Our AI/ML powered Computational Discovery Approach
Our target discovery is a proprietary, data driven computational process that we initiate
based on an unmet medical and therapeutic strategy, which dictates the target discovery approach, the appropriate tools and most relevant
data to be analyzed. We have developed drug target discovery capabilities that leverage the power of AI/ML based computational algorithms,
guided by our scientific expertise and extensive public and proprietary datasets, to identify novel drug targets towards the development
of new cancer immunotherapy treatments. Our multi-omics datasets and analysis are designed to identify novel drug target candidates, which
are generally difficult to identify using traditional experimental approaches or literature mining. We believe that our cutting-edge
AI/ML powered computational capabilities integrated with our ground-breaking immuno-oncology research and drug development expertise is
a key differentiator from others employing computational discovery approaches.
Our broadly applicable computational drug target discovery capabilities employ a suite
of cloud-based solutions and purpose-built algorithms to sort through both public and proprietary datasets encompassing genomics, single
cell RNA sequencing, proteomics and spatial transcriptomics, combined with machine learning based analysis of tissue spatial images. From
these massive datasets, our platforms analyze characteristics, such as gene structure, protein domains, predicted cellular localization,
expression pattern, as well as other characteristics to identify potential druggable targets and predict their expression pattern and
biological functions. Over the past decade, we have continued to refine our analysis by incorporating new public and in-house experimental
data and adding AI/ML powered tools under the Unigen platform. The platform uses computational methods that learn patterns from large,
diverse biological and experimental datasets to enhance our ability to identify, assess, and prioritize novel drug targets. It combines
advanced analytical capabilities with our scientific expertise to streamline discovery workflows and strengthen the value and impact of
our computational discovery platform.
We have demonstrated the applicability of our computationally discovery approach in
identifying multiple drug targets, including PVRIG, TIGIT, IL-18BP and ILDR2, the first three now serve as the targets
for therapeutic antibodies currently being evaluated in the clinic by us and others. The antibodies designed to block these targets are
or have been evaluated in clinical trials by us (COM701, COM902 and GS-0321 (previously COM503)) or by our partners (bapotulimab and rilvegostomig).
55
Business Strategy and Partnerships
Our business strategy includes entering into various forms of revenue-sharing collaborations
with pharmaceutical or biotechnology partners for our novel drug targets and product candidates at various stages of research and development.
Such collaborations or other types of partnering arrangements might include one or more of our therapeutic pipeline programs. Through
these collaborations we seek to generate, further develop and commercialize our therapeutic product candidates. Additionally, our discovery
capabilities designed to feed our internal pipeline may allow for future research and discovery collaborations aimed at harnessing our
capabilities towards a potential partner’s pipeline needs. Potential revenue sources in line with this business strategy could include
upfront fees, research funding, in-kind funding, milestones payments, license fees, royalties and other revenue sharing payments. We may
also seek co-development arrangements pursuant to which we would further advance partnered programs under any such partnership in order
to potentially retain a higher share of proceeds from future collaborations.
Gilead License Agreement
On December 18, 2023, we entered into the license agreement, pursuant to which we
granted Gilead an exclusive license under our preclinical antibody program against IL-18 binding protein and all intellectual property
rights subsisting therein, to use, research, develop, manufacture and commercialize products, including GS-0321 (previously COM503), and
additional products that may be so developed by Gilead, together with GS-0321 (previously COM503), referred to herein as the Licensed
Products.
Pursuant to the license agreement, Gilead paid us a $60 million upfront license payment
($51 million net after $9 million were withheld at source) in January 2024 and additional $30 million ($25.5 million net after $4.5 million
were withheld at source) as a milestone payment upon clearance of the IND application for GS-0321 (previously COM503) in the third quarter
of 2024. We are also eligible to receive up to approximately $758 million in additional milestone payments upon the achievement of certain
development, regulatory and commercial milestones. We are further eligible to receive single-digit to low double-digit tiered royalties
on worldwide net sales of Licensed Products. We are required to make certain upstream payments to certain service providers with respect
to the Licensed Products.
We are responsible for conducting the Phase 1 clinical trial for GS-0321 (previously
COM503), including handling the regulatory matters in connection therewith, and are bearing the costs of such trial (including the GS-0321
(previously COM503) drug supply), with Gilead having the obligation to provide us its anti-PD-1 antibody, zimberelimab, for such trial.
In certain circumstances, Gilead may assume the role of conducting the Phase 1 clinical trial.
Upon completion of the Phase 1 clinical trial for GS-0321 (previously COM503), we
are required to initiate the transfer of development activities related to GS-0321 (previously COM503) to Gilead, following which, Gilead
will have sole responsibility to develop and commercialize the Licensed Products. Such transfer may also take place under certain circumstances
prior to the completion of the Phase 1 clinical trial.
During the term of the license agreement, we are prohibited from researching, developing,
making and commercializing any compounds, molecules, products or treatment methods that are directed to IL-18 or any companion diagnostics
for an IL-18 product.
Unless terminated early by a party pursuant to its terms, the license agreement will
continue in effect on a Licensed Product-by-Licensed Product and country-by-country basis until the expiration of the last royalty term
in such country.
Gilead withheld at source 15% from the upfront payment and the milestone payment amount
paid to us in January 2024 and in September 2024, respectively, and is expected to continue to withhold at source all taxes required by
law from all payments payable to us under the license agreement.
The license agreement contains customary representations, warranties, covenants, and
terms governing the prosecution and enforcement of certain intellectual property and issues related to technology transfer, manufacturing
transfer, provisions with respect to establishment of joint steering committee and its governance covenants with respect change of control
and others.
AstraZeneca License
In March 2018, we entered into an exclusive license agreement with AstraZeneca, to
enable the development of bi-specific and multi-specific immuno-oncology antibody products.
Under the terms of the license agreement, as amended, we granted an exclusive license
to AstraZeneca to use our monospecific antibodies that bind to TIGIT, including COM902, for the development of bi-specific and multi-specific
antibody products, excluding such bi-specific and multi-specific antibodies that also bind to PVRIG, PVRL2 and/or TIGIT. AstraZeneca has
the right to create multiple products under this license agreement and is solely responsible for all research, development and commercial
activities under the license agreement. In connection with such license agreement, AstraZeneca developed rilvegostomig, a novel PD-1/TIGIT
bi-specific antibody with a TIGIT component that is derived from our COM902 and entered the clinic in September 2021 and initiated Phase
3 with first patient dosing in December 2023.
56
From the date of the license agreement until the recent amendment thereto dated December
16, 2025, we received a $10 million upfront payment and were eligible to receive up to $200 million in development, regulatory and
commercial milestones for the first product as well as mid-single-digit tiered royalties on future product sales, out of which we accrued
$2 million in 2020 as a preclinical milestone, $6 million in 2021 as a clinical milestone (triggered by the dosing of the first patient
in a Phase 1/2 clinical trial evaluating rilvegostomig), an additional $7.5 million in 2022 as a clinical milestone (triggered by the
dosing of the first patient in its ARTEMIDE Phase 2 clinical trial evaluating rilvegostomig), an additional $10 million in 2023 as a clinical
milestone (triggered by the dosing of the first patient in its ARTEMIDE-Bil01 Phase 3 clinical trial evaluating rilvegostomig), and
an additional $5 million in 2024 (triggered by dosing of the first patient in the second Phase 3 clinical trial evaluating rilvegostomig).
If additional products are developed, additional milestones and royalties would be due to us for each product. In 2024, AstraZeneca provided
a non-risk adjusted peak year revenue target for rilvegostomig of over $5 billion.
On December 16, 2025, we amended the license agreement and sold to AstraZeneca a portion
of our existing royalty interest in rilvegostomig for a $65 million upfront payment which was paid in December 2025 and for an addition
of $25 million to the next milestone payment to be paid to us, which is the first acceptance of the Biologics License Application (“BLA”).
Following the amendment, we remain eligible for potential future regulatory and commercial milestones of up to $195 million (including
the $25 million stated above) for rilvegostomig. In addition, we maintained the majority of our royalties, being eligible for tiered royalties
of up to mid-single digit on future sales, also after the amendment.
Subject to termination rights for material breach, bankruptcy or by us for patent
challenge by AstraZeneca, the term of the license agreement continues until the expiration of the last Royalty Term in the Territory,
each as defined in the license agreement. In addition, AstraZeneca may terminate the agreement for convenience upon prior written notice.
Bristol Myers Squibb Collaboration
On October 10, 2018, we entered into a master clinical trial collaboration agreement,
or the MCTC, with Bristol Myers Squibb to evaluate the safety and tolerability of COM701 in combination with Bristol Myers Squibb’s
PD-1 immune checkpoint inhibitor Opdivo® (nivolumab), in patients with advanced solid tumors.
The collaboration was also designed to address potential future combinations. The
parties agreed that Bristol Myers Squibb and Compugen will each supply the other company with its own compound for the other party’s
trial, and otherwise each party will be responsible for all costs associated with the trial that it is conducting.
Pursuant to the terms of MCTC, as amended from time to time, we conducted triple combination
clinical trials to evaluate the safety, tolerability and antitumor activity of COM701 in combination with Opdivo® (nivolumab), and
Bristol Myers Squibb’s investigational antibody targeting TIGIT known as BMS-986207, in patients with advanced solid tumors, and
dual combination clinical trials to evaluate the dual combination of COM701 and Opdivo® in patients with advanced solid tumors. In
all these clinical trials we were responsible for and sponsored all the clinical trials and Bristol Myers Squibb provided us with Opdivo®
and BMS-986207 at no cost to us.
The MCTC provided Bristol Myers Squibb a right to negotiate a license for commercialization
and further provided Bristol Myers Squibb with certain exclusivity rights.
In conjunction with the signing of the MCTC in October 2018, Bristol Myers Squibb
made a $12 million investment in us and in conjunction with the signing one of the amendments to the MCTC in November 2021, Bristol
Myers Squibb made additional $20 million investment in us. In both investments, the share price paid by Bristol Myers Squibb represented
a 33% premium over the closing price of our ordinary shares on the last trading day immediately prior to the execution of the applicable
securities purchase agreement. In these two investments, we issued Bristol Myers Squibb 4,757,058 ordinary shares aggregately.
On August 3, 2022, we entered into a letter agreement with Bristol Myers Squibb pursuant
to which the MCTC between the parties was terminated as of such date and all ongoing clinical trials at the time of the termination entered
into a winding down process. Please see “Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital Resources.”
57
Competition
The biotechnology and pharmaceutical industries are highly competitive and characterized
by the rapid evolution of new technologies and the adoption of new therapies. Additionally, the oncology therapeutic space, represents
the therapeutic area with what we believe to be one of the highest industry focus and investment. In addition, in recent years, computational
approaches and systems are being integrated into multiple life science aspects, including the formation of new companies focusing on computational
drug target discovery. Our competitors include biotechnology and pharmaceutical companies both small and large, the research and discovery
groups within pharmaceutical companies, computational discovery and development companies, academic and research institutions, newly founded
companies and governmental and other publicly funded agencies.
Any product candidates that we successfully develop will compete with currently approved
therapies and new therapies that may become available in the future. We face, and expect to continue to face, ongoing competition from
entities that discover novel targets and develop novel products, and that have therapeutic product candidates or products that address
the same drug targets or act by similar, or possibly identical, mechanism of action as well as by different mechanisms but address the
same drug target or patient population or unmet clinical need. Our potential competitors are also comprised of companies that discover
and develop monoclonal antibody therapies and/or therapeutic proteins to novel targets, and/or other modalities, including bi-specifics
and tri-specifics antibodies, T cell engagers (TCE), cell therapies, ADCs, small molecules such as protein degraders, molecular glues,
and oligonucleotides based mRNA therapeutics. Specifically, in the field of immune checkpoints for cancer immunotherapy, there are several
leading pharmaceutical and biotechnology companies as well as smaller biotechnology companies and academic institutions that are developing
cancer immunotherapies to enhance immune response towards tumors, some of which may be based on the same targets we pursue. For examples
of the competition we face, see “Item 3. Key Information - D. Risk Factors - Risks Related to Intellectual Property - If the scope
of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors
from commercializing similar or identical product candidates would be adversely affected.” and “Item 3. Key Information –
D. Risk Factors - Risks Related to Competition and Commercialization - We operate in a highly competitive and rapidly changing industry
which may result in others discovering, developing or commercializing competing products ahead of us or more successfully than we do.”
Our discovery programs depend, in large part, on our computational discovery capabilities
in integration with our immuno-oncology experimental capabilities and drug development capabilities as well as our proprietary data to
make inventions and establish intellectual property rights in our drug target candidates and product candidates. There are additional
companies exploring computational approaches and systems for drug target discovery and other means by which such inventions and intellectual
property can be generated. We believe that our computational capabilities, and specifically our Unigen platform, provide us with a competitive
advantage in predicting protein functions and expression and linking proteins to specific mechanisms and diseases, and as a result, predicting
novel immuno-oncology drug targets. We believe that this advantage is made possible by building an integrated immuno-oncology platform
for discovery based on cutting-edge AI/ML powered computational capabilities integrated with our ground-breaking immuno-oncology research
and drug development expertise, as well as our unique team of multidisciplinary research scientists, who have vast experience in computational
discovery, including developing and handling advance data science approaches, and who over time discovered several drug targets that entered
clinical trials and have generated peer reviewed publications in scientific journals.
We also face competition from companies that utilize AI/ML for target discovery in
the field of immuno-oncology/cancer, some of which besides utilizing a computational platform for target discovery, also perform the molecule
discovery. For more information on this matter, please see relevant information “Item 3. Key Information - D. Risk Factors - Risks
Related to Intellectual Property - If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our
patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely
affected.” and “Item 3. Key Information – D. Risk Factors - Risks Related to Competition and Commercialization - We
operate in a highly competitive and rapidly changing industry which may result in others discovering, developing or commercializing competing
products ahead of us or more successfully than we do.”
We anticipate that we will face intense and increasing competition as advanced technologies
or new therapy modalities become available.
58
Intellectual Property Rights
Our intellectual property assets are our principal assets. These assets include the
intellectual property rights subsisting in our proprietary know-how and trade secrets underlying our biology capabilities and discovery
capabilities, our patents and patent applications, particularly with respect to our discovered proteins, therapeutic and diagnostic product
candidates. We seek to vigorously protect our rights and interests in our intellectual property. We expect that our commercial success
will depend on, among other things, our ability to obtain commercially valuable patents, especially for our therapeutic and diagnostic
product candidates, maintain the confidentiality of our proprietary know-how and trade secrets, and otherwise protect our intellectual
property. We design our patent strategy to fit the business competitive landscape and continual legislative changes. In addition, we periodically
analyze and examine our patent portfolio to align it with our pipeline strategy and business needs. We seek patent protection for certain
promising inventions that relate to our therapeutic and diagnostic product candidates. As of February 1, 2026, we had a total of 78 issued
and allowed patents, of which 16 are U.S. patents, 7 are European patents and additional 55 patents in other territories. Our issued and
allowed patents expire between 2036 and 2038. As of February 1, 2026, we had over 142 pending patent applications that have been filed
in the United States, Europe and in other territories as well as pending patent applications that have been filed under the Patent Cooperation
Treaty for which we have not yet designated the countries of filing. The patents issued in the U.S. and Europe for COM701 and COM902 were
issued between 2017 and 2025 and should expire no earlier than 2036. These patents include issued claims directed to, among others, the
composition of these product candidates and/or methods of using the same to treat cancer by activating T cells and/or NK cells, and/or
combinations of our product candidates with other checkpoint inhibitors. Our general policy is to continue patent filings and maintenance
for our therapeutic and diagnostic product candidates, only with respect to candidates or programs that are being actively pursued internally
or with partners, or that we believe to have future commercial value. We routinely abandon patent applications and may choose to abandon
maintenance of patents supporting candidates or programs that do not meet these criteria.
We also seek protection for our proprietary know-how and trade secrets that are not
protectable or protected by patents, by way of safeguarding them against unauthorized disclosure. This is done through the extensive use
of confidentiality agreements and assignment agreements with our employees, consultants and third parties as well as by technological
means. We use license agreements both to access third-party technologies and to grant licenses to third parties to exploit our intellectual
property rights.
We are currently facing an appeal before the board of appeal of the EPO with respect
to our granted European broad patent relating to anti-PVRIG antibodies. For information about our oppositions, see “Item 3. Key
Information – D. Risk Factors - Risks Related to Intellectual Property - If the scope of any patent protection we obtain is not
sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or
identical product candidates would be adversely affected.”
Manufacturing
We currently rely on contract manufacturers or our collaborative partners to produce
and control materials, drug substances and drug products required for the research and development activities. We do not currently own
or operate manufacturing facilities for the production of clinical or commercial quantities of our therapeutic drug candidates. We do
not have, and we do not currently plan to acquire or develop the facilities or capabilities to manufacture bulk drug substance or filled
drug product for use in human clinical trials. We rely on CMOs, advisors and third-party contractors to generate formulations and produce
small scale and larger scale amounts of GLP, cGMP clinical and commercial drug substance and the drug product required for our clinical
trials for the foreseeable future. We also contract with CMOs and third-party contractors for the labeling, packaging, storage and distribution
of investigational drug products.
We entered into agreements with certain CMOs for the manufacturing and respective
analytics of COM701, COM902 and GS-0321 (previously COM503). Our manufacturing strategy is currently structured to support the current
clinical development of COM701 and COM902 and GS-0321 (previously COM503) (for which we are responsible for the Phase 1 clinical development).
Although we believe the general manufacturing strategy developed for the United States or in Europe will be applicable in other geographies,
specific strategies for other geographies will be developed, if required, as part of our clinical and commercial plans for such other
geographies. See “Item 3. Key Information - D. Risk Factors - Risks Related to Our Dependence on Third Parties - We rely on and
expect to continue to rely completely on third parties to manufacture and supply our preclinical and clinical drug supplies. Our business
could be harmed if those third parties fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality
and quantity levels, prices or timelines.”
59
Government Regulation
Regulation of Therapeutic Product Candidates
In the United States, the FDA regulates pharmaceutical and biologic products under
the Federal Food, Drug, and Cosmetic Act, or FDCA, the Public Health Service Act, other statutes and regulations and implementing
regulations. We anticipate that our product candidates will be regulated as biologics. The process of obtaining regulatory approvals and
the subsequent compliance with applicable federal, state and local statutes and regulations require the expenditure of substantial time
and financial resources. Failure to comply with the applicable United States requirements at any time during the product development process,
approval process or after approval, may subject an applicant to administrative or judicial sanctions. The process required by the FDA
before a biologic may be marketed in the United States generally involves the following:
| • |
completion of preclinical laboratory tests and animal studies in compliance with the FDA’s GLP or other applicable regulations;
|
| • |
submission to the FDA of an IND, which must become effective before human clinical trials may begin; |
| • |
performance of adequate and well-controlled human clinical trials in accordance with GCPs to establish the safety and efficacy of
the product for its intended use; |
| • |
submission of annual reports to regulatory authorities; |
| • |
submission to the FDA of a biologics license application, or BLA; |
| • |
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug or biologic is produced
to assess compliance with current Good Manufacturing Practice, or cGMP, to assure that the facilities, methods and controls are adequate
to preserve the product’s identity, strength, quality and purity; and |
| • |
FDA review and approval of the BLA. |
Once a pharmaceutical candidate is identified for development, it enters the preclinical
testing stage. Preclinical tests include, among others, laboratory evaluations of product function, toxicity and formulation as well as
animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical
data, among other information, to the FDA as part of the IND. The sponsor will also include a clinical protocol detailing, among other
things, the objectives of the first phase of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness
criteria to be evaluated, if the first phase lends itself to an efficacy evaluation. The IND automatically becomes effective 30 days after
receipt by the FDA, unless the FDA, within the 30-day time period, places the clinical trial on a clinical hold. In such a case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Clinical holds also may be imposed by the
FDA at any time before or during a clinical trial due to, among other things, safety concerns or non-compliance with applicable requirements.
All clinical trials must be conducted under the supervision of one or more qualified
investigators in accordance with GCPs. An IRB at each institution participating in the clinical trial must review and approve the trial
plan for any clinical trial before it commences at that institution. An IRB considers, among other things, whether the risks to individuals
participating in the trials are minimized and are reasonable in relation to anticipated benefits. The IRB also reviews the information
regarding the trial, participant recruiting materials and the informed consent form that must be provided to each trial subject or his
or her legal representative before participating in the trial. In addition, the IRB will monitor the trial until completed.
Each new clinical trial protocol must be submitted to the FDA, and to the IRBs. Protocols
detail, among other things, the objectives of the trial, dosing procedures, subject selection and exclusion criteria, and the parameters
to be used to monitor subject safety and determine efficacy.
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Human clinical trials are typically conducted in three phases that may overlap or
be combined:
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• |
Phase 1: The product candidate is initially
introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and excretion. In
the case of some products, usually for severe or life-threatening diseases, especially when
the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testing may be conducted in patients.
|
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• |
Phase 2: Involves studies in a limited patient
population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted
diseases and to determine dosage tolerance and optimal dosage. |
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• |
Phase 3: Involves studies undertaken to further
evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These
studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for product labeling and
approval. |
Progress reports detailing the results of the clinical trials must be submitted at
least annually to the FDA and safety reports for serious and unexpected adverse events must be submitted to the FDA and the investigators
more frequently. The FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding
that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval
of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the applicable regulations or IRB
requirements or if the drug has been associated with unexpected serious harm to patients.
Concurrent with clinical trials, companies usually complete additional nonclinical
studies and must also finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
The manufacturing process must be capable of consistently producing quality batches of the product within required specifications and,
among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the product. Additionally,
appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product does not undergo
unacceptable deterioration over its shelf life.
United States Review and Approval Processes
The results of product development, nonclinical studies and clinical trials, along
with descriptions of the manufacturing process, analytical tests, proposed labeling, and other relevant information are submitted to the
FDA as part of a BLA requesting approval to market the product for one or more indications. The FDA initially reviews all BLAs submitted
to ensure that they are sufficiently complete for substantive review before it accepts them for filing. The FDA may request additional
information rather than accept a BLA for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review.
The FDA may refer the BLA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved
and under what conditions. The FDA is not bound by the recommendation of an advisory committee.
The review process is lengthy, and the FDA may issue a complete response letter rather
than approve a BLA if the applicable regulatory criteria are not satisfied or may require the submission of additional clinical or other
data and information. Even if such data and information are submitted, the FDA may ultimately decide that the BLA does not satisfy the
criteria for approval.
If a product receives regulatory approval, the approval will be limited to specific
diseases and dosages or the approved indications for use may otherwise be limited, which could restrict the commercial value of the product.
In addition, the FDA may require a company to conduct post-approval testing and clinical trials, to further assess a product’s safety
and effectiveness after BLA approval and may require testing and surveillance programs to monitor the safety of approved products which
have been commercialized including Risk Evaluation and Mitigation Strategy (REMS) programs to ensure that the benefits of a product outweigh
its risks.
Post-approval Requirements
Approved biologics are subject to extensive and continuing regulation by the FDA,
including, among other things, cGMP compliance, record-keeping requirements, reporting of adverse experiences, providing the FDA with
updated safety and efficacy information, and complying with FDA promotion and advertising requirements. After an approval is granted,
the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if serious problems occur after the
product reaches the market. Biologics may be promoted for use only for the approved indication or indications and in accordance with the
provisions of the approved label. The FDA and other federal and state agencies actively enforce the laws and regulations prohibiting the
promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to criminal and civil
penalties. However, physicians may, in their independent medical judgment, prescribe legally
available products for off-label uses. The FDA does not regulate the behavior of physicians in their choice of treatments, but the FDA
does restrict manufacturer’s communications on the subject of off-label use of their products.
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Other Healthcare Laws
Our current and future business operations, including, among other things, our clinical
research activities and our business and financial arrangements and relationships with healthcare providers, physicians and other parties
through which we may market, sell and distribute our products, once approved, may be subject to extensive U.S. federal, U.S. state and
foreign healthcare fraud and abuse, transparency, and data privacy and security laws. For example, U.S. federal civil and criminal laws
and regulations prohibit, among other things: knowingly and willfully soliciting, receiving, offering or providing remuneration, directly
or indirectly, to induce or reward either the referral of an individual, or the furnishing, recommending or arranging for a good or service,
for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs; knowingly presenting or
causing to be presented, a false or fraudulent claim for payment by a federal healthcare program; and knowingly and willfully executing,
or attempting to execute, a scheme to defraud any healthcare benefit program (including a private payor), or knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false statement in connection with the delivery of, or payment for,
healthcare benefits, items or services. Many U.S. states and foreign countries have analogous prohibitions that may be broader in scope
and apply regardless of payor. Additionally, some state and local laws require certain regulatory licenses to manufacture or distribute
our products commercially and/or the registration of pharmaceutical sales representatives in the jurisdiction. In addition, we may be
subject to U.S. federal, U.S. state and foreign laws that require us to report information related to certain payments and other transfers
of value to certain health care professionals, as well as ownership and investment interests in our company held by those health care
professionals and their immediate family members, and data security and privacy laws that restrict our practices with respect to the use
and storage of certain data.
Efforts to ensure that our current and future business arrangements with third parties
comply with applicable healthcare laws and regulations may involve substantial costs. If we are found to be in violation of any of these
laws, we could be subject to significant civil, criminal and administrative penalties, including damages, fines, disgorgement, imprisonment,
exclusion from participation in government healthcare programs, additional integrity oversight and reporting obligations, contractual
damages, reputational harm and the curtailment or restructuring of our operations.
Healthcare Policy and Reform
Our ability to commercialize our future therapeutic product candidates successfully,
alone or with collaborators, will depend in part on the extent to which coverage and reimbursement for these product candidates will be
available from government health programs, such as Medicare and Medicaid in the United States, private health insurers and other third-party
payors. At present, significant changes in healthcare policy, in particular the continuing efforts of the U.S. and other governments,
insurance companies, managed care organizations and other payors to contain or reduce health care costs are being discussed, considered
and proposed. Drug prices in particular are under significant scrutiny and continue to be subject to intense political and societal
pressures, which we anticipate will continue and escalate on a global basis.
For example, in the United States, there have been several initiatives implemented
to achieve these aims. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation
Act, collectively, the ACA, substantially changed the way healthcare is financed by both governmental and private insurers and significantly
affects the pharmaceutical industry. With regard to biopharmaceutical products, the ACA has, among other things, expanded and increased
industry rebates for products covered under Medicaid programs and changed the coverage requirements under the Medicare Part D program.
There have been congressional, judicial, and executive branch challenges and amendments to the ACA, which has resulted in delays in the
implementation of, and action taken to repeal or replace, certain aspects of the ACA. For example, on July 4, 2025, the One Big Beautiful
Bill Act, or the OBBBA, was signed into law, which narrowed access to ACA marketplace exchange enrollment and declined to extend the ACA
enhanced advanced premium tax credits that expired at the end of 2025, which, among other provisions in the law, are anticipated to reduce
the number of Americans with health insurance. The OBBBA also is expected to reduce Medicaid spending and enrollment by implementing work
requirements for some beneficiaries, capping state-directed payments, reducing federal funding, and limiting provider taxes used to fund
the program. Congress is considering proposed legislation intended to further reduce healthcare costs with alternatives to replace the
expired ACA subsidies.
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In addition, other legislative changes have been proposed and adopted since the ACA
was enacted. The Budget Control Act of 2011, triggered automatic reduction to several government programs, including reductions to Medicare
payments to providers, which went into effect in April 2013 and will remain in effect until 2032, unless additional congressional action
is taken.
The current administration is pursuing policies to reduce regulations and expenditures
across government agencies including at the U.S. Department of Health and Human Services, or HHS, the FDA, the Centers for Medicare &
Medicaid Services and related agencies. These actions, presently directed by executive orders or memoranda from the Office of Management
and Budget, may propose policy changes that create additional uncertainty for our business. For example, the current administration has
announced agreements with pharmaceutical companies that require the drug manufacturers to offer, through a direct-to-consumer platform
(TrumpRx), U.S. patients and Medicaid programs prescription drug Most-Favored Nation pricing equal to or lower than those paid in other
developed nations, with additional mandates for direct-to-patient discounts and repatriation of foreign revenues. Other recent actions,
for example, include (1) directing agencies to reduce agency workforce and cut programs; (2) directing HHS and other agencies to lower
prescription drug costs through a variety of initiatives; (3) imposing tariffs on imported pharmaceutical products; and (4) as part of
the Make America Healthy Again (MAHA) Commission’s Strategy Report released in September 2025, working across government agencies
to increase enforcement on direct-to-consumer pharmaceutical advertising. These actions and policies may significantly reduce U.S. drug
prices, potentially impacting manufacturers’ global pricing strategies and profitability, while increasing their operational costs
and compliance risks. Additionally, the current administration recently called on Congress to enact “The Great Healthcare Plan,”
to codify and expand Most-Favored Nation pricing, lower government subsidies to private insurance companies, increase healthcare price
transparency, expand pharmaceutical drugs available for over-the-counter purchase, and enact restrictions on pharmacy benefit manager
(PBM) payment methodologies, among other things. In June 2024, the U.S. Supreme Court’s Loper Bright decision greatly reduced judicial
deference to regulatory agencies, which could increase successful legal challenges to federal regulations affecting our operations.
We cannot predict what healthcare reform initiatives may be adopted in the future.
However, we anticipate that Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare
delivery and payment systems and may in the future propose and adopt legislation or policy changes or implementations effecting additional
fundamental changes in the healthcare delivery system. We also expect ongoing legislative and regulatory initiatives to increase pressure
on drug pricing.
Coverage and Reimbursement
Market acceptance of products is dependent on the extent to which coverage and reimbursement
is available from third-party payors. Significant uncertainty exists as to the coverage and reimbursement status of any products for which
we may obtain regulatory approval. Coverage decisions may not favor new products when more established or lower cost therapeutic alternatives
are already available. Even if we obtain coverage for a given product, the associated reimbursement rate may not be adequate to cover
our costs, including research, development, intellectual property, manufacture, sale and distribution expenses, or may require co-payments
that patients find unacceptably high. Coverage and reimbursement policies for products can differ significantly from payor to payor as
there is no uniform policy of coverage and reimbursement for products among third party payors in the United States. Additionally, the
containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this
effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment
programs, including price controls, restrictions on reimbursement and requirements for substitution of generic drugs. For example, the
U.S. Department of Health and Human Services, or HHS, imposes rebates on many Medicare Part B and Medicare Part D products to penalize
price increases that outpace inflation on an annual basis. In addition, HHS has been empowered to negotiate the price to negotiate the
price of certain single-source biologics that have been on the market for at least eleven (11) years covered under Medicare as part of
the Medicare Drug Price Negotiation Program. Each year up to twenty (20) products will be selected by HHS for the Medicare Drug Price
Negotiation Program. Products subject to the Medicare Drug Price Negotiation Program are expected to experience a significant reduction
in reimbursement from the Medicare program on a per unit basis. Further, coverage policies and third-party payor reimbursement rates may
change at any time. Even if favorable coverage and reimbursement status is attained for a product for which we receive regulatory approval,
less favorable coverage policies and reimbursement rates may be implemented in the future. Additionally, we, or our collaborators, may
develop companion diagnostic tests for use with our product candidates, once approved. We, or our collaborators, will be required to obtain
coverage and reimbursement for these tests separate and apart from the coverage and reimbursement we seek for our product candidates,
once approved.
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Non-U.S. Regulations
In addition to regulations in the United States, biologics are subject to a variety
of foreign laws and regulations governing clinical trials and commercial sales and distribution before they may be sold outside the United
States. Whether or not we obtain FDA approval for a product, we must obtain the necessary approvals from comparable regulatory authorities
of foreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies
from country to country and the time may be longer or shorter than that required for FDA approval. In some countries, we will also have
to get pricing approval.
Environmental Regulation
Some of our research and development activities involve the controlled use of biological
and chemical materials, a small amount of which could be considered to be hazardous. We are subject to laws and regulations in the U.S.,
European Union and Israel governing the use, storage, handling and disposal of all these materials and resulting waste products. We store
relatively small amounts of biological and chemical materials. To our knowledge, we substantially comply with these laws and regulations.
However, the risk of accidental contamination or injury from these materials cannot be entirely eliminated. In the event of an accident,
we could be held liable for any resulting damages, and any liability could exceed our resources.
Regulation of Use of Human Tissue
We need to access and use various human or non-human tissue samples for the purpose
of research, development and/or validation of some of our product candidates. Our access and use of these samples are subject to government
regulation, in the United States, Israel and elsewhere and may become subject to further regulation. The use of clinical data associated
with human tissue samples is also heavily regulated in the United States, Israel and elsewhere. United States and other governmental agencies
may also impose restrictions on the use of data derived from human or other tissue samples.
Regulations Concerning the Use of Animals in Research
We also are subject to various laws and regulations regarding laboratory practices
and the use of animals in our research. In the United States, the FDA regulations describe good laboratory practices, or GLPs, for various
types of nonclinical laboratory studies that support or are intended to support applications for research or marketing permits for products
regulated by the FDA, including INDs. Nonclinical animal studies conducted by us or third parties on our behalf may be subject to the
U.S. Animal Welfare Act, the U.S. Public Health Service Policy on Humane Animal Care and Use, U.S. Department of Agriculture regulations
for certain animal species or applicable laws and regulations of other countries where we or third parties on our behalf conduct these
studies. In Israel, the Council on Animal Experimentation has regulatory and enforcement powers, including the ability to suspend, change
or withdraw approvals, among other powers. To our knowledge, we and the third-party service providers we work with, as applicable, substantially
comply with these regulatory requirements.
Regulation of Products Developed with the Support of Research and
Development Grants
For a discussion of regulations governing products developed with research and development
grants from the Government of Israel, see “Item 5. Operating and Financial Review and Prospects - C. - Research and Development,
Patents and Licenses - The Israel Innovation Authority.”
C. ORGANIZATIONAL STRUCTURE
We were incorporated under the laws of the State of Israel on February 10, 1993, as
Compugen Ltd., which is both our legal and commercial name. Compugen USA, Inc., our wholly owned subsidiary, was incorporated in Delaware
in March 1997 and is qualified to do business in California.
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D. PROPERTY, PLANTS AND EQUIPMENT
In December 2015, we moved to our facilities in Holon, Israel where we leased an aggregate
of approximately 35,250 square feet of office, biology laboratory facilities and warehouse. Following the exercise of our first and second
option, we lease 30,140 square feet under that lease that will expire on March 14, 2031. Compugen USA, Inc. no longer leases office space.
To our knowledge, there are no environmental issues that affect our use of the properties
that we lease.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion of our operating and financial
review and prospects should be read in conjunction with our consolidated financial statements and related notes, prepared in accordance
with U.S. GAAP as of December 31, 2025, and with any other financial data included elsewhere in this Annual Report.
Background
We are a clinical-stage therapeutic discovery and development company utilizing Unigen™,
our AI/ML powered computational discovery platform, to identify novel drug targets and to develop therapeutics in the field of cancer
immunotherapy. Our innovative immuno-oncology pipeline consists of four clinical-stage programs: COM701, COM902, rilvegostomig and GS-0321
(previously COM503). COM701, a potential first-in-class anti-PVRIG antibody, and COM902, a potential best-in-class therapeutic anti-TIGIT
antibody, have been evaluated for the treatment of solid tumors as monotherapy and in combinations of dual (PVRIG/PD-1, PVRIG/TIGIT) and
triple (PVRIG/PD-1/TIGIT) blockade. The last patient in the clinical trial evaluating the triple combination treatment of COM701, COM902
and pembrolizumab (initiated in 2023), received the last dose in January 2026. Currently, the only clinical trial we are sponsor and conduct
is a blinded randomized ovarian cancer platform trial evaluating COM701 as a single agent in maintenance therapy in relapsed platinum
sensitive ovarian cancer (named MAIA-ovarian trial) and we expect an interim analysis from this trial in the first quarter of 2027. Rilvegostomig, a
PD-1/TIGIT bispecific antibody with a TIGIT component that is derived from our COM902 program, is being developed by AstraZeneca pursuant
to an exclusive license agreement between us and AstraZeneca and is being evaluated in multiple Phase 3, Phase 2 and Phase 1 clinical
trials. GS-0321 (previously COM503), our potential first-in-class high-affinity antibody, which blocks the interaction between IL-18 binding
protein and IL-18, is licensed to Gilead and is being evaluated in a Phase 1 clinical trial that we sponsor and conduct. In addition,
we have an early-stage immuno-oncology therapeutic pipeline that consists of research programs aiming to address various mechanisms to
enhance anti-cancer immunity.
Our business model is to selectively enter into collaborations for our novel targets
and drug product candidates at various stages of research and development under various revenue-sharing arrangements. Integrating cutting
edge computational capabilities with ground-breaking immuno-oncology research and drug development expertise is our differentiator and
has enabled us to advance drug targets from computer prediction through successful preclinical studies to the clinic. Therefore, we believe
that we are uniquely positioned to discover and develop innovative treatment options for cancer patients.
A. OPERATING RESULTS
Overview
Since our inception, we have incurred significant losses and, as of December 31, 2025,
we had an accumulated deficit of $453.4 million. We expect to continue to incur net losses in the foreseeable future.
We are currently pursuing clinical development of our internal program COM701 as well
as GS-0321 (previously COM503) on behalf of our partner, Gilead, for which we are only responsible for the Phase 1 development. We have
two partnerships in place, one with AstraZeneca, who is developing rilvegostomig, an anti PD-1/TIGIT bispecific antibody with a TIGIT-specific
component that is derived from our COM902 antibody and is in multiple Phase 3, Phase 2 and Phase 1 clinical trials, and the second, with
Gilead, pursuant to a license agreement for our GS-0321 (previously COM503) program, which is currently in Phase 1 clinical trial.
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We incurred net profit of approximately $35.3 million in 2025, and net loss of approximately
$14.2 million in 2024 and approximately $18.8 million in 2023. We expect to continue to incur net losses for the foreseeable future due
in part to the costs and expenses associated with our research, discovery and development activities. While we currently have two active
collaborations, our business model primarily involves establishing collaborations for our novel targets and therapeutic product candidates
at various stages of research and development to provide us with potential milestone payments and royalties on product sales or other
forms of payments.
Our research and development expenditures have always comprised a significant portion
of our total cash expenditures, and they are expected to remain our major operating expense in 2025.
We believe that we have sufficient cash and cash equivalents, short-term bank deposits
and investment in marketable securities in order to sustain our operations into 2029, based on our current plans without considering the
possible receipt of any additional funds, such as proceeds from existing or additional licensing and/or collaborative agreements, or from
financings. However, if our plans change or if our burn-rate increases, our cash balances may only be sufficient for a shorter period
of time. For a detailed description of our cash and cash equivalents position, see “Item 5. Operating and Financial Review and Prospects
- B. Liquidity and Capital Resources.”
Years Ended December 31, 2025 and 2024
Revenues. Revenues for the year ended December
31, 2025, were approximately $72.8 million, compared with $27.9 million in the comparable period of 2024. The revenues for 2025 include
the upfront payment from AstraZeneca in the amount of $65 million following the amendment of the license agreement with them and the portion
of the upfront payment and the IND milestone payment from the license agreement with Gilead allocated to the Phase 1 research and development
activities, while the revenues for 2024 reflect the portion of the upfront payment and the IND milestone payment from the license agreement
with Gilead allocated to the IND and Phase 1 research and development activities and to the license granted to Gilead, in addition to
the clinical milestone from the license agreement with AstraZeneca in the amount of $5 million.
Cost of Revenues. During the year ended December
31, 2025, cost of revenues was approximately $9.3 million compared with approximately $7.9 million cost of revenues in the comparable
period of 2024. Cost of revenues for the year ended December 31, 2025, represents the cost of Phase 1 activities related to the license
agreement with Gilead and royalties to the Israeli Innovation Authority, or the IIA, in connection with our revenues, while cost of revenues
for the year ended December 31, 2024, represents the cost of IND and Phase 1 activities related to the license agreement with Gilead and
royalties to the IIA in connection with our revenues from AstraZeneca, offset by royalty reversal in 2024 due to exemption from royalties
on IL-18BP received from the IIA.
Research and Development Expenses, net. Research
and development expenses during 2025 decreased by 8% and totaled approximately $22.8 million compared with approximately $24.8 million
in the comparable period of 2024. The decrease was mainly due to lower clinical expenses resulting from winding down prior clinical trials,
partially offset by an increase in clinical expenses related to MAIA-ovarian trial initiated in 2025. Research and development expenses,
as a percentage of total operating expenses, were 71% in 2025 and in 2024.
Marketing and Business Development Expenses.
Marketing and business development expenses decreased by 6% to approximately $0.5 million in 2025 compared with approximately $0.6 million
in the comparable period of 2024. Marketing and business development expenses, as a percentage of total operating expenses, were 2% in
both 2025 and 2024.
General and Administrative Expenses. General
and administrative expenses during 2025 decreased by 6% to approximately $8.9 million in 2025 compared with approximately $9.4 million
in the comparable period of 2024. The decrease during 2025 was mainly attributed to lower D&O insurance premium costs coupled with
lower legal fees partially offset by higher salary related expenses. General and administrative expenses, as a percentage of total operating
expenses, were 28% in 2025 and 27% in 2024.
Financial and Other Income, net. Financial
and other income decreased by 21% to approximately $4.1 million in 2025 from approximately $5.2 million in the comparable period of 2024.
The decrease was mainly attributed to lower cash balances during most of the year and lower interest rates and lower yield on marketable
securities leading to lower accretion and financial income.
Taxes on Income, net. Taxes on income were
approximately $0.1 million in 2025 compared with approximately $4.5 million in the comparable period of 2024. The taxes on income in 2024
represent primarily taxes withheld by Gilead on the IND milestone payments.
Net profit and loss. Net profit was approximately
$35.3 million in 2025, compared with net loss of $14.2 million in the comparable period of 2024.
Net profit and Loss per share. Net profit
per share was 38 cents per basic share in 2025, compared with net loss of 16 cents per basic share in the comparable period of 2024, and
net profit per share was 38 cents per diluted share in 2025, compared with net loss of 16 cents per diluted share in the comparable period
of 2024.
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Years Ended December 31, 2024 and 2023
Revenues. Revenues for the year ended December
31, 2024, were approximately $27.9 million, compared with $33.5 million in the comparable period of 2023. The revenues for 2024 include
the portion of the upfront payment and the IND milestone payment from the License Agreement with Gilead allocated to the IND and Phase
1 research and development activities and to the license in addition to the clinical milestone from the license agreement with AstraZeneca
in the amount of $5 million, while the revenues for 2023 reflect the portion of the upfront payment from the license agreement with Gilead
allocated to the license and the clinical milestones from the license agreement with AstraZeneca in the amount of $10.0 million.
Cost of Revenues. During the year ended December
31, 2024, cost of revenues was approximately $7.9 million compared with approximately $2.0 million cost of revenues in the comparable
period of 2023. Cost of revenues for the year ended December 31, 2024, represents the cost of IND and Phase 1 activities and royalty payments
in connection with our revenues, offset by royalty reversal in 2024 due to exemption from royalties on IL-18BP received from the IIA,
while cost of revenues for the year ended December 31, 2023, represents milestone and royalty payments in connection with our revenues.
Research and Development Expenses, net. Research
and development expenses during 2024 decreased by 28% and totaled approximately $24.8 million compared with approximately $34.5 million
in the comparable period of 2023. The decrease was mainly due to the classification of expenses related to GS-0321 (previously COM503)
to cost of revenues and to lower CMC and IND enabling activities related to GS-0321 (previously COM503), partially offset by an increase
in clinical expenses. Research and development expenses, as a percentage of total operating expenses, were 71% in 2024 compared to 78%
in 2023.
Marketing and Business Development Expenses.
Marketing and business development expenses increased by 136% to approximately $0.6 million in 2024 compared with approximately $0.2 million
in the comparable period of 2023. The increase was mainly due to higher headcount. Marketing and business development expenses, as a percentage
of total operating expenses, were 2% in 2024 compared to 1% in 2023.
General and Administrative Expenses. General
and administrative expenses during 2024 decreased by 3% to approximately $9.4 million in 2024 compared with approximately $9.7 million
in the comparable period of 2023. The decrease during 2024 was mainly attributed to lower D&O insurance premium costs, coupled with
lower salaries related expenses and legal fees partially offset by an increase in travel and consulting expenses. General and administrative
expenses, as a percentage of total operating expenses, were 27% in 2024 compared to 22% in 2023.
Financial and Other Income, net. Financial
and other income increased by 62% to approximately $5.2 million in 2024 up from approximately $3.2 million in the comparable period of
2023. The increase was mainly attributed to higher cash balances which resulted in higher financial income.
Taxes on Income, net. Taxes on income were
approximately $4.5 million in 2024 compared with $9.0 million in the comparable period of 2023. The taxes on income in 2024 and 2023 represent
primarily taxes withheld by Gilead on the upfront the IND milestone payments.
Net loss. Net loss was approximately $14.2
million in 2024, compared with $18.8 million in the comparable period of 2023.
Net Loss per share. Net loss per share was
16 cents per basic and diluted share in 2024, compared with 21 cents per basic and diluted share in the comparable period of 2023.
Governmental Policies that Materially Affected
or Could Materially Affect Our Operations
Our income tax obligations consist of those of Compugen Ltd. in Israel and of Compugen
USA, Inc. in its taxing jurisdictions.
The corporate tax rate in Israel was 23% in 2025, 2024 and 2023.
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In the future, if and when we generate taxable income, our effective tax rate may
be influenced by, among others: (a) the split of taxable income between the various tax jurisdictions; (b) the availability of tax loss
carry forwards, R&D credits carry forwards and the extent to which valuation allowance has been recorded against deferred tax assets;
(c) the tax benefits we will be entitled to pursuant to the Investment Law; and (d) the changes in the exchange rate of the dollar to
the NIS. We may benefit from certain government programs and tax legislation, particularly as a result of the entitlement to Preferred
Enterprise status that resulted from our eligibility for tax benefits under the Investment Law. To be eligible for these benefits, we
need to meet certain conditions. Should we fail to meet such conditions, these benefits could be cancelled, and we might be required to
refund the amount of the benefits previously received, if any, in whole or in part, together with interest and linkage differences to
the Israeli CPI, or other monetary penalty. We also received grants from the IIA pursuant to approved IIA programs and accordingly, we
are subject to the terms of such programs and approvals as well as to the terms of the R&D Law. For more information, please see “Item
5 Operating and Financial Review and Prospects - C. Research and Development, Patents and Licenses - The Israel Innovation Authority.”
There can be no assurance that these programs and tax legislation will continue in the future or that the available benefits will not
be reduced.
The termination or curtailment of these programs or the loss or reduction of benefits
under the Investment Law could have a material adverse effect on our business, financial condition and results of operations.
Currently we are entitled to a Preferred Enterprise status under the Investment Law.
These benefits should result in income recognized by us being taxed at a lower rate. However, these benefits may not be applied to reduce
the U.S. federal tax rate for any income that our U.S. subsidiary may generate.
Certain amendments to the Investment Law became effective in January 2011, or the 2011
Amendment. Under the 2011 Amendment, income derived by ‘Preferred Companies’ from ‘Preferred Enterprises’ (both
as defined in the 2011 Amendment) would be subject to a uniform rate of corporate tax for an unlimited period as opposed to the incentives
prior to the 2011 Amendment that were limited to income from Approved or Benefiting Enterprises during their benefits period. According
to the 2011 Amendment, the uniform tax rate on such income, referred to as ‘Preferred Income’, would be 10% in areas in Israel
that are designated as Development Zone A and 15% elsewhere in Israel during 2011-2012, 7% and 12.5%, respectively, in 2013, and 9% and
16%, respectively, thereafter. Income derived by a Preferred Company from a ‘Special Preferred Enterprise’ (as defined in
the Investment Law) would enjoy further reduced tax rates for a period of ten years of 5% in Development Zone A and 8% elsewhere. As of
January 1, 2014, dividends distributed from Preferred Income would subject the recipient to a 20% tax (or lower, if so provided under
an applicable tax treaty, subject to the receipt in advance of a valid tax certificate from the Israel Tax Authority allowing for a reduced
tax rate), which would generally be withheld by the distributing company, provided however that dividends distributed from ‘Preferred
Income’ from one Israeli corporation to another, would not be subject to tax. Under the transitional provisions of the 2011 Amendment,
companies may elect to irrevocably implement the 2011 Amendment with respect to their existing Approved and Benefiting Enterprises while
waiving benefits provided under the legislation prior to the 2011 Amendment or keep implementing the legislation prior to the 2011 Amendment.
Should a company elect to implement the 2011 Amendment with respect to its existing Benefiting Enterprises prior to June 30, 2015 dividends
distributed from taxable income derived from Benefiting Enterprises to another Israeli company would not be subject to tax. While a company
may incur additional tax liability in the event of distribution of dividends from tax exempt income generated from its Benefiting Enterprise,
as previously described, no additional tax liability will be incurred by a company in the event of distribution of dividends from Preferred
Income. We have elected to implement the 2011 Amendment and we currently have a Preferred Enterprise.
68
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying
the Economic Policy for the 2017 and 2018 Budget Years), 2016 which includes Amendment 73 to the Law, or Amendment 73, was published.
According to Amendment 73, a Preferred Enterprise located in development area A will be subject, under certain conditions, to a tax rate
of 7.5% instead of 9% effective from January 1, 2017, and thereafter (the tax rate applicable to preferred enterprises located in other
areas remains at 16%). Amendment 73 also prescribes special tax tracks for Technological Enterprises, which are subject to regulations
issued by the Minister of Finance on May 16, 2017.
The new tax tracks under the Amendment are as follows:
Technological Preferred Enterprise - an enterprise for which total consolidated revenues
of its parent company and all subsidiaries are less than NIS 10 billion. A Technological Preferred Enterprise, as defined in the Law,
which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development
area A - a tax rate of 7.5%).
Special Technological Preferred Enterprise - an enterprise for which total consolidated
revenues of its parent company and all subsidiaries exceed NIS 10 billion. Such enterprise will be subject to tax at a rate of 6% on profits
deriving from intellectual property, regardless of the enterprise’s geographical location.
Any dividends distributed to “foreign companies”, as defined in the Law,
deriving from income from the Technological Enterprises will be subject, under certain conditions, including holding at least 90% of the
share capital, to tax at a rate of 4%.
As of December 31, 2025, our net operating loss carry-forward for Israeli tax purposes
amounted to approximately $381.4 million. Under Israeli law, this net operating loss may generally be carried forward indefinitely and
offset against certain future taxable income.
As of December 31, 2025, the net operating loss carry-forward of our U.S. subsidiary
for federal income tax purposes amounted to approximately $1.5 million. Approximately $0.3 million of this loss are available to offset
any future U.S. taxable income of our U.S. subsidiary and will expire between 2027 and 2032.
Use of our U.S. net operating loss may be subject to substantial annual limitation
due to the “change in ownership” provisions of the Code and similar state provisions. The annual limitation may result in
the expiration of net operating loss before utilization.
For a description of Israel government policies that affect our research and development
expenses, and the financing of our research and development, see “Item 5. Operating and Financial Review and Prospects - C. Research
and Development, Patents and Licenses - The Israel Innovation Authority.”
B. LIQUIDITY AND CAPITAL RESOURCES
Public Offering of Ordinary Shares
Sales Agreement with Leerink Partners LLC
On January 31, 2023, we entered into a Sales Agreement, or the Sales Agreement with
Leerink, as sales agent, pursuant to which we may offer and sell, from time to time through Leerink, our ordinary shares. The offer and
sale of our ordinary shares, if any, will be made pursuant to our shelf registration statement on Form F-3, as supplemented by the prospectus
supplement filed on January 31, 2023. Pursuant to the said prospectus supplement, we may offer and sell up to $50 million of our ordinary
shares.
We are not obligated to make any sales under the Sales Agreement and no assurance
can be given that we will sell any ordinary shares under the Sales Agreement, or, if we do, as to the price or number of ordinary shares
that we will sell, or the dates on which any such sales will take place.
For the year ended December 31, 2025, December 31, 2024, and December 31, 2023, the
Company sold 4,862,076, 292,728, and 2,612,822 ordinary shares, respectively, pursuant to the Sales Agreement, for gross proceeds of approximately
$10.9 million, $0.6 million, and $3.6 million, respectively, and net proceeds (after deducting expenses and commissions paid) of approximately
$10.5 million, $0.5 million, and $3.1 million respectively. From January 1, 2026 until February 28, 2026, we have not sold any ordinary
shares pursuant to the Sales Agreement.
Shelf Registration Statement
On March 30, 2023, we filed a shelf registration statement on Form F-3 with the SEC
under which we may offer and sell from time to time in one or more offerings, our ordinary shares, debt securities, rights, warrants and
units having an aggregate offering price of up to $350 million, $50 million of which may be offered, issued and sold under the above mentioned
Sales Agreement with Leerink. This registration statement was declared effective by the SEC on June 27, 2023.
69
License Agreement
AstraZeneca License Agreement
On March 30, 2018, we and AstraZeneca, entered into an exclusive license agreement
to enable the development of bi-specific and multi-specific immuno-oncology antibody products based on the Company’s monospecific
antibodies that bind to TIGIT, including COM902, pursuant to which the Company received an upfront payment of $10 million and was eligible
to receive up to $200 million in development, regulatory and commercial milestones for the first product as well as mid-single-digit tiered
royalties on future product sales, out of which we accrued $2 million in 2020 as a preclinical milestone, $6 million in 2021 as a clinical
milestone (triggered by the dosing of the first patient in a Phase 1/2 clinical trial evaluating rilvegostomig), $7.5 million in 2022
as a clinical milestone (triggered by the dosing of the first patient in its ARTEMIDE Phase 2 clinical trial evaluating rilvegostomig),
$10 million in 2023 as a clinical milestone (triggered by the dosing of the first patient in its ARTEMIDE-Bil01 Phase 3 clinical trial
evaluating rilvegostomig), and an additional $5 million in 2024 (triggered by dosing of the first patient in the second Phase 3 clinical
trial evaluating rilvegostomig). If additional products are developed, additional milestones and royalties would be due to us for each
product.
On December 16, 2025, we amended the license agreement and sold to AstraZeneca a portion
of our existing royalty interest in rilvegostomig for a $65 million upfront payment which was paid in 2025 and for an addition of $25
million to the next milestone payment to be paid to us, which is the first acceptance of the BLA. Following the amendment, we remain eligible
for potential future regulatory and commercial milestones of up to $195 million (including the $25 million stated above) for rilvegostomig.
In addition, we maintained the majority of our royalties, being eligible for tiered royalties of up to mid-single digit on future sales,
also after the amendment.
Gilead License Agreement
On December 18, 2023, we and Gilead, entered into an exclusive license agreement,
pursuant to which we granted Gilead an exclusive license under our preclinical antibody program against IL-18 binding protein and all
intellectual property rights subsisting therein, to use, research, develop, manufacture and commercialize products, including our GS-0321
(previously COM503) product candidate, or together, the GS-0321 (previously COM503), and additional
products that may be developed by Gilead, together with GS-0321 (previously COM503), the Licensed Products.
Pursuant to the license agreement, Gilead paid us a gross amount of $60 million upfront
license payment ($51 million net, after $9 million were withheld at source) in January 2024 and additional $30 million ($25.5 million
net, after $4.5 million were withheld at source) as a milestone payment upon clearance of the IND application for GS-0321 (previously
COM503) in the third quarter of 2024. We are also eligible to receive up to approximately $758 million in additional milestone payments
upon the achievement of certain development, regulatory and commercial milestones. We are further eligible to receive single-digit to
low double-digit tiered royalties on worldwide net sales of Licensed Products.
Unless terminated early by a party pursuant to its terms, the license agreement will
continue in effect on a Licensed Product-by-Licensed Product and country-by-country basis until the expiration of the last royalty term
in such country.
Gilead withheld at source 15% from the upfront payment and the milestone payment amount
specified above and is expected to continue to withhold at source all taxes required by law from all payments payable to us under the
license agreement.
If additional products are developed, additional milestones and royalties would be
due to us.
Capital Resources
In 2025, our primary sources of cash were mainly:
| • |
cash received from our partner, AstraZeneca; |
| • |
proceeds from ordinary shares sold through the Sales Agreement with Leerink; and |
| • |
cash at hand and yield on investment of such cash balances. |
We used these funds primarily to finance our
business operations.
70
We expect that our sources of cash for 2026 will include cash at hand at the end of
2025. Additional potential sources of cash may include proceeds generated from agreements with collaborators and other third parties with
respect to our novel targets and therapeutic drug candidates and proceeds from issuance of ordinary shares pursuant to our equity plans,
from the Sales Agreement and other financing transactions.
Net Cash Used in or Provided by Operating Activities
Net cash provided by operating activities was approximately $31.6 million in 2025,
compared with approximately $49.6 million in 2024 and net cash used in operating activities of approximately $35.9 million in 2023. Decrease
in net cash provided by operating activities in 2025 compared to 2024 was mainly due to $65 million derived from upfront payment collected
from AstraZeneca in 2025, compared with $91.5 million derived from upfront payment and clinical milestones payments collected from Gilead
and from AstraZeneca, net of withholding taxes in 2024, offset by operating expenses on cash basis.
Net Cash Used in or Provided by Investing Activities
Net cash provided by investing activities was approximately $30.0 million in 2025,
compared with net cash used in approximately $46.3 million in 2024 and net cash provided by investing activities of approximately $35.5
million in 2023. Increase in net cash provided by investing activities in 2025 compared to 2024 was mainly due to increase in our cash
and cash equivalents.
Net Cash Provided by Financing
Activities
Net cash provided by financing activities was approximately $10.6 million in 2025,
approximately $0.6 million in 2024 and approximately $3.1 million in 2023. The principal source of cash provided by financing activities
in 2025, 2024 and 2023 was proceeds received from sale of ordinary shares through the Sales Agreement with Leerink.
Net Liquidity
Liquidity refers to the liquid financial assets available to fund our business operations
and pay for near-term obligations. These liquid financial assets mostly consist of cash and cash equivalents as well as short-term bank
deposits and investment in marketable securities. As of December 31, 2025, we had cash and cash equivalents, short-term bank deposits
and investment in marketable securities of approximately $145.6 million compared to approximately $103.3 million on December 31, 2024.
We believe that our existing cash, cash equivalents, short-term bank deposits and investment in marketable securities will be sufficient
to fund our operations over the next 12 months. We believe we will meet longer-term expected future cash requirements into 2029 based
on our current plans, without considering the possible receipt of any additional funds, such as proceeds from existing or additional licensing
and/or collaborative agreements, or from financings. We believe that our working capital is sufficient for our present requirements.
The table below summarizes our contractual obligations as of December 31, 2025, and
should be read together with the accompanying comments that follow.
|
Payments due by period
(US$ in thousands) |
||||||||||||||||||||
|
Total
|
Less than 1 year
|
1-3 years
|
3-5 years
|
More than 5 years
|
||||||||||||||||
|
Operating Lease Obligations(1)
|
3,538 |
721 |
1,394 |
1,292 |
131 |
|||||||||||||||
|
Accrued Severance Pay, net(2)
|
244 |
- |
- |
- |
244 |
|||||||||||||||
|
Total |
3,782 |
721 |
1,394 |
1,292 |
375 |
|||||||||||||||
(1)
Consists of operating leases for our facilities and for motor vehicles. Includes the first and second five-year option periods of the
lease of the Israeli facility. The first option was exercised during 2020 and the second option was exercised during 2025.
(2)
Severance pay obligations to our Israeli employees. For more information, see “Item 6. Directors, Senior Management and Employees
– D. Employees.”
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The above table does not include royalties that we may be required to pay to the IIA.
For more information, see “Item 5. Operating and Financial Review and Prospects - C. Research and Development, Patents and Licenses
- The Israel Innovation Authority.”
The above table also does not include contingent contractual obligations or commitments
that may enter into effect in the future, such as contractual undertakings to pay royalties subject to certain conditions occurring.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
We invest heavily in research and development. Research and development expenses were
our major operating expenses representing approximately 71% of total operating expenses in 2025 and in 2024 and approximately 78% in 2023.
Our research and development expenses, net, were approximately $22.8 million in 2025, approximately $24.8 million in 2024, and approximately
$34.5 million in 2023. As of December 31, 2025, 53 of our employees were engaged in research and development on a full-time basis. This
represents approximately 71% of our entire work force at that time.
We focus our efforts on the development of our discovery capabilities and related
technologies, and the discovery and validation of our drug targets and the preclinical and clinical development of the respective therapeutic
products. Our pipeline programs are continuously evolving, and we expect that in 2026 our research and development expenses will continue
to be our major operating expense.
We believe that our future success will depend, in large part, on our ability to discover
promising drug target candidates and therapeutic product candidates and to successfully advance the research and development of certain
of our product candidates in our internal pipeline towards preclinical and clinical studies and to successfully develop these products
or enter into revenue-sharing partnering agreements with pharmaceutical companies with respect to them at the various development stages
and eventually the success of such products.
Research and Development Grants
We have participated in programs offered by the IIA that support research and development
activities. See Note 8b to our 2025 consolidated financial statement. Except for a grant received from the IIA in 2025 under a specific
“Maagad” program of the IIA in the amount of approximately 58% of a total budget of approximately $130 thousands (to which
the royalty payments terms to the IIA do not apply, however all other terms of the R&D Law do apply to it), we have not applied for
additional grants from the IIA for research and technological development since 2012.
The Israel Innovation Authority
The government of Israel encourages research and development projects in Israel through
the IIA, pursuant to and subject to the provisions of the R&D Law. Under the R&D Law, research and development projects which
are approved by the Research Committee of the IIA are eligible for grants, in exchange for payment of royalties from revenues generated
from Financed Know-How or otherwise from all revenues generated by the Company, as designated by the applicable IIA programs, approvals
and the R&D Law, and are subject to compliance with certain requirements and restrictions under the R&D Law as detailed below,
which must generally continue to be complied with even following full repayment of all IIA grants (as adjusted for fluctuation in the
USD/NIS exchange rate), with applicable interest, assuming we neither grant licenses thereunder nor transfer production or development
outside of the State of Israel.
We received grants from the IIA for several projects and may receive additional grants
in the future. Under the terms of the grants received, we are required to pay royalties ranging between 3% to 5% of the revenues we generate
from our products and/or services which incorporate Financed Know-How, or IIA Products, or as otherwise designated by the applicable IIA
programs, approvals and the R&D Law, until 100% of the dollar value of the grant is repaid, plus, as follows: (i) with respect to
grants received on or after January 1, 1999 and until December 31, 2023, the applicable interest is (a) LIBOR interest until December
31, 2023, and (b) from January 1, 2024, the 12 months Term SOFR interest as published on the first trading day of each year by CME Group,
or by any other party authorized by the Federal Reserve, or in alternative publication by the Bank of Israel, together with an additional
0.71513% to the applicable interest rate, and (ii) with respect to grants received on or after January 1, 2024, the applicable interest
shall be the 12 months Term SOFR interest as detailed in section (b) above. As of December 31, 2025, we received grants from the IIA in
the principal amount of approximately $7.3 million that are subject to royalty payment to the IIA. Therefore, our contingent obligation
for royalties, net of royalties already paid or accrued in the sum of approximately $4.4 million, along with the accumulated LIBOR/SOFR
interest to date of approximately $5.4 million, totaled to approximately $8.3 million as of December 31, 2025.
72
With respect to the Company’s requirement to pay royalties, in February 2025,
the IIA approved that the Company will be required to pay royalties from all revenues of the Company, other than from income derived from
sales associated with products related to IL-18BP (which currently include, GS-0321 (previously COM503)).
In addition, the Company participated in four MAGNET Consortium programs - Drugs and
Diagnostic Kits, or DAAT Consortium, Tevel Biotechnology Consortium, Pharmalogica Consortium and Rimonim Consortium – for which
it received from the IIA a total amount of approximately $2.1 million, in two MAGNETON programs, for which it received from the IIA approximately
$0.6 million and most recently in a Maagad program for which it is entitled to receive approximately 58% of a total budget of approximately
$130 thousands. These grants do not bear any royalty obligations, but as the R&D Law applies to these programs, the restrictions on
transfer of know-how or manufacturing outside of Israel, as detailed below, do apply. The R&D Law requires that the manufacture of
products which incorporate Financed Know-How will be carried out in Israel, unless the IIA provides its approval to the contrary. This
approval, to the extent given by the IIA, may be subject to various conditions, including the repayment of increased royalties equal to
up to 300% of the total grant amount plus applicable interest and an increase of 1% in the royalty rate, depending on the extent of the
manufacturing that is to be conducted outside of Israel. The R&D Law also provides that Financed Know-How and any right derived therefrom
may not be sold, licensed, outsourced for development activities or otherwise transferred to third parties, unless such transfer was approved
in accordance with the R&D Law. The Research Committee operating under the IIA may approve the sale, license, outsourcing for development
activities or otherwise transfer of Financed Know-How between Israeli entities, provided that the transferee undertakes all the obligations
in connection with the grant as prescribed under the R&D Law. In certain cases, the research committee may also approve a transfer
of the Financed Know-How outside of Israel, in both cases, subject to the receipt of certain payments calculated according to a formula
set forth in the R&D Law. In the case of transfer outside of Israel, a payment of up to six times the amount of the grant (as adjusted
for fluctuation in the USD/NIS exchange rate) with applicable interest; and in the case the R&D activity related to the Financed Know-How
remains in Israel, a payment of up to 3 times of such total amount. These approvals are not required for the sale or export of any products
resulting from such R&D activity or based on such Financed Know-How. In addition, the government of Israel may from time to time audit
sales of products which it claims incorporate Financed Know-How and this may lead to royalties being payable on additional products, and
may subject such products to the restrictions and obligations specified hereunder. Failure to comply with the requirements under the R&D
Law may subject us to financial sanctions, to mandatory repayment of grants received by us (together with interest and penalties), as
well as expose us to criminal proceedings.
For a discussion regarding the effects of the grants we received from the IIA on our
business, see “Item 3. Key Information - D. Risk Factors - Risks Related to Operations in Israel - We
received grants from the IIA that may require us to pay royalties and restrict the transfer of know-how that we develop.”
D. TREND INFORMATION
We are unable to predict with a reasonable degree of accuracy the outcome of our research
and development efforts. As such, it is not possible for us to predict with a reasonable degree of accuracy any material trends, uncertainties,
or other events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause
financial information to not necessarily be indicative of our future operating results or our financial condition. However, subject to
such limitation, we did identify certain trends that may have an effect on us, some of which are as specified below, and as covered in
the risk factors set forth under “Item 3. Key Information - D. Risk Factors.”
Access to Additional Funds
Should we need to secure additional sources of liquidity, we believe that we could
finance our needs through the issuance of equity securities, including through our Sales Agreement with Leerink, debt securities or other
arrangements. However, we cannot guarantee that we will be able to obtain financing through the issuance of any of the above arrangements
on reasonable terms.
73
Unfavorable Global or Domestic Political or Economic Conditions
The global economy continues to experience significant volatility,
and the economic environment may continue to be, or become, less favorable than that of past years. Higher costs for goods and services,
inflation, deflation, the imposition of tariffs or other measures that create barriers to or increase the costs associated with international
trade, overall economic slowdown or recession and other economic factors in Israel, the U.S. or in any other markets in which we operate
could adversely affect our operations and operating results and can result in increased operations costs. After several credit rating
reductions in recent years, on November 7, 2025, S&P Global Ratings revised its outlook on Israel to “stable” from “negative”,
while affirming the “A” rating and on January 30, 2026, Moody’s also revised its outlook on Israel to “stable”
from “negative, while affirming Israel’s Baa1 long-term local and foreign-currency issuer ratings. Despite this stabilization
in outlook by S&P and Moody’s, other agencies, including Fitcch Ratings, continued to maintain a negative outlook as of early
2026, citing persistent exposure to geopolitical risks and a polarized political system. While these downgrades and negative outlook as
of late 2025 did not have an immediate nor direct impact on us, an extended period of economic disruption, including a continued market
downfall in Israel, which may be impacted by such downgrades or by some agencies maintaining negative outlook, by future downgrades, by
the continuing instability in Israel and the Middle East and its surrounding countries, including as a result of the armed conflicts in
the region and the political and civil actions in Israel which began in early 2023, resulting from, among other things, proposed changes
to certain Israeli constitutional legislation, as well as other global conflicts, such as the recent developments between the U.S. and
Venezuela, the conflict between Russia and Ukraine, and the inner tensions in Iran and their potential global impact, or as a continued
market downfall in the United States or any other major market in which we or our partners operate, could materially affect our ability
to secure additional funds and could further materially affect our business, strategy, results of operations and financial condition.
Exchange Rate
A significant portion of our expenses is denominated in currencies other than the
dollar. The Company is therefore subject to non-U.S. currency risks and non-U.S. exchange exposure, especially the NIS. Exchange rates
can be volatile and a substantial change in foreign currencies against the dollar could increase or reduce the Company’s expenses
and net loss and impact the comparability of results from period to period. The depreciation of the dollar against the NIS was 12.5% in
2025 and the appreciation of the dollar against the NIS was 0.6% and 3.1% in 2024 and 2023, respectively. For more information regarding
exchange rate risk please see “Item 11. Quantitative And Qualitative Disclosures About Market Risk – Interest Rate Risk.”
Interest rate
A significant portion of our cash and cash equivalents is invested in bank deposits
or in marketable securities and bear interest or yield that depends on the interest rate. The Company’s financial income is therefore
subject to interest rate risk. Interest rates can be volatile, and a substantial change in interest rates could increase or reduce the
Company’s financial income and net loss. In addition to the impact on our cash and cash equivalents, rising interest rates, or the
perception thereof, may have wide economic impacts, including an adverse impact on capital markets, the price of our shares and on supplies
that we require to acquire for our different operations. For more information regarding interest rate risk please see “Item 11.
Quantitative And Qualitative Disclosures About Market Risk – Interest Rate Risk.”
Trend Towards Biologics
Biologics (monoclonal and bispecific antibodies, ADCs, enzymes and engineered proteins)
represent one of the fastest growing segments in the drug industry, making up 31% of FDA approved drugs in 2023, 32% in 2024, and 25%
in 2025. The growth of this class has driven a large number of companies to invest in new technologies (e.g., bi-specific monoclonal antibodies,
multi-specific antibodies, ADCs, antibody fragments, T cell engagers) and new approaches to fully exploit the potential of this class.
As these new modalities become more widely available, they raise the bar for differentiation, making it increasingly challenging for novel
therapeutic candidates, especially those based on traditional formats, to stand out in a competitive landscape. The broadening array of
technologies addressing drug targets may therefore reduce the relative attractiveness of earlier‑generation or less differentiated
therapeutic approaches.
E. CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements and other financial information
appearing in this Annual Report requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate on an on-going basis these estimates,
mainly related to revenue recognition and share-based payments.
74
We base our estimates on our experience and on various assumptions that we believe
are reasonable under the circumstances. The results of our estimates form the basis for our management’s judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Revenue Recognition
Our revenues are generated mainly from collaborative and license agreements. In the
agreements, revenues are typically derived mainly from upfront payment and contingent payments related to milestone achievements.
The Company recognizes revenue in accordance with ASC 606 - “Revenue from Contracts
with Customers.”
As such, the Company analyzes its collaborative and license agreements to assess whether
they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations
under each of its agreements, the Company performs the following five steps: (i) identification of the contract, or contracts, with a
customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation
of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when, or as, we satisfy a performance
obligation.
The consideration promised in a contract with a customer may include fixed amounts,
variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained.
We use assumptions to determine the standalone selling price of each performance obligation identified in the contract. We then allocate
the total transaction price to each performance obligation based on the estimated standalone selling prices of each performance obligation.
We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance
obligation is satisfied.
After contract inception, the transaction price is reassessed at every period end
and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations
on the same basis as at contract inception.
In December 2020 the program under the exclusive license agreement with AstraZeneca
achieved a preclinical milestone and in September 2021, November 2022, December 2023 and May 2024 such program achieved clinical milestones
and in connection with such milestones, we recognized revenues in an amount of $2 million, $6 million, $7.5 million, $10 million and $5
million, in the years 2020, 2021, 2022, 2023 and 2024, respectively, and in 2025 we amended the license agreement with AstraZeneca and
sold a portion of our royalty interest to AstraZeneca, leading to revenue recognition of $65 million, all in accordance with the criteria
prescribed under ASC 606. See Note 2j to our 2025 consolidated financial statements.
In December 2023, following entrance into license agreement with Gilead, we assessed
the promises under the license agreement and concluded that its promise to deliver the GS-0321 (previously COM503) License, the promise
to perform IND research and development activities and Phase 1 research and development activities represented separate performance obligations
in the license agreement.
We also evaluated as a possible variable consideration all milestones and royalties.
With respect to clinical development and regulatory milestones, we concluded that all such amounts should be fully constrained and are
not included in the initial transaction price. Accordingly, we did not include any potential clinical development, regulatory and sales
milestones and royalties in the initial transaction price.
We allocated the transaction price to each performance obligation on a relative estimated
standalone selling price basis. We developed the estimated standalone selling price for the license. In developing such an estimate, we
applied judgement in determining the timing needed to develop the licensed product, the probability of success, and the discount rate.
We developed the estimated standalone selling price for the IND research and development activities using a “cost plus” reasonable
margin approach. To determine the estimated standalone selling price of the Phase 1 research and development activities obligation, we
estimated the standalone selling price of the underlying performance obligations and estimated the probability of our performance of such
obligations.
75
We determined that the license granted was a functional license since the underlying
intellectual property has significant standalone functionality and recognized the entirety of the initial transaction price allocated
to the license performance obligation during the year ended December 31, 2023, in the amount of $23.5 million.
The IND research and development activities and Phase 1 research and development activities
performance obligations are recognized over time. We determined that the input method under ASC 606 is the best measure of progress towards
satisfying the performance obligation and reflects a faithful depiction of the transfer of goods and services. The method of measuring
progress towards delivery of the services incorporates actual internal and external costs incurred, relative to total internal and external
costs expected to be incurred to satisfy the performance obligation. The period over which total costs were estimated reflected the period
over which it performed the activities to achieve clearance of an IND application and our best estimate of the period over which it would
take to perform the completion of the phase 1 clinical trial.
During the year ended December 31, 2025, the Company recognized $7,764 of Phase 1
services revenues, during the year ended December 31, 2024, the Company recognized $22,864 of license, IND services and Phase 1 services
revenues, and during the year ended December 31, 2023, the Company recognized $23,459 of license revenues. As of December 31, 2025, the
Company included deferred revenues of $10,970 in current liabilities and $24,943 in non-current liabilities.
Share Based Payments
We account for stock-based compensation in accordance with ASC 718, “Compensation
- Stock Compensation”, or ASC 718, which requires companies to estimate the fair value of equity-based payment awards on the date
of grant using an option-pricing model. We account for forfeitures as they occur. The value of the pro-rata portion of the award, assuming
no forfeiture, is recognized in our consolidated statement of comprehensive loss as an expense over the requisite service periods. Upon
forfeiture the expense is adjusted so that expense is recognized for the portion of the award that actually vested.
We selected the Black-Scholes-Merton option pricing model as the most appropriate
method for estimating the fair value of our share-based awards. The resulting cost of an equity incentive award is recognized as an expense
over the requisite service period of the award, which is usually the vesting period. We recognize compensation expense over the vesting
period using the straight-line method and classify these amounts in the consolidated financial statements based on the department to which
the related employee reports.
This model evaluates the options as if there is a single exercise point, and thus
considers expected option life (expected term). The input factored in this model is constant for the entire expected life of the option.
The determination of the grant date fair value is affected by estimates and assumptions
regarding a number of complex and subjective variables, including the expected term of the options, the expected volatility of our share
price over the expected term, risk-free interest rates and expected dividends. The computation of expected volatility is based on the
historical volatility of our shares. The risk-free interest rate assumption is the implied yield currently available on United States
treasury zero-coupon issues with a remaining term equal to the expected life term of the options. We determined the expected life of the
options based on historical experience, representing the period of time that options granted are expected to be outstanding.
The fair value of RSUs is the fair value of the ordinary share at the date of grant.
Share-based compensation expense recognized under ASC 718 was approximately $1.9 million,
$3.0 million and $3.6 million for the years ended December 31, 2025, 2024 and 2023, respectively.
76
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. DIRECTORS AND SENIOR MANAGEMENT
The following table sets forth information with respect to Compugen’s directors
and senior management as of February 28, 2026:
|
Name |
Age |
Positions | ||
|
Anat Cohen-Dayag, Ph.D.(1)
|
59 |
Executive Chair of the Board of Directors | ||
|
Eran Ophir, Ph.D.(2)
|
48 |
President and Chief Executive Officer, Director | ||
|
Mathias Hukkelhoven, Ph.D. |
72 |
Director | ||
|
Gilead Halevy(3)(4)
|
59 |
Director (Chairman of the Audit Committee and of the Nomination and Corporate Governance
Committee and Lead Independent Director) | ||
|
Kinneret Livnat Savitzky, Ph.D.(4)(5)
|
58 |
Director | ||
|
Eran Perry(3)(5)
|
55 |
Director | ||
|
Sanford (Sandy) Zweifach(3)(4)(5)
|
69 |
Director (Chairman of the Compensation Committee) | ||
|
Michele Holcomb, Ph.D.(6)
|
57 |
Director | ||
|
David Silberman |
42 |
Chief Financial Officer | ||
|
Michelle Mahler, MD |
48 |
Chief Medical Officer | ||
|
Pierre Ferre, Ph.D. |
48 | Chief Operating Officer | ||
|
Zurit Levine, Ph.D. |
58 |
Senior Vice President, Business Development | ||
|
Sharon Kredo-Russo, Ph.D. |
46 |
Senior Vice President, Research & Discovery |
____________________
| (1) |
Served as President, Chief Executive Officer, and Director until September 16, 2025, and on such date transitioned into her current
role as Executive Chair of the Board of Directors. |
| (2) |
Served as Chief Scientific Officer until September 16, 2025, and on such date transitioned into his current role as President, Chief
Executive Officer, and Director |
|
(3) |
Member of our Audit Committee |
|
(4) |
Member of our Nomination and Corporate Governance Committee |
|
(5) |
Member of our Compensation Committee |
|
(6) |
Joined the Board of Directors on February 11, 2026 |
Dr. Anat Cohen-Dayag was appointed Executive
Chair of Compugen’s Board of Directors in September 2025, having served as President and CEO of Compugen for 15 years and a member
of Compugen’s board of directors for more than 10 years. Dr. Cohen-Dayag has about 30 years of experience in the biotech industry,
both in R&D and executive leadership roles. Dr. Cohen-Dayag joined Compugen in 2002, and has held various senior managerial positions,
including VP R&D, before being appointed President and Chief Executive Officer. Under her leadership, Compugen transformed from a
service provider in the field of computational biology to a therapeutic discovery and development company advancing an innovative immuno-oncology
pipeline originating from Compugen’s proprietary AI/ML-driven computational discovery platform, Unigen™, and entered into
global strategic partnerships with pharma companies. Dr. Cohen-Dayag is also a member of the board of directors of Yeda Research and Development
Company Ltd. (the commercial arm of the Weizmann Institute of Science) and over the years has been a director on multiple boards of private
and public companies. Prior to Compugen, Dr. Cohen-Dayag held several senior positions advancing R&D innovation across multiple biotech
companies. Dr. Cohen-Dayag holds a B.Sc. in Biology from Ben-Gurion University, and an M.Sc. in Chemical Immunology and a Ph.D. in Cellular
Biology, both from the Weizmann Institute of Science.
77
Dr. Eran Ophir was appointed President and
Chief Executive Officer of Compugen and joined Compugen’s Board of Directors in September 2025. Prior to his current position, Dr.
Ophir served in various managerial and executive roles at Compugen for nearly a decade. In his most recent position as Chief Scientific
Officer, he led research and discovery efforts and played a central role in building the Company’s innovative immuno-oncology pipeline
and corporate strategy. Dr. Ophir joined Compugen in 2015 as a senior scientist and has since held various positions in Compugen with
increasing responsibilities including appointment to the management team in March 2020. Dr. Ophir received a B.Sc. in Bioinformatics from
Tel Aviv University, a Ph.D. in Biology from the Weizmann Institute of Science and served as a Postdoctoral Research Fellow at the Ludwig
Institute for Cancer Research, Switzerland.
Dr. Mathias (Math) Hukkelhoven joined the Board
of Directors in March 2022 and serves as a Venture Partner for Panacea Venture Management Company Ltd. Dr. Hukkelhoven has a wealth of
experience in global regulatory affairs and drug development, evidenced by his contribution to more than 50 NCEs and hundreds of new indications
and line extensions over his career to date. Dr. Hukkelhoven has participated in activities that have shaped health authority interactions
for the industry, including serving as chairperson of the Regulatory Affairs Coordinating Committee at PhRMA, and recently as a PhRMA
negotiator for the PDUFA VII negotiations with the FDA. Since his retirement from Bristol Myers Squibb in July 2021, Dr. Hukkelhoven has
been a consultant for several biotech companies and Senior Advisor for McKinsey and on July 1, 2022 he joined the Board of Directors of
Centessa Pharmaceuticals plc. Dr. Hukkelhoven joined Bristol Myers Squibb in March 2010 as the Senior Vice President, Global Regulatory,
Safety & Biometrics and was also responsible for the R&D group in BMS China and the Clinical Pharmacology and Pharmacometrics
group. As such, he had responsibility for a large part of the global Bristol Myers Squibb development organization. Since the acquisition
of Celgene by Bristol Myers Squibb, he was responsible for Global Regulatory and Safety Sciences at Bristol Myers Squibb. Prior to joining
Bristol Myers Squibb, Dr. Hukkelhoven held the role of Chairman Portfolio Stewardship Board at Novartis Pharmaceuticals. From 2001 to
2009, he was the Senior Vice President, Global Head Drug Regulatory Affairs at Novartis. Dr. Hukkelhoven received his B.S. and Ph.D.
honors degrees in Biology and Biochemistry from the University of Nijmegen, the Netherlands.
Gilead Halevy joined the Board of Directors
in June 2018. Mr. Halevy serves as a general partner of Kedma Capital Partners, a leading Israeli private equity fund, of which he is
also a founding member, since 2006. Mr. Halevy currently serves as chairman of board of directors of Carmel Wineries Corp. Ltd.; Continuity
Software Ltd., Zriha Hlavin Industries Ltd. and as a director of Keter Holdings Ltd., S. AL Holdings Ltd., Plastfit Ltd. AA Politiv (1999)
Ltd. and Odem Scientific Applications Ltd. Mr. Halevy holds a B.A. in Humanities (multidisciplinary program for exceptional students)
and an LL.B. (Magna Cum Laude) both from the Hebrew University of Jerusalem.
Dr. Kinneret Livnat Savitzky joined the Board
of Directors in June 2018. Dr. Livnat Savitzky currently serves as an entrepreneur in residence at Team8. Dr. Livnat Savitzky also serves
on the board of directors of Ramot (TTO of Tel-Aviv University). Between 2017 and 2021 she served as the Chief Executive Officer of FutuRx
Ltd., an Israeli biotechnology accelerator established by OrbiMed Israel Partners, Johnson & Johnson Innovation, Takeda Ventures Inc.,
and LEAPS, the venture arm of Bayer. From 2010 to 2016, Dr. Livnat Savitzky served as Chief Executive Officer of BioLineRX Ltd., a Nasdaq-listed
drug development company focused on oncology and immunology. During her tenure, BioLineRX signed a strategic collaboration with Novartis
as well as licensing agreements with Merck (MSD), Genentech and others. Prior to being appointed Chief Executive Officer of BioLineRX,
Dr. Livnat Savitzky held various R&D management positions at BioLineRX and Compugen. Dr. Livnat Savitzky holds a B.Sc. in Biology
from The Hebrew University of Jerusalem, and an M.S.c and Ph.D. with distinction in Human Genetics from Tel Aviv University.
Eran Perry joined the Board of Directors in
July 2019. Mr. Perry brings to Compugen over 20 years of diverse experience across various segments of the healthcare industry as an entrepreneur
and venture capital investor as well as in general management and strategy. In 2018, Mr. Perry co-founded MII Fund & Labs, an
immunology dermatology-focused venture capital fund where he also serves as Managing Director and Chairman of the Investment Committee.
Mr. Perry is also the co-founder of several pharmaceutical companies including Seanergy Dermatology, Follicle Pharma Silverskate Bio and
Upstream Bio. Mr. Perry also serves on the board of directors of MyBiotics Pharma and Noon Aesthetics. From 2006 to 2016, he served as
Managing Director and Partner of Israel Healthcare Ventures (IHCV) and represented IHCV in numerous portfolio companies. Prior to IHCV,
Mr. Perry was a consultant in McKinsey & Company, serving clients worldwide in the pharmaceutical industry, among others. Prior to
that, he was a member of the Global Marketing group at Novartis Oncology. Before moving to the private sector, Mr. Perry served
in the Israeli Ministry of Justice. Mr. Perry holds an MBA from Columbia University, and an LL.B. in Law and a B.Sc. in Mathematics and
Computer Science, both from Tel Aviv University.
78
Sanford (Sandy) Zweifach joined the Board of
Directors in June 2018. Mr. Zweifach is a senior executive with over 32 years of experience in the life sciences industry. He has extensive
experience in corporate partnering, business development, operations, private and public investing, and capital raising. Mr. Zweifach
founded and served as Chief Executive Officer of both Nuvelution Pharma, Inc. and Ascendancy Healthcare, Inc. Mr. Zweifach was also a
Partner at Reedland Capital Partners, a boutique investment bank, from 2005 to 2010, where he headed its life sciences M&A and advisory
efforts. Prior to this, he was Chief Executive Officer of Pathways Diagnostics, a biomarker development company. Mr. Zweifach was a Managing
Director/CFO of Bay City Capital, a venture capital/merchant banking firm, specializing in the biotech and the life science industry,
where he was President of the firm’s M&A and financing division and was also responsible for oversight of the firm’s finance
department. Prior to this, he was President and CFO of Epoch Biosciences, which was acquired by Nanogen. Currently Mr. Zweifach serves
as the Chairman of the board of directors of Carisma Therapeutics, Inc., President and CBO and member of the board of directors of IMIDomics,
Inc. and a member of the board of directors of Essa Pharma, Inc. In addition, Mr. Zweifach sits on several other private boards of directors
and has advisory roles with two investment funds. Earlier in his career, Mr. Zweifach was a Certified Public Accountant (US) for Coopers
& Lybrand and held various investment banking positions focusing on biotech. He received his B.A. in Biology from UC San Diego and
an M.S. in Human Physiology from UC Davis.
Dr. Michele Holcomb joined the Board of Directors
in February 2026. Dr. Holcomb is a strategic leader with more than 30 years of healthcare experience across biotech, pharmaceuticals, and
healthcare services industries. She serves on both public and private boards, and has been a scientist, consultant, and
executive, driving change through innovation and optimization at key interfaces. Dr. Holcomb was previously EVP, Chief Strategy and
Business Development Officer at Cardinal Health (NYSE: CAH). Prior to Cardinal Health, Dr. Holcomb was the Chief Operating Officer
of Global R&D and SVP of Strategy, Portfolio, Search and Partnerships at Teva Pharmaceuticals (NYSE: TEVA). She also spent
15 years at McKinsey & Company and was a Partner of the Global Pharmaceutical Practice and one of the founders of the
firm’s work in biotech. Dr. Holcomb is a member of the Board of Directors and of the Audit Committee and the Transaction Committee
of PureTech Health plc (LSE: PRTC). She is a member of the Board of Directors and the chair of the Nominating and ESG (NESG)
Committee of Kimball Electronics, Inc. (Nasdaq: KE). She also serves as a Board Director for Controlant hf (private). Dr.
Holcomb holds a BS in chemistry from Stanford University and a PhD in chemistry from the University of California, Berkeley.
David Silberman joined Compugen in 2024, as
Chief Financial Officer. Mr. Silberman brings more than 15 years of experience working in finance, including more than 10 years of experience
in the healthcare and biotech industries. Since 2025, Mr. Silberman has been serving as director and chairman of the audit committee of
Nasus Pharma Ltd. (NYSE: NSRX). Before joining Compugen, Mr. Silberman served as Chief Financial Officer of Oramed Pharmaceuticals (NASDAQ:
ORMP, TASE: ORMP), a pharmaceutical company engaged in the research and development of innovative pharmaceutical solutions with a technology
platform that allows for the oral delivery of therapeutic proteins. Prior to joining Oramed Pharmaceuticals in 2021, Mr. Silberman served
as a Corporate Financial Planning and Analysis Director and as Global Internal Audit Senior Manager at Teva Pharmaceutical Industries
Ltd. Earlier in his career, Mr. Silberman provided internal audit and risk management services in the advisory department of Grant Thornton
Fahn Kanne Control Management and served in the audit department of KPMG. Mr. Silberman holds degrees in accounting and management from
the French Ministry of Higher Education and Research and is a certified public accountant in Israel.
Dr. Michelle Mahler joined Compugen in October
2023 as Vice President of Clinical Development and was promoted to Chief Medical Officer, effective March 1, 2024. Before joining Compugen,
Dr. Mahler was most recently the Chief Medical Officer of 1 E Therapeutics Ltd., a drug development company, creating a novel class of
programmable oligonucleotide therapeutics and Aummune Therapeutics Ltd., a clinical-stage company developing a first-of-its-kind approach
for individualized treatment of solid tumors. Dr. Mahler was Vice President of Clinical Development at C4 Therapeutics, Inc., helping
to build up the clinical development group and leading the successful submission of two INDs and initiation of Phase 1 studies. Prior
to C4 Therapeutics, Dr. Mahler worked in R&D for 9 years at Janssen (now Johnson & Johnson). During her time there she gained
experience in late-stage clinical development, pediatric development and global medical affairs while being a key member of the ibrutinib
development team and held positions of increasing responsibility. In addition, Dr. Mahler supported key due diligence projects including
the acquisition of Momenta Pharmaceuticals, Inc., by Johnson & Johnson. Prior to starting in industry in 2011, Dr. Mahler trained
at Memorial Sloan Kettering Cancer Center and New York Presbyterian Hospital/Weill Cornell. She also spent time at Columbia Presbyterian
and Mount Sinai Medical Center in New York. Dr. Mahler obtained her medical degree from University of the Witwatersrand, South Africa
and is a board-certified pediatric hematologist and oncologist.
79
Dr. Pierre Ferre joined Compugen in April 2021
as Vice President Preclinical Development and was appointed as Chief Operating Officer in 2025, after serving as Compugen’s Senior
Vice President, Preclinical Development and Corporate Operations since 2024. Dr. Ferre’s team is responsible for drug manufacturing
and supply, preclinical development, PK/PD and clinical pharmacology/biomarkers, operational efficiency with preclinical and clinical
CROs and Quality Assurance Governance. Dr. Ferre has two decades of experience in all aspects of clinical and non-clinical drug development
in oncology and immuno-oncology. Dr. Ferre joined Compugen from Pierre Fabre Pharmaceuticals, France, where he spent most of his career
in multiple positions, lastly as Director of Oncology Programs in which he led the development strategy of a portfolio of R&D programs
in oncology from initiation and discovery, through preclinical and clinical development. Previously, at Pierre Fabre Oncology R&D,
he acted as Director, Pharmacokinetics/Pharmacodynamics, overseeing also translational, biomarker-related activities. Before that Dr.
Ferre was in charge of oncology Preclinical Pharmacokinetics. Dr. Ferre was initially trained as a veterinary doctor. He holds a Ph.D.
in biology, from Toulouse INP (Institut National Polytechnique), and a M.Sc. from Aix-Marseille University and Paris INA-PG (Institut
National Agronomique) for his research work conducted in experimental pathophysiology and toxicology.
Dr. Zurit Levive was appointed as Senior Vice
President, Business Development in 2025 after being Senior Vice President of Strategic Collaborations in 2024. Zurit is responsible for
business development activities, identifying and establishing strategic partnerships, competitive market intelligence and leading Compugen’s
intellectual property strategy and portfolio. Dr. Levine joined Compugen in 1999 and has held several positions with increasing responsibility
in Compugen’s Research & Development department. In 2004 she was appointed as Director of Therapeutic Selection & Validation,
a position she held until 2007 when she was appointed as Director of Therapeutic Discovery. In 2009, she was appointed as Executive Director
of Research & Development. From January 2010 to August 2011, she held the position of Vice President, Research and Development. In
August 2011, she was appointed as Vice President, Research and Discovery. In 2018, Dr. Levine was appointed as Senior Vice President,
Technology Innovation. Dr. Levine holds a B.Sc. in Biology, an M.Sc. in Biochemistry and a Ph.D. in Biochemistry, all from Tel Aviv
University.
Dr. Sharon Kredo-Russo joined Compugen as Senior
Vice President, Research & Discovery in November 2025 as part of the Management team, bringing more than a decade of experience in
leading innovative drug discovery and development programs in oncology and immunology therapeutic areas. Before joining Compugen, Dr.
Kredo-Russo served as VP of Ideation at AION Labs, where she led the creation of AI-driven startups for drug discovery, in partnership
with leading pharmaceutical companies and venture capital firms. Prior to AION Labs, Dr. Kredo-Russo held leadership positions at BiomX
and Rosetta Genomics, as well as advisory roles with academic and industry groups. Dr. Kredo-Russo has a proven track record of advancing
programs from inception through clinical phases, including successful partnerships with pharma, biotech and academic labs. Dr. Kredo-Russo
holds a Postdoctoral fellowship, Ph.D. and M.Sc. in Molecular Genetics from the Weizmann Institute of Science and a B.Sc. in Biology from
Tel Aviv University. She has published extensively and is an inventor on several patents in gene regulation and drug discovery.
Arrangements Involving Directors and Senior Management
There are no arrangements or understandings of which we are aware relating to the
election of our directors or the appointment of executive officers in the Company. In addition, there are no family relationships among
any of the individuals listed in this Item 6.A.
B. COMPENSATION
Aggregate Executive Compensation
During 2025, the aggregate compensation paid or accrued by us to all persons listed
in Item 6.A above (Directors and Senior Management), including our former chairman of the board, Mr. Paul Sekhri, who ceased to serve
as chairman in September 2025 and our former member of senior management, Dr. Yaron Turpaz, who ceased to serve at the end of 2025, was
approximately $4.2 million. This amount includes approximately $0.7 million set aside or accrued to provide pension, severance, retirement
or similar benefits, but excludes expenses (including business travel, professional and business association dues and expenses) reimbursed
to our executives and other fringe benefits commonly reimbursed or paid by companies in Israel.
80
During 2025, we granted to our Directors and Senior Management listed in Item 6.A
a total of 512,000 options to purchase ordinary shares and a total of 106,500 restricted share units, or RSUs. The options are exercisable
at a weighted average exercise price of $1.78 per share and generally expire ten years after their respective dates of grant. As of December
31, 2025, there were a total of 3,668,250 outstanding options to purchase ordinary shares and 191,715 RSUs that were held by our Directors
and Senior Management listed in Item 6.A.
Individual Compensation of Covered Office Holders
The table below outlines the compensation granted to our five most highly compensated
Office Holders (as such term is defined in the Companies Law - see below under “Approvals Required for Office Holders Terms of Office
and Employment”) with respect to the year ended December 31, 2025. All amounts reported in the table reflect the cost to the
Company, as recognized in our financial statements for the year ended December 31, 2025. We refer to the five individuals for whom
disclosure is provided herein as our “Covered Office Holders”.
|
Information Regarding the Covered Office Holders |
Compensation for Services(2)
|
|||||||||||||||
|
Name and Principal Position(1)
|
Base Salary ($) |
Benefits and
Perquisites ($)(3)
|
Stock-Based Compensation ($)(4)
|
Total ($) |
||||||||||||
|
Dr. Anat Cohen-Dayag, Executive Chair of the Board of Directors(5)
|
521,452 |
94,433 |
308,712 |
924,597 |
||||||||||||
|
Dr. Pierre Ferre, Chief Operating Officer |
277,236 |
208,615 |
125,022 |
610,873 |
||||||||||||
|
Dr. Michelle Mahler, Chief Medical Officer |
382,398 |
153,095 |
23,264 |
558,757 |
||||||||||||
|
Dr. Eran Ophir, President and Chief Executive Officer(6)
|
295,055 |
115,135 |
110,697 |
520,887 |
||||||||||||
|
Dr. Zurit Levine, Senior Vice President, Business Development |
208,581 |
104,030 |
98,777 |
411,388 |
||||||||||||
| 1) |
All Covered Office Holders listed in the table were full-time officers of the Company during their term of service in 2025.
|
| 2) |
Cash compensation amounts denominated in currencies other than the dollar were converted into dollars at an exchange rate of NIS
3.4519 = $1.00, which reflects the average conversion rate for 2025, or the Representative Rate. |
| 3) |
Amounts reported in this column include benefits and perquisites, including those mandated by applicable law. Such benefits and perquisites
may include, to the extent applicable to the respective Covered Office Holder, bonuses, payments, contributions and/or allocations for
savings funds, pension, severance, vacation, car or car allowance, medical insurances and benefits, risk insurance (e.g., life, disability,
accident), phone, convalescence pay, payments for social security, tax gross-up payments and other benefits and perquisites consistent
with the Company’s policies. |
| 4) |
Amounts reported in this column represent the expense recorded in our financial statements for the year ended December 31, 2025,
with respect to options to purchase our ordinary shares and RSUs granted to our Covered Office Holders. Assumptions and key variables
used in the calculation of such amounts are discussed in Note 2n to our 2025 consolidated financial statements set forth elsewhere in
this report. |
81
| 5) |
Served as President, Chief Executive Officer, and Director until September 16, 2025, and on such date transitioned into her current
role as Executive Chair of the Board of Directors. |
| 6) |
Served as Chief Scientific Officer until September 16, 2025, and on such date transitioned into his current role as President, Chief
Executive Officer, and Director. |
Compensation Policy
Under the Companies Law we are required to adopt a compensation policy, which sets
forth company’s policy regarding the terms of office and employment of Office Holders (as such term is defined in the Companies
Law), including compensation, equity awards, severance and other benefits, exemption from liability and indemnification. Such compensation
policy should take into account, among other things, the provision of proper incentives to Office Holders, management of risks by the
company, the Office Holders’ contribution to achieving corporate objectives and increasing profits, and the function of the officer
or director.
Our compensation policy, or the Compensation Policy, is designed to balance between
the importance of incentivizing Office Holders to reach personal targets and the need to assure that the overall compensation meets our
long-term strategic performance and financial objectives. The Compensation Policy provides our compensation committee and our board of
directors with adequate measures and flexibility to tailor each of our Office Holder’s compensation package based, among other matters,
on geography, tasks, role, seniority and capability. Moreover, the Compensation Policy is intended to motivate our Office Holders to achieve
ongoing targeted results in addition to high-level business performance in the long term, without encouraging excessive risk taking. The
Company draws upon a pool of talent that is highly sought after by large and established global pharmaceutical and biotechnology companies,
as well as by other development-stage life science companies which operate both within and outside of the Company’s geographic areas.
The Company believes that it therefore must offer its Office Holders compensation terms that are competitive with the compensation standards
that exist in the companies with whom it competes for such talents.
In accordance with the Companies Law, an Israeli public company’s compensation
policy and any amendments thereto must be approved by the board of directors, after considering the recommendations of the compensation
committee, and generally by a special majority of our shareholders, or a Special Majority, which include (i) at least a majority of the
shareholders who are not controlling shareholders and who do not have a personal interest in the matter, present and voting (abstentions
are disregarded), or (ii) the non-controlling shareholders and shareholders who do not have a personal interest in the matter who were
present and voted against the matter hold two percent or less of the voting power of the company. The compensation policy must be reviewed
from time to time by the board and must be re-approved or amended by the board of directors and generally by the shareholders at least
once every three years. If the compensation policy is not approved by the shareholders, the compensation committee and the board of directors
may nonetheless, in special circumstances, approve the policy, following further discussion of the matter and for detailed reasons.
Our Compensation Policy for Office Holders was originally approved by our shareholders
in September 2013, with the most recent amendment adopted at the 2023 Annual General Meeting of Shareholders held on September 20, 2023,
or the 2023 AGM.
Approvals Required for Office Holders Terms of Office and Employment
The term “Office Holder” as defined in the Companies Law includes a director,
the chief executive officer, chief business manager, deputy chief executive officer, vice chief executive officer, any other person fulfilling
or assuming any of the foregoing positions without regard to such person’s title, and any manager who is directly subordinated to
the chief executive officer. In addition to each person listed in the table under “Item 6. Directors, Senior Management and Employees
- A. Directors and Senior Management”, three additional individuals were Office Holders as of December 31, 2025.
“Terms of Office and Employment” means the terms of office and employment
of our Office Holders, including exemption and release of the Office Holder from liability for breach of his or her duty of care to the
Company, an undertaking to indemnify the Office Holder, post factum indemnification or insurance; any grant, payment, remuneration, compensation,
or other benefit provided in connection with termination of service and any benefit, other payment or undertaking to provide any payment
as aforesaid.
82
Compensation for Office Holders subordinated to the
Chief Executive Officer. The Terms of Office and Employment of Office Holders (other than directors and chief executive officer)
require the approval of the compensation committee and the board of directors, in that order, provided that such terms are in line with
the company’s compensation policy. In the event that the Terms of Office and Employment of such Office Holder are not in line with
such policy, additional shareholder approval is also required. However, in special circumstances the compensation committee and then the
board of directors may nonetheless approve such Terms of Office and Employment even if such terms were not approved by the shareholders,
following a further discussion and for detailed reasoning.
Compensation for Office Holders who are Directors
or Chief Executive Officers. The Terms of Office and Employment of directors, other than directors who serve as chief executive
officers and/or who possess a controlling interest in a company or who are external directors (to the extent applicable), require the
approval of the compensation committee, board of directors and shareholders by a simple majority, as long as they are in line with the
compensation policy. With respect to our president and chief executive officer, who is also a director, or with respect to any chief executive
officer who is not a director (to the extent applicable in the future), further approval of the shareholders by the Special Majority is
required. However: (A) under certain circumstances, and to the extent that the proposed Terms of Office and Employment are in line with
the compensation policy, a company may be exempt from receiving shareholder approval with respect to the Terms of Office and Employment
of a candidate for the position of chief executive officer (provided that the candidate is not a director) (i) provided that the company’s
compensation committee and board of directors approved such terms and that such terms: (a) are not more beneficial than the terms of the
former chief executive officer, or are essentially the same in their effect; (b) are in line with the compensation policy; and (c) are
brought for shareholder approval at the next general meeting of shareholders; and (B) a company’s compensation committee and board
of directors are permitted to approve Terms of Office and Employment of a director, without convening a general meeting of shareholders,
provided that such terms are only beneficial to the Company or that such terms are in line with the terms set forth in the Israeli Companies
Regulations (Rules Regarding Compensation and Expenses of External Directors), 2000, or the Compensation Regulations. To the extent applicable,
external directors are entitled to Terms of Office and Employment as set forth in the Compensation Regulations, as supplemented by the
Israeli Companies Regulations (Alleviation for Public Companies whose shares are Traded on the Stock Exchange Outside of Israel), 2000,
or the Alleviation Regulations. In addition, the Israel Securities Authority may issue from time to time bulletins or staff position statements
relating to, among other things, compensation payable to external directors. Since our board of directors determined to opt out of the
requirement to elect and have external directors and composition criteria of the audit committee and compensation committee under the
Companies Law pursuant to the relief available under the Alleviation Regulations, as further detailed in this Item below under “Board
Practices - External Directors and Independent Directors Under the Companies Law”, we are not subject to such bulletins or staff
position statements.
Variable Compensation and Annual Cash Bonuses of
Office Holders. The Companies Law requires that all variable compensation of directors and chief executive officers be based on
measurable criteria, with the exception of a non-substantial portion of up to 3 monthly salaries, which should take into consideration
the applicable Office Holder’s contribution to the company. With respect to Office Holders who are not directors or chief executive
officers, the Companies Law allows that 100% of the variable compensation be based on non-measurable criteria. Our Compensation Policy
allows for a non-substantial portion of up to 20% of the bonus objectives for each year to be based on non-measurable criteria, provided,
however, that with respect to (i) our Office Holders who are not directors nor our chief executive officer, our compensation committee
and board of directors may increase the portion of targets based on non-measurable criteria above the rate of 20%, up to 50% and with
respect to our chief executive officer, our compensation committee and board of directors may increase the portion of targets based on
non-measurable criteria for up to three (3) monthly base salaries. Further, the annual cash bonus of each of our Office Holders who is
not a director is determined according to a formula that is consistent with the Compensation Policy and that links the bonus payment score
to measurable and qualitative objectives relating to both the Company’s performance and to the performance by each such Office Holder
of his or her responsibilities (and with respect to our Executive Chair of the Board, to measurable and qualitative objectives relating
to the Company’s performance). In the case of our Office Holders, other than the chief executive officer and our Executive Chair
of the Board, assuming that the bonus terms conform to the Compensation Policy, the annual bonus objectives and subsequent payment scores
are determined by the compensation committee and board of directors, while the bonus terms for our chief executive officer and our Executive
Chair of the Board generally require the additional approval by our shareholders. Our board of directors established a policy that sets
forth the maximum target bonus for each of our Office Holders, including our chief executive officer and our Executive Chair of the Board
and targets are being approved annually by our compensation committee and board of directors.
83
In October 2023, our Board adopted a policy for recovery of erroneously awarded compensation
(clawback policy) that complies with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Compensation Paid to our Non-Executive Directors
On August 6, 2018, our shareholders approved, following previous resolutions made
by our audit committee (then sitting as a compensation committee) and the board of directors, and consistent with our Compensation Policy,
to compensate each of our non-executive directors whether currently in office or appointed in the future as follows:
Cash Fee
(i) an annual fee of $45,000; and
(ii) an additional annual amount to be paid to non-executive directors
for service as members on each of the Company’s committees, as follows:
| (a) |
Audit Committee - $2,500 for a member, or $5,000 for the chairperson; |
| (b) |
Compensation Committee - $2,000 for a member, or $4,000 for the chairperson; and |
| (c) |
Nomination and Governance Committee - $1,000 for a member, or $3,000 for the chairperson. |
No additional compensation shall be paid for attendance at a board or committee meeting.
VAT is added to the above compensation in accordance with applicable law.
Equity
In addition to the cash compensation detailed above, at the 2024 Annual General Meeting
of Shareholders held on September 12, 2024, or the 2024 AGM, our shareholders approved, following previous resolutions made by our
compensation committee and the board of directors, and consistent with our Compensation Policy, that each non-executive director is entitled
to a yearly grant of options to purchase the Company’s ordinary shares, so that in the first year of service as a director, each
non-executive director shall be entitled to a one-time grant of 50,000 options, or Initial Equity Grant, and, in addition, to a yearly
grant of 25,000 options in each of the following years of service, or the Annual Equity Grant, pursuant to the detailed below (including
with respect to the issuance of RSUs).
The grant date of each Initial Equity Grant is the date of appointment for service
as director, whether initially appointed by the Board or by the general meeting of shareholders, with an exercise price equal to the closing
price of the Company’s ordinary shares on the Nasdaq on the last trading day prior to the date of their initial appointment to serve
on the Board. The grant date of each Annual Equity Grant shall be such date in each year on which the Board approves the annual equity
grants to other management Office Holders (provided that the service as director continues at the time of each grant), with an exercise
price equal to the closing price of the Company’s ordinary shares on the Nasdaq on the last trading day prior to such Board approval.
Both the Initial and the Annual Equity Grants are subject (other than as described
herein) to the terms and conditions of the 2010 Plan, or any other equity-based incentive plan the Company may adopt in the future and
pursuant to which these equity awards would be granted. All such grants vest over a four-year period as follows: twenty five percent (25%)
of the options granted vest on the first day of the quarter one calendar year immediately following the quarter in which the options were
granted; and an additional 6.25% of the options granted vest each quarter thereafter, for the next 36 months.
Notwithstanding the terms of the relevant plan, all options granted to non-executive
directors become fully vested immediately upon the completion of one or more of the following events, whether by way of a consolidation,
merger or reorganization of the Company or otherwise: (a) a sale of all or substantially all of Company’s issued share capital or
assets to any other company, entity, person or a group of persons, or (b) the acquisition of more than 50% of the Company’s equity
or voting power by any shareholder or group of shareholders. Further, notwithstanding the terms of the relevant plan, all options granted
which shall be vested as of the date of final termination of office as a non-executive director of the Company may be exercised within
one year following such termination of office. To the extent legally available and applicable, such options will be granted to the non-executive
directors through a trustee under Section 102 of the Israel Income Tax Ordinance [New Version], 5721-1961, or the Tax Ordinance, under
the capital gains route.
84
At the Company’s Annual General Meeting of Shareholders for 2020, held on September
16, 2020, or the 2020 AGM, and the 2024 AGM, our shareholders approved, following previous resolutions made by our compensation committee
and the board of directors, and consistent with our Compensation Policy, that the compensation committee and the board may issue to all
non-executive directors RSUs or other equity awards which are not options, or Other Equity in connection with the Initial Equity Grant
and the Annual Equity Grant, and that each such grants shall be adjusted, on a pro rata basis, to give effect to the relative portion
of each type of equity awarded. For the purpose of determining the respective number of Other Equity, Other Equity shall be given a “double
weight” relative to options, so that each unit of Other Equity will be equal to two (2) option units, such that for illustration
purposes, if the compensation committee and board of directors approve the grant of 2,500 RSUs to the non-executive directors, the relevant
annual equity grant will be comprised of a total of 22,500 units, out of which 20,000 will be options and 2,500 will be RSUs. The same
weight will apply to the Initial Equity Grant.
The provisions relating to vesting, acceleration and exercise period applicable to
options, as specified above, shall apply to Other Equity that may be granted, mutatis mutandis.
Compensation to the Company’s Former Chairman of the Board
of Directors
Following approval of our audit committee (then sitting as a compensation committee),
our compensation committee, our board of directors and shareholders, Mr. Paul Sekhri, our non-executive Chairman of the Board was entitled
to an annual cash fee of $150,000 (with no additional meeting fees) during his term of service.
In connection with his appointment, Mr. Sekhri was also granted an initial grant of
options to purchase 500,000 ordinary shares, all of which were fully vested upon his termination.
Starting in 2020 (inclusive) until he stepped down from his position, Mr. Sekhri was
entitled to the same annual grant of equity as were the other non-executive directors.
Compensation to Dr. Anat Cohen-Dayag, in her capacity as our former
President and Chief Executive Officer
Dr. Anat Cohen-Dayag served as our President and Chief Executive Officer from 2010
until the 2025 Annual General Meeting of Shareholders held on September 16, 2025, or the 2025 AGM. Immediately following the 2025 AGM,
Dr. Cohen-Dayag assumed the newly created role the Executive Chair of our Board, replacing Paul Sekhri, our then-serving chairman
of the Board, who stepped down from the Board at the conclusion of the 2025 AGM. At such time, Dr. Eran Ophir succeeded Dr. Cohen-Dayag
in the position of President and Chief Executive Officer.
Pursuant to the terms of Dr. Cohen-Dayag’s employment agreement and in accordance
with the approval of her updated Terms of Office and Employment at the 2023 AGM and the approval of the terms below at the 2025 AGM, Dr.
Cohen-Dayag was entitled to a gross monthly salary of NIS 150,000 (approximately $43,450 according to the Representative Rate) through
December 31, 2025. Dr. Cohen-Dayag was also entitled to certain benefits and perquisites customary in Israel, including those mandated
by applicable law, as well as to an amount of NIS 286,840 (approximately $83,100 according to the Representative Rate) for redemption
of unused vacation days (based on the number of accrued vacation days at the time she ceases to serve as the Company’s President
and Chief Executive Officer) and an amount of NIS 25,960 (approximately $7,520 according to the Representative Rate) in connection with
termination of her car lease. In addition, Dr. Cohen-Dayag was eligible for an annual grant of equity-based compensation and to an annual
cash bonus based upon achievement of objectives determined by the Company, as approved at the 2023 AGM as detailed below. In terms of
the equity award for 2025, as this is perceived by the Company to be primarily a forward-looking component, Dr. Cohen-Dayag was not be
entitled to an equity award for her service as CEO in 2025, but rather to an award under the Chair Equity Framework (as specified below),
which was tied to her period as Executive Chair.
With respect to annual cash bonus for 2025, at the 2023 AGM, our shareholders approved
that Dr. Cohen-Dayag shall be eligible to receive an annual cash bonus of up to nine monthly salaries for each of the calendar years 2024,
2025 and 2026 (which eligibility for 2026 was replaced with her eligibility to cash bonus in her capacity as Executive Chair at the 2025
AGM, as further detailed below), without the need for further shareholder approval, subject to meeting the specific performance criteria
determined by the compensation committee and board with respect to each such year, in accordance with the objectives and terms thereof
and the continuous employment of Dr. Cohen-Dayag as the Company’s chief executive officer through the last day of the calendar year
with respect to which the annual cash bonus is proposed to be paid. In addition, in accordance with our Compensation Policy, in addition
to annual cash bonuses, our compensation committee and board of directors may approve a special bonus for significant or extraordinary
achievements or efforts that produced an exceptional result, up to a total maximum amount (to any calendar year) equal to 6 monthly base
salaries of the relevant Office Holder. Accordingly, at the 2024 AGM, our shareholders approved the grant of a special cash bonus in the
amount of NIS 202,000 (approximately $79,140 based on the NIS/USD representative rate used in connection with the 2024 AGM) to Dr. Cohen-Dayag
in connection with her significant contribution to the engagement with Gilead in the License Agreement.
85
Pursuant to the change in Dr. Cohen-Dayag’s role and the approval of the 2025
AGM, all vested options and Other Equity (to the extent applicable) granted to Dr. Cohen-Dayag have an exercise period of one-year following
the termination of her employment as the Executive Chair (subject to the termination for “cause” defined in her employment
agreement as shall be in effect from time to time).).
As of December 31, 2025, Dr. Cohen-Dayag held options to purchase a total of 1,515,000
ordinary shares and 36,091 RSUs. Out of the outstanding options: (i) options to purchase 1,140,607 ordinary shares, with a weighted average
exercise price of $5.04 per share, were exercisable as of December 31, 2025; and (ii) options to purchase 374,693 ordinary shares, with
a weighted average exercise price of $1.43 per share, had not vested as of December 31, 2025. Of the unvested options on December 31,
2025, options to purchase 164,377 ordinary shares are expected to vest during 2026, options to purchase 130,002 ordinary shares are expected
to vest during 2027 and options to purchase the remaining 80,314 ordinary shares are expected to vest during the period between March
31, 2028, and September 30, 2029. These unvested options were granted under the Company’s 2010 Plan. For additional information
on Dr. Cohen-Dayag’s holdings see “Item 6. Directors, Senior Management and Employee - E. Share Ownership - Share Ownership
by Directors and Other Executive Officers.”
Dr. Cohen-Dayag’s employment agreement may generally be terminated by either
party by providing six (6) months advance written notice, provided that in the event of termination by the Company for “justifiable
cause” (as such term is defined in her employment agreement as shall be in effect from time to time) the Company may terminate Dr.
Cohen-Dayag’s employment without advance notice and that Dr. Cohen-Dayag may resign with advance notice of only two (2) months in
the event of resignation for “good reason” (as such term is defined in her employment agreement as shall be in effect from
time to time). Upon termination, Dr. Anat Cohen-Dayag is entitled to receive certain payments associated with termination.
In the event that Dr. Cohen-Dayag’s employment is: (a) terminated by the Company,
other than for “justifiable cause”; or (b) terminated by Dr. Cohen-Dayag for “good reason” (hereinafter, (a) and
(b) shall be referred to together as “Dismissal”), Dr. Cohen-Dayag will also be entitled to an additional one-time payment
equal to six (6) monthly salaries, or the Termination Payment, and upon Dismissal within one year following certain “change of control”
events (as defined in her employment agreement as shall be in effect from time to time), Dr. Cohen-Dayag will be entitled to a special
termination payment (in addition to the Termination Payment) in an amount equal to six (6) monthly salaries.
In addition, upon Dismissal, or in the event of a “change of control”,
all outstanding unvested options granted to Dr. Cohen-Dayag as of such time will be accelerated and become immediately exercisable as
of the effective date of such Dismissal or change of control. Upon Dismissal, Dr. Cohen-Dayag will also be entitled to exercise all outstanding
vested options (including those options vested as a result of such accelerated vesting) for a period of one (1) year from the date of
such Dismissal, provided that such period does not extend beyond ten (10) years from the date of grant. Upon an event of change of control,
following which Dr. Cohen-Dayag’s employment is, within 12 months of the closing of such an event: (a) terminated by the Company,
other than for “justifiable cause”; or (b) terminated by Dr. Cohen-Dayag for any reason, Dr. Cohen-Dayag will be entitled
to exercise all outstanding vested options (including those vested as a result of such accelerated vesting) for a period of one (1) year
from the date of termination of her employment, provided that such period does not extend beyond ten (10) years from the date of grant.
86
Compensation to Dr. Anat Cohen-Dayag, in her capacity as our Executive
Chair of the Board
In connection with the transition of Dr. Cohen-Dayag to her new position as Executive
Chair of the Board (effective as of the time of the 2025 AGM), Dr. Cohen-Dayag’s employment agreement was amended as follows:
| (i) |
Starting January 1, 2026, Dr. Cohen-Dayag’s gross monthly base salary was reduced by 50% and is equal to NIS 75,000 (approximately
$21,730 according to the Representative Rate). |
| (ii) |
Dr. Cohen-Dayag’s bonus for the calendar years 2026 and 2027 will be equal to (a) an annual target bonus payment of up to six
(6) gross monthly base salaries and (b) an annual maximum bonus payment of up to nine (9) gross monthly base salaries for over achievement,
where 100% of Dr. Cohen-Dayag’s annual bonus will be based on measurable criteria only, as shall be determined by the Compensation
Committee and Board with respect to each calendar year. For any of the calendar years 2026 and 2027, the Compensation Committee and the
Board will set at least two (2) measurable criteria and relative weight for each criterion. These measurable criteria may include, among
other things, significant objectives relating to the progress of clinical trials, progress of pipeline products, operational, financial
and business targets and any additional significant objectives determined by the Compensation Committee and the Board derived from the
Company’s annual work plan and strategy. The annual target cash bonus, and the annual maximum bonus payment will be determined linearly
based on the performance score for each year, provided that, if less than an aggregate score of 50% of the measurable objectives set for
a respective year is achieved, Dr. Cohen-Dayag will not be entitled to any annual cash bonus for such year. Dr. Cohen-Dayag shall be eligible
to receive the annual cash bonus for each of the calendar years specified above, subject to her continuous employment as the Executive
Chair of the Board through the last day of the calendar year with respect to which the annual cash bonus is to be paid. |
| (iii) |
As approved at the 2025 AGM, for the year 2025 and onwards, Dr. Cohen-Dayag shall be entitled to an annual equity grant of options
to purchase 100,000 Ordinary Shares (“Chair Equity Framework”) in each of these years,
subject to the approval of the compensation committee and board of directors with respect to each such year a as long as she acts as the
Executive Chair of the Board at the time of grant. |
Additionally, as approved at the 2025 AGM, in order to align
such grants (including the exercise price and vesting period) with the annual grant of options to other executive Office Holders (for
whom shareholder approval is not required), our shareholders resolved that the annual grant to Dr. Cohen-Dayag (other than the annual
grant for 2025) will be made on such date on which the board of directors approves the respective year’s annual option grants to
management Office Holders in such year, and with respect to the grant for 2025, such grant took place upon shareholder approval on the
date of the 2025 AGM, and the exercise price of the options specified above is the closing price of the Ordinary Shares on the Nasdaq
on the last trading day prior to the date of the 2025 Meeting.
The options granted in each respective year are subject to the
terms and conditions applicable to options granted under the 2010 Plan (or any other option plan adopted by the Company). Each annual
equity grant vests over a four-year period as follows: twenty five percent (25%) vests on the last day of the quarter one calendar year
from the date of grant; and an additional 6.25% vests each quarter thereafter for the next 36 months. The options granted in these equity
grants have an exercise price equal to the closing price of the Company’s ordinary shares on Nasdaq on the last trading day prior
to the approval of each year’s grant by the board of directors (other than with respect to the grant for 2025, as detailed above).
These equity grants expire ten years after the grant date, unless they expire earlier in accordance with the terms of the 2010 Plan or
the terms of the option agreement to be entered into between the Company and Dr. Cohen-Dayag. These equity grants will be granted through
a trustee under Section 102 of the Tax Ordinance and, in accordance with the Company’s previous election in this regard, be subject
to the capital gains route for tax purposes.
All other terms applying to the equity specified above (e.g.,
acceleration) shall apply to the Chair Equity Framework.
| (iv) |
Dr. Cohen-Dayag will continue to be a party to the letter of indemnification that the Company provides its Office Holders with and
will continue to be insured under the Company’s directors’ and officers’ insurance policy. |
87
| (v) |
Any reference to her role as Chief Executive Officer (and therefore any rights, obligations and scope derived from that role as specified
above) will be made to her role as Executive Chair of the Board. |
All other terms of Dr. Cohen-Dayag employment agreement as described
above (under the heading “Compensation to Dr. Anat Cohen-Dayag, in her capacity as our Former President and Chief Executive Officer”)
will continue to apply in accordance with their terms.
Compensation to Dr. Eran Ophir, our President and Chief Executive
Officer
Dr. Eran Ophir entered into office as our President and Chief Executive Officer on
the date of the 2025 AGM.
Pursuant to the terms of Dr. Ophir’s employment agreement and (in accordance
with the approval of the terms below at the 2025 AGM), Dr. Ophir is entitled to a gross monthly base salary of NIS 120,000 (approximately
$34,760 based on the Representative Rate), plus customary fringe benefits which include, among others, managers’ insurance, pension
and education fund, long-term disability and life insurance, D&O insurance and indemnification undertaking by the Company, meals arrangements
and car-related expenses.
Dr. Ophir is also entitled to an annual cash bonus plan for each of the years 2025,
2026 and 2027, based on annual measurable objectives and discretionary components as specified in the proxy for the 2025 AGM. The annual
cash bonus amount that Dr. Ophir will be entitled to upon achieving 100% of his objectives, as shall be determined by the Compensation
Committee and Board for each of the relevant years, i.e., his target annual cash bonus, will be
up to six (6) gross monthly base salaries. For each relevant year, the annual cash bonus formula will include an over achievement opportunity
designed to encourage him to reach exceptional achievements, pursuant to which the maximum payment with respect to each calendar year
shall be up to 150% of the target bonus determined by the Compensation Committee and the Board for such year (i.e.,
nine (9) monthly base salaries if the target bonus is set at six (6) gross monthly base salaries. The annual cash bonus will be determined
linearly based on his performance score for each year, provided that if less than an aggregate score of 50% of the applicable measurable
objectives set for a respective year is achieved, Dr. Ophir will not be entitled to any annual cash bonus for that year. Dr. Ophir shall
be eligible to receive the annual cash bonus for each of the years 2025, 2026 and 2027 under the framework set forth herein, subject to
his continuous employment as the Company’s Chief Executive Officer through the last day of the calendar year with respect to which
the annual cash bonus is to be paid.
With respect to 2025 only, since Dr. Ophir served as our Chief Executive Officer during
a partial period in 2025, he will be entitled to a bonus payment which takes into account his different salaries during the different
periods and the different bonus formulas for him as a Chief Scientific Officer and as a Chief Executive Officer.
Additionally, Dr. Ophir shall be granted options to purchase up to 200,000 Ordinary
Shares for each of the calendar years 2025, 2026 and 2027 (the “CEO Equity Framework”),
as shall be determined by the Compensation Committee and the Board with respect to each calendar year.
In order to align such equity grants and their terms (including the exercise price
of the options and the vesting periods) with the annual grants of equity to employees and other Office Holders (for whom shareholder approval
is not required), the annual equity awards to Dr. Ophir under the CEO Equity Framework will be approved by the Board on the date on which
it approves the respective year’s annual equity grants to other Office Holders.
Each annual equity grant awarded under the CEO Equity Framework will vest over a four-year
period as follows: 25% will vest on the last day of the quarter one (1) year from the date of grant and an additional 6.25% will vest
on the last day of each quarter thereafter for the next thirty-six (36) months. Notwithstanding the foregoing, the vesting of all unvested
equity awards awarded under the CEO Equity Framework shall be accelerated upon the occurrence of both of the following terms (y) the closing
of a Merger/Sale, as defined in the 2010 Plan; and (z) following the closing of such Merger/Sale and within 12 months from the date of
the closing thereof, either (i) the termination by the Company or the Successor Corporation (as defined in the 2010 Plan) of Dr. Ophir’s
employment (other than termination for “Cause” (as defined in the 2010 Plan)); or (ii) Dr. Ophir resigns for Just Reason.
For purposes hereof, “Just Reason” is defined as a change in Dr. Ophir’s position in the Company (or the surviving entity
following merger), provided that Dr. Ophir is not offered to continue to be employed in a comparable or more senior position and/or on
comparable or more favorable terms.
88
The options granted under the Equity Framework will have an exercise price equal to
the closing price of the Shares on Nasdaq on the last trading day prior to the approval of each year’s grant by the Board.
The options granted each year to Dr. Ophir will be subject to the terms and conditions
of the 2010 Plan, or any other equity-based incentive plan that the Company may adopt in the future and pursuant to which these equity
awards would be granted, and to the terms of the option agreements for such options. These options will expire 10 (ten) years after their
grant date, unless they expire earlier in accordance with the terms of the 2010 Plan (e.g., expiration due to termination of employment)
or the terms of the option agreements for such options. If applicable, these equity awards will be granted through a trustee under Section
102 of the Tax Ordinance (Capital Gains Route).
All vested options granted to Dr. Ophir under the Equity Framework shall have a one-year
exercise term following the termination of his employment as the Company’s Chief Executive Officer, other than in the event of termination
for “cause” (as defined in his employment agreement as shall be in effect from time to time).
In addition to the foregoing, and not as part of the Equity Framework, Dr. Ophir will
also be entitled to participate until the end of 2027 in the Company’s 2021 Employee Share Purchase Plan or any other employee share
purchase plan(s) that may be adopted by the Company from time to time (the “ESPP”), as long as the fair market value of the
benefit provided to him under such ESPP (determined by the Company at the beginning of the respective offering period) in any given twelve
(12) month period does not exceed ten percent (10%) of his gross annual base salary.
As of December 31, 2025, Dr. Ophir held options to purchase a total of 550,250 Ordinary
Shares with a weighted average exercise price of $3.42 per share and 7,821 RSUs. Out of the outstanding options: (i) options to purchase
281,515 Ordinary Shares, with a weighted average exercise price of $5.33 per share, were exercisable as of December 31, 2025; and (ii)
options to purchase 268,735 Ordinary Shares, with a weighted average exercise price of $1.42 per share, had not vested as of December
31, 2025. Of the unvested options on December 31, 2025, options to purchase 100,562 Ordinary Shares are expected to vest during 2026,
options to purchase 72,750 Ordinary Shares are expected to vest during 2027, and options to purchase the remaining 95,423 Ordinary Shares
are expected to vest during the period between March 31, 2028, and September 30, 2029. As of December 31, 2025, the total Number of Ordinary
Shares Beneficially Owned (as such term is defined in the beneficial ownership table above) by Dr. Ophir is 298,108.
Dr. Ophir is entitled to up to 23 vacation days per year, with a permitted accumulation
of up to 46 days, and is a party to the letter of indemnification that the Company provides its Office Holders with is insured under the
Company’s directors’ and officers’ insurance policy.
Both Dr. Ophir and the Company will need to provide the other party with six (6) months’
notice for termination.
Insurance, Indemnification and Exemption
Under the Companies Law, exemption and indemnification of, and procurement of insurance
coverage for our Office Holders, must be approved by our compensation committee and our board of directors and, with respect to an Office
Holder who is the CEO or a director, also by our shareholders. However, according to regulations promulgated under the Companies Law,
shareholders and board of directors approvals for the procurement of such insurance are not required if the insurance policy is approved
by our compensation committee and: (i) the terms of such policy are within the framework for insurance coverage as approved by our shareholders
and set forth in our Compensation Policy; (ii) the premium paid under the insurance policy is at fair market value; and (iii) the insurance
policy does not and may not have a substantial effect on the Company’s profitability, assets or obligations.
Our Office Holder’s Insurance. Our Articles
provide that, subject to the provisions of the Companies Law, we may enter into contracts to insure the liabilities of our Office Holders
for any liabilities or expenses incurred by or imposed upon them as a result of any act (or omission) carried out by them as our Office
Holders, including with respect to any of the following:
| • |
a breach of duty of care to us or to another person; |
| • |
a breach of duty of loyalty to us, provided that the Office Holder acted in good faith and had reasonable grounds to assume that
such act would not prejudice our interests; |
89
| • |
monetary liabilities or obligations imposed upon him or her in favor of another person; |
| • |
A payment which the Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the Securities
Law, and expenses that the Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or I’1 of
the Securities Law, including reasonable litigation expenses, including attorney’s fees, or in connection with Article D of Chapter
Four of Part Nine of the Companies Law; and |
| • |
Expenses incurred by the Office Holder in connection with a proceeding under Chapter G’1, of the Israel Restrictive Trade Practices
Law, 5748-1988, or Restrictive Trade Law, including reasonable litigation expenses, including attorney’s fees. |
In accordance with our Compensation Policy, approved by our shareholders at the 2023
AGM, we are currently entitled to hold directors’ and officers’ liability insurance policy for the benefit of our Office
Holders with insurance coverage of up to $100 million and with such annual premium reflecting market terms and not having a
substantial effect on our profitability, assets or obligations.
Our Office Holders’ Indemnification. Our
Articles provide that, subject to the provisions of the Companies Law, we may indemnify any of our Office Holders for all liabilities
and expenses incurred by them arising from or as a result of any act (or omission) carried out by them as Office Holders of the Company,
including as follows:
| • |
For any monetary liabilities or obligations imposed on our Office Holder in favor of another person pursuant to a court judgment,
including a compromise judgment or an arbitrator’s decision approved by a court; |
| • |
For any payments which our Office Holder is obligated to make to an injured party as set forth in Section 52(54)(a)(1)(a) of the
Israeli Securities Law and expenses the Office Holder incurred in connection with a proceeding under Chapters H’3, H’4 or
I’1 of the Israeli Securities Law, including reasonable litigation expenses, including attorney’s fees, or in connection with
Article D of Chapter Four of Part Nine of the Companies Law; |
| • |
For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder in consequence of an investigation
or proceeding instituted against the Office Holder by an authority that is authorized to conduct such investigation or proceeding, and
which was concluded without filing of an indictment against the Office Holder and without imposing on the Office Holder a financial obligation
in lieu of criminal proceedings, or which was concluded without filing of an indictment against the Office Holder but with imposing on
such Office Holder a financial obligation in lieu of criminal proceedings in respect of an offense that does not require proof of criminal
intent or in connection with a financial sanction; For the purposes hereof: (i) “a proceeding that concluded without filing an indictment
in a matter in respect of which an investigation was conducted”; and (ii) “financial obligation in lieu of a criminal proceeding”,
shall have the meanings specified in Section 260(a)(1A) of the Companies Law; |
| • |
For reasonable litigation expenses, including attorney’s fees, incurred by the Office Holder or which the Office Holder is
ordered to pay by a court, in a proceeding filed against the Office Holder by the Company or on its behalf or by another person, or in
a criminal action of which the Office Holder is acquitted, or in a criminal action in which the Office Holder is convicted of an offense
that does not require proof of criminal intent; |
| • |
For expenses incurred by our Office Holder in connection with a proceeding under Chapter G’1, of the Restrictive Trade Law,
including reasonable litigation expenses, including attorney’s fees; and |
| • |
For any other liability, obligation or expense indemnifiable or which our Officer Holders may from time to time be indemnifiable
by law. |
The Company may undertake to indemnify an office holder as mentioned above: (a) prospectively,
provided that with respect of the first act (financial liability) the undertaking is limited to events which in the opinion of the board
of directors are foreseeable in light of the Company’s actual operations when the undertaking to indemnify is given, and to an amount
or criteria set by the board of directors as reasonable under the circumstances, and further provided that such events and amount or criteria
are set forth in the undertaking to indemnify, and (b) retroactively.
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Indemnification letters, covering indemnification of those liabilities discussed above,
were granted to each of our present Office Holders and were amended at the Company’s Annual General Meeting of Shareholders for
2021, held on September 2, 2021. Under the letters of indemnification and exemption and release (i) our undertaking to indemnify each
Office Holder for monetary liabilities or obligations imposed by a court judgment (including a settlement or an arbitrator’s award
approved by a court) is limited to matters that result from or are connected to those events or circumstances set forth therein, and (ii)
the indemnification that we undertake towards all persons whom it resolved to indemnify for the matters and circumstances described therein,
jointly and in the aggregate, do not exceed the higher of the: (i) an amount equal to 25% of the Company’s shareholders’ equity,
per the most recent financial statements (audited or reviewed) after the time that notice is provided to the Company; or (y) $20 million.
Our Office Holder’s Exemption. Our Articles
provide that, subject to the provisions of the Companies Law, we may exempt and release our Office Holders, including in advance, from
all or part of such Office Holder’s liability for monetary or other damages due to a breach of their duty of care to the Company.
Our directors are released and exempted from all liability as aforesaid to the fullest extent permitted by law with respect to any such
breach which has been or may be committed.
Limitations on Insurance, Indemnification and Exemption. The
Companies Law provides that a company may not insure, exempt or indemnify an Office Holder for any breach of his or her liability arising
from any of the following:
| • |
a breach by the Office Holder of his or her duty of loyalty, except that the company may enter into an insurance contract or indemnify
an Office Holder if the Office Holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
| • |
a breach by the Office Holder of his or her duty of care if such breach was intentional or reckless, but unless such breach was solely
negligent; |
| • |
any act or omission done with the intent to derive an illegal personal benefit; or |
| • |
any fine, civil fine, financial sanction or monetary settlement in lieu of criminal proceedings imposed on such Office Holder.
|
Administrative Enforcement
The Israeli Securities Law includes an administrative enforcement procedure that may
be used by the Israeli Securities Authority, to enhance the efficacy of enforcement in the securities market in Israel. Pursuant to the
Companies Law and the Israeli Securities Law, the Israeli Securities Authority is authorized to impose administrative sanctions, including
monetary fines, against companies like ours and their officers and directors for certain violations of the Israeli Securities Law or the
Companies Law. Furthermore, the Israeli Securities Law requires that the CEO of a company supervise and take all reasonable measures to
prevent the company or any of its employees from breaching the Israeli Securities Law. The CEO is presumed to have fulfilled such supervisory
duty if the company adopts internal enforcement procedures designed to prevent such breaches, appoints a representative to supervise the
implementation of such procedures and takes measures to correct the breach and prevent its reoccurrence.
Under the Israeli Securities Law, a company cannot obtain insurance against or indemnify
a third-party (including its officers and/or employees) for any administrative procedure and/or monetary fine (other than for payment
of damages to an injured party). The Israeli Securities Law permits insurance and/or indemnification for expenses related to an administrative
procedure, such as reasonable legal fees, provided that it is permitted under the company’s articles of association.
We have adopted and implemented an internal enforcement plan to reduce our exposure
to potential breaches of sections in the Companies Law and the Israeli Securities Law, applicable to us. Our Articles and letters of indemnification
permit, among others, insurance and/or indemnification as contemplated under the Israeli Securities Law (see “Insurance,
Indemnification and Exemption” above).
C. BOARD PRACTICES
We are incorporated in Israel, and, therefore, are generally subject to various corporate
governance practices under Israeli law such as with respect to external directors, independent directors, audit committee, compensation
committee, an internal auditor and approvals of interested party transactions. These matters are in addition to the requirements of The
Nasdaq Capital Market and other relevant provisions of U.S. securities laws applicable to us. Under the Nasdaq Listing Rules, a foreign
private issuer may generally follow its home country practices for corporate governance in lieu of the comparable Nasdaq Capital Market
requirements, except for certain matters such as composition and responsibilities of the audit committee and the SEC-mandated standards
for the independence of its members. We currently comply with all the above-mentioned requirements. See “Item 3. Key Information
- D. Risk Factors - Risks related to operations in Israel - Being a foreign private issuer exempts us from certain SEC requirements and
Nasdaq rules, which may result in less protection that is afforded to investors under rules applicable to domestic issuers”. For
information regarding home country practices followed by us see “Item 16G - Corporate Governance”.
91
Board of Directors
Our Articles provide that we may have no less than five nor more than fourteen directors.
Currently our board of directors consists of eight members. Our directors are elected at the annual general meeting for a term of approximately
one year, ending at the annual general meeting immediately following the annual general meeting at which they were elected or upon earlier
termination in circumstances referred to under the Companies Law or our Articles. Our directors may further be appointed by the board
of directors and in this case shall hold office until the end of the immediately following annual general meeting or upon earlier termination
in circumstances referred to under the Companies Law or our Articles.
None of our directors is party to a service contract with us that provides for any
severance or similar benefits upon termination of his or her service, other than our President and Chief Executive Officer, Dr. Eran Ophir
and our Executive Chair of the Board, Dr. Anat Cohen-Dayag, with whom we have employment agreements in place. For additional information
on the employment agreement entered into with each Dr. Eran Ophir and Dr. Cohen-Dayag, please see “Item 6 - Directors, Senior Management
and Employees - B. Compensation”
Board of Directors Diversity
Our Nomination and Corporate Governance Committee oversees the identification and
recommendation of director candidates. In evaluating candidates, the Committee considers a balanced mix of qualifications, including experience,
skills, expertise, independence, integrity, time availability and diversity of backgrounds, skills, and perspectives, with the goal that
the Board as a whole reflects an appropriate balance of knowledge, experience, skills, expertise, diversity and other attributes. This
approach is consistent with our Nomination and Corporate Governance Committee Charter.
As of February 28, 2026, our Board comprised of eight directors, of whom three are
women.
Directors Under the Companies Law - General
A nominee for service as a director in a public company may not be elected without
submitting a declaration to the company, prior to his or her election, specifying that he or she has the requisite qualifications to serve
as a director, an external director or an independent director, as applicable, and the ability to devote the appropriate time to performing
his or her duties as such.
A director, including an external director or an independent director, who ceases
to meet the statutory requirements to serve as a director, external director or independent director, as applicable, must notify the company
to that effect immediately and his or her service as a director will expire upon submission of such notice.
External Directors and Independent Directors Under the Companies
Law
Under the Companies Law, Israeli public companies are generally required to have on
their board of directors at least two external directors meeting certain independence criteria, provided under Israeli law. In accordance
with the Alleviation Regulations, we, as an Israeli public company with no controlling shareholder (within the meaning of the Companies
Law), whose shares are listed on The Nasdaq Capital Market, may opt out from the requirement of electing and having external directors
on our board of directors and related requirements concerning the composition of the audit and compensation committees of the board of
directors, provided that we do not have a controlling shareholder, we continue to comply with the U.S. securities laws and Nasdaq Listing
Rules applicable to U.S. domestic issuers regarding the independence of the board of directors and the composition of the audit and compensation
committee, or the Opt Out Criteria. On June 7, 2018, our board of directors determined to opt out of the requirement to elect and have
external directors and of the rules governing composition of the audit committee and compensation committee under the Companies Law pursuant
to the relief available under the Alleviation Regulations, since at that time (and since that time) we have complied and continue to comply
with the Opt Out Criteria. In accordance with this decision, we currently have no external directors on our board of directors, and we
are subject to the U.S. securities laws and Nasdaq Listing Rules applicable to U.S. domestic issuers regarding the independence of our
board of directors and the composition of our audit and compensation committees.
92
The term controlling shareholder as used in the Companies Law for purposes of all
matters related to external directors and for certain other purposes, means a shareholder that has the ability to direct the activities
of the company, other than by virtue of being an Office Holder. For all purposes related to external directors, a shareholder is presumed
to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in the company or has the right to appoint the
majority of the directors of the company or its chief executive officer.
Under the Companies Law, an ‘independent director’ is either an external
director or a director appointed or classified as such who meets the same non-affiliation criteria as an external director, as determined
by the company’s audit committee, and who has not served as a director of the company for more than nine consecutive years. For
these purposes, ceasing to serve as a director for a period of two years or less would not be deemed to sever the consecutive nature of
such a director’s service. However, as our shares are listed on The Nasdaq Capital Market, pursuant to the Alleviation Regulations,
we may also classify directors who qualify as independent directors under the relevant non-Israeli rules, as ‘independent directors’
under the Companies Law. In addition, the Alleviation Regulations provide that ‘independent directors’ may be elected for
additional terms that do not exceed three years each, beyond the 9 consecutive years, provided that, if the director is being re-elected
for an additional term or terms beyond the 9 consecutive years, the audit committee and board of directors must determine that, in light
of the director’s expertise and special contribution to the board of directors and its committees, the re-election for an additional
term is to the company’s benefit and the director must be re-elected by the required majority of shareholders and subject to the
terms specified in the Companies Law. Each of our directors, other than Dr. Eran Ophir, who also serves as our President and Chief Executive
Officer, and Dr. Anat Cohen-Dayag, who serves as the Executive Chair of our Board, meets the ‘independent directors’ criteria
under the Companies Law.
Independent Directors Under the Nasdaq Listing
Rules
In addition to the requirements of the Companies Law as described above, since our
shares are listed on The Nasdaq Capital Market, pursuant to the Nasdaq Listing Rules, a majority of our directors must be independent
(as defined under the Nasdaq Listing Rules). We comply with such Nasdaq independence requirement, as each of our directors, other than
Dr. Eran Ophir, who also serves as our President and Chief Executive Officer and Dr. Anat Cohen-Dayag, who serves as the Executive Chair
of our Board, has been determined by our board of directors to meet the Nasdaq independence requirements.
Financial and Accounting Expertise Under the
Companies Law
Pursuant to the Companies Law, the board of directors of a publicly traded company
is required to make a determination as to the minimum number of directors who must have financial and accounting expertise according to
criteria set forth under the Companies Law and regulations promulgated there under and based, among other things, on the type of company,
its size, the volume and complexity of the company’s activities and the number of directors. Our board of directors has determined
that the minimum number of directors with financial and accounting expertise is one. Currently, each of Mr. Gilead Halevy, Mr. Eran Perry
and Mr. Sanford (Sandy) Zweifach qualifies as such.
Board Committees
Audit Committee
The Companies Law requires public companies such as ours to appoint an audit committee,
the responsibilities of which include, among other things: (i) identifying flaws in the management of the company’s business, among
other things, in consultation with the company’s internal auditor or external auditor, and making recommendations to the board of
directors as to how to correct them, (ii) reviewing and considering certain related party transactions and certain actions involving conflicts
of interest (as well as deciding whether certain actions specified in the Companies Law are considered material or non-material and whether
certain transactions are considered exceptional or ordinary), (iii) establishing procedures to be followed with respect to related party
transactions with a “controlling shareholder” (where such are not extraordinary transactions), which may include, where applicable,
the establishment of a competitive process for such transaction, under the supervision of the audit committee, or individual, or other
committee or body selected by the audit committee, in accordance with criteria determined by the audit committee, (iv) determining procedures
for approving certain related party transactions with a “controlling shareholder”, which were determined by the audit committee
not to be extraordinary transactions, but which were also determined by the audit committee not to be negligible transactions, (v) reviewing
the internal auditor’s work program performance, examining the company’s internal control structure and processes and determining
whether the internal auditor has the requisite tools and resources required to perform his or her role, (vi) examining the external auditor’s
scope of work as well as the external auditor’s fees and providing its recommendations to the appropriate corporate organ, (vii)
overseeing the accounting and financial reporting processes of the Company, and (viii) providing arrangements regarding employee complaints
with respect to flaws in the management of the Company’s business and the protection to be provided to such employees.
93
Under the Nasdaq Listing Rules, we are required to maintain an audit committee that
operates under a formal written charter and has certain responsibilities and authority, including being directly responsible for the appointment,
compensation, retention and oversight of the work of our external auditor. However, under Israeli law and our Articles, the appointment
of external auditor requires the approval of the shareholders and their compensation requires the approval of our board of directors.
In addition, as described above, pursuant to the Companies Law, the audit committee is required to examine the external auditor’s
scope of work as well as the external auditor’s fees and to provide its recommendations with respect thereto to the appropriate
corporate organ. Accordingly, the appointment of our external auditor is approved by our shareholders at the audit committee’s recommendation
and its compensation for audit and non-audit services is approved by the board of directors following the audit committee’s recommendation.
We have adopted a charter for the audit committee, which sets forth the purpose and
responsibilities of such committee.
In carrying out its duties, the audit committee meets with management at least once
in each fiscal quarter at which time, among other things, it reviews, and either approves or disapproves, the financial results of the
Company for the immediately preceding fiscal quarter and conveys its conclusions in this regard to the board of directors. The audit committee
also generally monitors the services provided by the Company’s external auditor to ensure their independence and reviews all audit
and non-audit services provided by them. The Company’s external and internal auditors also report regularly to the audit committee
and the audit committee discusses with our external auditor the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in our financial statements, as and when it deems it appropriate
to do so.
Under the Nasdaq Listing Rules, the audit committee is required to consist of at least
three independent directors, each of whom is financially literate and at least one of whom has accounting or related financial management
expertise.
We have an audit committee consisting of three directors, Mr. Gilead Halevy, who serves
as the chairman of our audit committee, Mr. Eran Perry and Mr. Sanford (Sandy) Zweifach, all of whom are financially literate under the
applicable rules and regulations of the SEC and Nasdaq Listing Rules and each of whom is an audit committee financial expert, as defined
by the SEC rules, and has the requisite financial experience required under the Nasdaq Listing Rules. Additionally, each of the members
of the audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, which is different
from the general test for independence of board and committee members under the Nasdaq Listing Rules.
The audit committee composition requirements referred to under Section 115 of the
Companies Law are not applicable to the Company as our board of directors, as part of its decision to opt out of the requirement to elect
external directors pursuant to the relief available under the Alleviation Regulations, also opted out of such composition requirements
on the basis that the Company complies, and will continue to comply, with the U.S. Securities Law and Nasdaq Listing Rules concerning
the composition of the audit committee, as described above.
Compensation Committee
The Companies Law generally provides that public companies such as the Company must
appoint a compensation committee, the responsibilities of which include, among others: (i) reviewing and making recommendations to the
board of directors with respect to our Compensation Policy and with respect to any updates which may be required thereto from time to
time, (ii) reviewing the implementation of the Compensation Policy by the Company, (iii) reviewing and considering arrangements with respect
to the Terms of Office and Employment of Office Holders, (iv) exempting, under certain circumstances, a transaction relating to the Terms
of Office and Employment of Office Holders from the requirement of approval of the shareholders, and (v) overseeing, subject to applicable
law, the administration of the Company’s various compensation plans and arrangements, including, incentive compensation and equity
based plans. Under the Companies Law, the compensation committee may need to seek the approval of the board of directors and the shareholders
for certain compensation-related decisions (see “Item 6 - Directors, Senior Management and Employees - B. Compensation - Approvals
Required for Office Holders Terms of Office and Employment”).
94
We have adopted a charter for the compensation committee, which sets forth the purpose
and responsibilities of such committee.
Under the Nasdaq Listing Rules, we are required to maintain a compensation committee
consisting of at least two independent directors (as defined under the Nasdaq Listing Rules). Each compensation committee member must
also be deemed by our board of directors to meet the enhanced independence requirements for members of the compensation committee under
the Nasdaq Listing Rules, which requires, among other things, that our board of directors considers the source of each such committee
member’s compensation in considering whether he or she is independent.
The compensation committee composition requirements referred to under Section 118A
of the Companies Law are not applicable to the Company as our board of directors, as part of its decision to opt out of the requirement
to elect external directors pursuant to the relief available under the Alleviation Regulations, also opted out of such composition requirements
on the basis that the Company complies, and will continue to comply, with the Nasdaq majority board independence requirement and with
US Securities Law and Nasdaq Listing Rules concerning the composition of the compensation committee, as described above.
We have a compensation committee consisting of three directors, Mr. Sanford (Sandy)
Zweifach, who serves as the chairman of our compensation committee, Dr. Kinneret Livnat Savitzky and Mr. Eran Perry. Each member
of our compensation committee is an ‘independent director’ in accordance with the Nasdaq listing standards.
Nomination and Corporate Governance Committee
and Lead Independent Director
The Nasdaq Listing Rules require that director nominees be selected or recommended
for the board’s selection either by a nomination committee composed solely of independent directors, or by a majority of independent
directors, in a vote in which only independent directors participate, subject to certain exceptions. Mr. Gilead Halevy, who serves as
the chairman of our nomination and corporate governance committee and who is also our lead independent director, Dr. Kinneret Livnat Savitzky
and Mr. Sanford (Sandy) Zweifach, each an independent director, are the members of our nomination and corporate governance committee,
which, among other responsibilities, recommends director nominees for our board’s approval.
Key responsibilities of the lead independent director include ensuring effective communication
between the Executive Chair and other board members and between the Board and management to foster a collaborative and informed decision-making
environment and to provide independent oversight and input to the Nomination and Corporate Governance Committee regarding the performance
of the Executive Chair.
Internal Auditor
Under the Companies Law, the board of directors must appoint an internal auditor,
recommended by the audit committee. The role of the internal auditor is to examine, among other matters, whether the company’s actions
comply with the law and orderly business procedures. Under the Companies Law, an interested party or an Office Holder of a company, or
a relative of an interested party or of an Office Holder of a company, as well as the company’s external auditor or anyone on behalf
of the external auditor may not serve as a company’s internal auditor. The internal auditor’s tenure cannot be terminated
without his or her consent, nor can he or she be suspended from such position unless the board of directors has so resolved after hearing
the opinion of the audit committee and after providing the internal auditor with the opportunity to present his or her position to the
board of directors and to the audit committee. An interested party is defined in the Companies Law as a holder of 5% or more of the company’s
outstanding shares or voting rights, any person or entity who has the right to designate one or more directors or the chief executive
officer of the company or any person who serves as a director or as a chief executive officer of the company.
Ms. Tali Yaron of Brightman, Almagor, Zohar & Co., a member firm of Deloitte Touche
Tohmatsu, has served as our internal auditor since 2023 (replaced a different partner at Brightman Almagor Zohar & Co., a member firm
of Deloitte Touche Tohmatsu). Ms. Tali Yaron is not an employee, affiliate or Office Holder of the Company, or affiliated with the Company’s
external auditor.
95
Fiduciary Duties and Approval of Related Party Transactions Under
Israeli Law
Fiduciary Duties of Office Holders
The Companies Law codifies the fiduciary duties that Office Holders owe to a company.
All persons listed in the table under “Item 6. Directors, Senior Management and Employees - A. Directors and Senior Management”
are Office Holders. In addition to those persons listed in the table under Item 6.A, except for Dr. Michele Holcomb who was not a director
on December 31, 2025, there were three additional individuals who were Office Holders of the Company as of December 31, 2025.
An Office Holder’s fiduciary duties consist of a duty of care and a duty of
loyalty. The duty of care requires an Office Holder to act with the standard of skills with which a reasonable Office Holder in the same
position would have acted under the same circumstances. The duty of care includes a duty to use reasonable means to obtain:
| • |
information regarding the business advisability of a given action brought for the Office Holder’s approval or performed by
the Office Holder by virtue of his or her position; and |
| • |
all other information of importance pertaining to the aforesaid actions. |
The duty of loyalty requires an Office Holder to act in good faith and for the benefit
of the company and includes the duty to:
| • |
refrain from any act involving a conflict of interest between the fulfillment of his or her position in the company and the fulfillment
of any other position or his or her personal affairs; |
| • |
refrain from any act that is competitive with the business of the company; |
| • |
refrain from exploiting any business opportunity of the company with the aim of obtaining a personal gain for himself or herself
or for others; and |
| • |
disclose to the company all relevant information and provide it with all documents relating to the company’s affairs which
the Office Holder obtained due to his or her position in the company. |
Disclosure of Personal Interests of Office
Holders and Approval of Certain Transactions
The Companies Law requires that an Office Holder promptly discloses to the company
any personal interest that the Office Holder may have, and all related material information known to him or her, in connection with any
existing or proposed transaction by the company. In addition, if the transaction is an extraordinary transaction, as defined under Israeli
law, the Office Holder must also disclose any personal interest held by the Office Holder’s spouse, siblings, parents, grandparents,
descendants, spouse’s descendants and the spouses of any of the foregoing, or a Relative. In addition, the Office Holder must also
disclose any interest held by any corporation in which the Office Holder: (i) holds at least 5% of the company’s outstanding share
capital or voting rights; (ii) is a director or general manager; or (iii) has the right to appoint at least one director or the general
manager. An extraordinary transaction is defined as a transaction which is either not in the ordinary course of business, not on market
terms, or likely to have a material impact on the company’s profitability, assets or liabilities.
Under the Companies Law, unless the articles of association of a company provide otherwise,
a transaction in which an Office Holder has a personal interest and which is not an extraordinary transaction, requires board approval,
after the Office Holder complies with the above disclosure requirement and provided the transaction serves the company’s interest.
Our Articles do not provide for a different method of approval. Furthermore, if the transaction is an extraordinary transaction, then,
in addition to any approval stipulated by the articles of association, it also must be approved by the company’s audit committee
and then by the board of directors, and, under certain circumstances, by the shareholders of the company.
A person with a personal interest in any matter may not generally be present at any
audit committee, compensation committee or board of directors meeting where such matter is being considered, and if he or she is a member
of the committee or a director, he or she may not generally vote on such matter at the applicable meeting.
Disclosure of Personal Interest of Controlling Shareholders and
Approval of certain Transactions
The Companies Law extends the disclosure requirements applicable to an Office Holder
to a ‘controlling shareholder’ in an Israeli a public company. For this purpose, a ‘controlling shareholder’ is
a shareholder who has the ability to direct the activities of a company, including a shareholder or a group of shareholders who together
own 25% or more of the voting rights if no other shareholder holds more than 50% of the voting rights.
96
Extraordinary transactions of a public company with a controlling shareholder or in
which a controlling shareholder has a personal interest, as well as any engagement by a public company of a controlling shareholder or
of such controlling shareholder’s Relative, directly or indirectly, with respect to the provision of services to the company, and,
if such person is also an Office Holder of such company, with respect to such person’s Terms of Office and Employment as an Office
Holder, and if such person is an employee of the company but not an Office Holder, with respect to such person’s employment by the
company, generally require the approval of each of the audit committee (or with respect to Terms of Office and Employment, the compensation
committee), the board of directors and the shareholders of the company, in that order. The shareholder approval must fulfill one of the
following requirements: (i) it received the positive vote of at least a majority of the voting rights in the company who are present and
voting in the meeting and held by shareholders who do not have a personal interest in the transaction; (abstentions are disregarded) or
(ii) the voting rights held by shareholders who have no personal interest in the transaction and who have voted against the transaction,
do not exceed two percent of the voting rights in the company.
Any extraordinary transactions with a controlling shareholder or in which a controlling
shareholder has a personal interest with a term of more than three years generally need to be brought for re-approval in accordance with
the above procedure every three years, unless the audit committee determines that the duration of the transaction is reasonable given
the circumstances related thereto and has been approved by the shareholders for such longer duration.
Pursuant to regulations promulgated under the Companies Law, certain transactions
with a controlling shareholder or his or her Relative, or with directors, that would otherwise require approval of a company’s shareholders
may be exempt from shareholder approval upon certain determinations of the audit committee or the compensation committee and board of
directors.
For information concerning the direct and indirect personal interests of certain of
our Office Holders and principal shareholders in certain transactions with us, see “Item 7. Major Shareholders and Related Party
Transactions - B. Related Party Transactions.”
Shareholders’ Duties
Pursuant to the Companies Law, a shareholder has a duty to: (i) act in good faith
in fulfilling his obligations towards the company and the other shareholders; (ii) refrain from abusing his or her power with respect
to the company, including, when voting at a general meeting with respect to the following matters: (a) an amendment to the company’s
articles of association; (b) an increase of the company’s authorized share capital; (c) a merger; or (d) approval of interested
party transactions that require shareholders’ approval.
In addition, any controlling shareholder, any shareholder who knows that it possesses
power to determine the outcome of a shareholder vote and any shareholder who, pursuant to the provisions of a company’s articles
of association has the power to appoint or prevent the appointment of an office holder in the company or other power against the company,
is under a duty of fairness towards the company. The Companies Law does not describe the substance of such duty of fairness but states
that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty of fairness, taking
into account such shareholder’s position.
D. EMPLOYEES
The following table sets out the number of our full-time employees engaged in specified
activities, at the end of the fiscal years 2025, 2024 and 2023 (the numbers include employees of our wholly owned U.S. subsidiary Compugen
USA, Inc.):
|
December 31, 2025 |
December 31, 2024 |
December 31, 2023 |
||||||||||
|
Research & Development |
53 |
52 |
46 |
|||||||||
|
Administration, Accounting and Operations |
21 |
21 |
21 |
|||||||||
|
Marketing and Business Development |
1 |
1 |
1 |
|||||||||
|
Total |
75 |
74 |
68 |
|||||||||
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In addition to the headquarters in Holon, Israel, we have a team in the U.S. On December
31, 2025, 69 of our employees were located in Israel, 4 were located in the United States and 2 employees were located in Europe; on December
31, 2024, 66 of our employees were located in Israel, 5 were located in the United States and 3 employees were located in Europe, and
on December 31, 2023, 58 of our employees were located in Israel, 7 were located in the United States and 3 employees were located in
Europe.
We consider our relations with our employees to be satisfactory, and we have not experienced
a significant labor dispute or strike. We are not a party to any collective bargaining agreement with respect to our Israeli employees.
However, we are subject to certain labor related statutes and to certain provisions of expansion orders the Israeli Minister of the Economy
has given to collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordinating Bureau
of Economic Organizations and/or the Industrialists’ Association, which are applicable to the employment of our Israeli employees.
These statutes and provisions and additional mandatory Israeli labor law provisions cover a wide range of subjects and provide certain
minimum employment standards, including the length of the workday and work week, minimum wages, travel expenses, contributions to a pension
fund, insurance for work-related accidents, determination of severance pay, annual and other vacations, sick pay and other conditions
of employment. We generally provide our employees with benefits and working conditions beyond the required minimum.
Our employees are not represented by a labor union. We have written employment contracts
(including signed offers of employment) with each of our employees.
E. SHARE OWNERSHIP
Share Ownership by Directors and Other Executive Officers
All of the persons listed above under the caption “Directors and Senior Management”
own ordinary shares of the Company and/or options to purchase ordinary shares of the Company and/or RSUs. Except as set forth in the table
below, none of those directors or senior management members beneficially owns ordinary shares and/or ordinary shares underlying options
and/or RSUs amounting together to 1% or more of the outstanding ordinary shares. The following table sets forth certain information as
of February 20, 2026, regarding the beneficial ownership by our directors and senior management. All numbers quoted in the table are inclusive
of options to purchase shares that are exercisable within 60 days after February 20, 2026, and RSUs that are vested during such period.
The shares that may be issued under these options and RSUs are deemed to be outstanding for the purpose of computing the percentage of
ownership of such individual or group but are not deemed to be outstanding for the purpose of computing the percentage of ownership of
the other individual or group shown in the table. The information in this table is based on 94,554,127 ordinary shares outstanding as
of February 20, 2026.
|
Beneficial Owner |
Amount Owned |
Percent of Class |
||||||
|
Anat Cohen-Dayag(1)
|
1,256,432 |
1.3 |
% | |||||
|
All directors and executive officers
as a group (13 persons)(2)
|
2,649,607 |
2.7 |
% | |||||
___________________
| (1) |
Includes (i) 72,531 shares held by Dr. Cohen-Dayag, (ii) 1,180,620 shares subject to options that are exercisable within 60 days
after February 20, 2026, with a weighted average exercise price of $4.93 per share, and which expire between August 2026 and July 2034,
and (iii) 3,281 RSUs that are exercisable within 60 days after February 20, 2026. |
| (2) |
Includes (i) a total of 92,431 ordinary shares held by directors and executive officers,(ii) a total of 2,551,091 shares subject
to options that are beneficially owned by directors and executive officers that are exercisable within 60 days after February 20, 2026,
with a weighted average exercise price of $4.85 per share and which expire between July 2026 and September 2034, and (iii) 6,085 RSUs
that are exercisable within 60 days after February 20, 2026. |
98
Share Incentive Plan and Employee Share Purchase Plan
We currently maintain one active share incentive plan, which is our 2010 Share Incentive
Plan, or the 2010 Plan. In addition to the discussion below, see Note 9 to our 2025 consolidated financial statements.
Compugen 2010 Share Incentive Plan
On July 25, 2010, our board of directors adopted the 2010 Plan which was also approved
by our shareholders on May 12, 2011. In addition, the board of directors and shareholders resolved that the options available for grants
under the 2000 Option Plan, at such time, as well as any options that may return to such pool in connection with terminated options, will
be made available for future grants under the 2010 Plan. In May 2020 the board of directors extended the term of the 2010 Plan by additional
ten (10) years. Subject to applicable law, our board of directors may amend the 2010 Plan, provided that any action by our board of directors
which will alter or impair the rights or obligations of an option holder requires the prior consent of that option holder. In August 2023,
our board of directors decreased the number of shares available under the 2010 Plan by 500,000, in July 2024 our board of directors increased
the number of shares reserved under the 2010 Plan by 300,000, and in August 2025 our board of directors increased the number of shares
reserved under the 2010 Plan by additional 200,000 shares.
The compensation committee administers the 2010 Plan and has the authority to designate
the terms of the equity granted thereunder, including the identity of the grantees, exercise prices (if applicable), grant dates, vesting
schedules and expiration dates (if applicable), which may be no more than ten years after the grant date. According to the 2010 Plan,
options may not be granted with an exercise price of less than the fair market value of our ordinary shares on the date of grant, unless
otherwise determined by our board of directors. The administration of the 2010 Plan by our compensation committee is subject to applicable
law, including with respect to the approval procedure of compensation to Office Holders required under the Companies Law (for additional
information on the approval procedure of compensation to Office Holders, see “Item 6. Directors, Senior Management and Employees
- B. Approvals Required for Office Holders Terms of Office and Employment”).
If a grantee of options leaves his or her employment or other relationship with us,
or if his or her relationship with us is terminated without cause (and other than by reason of death or disability, as defined in the
2010 Plan), the term of his or her unexercised options will generally expire in 90 days, unless determined otherwise by our board of directors.
We currently grant our directors, officers and employees options and RSUs. As of December
31, 2025, options to purchase 8,628,743 ordinary shares at a weighted average exercise price of approximately $4.05 per share and 567,400
RSUs were outstanding (i.e., were granted but not canceled, expired nor exercised) under the 2010 Plan and 718,981ordinary shares remained
available for future grant under the 2010 Plan. Options to purchase 4,400,542 ordinary shares under the 2010 Plan have previously been
exercised through December 31, 2025, at a weighted average exercise price of approximately $4.85, and 79,486 RSUs have previously been
vested. As of December 31, 2025, outstanding options granted by the Company pursuant to the 2010 Plan expire between February 2026 and
November 2035 (subject to terms of the plan).
Compugen 2021 Employee Share Purchase Plan
In November 2020, we adopted the Compugen Ltd. 2021 Employee Share Purchase Plan,
or ESPP.
The ESPP applies to our employees and officers and is currently suspended, though
we reserve the right to resume it at any time.
Pursuant to the ESPP, in each twelve (12) months period, there are two offering periods,
comprised of six (6) months each (except for the first offering period under the ESPP which was for five (5) months only). Each eligible
participant, has the right to contribute up to 15% of his or her monthly Compensation (as defined in the ESPP), in order to buy ordinary
shares from us at a price per share equal with respect to each offering period, to 85% of the Fair Market Value of a share on the Entry
Date or the Purchase Date (as such terms are defined in the ESPP), whichever is lower, until changed by the committee of the board administering
the ESPP prior to the commencement of the enrollment process for such offering period. The maximum number of ordinary shares a Participant
may purchase during any calendar year shall be equal to a whole number of ordinary shares determined by dividing $40,000 by the Purchase
Price.
As of December 31, 2025, there were no ordinary shares available for issuance under
the ESPP.
99
Taxation of Equity Granted under our 2010 Plan
and ESPP to Israeli Grantees
Our board of directors elected the “Capital Gains Track” (as defined in
Section 102(b) (2) of the Tax Ordinance) for the grant of equity under the 2010 Plan and ESPP to Israeli grantees who are eligible for
grant under said Section 102 of the Tax Ordinance.
Pursuant to such election, and provided such eligible grantees comply with all the
requirements of the “Capital Gains Track”, gains derived by them, arising from the sale of shares acquired pursuant to the
ESPP or the exercise of options granted to them, or vesting of RSUs will generally be subject to a flat capital gains tax rate of 25%,
although these gains, or part of them, will also be considered part of a grantee’s regular salary and subject to such grantee’s
regular tax rate applicable to such salary. As a result of the Company’s election in the “Capital Gains Track” under
Section 102, the Company is not allowed to claim as an expense for tax purposes in Israel the amounts credited to the grantee as capital
gains, although it is generally entitled to do so in respect of the salary income component (if any) of such grant, if any, when the related
tax is paid by the grantee as long as the grantee complies with all the requirements of the “Capital Gains Track”.
F. DISCLOSURE OF A REGISTRANT’S ACTION
TO RECOVER ERRONEOUSLY AWARDED COMPENSATION.
Not applicable.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. MAJOR SHAREHOLDERS
As of February 20, 2026 we are not aware of any beneficial owner of more than 5% of
our outstanding ordinary shares. As of February 20, 2026, there were a total of 33 holders of record of our ordinary shares, of which
20 were registered with addresses in the United States. Such United States holders were, as of such date, the holders of record of more
than 99% of our outstanding ordinary shares. Our ordinary shares are traded on the Nasdaq
Capital Market in the United States and on the TASE in Israel. A significant portion of our shares are held in “street name”,
therefore we cannot determine who our shareholders are, their geographical location or how many shares a particular shareholder owns.
B. RELATED PARTY TRANSACTIONS
Other than as set forth below and transactions related to engagement with an compensation
(including insurance, indemnification and exemption) of our executive officers and directors as described under “Item 6. Directors,
Senior Management and Employees - B. Compensation” since January 1, 2025, we have not entered into any material related party transaction.
C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
INFORMATION
Consolidated Financial Statements
Our consolidated financial statements are included beginning on page F-1 of this Annual
Report. See also “Item 18. Financial Statements.”
Legal Proceedings
Currently, we are not a party to any legal or arbitration proceedings, including governmental
proceedings, that are pending or known to be contemplated, that our management believes, individually or in the aggregate, may have, or
have had in the recent past, a significant effect on our financial position or profitability, nor are we party to any material proceeding
in which any director, member of our senior management or affiliate is a party adverse to us or our subsidiary or has a material interest
adverse to us or our subsidiary.
100
Dividend Distribution Policy
We have never paid any cash dividends on our ordinary shares, and we do not intend
to pay cash dividends on our ordinary shares in the foreseeable future. Our current policy is to retain any earnings we have (if any)
for use in our business.
B. SIGNIFICANT CHANGES
Not applicable.
ITEM 9.
THE OFFER AND LISTING
A. OFFER AND LISTING DETAILS
Our ordinary shares were listed on The Nasdaq Global Market through June 16, 2009.
On June 17, 2009, the listing of our ordinary shares was transferred from The Nasdaq Global Market to The Nasdaq Capital Market, and on
January 27, 2014, the listing of our ordinary shares transferred back from The Nasdaq Capital Market to The Nasdaq Global Market. On May
4, 2023, the listing of our ordinary shares was transferred back from The Nasdaq Global Market to The Nasdaq Capital Market. Our trading
symbol on Nasdaq is CGEN. Our ordinary shares have been dually listed on the Tel Aviv Stock Exchange since January 2002. Our trading symbol
on each of The Nasdaq Capital Market and the Tel Aviv Stock Exchange is CGEN.
B. PLAN OF DISTRIBUTION
Not applicable
C. MARKETS
Our ordinary shares are traded in the United States on The Nasdaq Capital Market and
in Israel on the Tel Aviv Stock Exchange (TASE).
D. SELLING SHAREHOLDERS
Not applicable
E. DILUTION
Not applicable
F. EXPENSES OF THE ISSUE
Not applicable
ITEM 10.
ADDITIONAL INFORMATION
A. SHARE CAPITAL
Not applicable
B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Copies of our Amended and Restated Articles and our Amended and Restated Memorandum
of Association, as in effect as of the date of this Annual Report, are attached as Exhibits 1.1 and 1.2, respectively, to this Annual
Report. The information called for by this Item is set forth in Exhibit 2.1 to this Annual Report and is incorporated by reference into
this Annual Report.
C. MATERIAL CONTRACTS
Please see “Item 4. Information on the Company - B. Business Overview - Business
Strategy and Partnerships - Gilead License”, and “Item 4. Information on the Company - B. Business Overview - Business Strategy
and Partnerships - AstraZeneca License” and “Item 5. Operating and Financial Review and Prospects - B. Liquidity and Capital
Resources” for a discussion of our material contracts.
D. EXCHANGE CONTROLS
There are currently no exchange controls in effect in Israel that restrict the repatriation
by non-residents of Israel in non-Israeli currency of any dividends, if any are declared and paid, and liquidation distributions or the
Company’s ability to import and export capital, except that such restrictions may exist with respect to citizens of countries which
are in a state of war with Israel.
101
E. TAXATION
The following is a brief summary of certain material Israeli and U.S. federal tax
consequences concerning the ownership and disposition of our ordinary shares by purchasers or holders of our ordinary shares. Because
parts of this discussion are based on new or existing tax or other legislation that has not been subject to judicial or administrative
interpretation, there can be no assurance that the views expressed herein will be accepted by the tax or other authorities in question.
The summary below does not address all of the tax consequences that may be relevant to all purchasers or holders of our ordinary shares
in light of each purchaser’s or holder’s particular circumstances and specific tax treatment. For example, the summary below
does not address the tax treatment of residents of Israel and traders in securities who are subject to specific tax regimes. As individual
circumstances may differ, holders of our ordinary shares should consult their own tax advisors as to U.S., Israeli or other tax consequences
of the purchase, ownership and disposition of our ordinary shares. This discussion is not intended, nor should it be construed, as legal
or professional tax advice and it is not exhaustive of all possible tax considerations. Each person should consult his, her or its own
tax or legal advisor.
Israeli Taxation
Taxation of Capital Gains Applicable to Non-Israeli
Shareholders
Israeli law generally imposes a capital gains tax on the sale of securities of an
Israeli resident company traded on the TASE, on an authorized stock exchange outside Israel or on a regulated market (which includes a
system through which securities are traded pursuant to rules prescribed by the competent authority in the relevant jurisdiction), which
includes Nasdaq, in or outside Israel, or a “Recognized Exchange”. Pursuant to the Tax Ordinance, the capital gains tax rate
applicable to individuals upon the sale of such securities is such individual’s marginal tax rate but not more than 25%, or 30%
with respect to an individual who meets the definition of a ‘Substantial Shareholder’ on the date of the sale of the securities
or at any time during the 12 months preceding such date. A ‘Substantial Shareholder’ is defined as a person who, either alone
or together with any other person, holds, directly or indirectly, at least 10% of any of the means of control of a company (which includes,
among other things, the right to receive profits of the company, voting rights, the right to receive the company’s liquidation proceeds
and the right to appoint a director). If the individual claims real interest expenses and linkage differentials, the capital gain from
the sale of securities will be taxed at a rate of 30%.
With respect to corporate investors, capital gain tax equal to the corporate tax rate
(23% in 2025 and potentially the same thereafter) will be imposed on the sale of our traded shares.
However, if our ordinary shares are traded on a Recognized Exchange gains on the sale
of our ordinary shares held by non-Israeli tax resident investors will generally be, subject to certain conditions, exempt from Israeli
capital gains tax so long as the gains were not derived from a permanent establishment that the non-Israeli tax resident investor maintains
in Israel. Furthermore, non-Israeli “Body of Persons” (as defined in the Ordinance, and includes corporate entities, partnerships,
and other entities) will not be entitled to such exemption if Israeli residents, whether directly or indirectly, (i) holds more than 25%
of the means of control in such non-Israeli corporation or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues
or profits of such corporation.
Notwithstanding the foregoing, dealers in securities in Israel are taxed at regular
tax rates applicable to business income.
In addition, persons paying consideration for shares, including purchasers of shares,
Israeli securities dealers effecting a transaction, or a financial institution through which securities being sold are held, are required,
subject to any applicable exemptions and the demonstration by the selling shareholder of its non-Israeli residency and other requirements,
to withhold tax upon the sale of publicly traded securities at a rate of 25% for individuals and at the corporate tax rate (23% in 2025
and potentially the same thereafter) for corporations.
The sale of shares may also be exempt from Israeli capital gain tax under the provisions
of an applicable tax treaty. For example, the Convention Between the Government of the United States and the Government of the State of
Israel With Respect to Taxes of Income, as amended, or the U.S.-Israel Tax Treaty), exempts U.S. residents for the purposes of the treaty
(who are entitled to claim the benefits of the U.S.-Israel Tax Treaty) from Israeli capital gain tax in connection with such sale, provided
(i) the U.S. resident owned, directly or indirectly, less than 10% of the Israeli resident company’s voting power at any time within
the 12-month period preceding such sale; (ii) the seller, being an individual, is present in Israel for a period or periods of less than
183 days during the taxable year; and (iii) the capital gain from the sale was not derived through a permanent establishment of the U.S.
resident in Israel. Under the U.S.-Israel Tax Treaty, U.S. residents for the purposes of the treaty may be permitted to claim a credit
for such taxes against U.S. federal income tax imposed on the sale, under the circumstances and subject to the limitations specified in
the U.S.-Israel Tax Treaty and U.S. tax legislation, as discussed below under “Certain Material
U.S. Federal Income Tax Considerations to U.S. Holders – Distributions.”
102
Income Taxes on Dividend Distribution to Non-Israeli
Shareholders
In principle, non-Israeli residents (whether individuals or corporations) are generally
subject to Israeli income tax on the receipt of dividends paid by Israeli publicly traded companies at the rate of 25% if the shares are
registered with a nominee company (as such term is used in the Israeli Securities Law). If the shares are not registered with a nominee
company, the rate of 25% will apply to non-Israeli residents shareholders who are not considered Substantial Shareholders, as defined
above, and who were not considered Substantial Shareholders at any time during the 12 months preceding the date of the distribution, and
the rate of 30% will apply to dividends paid to Substantial Shareholders and to persons who were Substantial Shareholders at any time
during the 12 months preceding the date of the distribution. Notwithstanding the above, a lower tax rate may be provided under an applicable
tax treaty between Israel and the shareholder’s country of residence (subject to the receipt in advance of a valid tax certificate
from the Israel Tax Authority allowing for a reduced tax rate). The distribution of dividends to non-Israeli residents (either individuals
or corporations) from income derived from a company’s Approved Enterprises or Benefiting Enterprises during the applicable benefits
period or from Preferred Enterprises is subject to withholding tax at a rate of 20%, unless a lower tax rate is provided under an applicable
tax treaty (subject to the receipt in advance of a valid tax certificate from the Israel Tax Authority allowing for a 20% withholding
tax rate or a lower tax rate, provided by an applicable tax treaty).
A non-resident of Israel who has received dividend income derived from or accrued
in Israel, from which the full amount of tax was withheld, is generally exempt from the duty to file tax returns in Israel with respect
to such income, provided that: (i) such income was not derived from a business conducted in Israel by the taxpayer; (ii) the taxpayer
has no other taxable sources of income in Israel with respect to which a tax return is required to be filed; and (iii) the taxpayer is
not liable for Excess Tax (as described below).
Residents of the United States generally will have withholding tax in Israel deducted
at source. They may be entitled to a credit or deduction for U.S. federal income tax purposes for all or part of the amount of the taxes
withheld, subject to detailed rules contained in U.S. tax legislation, as discussed below under “Certain
Material U.S. Federal Income Tax Considerations to U.S. Holders – Distributions.”
U.S. Israel Tax Treaty
Under the U.S.-Israel Tax Treaty, the maximum Israeli withholding tax rate on dividends
paid to a holder of our ordinary shares who is a U.S. resident for the purposes of the U.S.-Israel Tax Treaty, is generally 25%. The U.S.-Israel
Tax Treaty provides that a 15% or a 12.5% Israeli dividend withholding tax will apply to dividends paid to a U.S. corporation owning 10%
or more of an Israeli company’s voting shares during, in general, the current and preceding tax year of the Israeli company. The
15% rate applies to dividends distributed from income derived from an Approved Enterprise, or a Benefiting Enterprise, in each case within
the applicable period or, from a Preferred Enterprise, and the lower 12.5% rate applies to dividends distributed from income derived from
other sources. However, these provisions do not apply if the company has certain amounts of passive income. The aforementioned rates under
the U.S.-Israel Treaty will not apply if the dividend income was derived through a permanent establishment of the U.S. resident in Israel.
Excess Tax
Furthermore, an additional tax liability at the rate of 3% is applicable on the annual
taxable income, including, but not limited to, income derived from dividends, interest and capital gains, of individuals who are subject
to tax in Israel (whether such individual is an Israeli resident or non-Israeli resident) exceeding a certain threshold (NIS 721,560 in
2025), which amount is linked to the Israeli consumer price index (while, according to the latest legislative acts, such linkage will
not take place for the years 2025-2027).
In addition to the above, as of January 1, 2025, individuals whose taxable income
from capital sources (income from capital gains, dividends and interests) in the tax year exceeds the amount specified above, will be
subject to an additional tax at a rate of 2% (5% in total), on the portion of their taxable income from capital sources that exceeds the
amount above.
103
Estate and Gift Tax
Israeli law currently does not impose estate or gift taxes.
Certain Material U.S. Federal Income Tax Considerations to U.S.
Holders
General
The following is a summary of certain material U.S. federal income tax considerations
generally applicable to the acquisition, ownership and disposition of our ordinary shares by U.S. holders (as defined below) that hold
our ordinary shares as “capital assets” (generally, property held for investment) under the Code. For this purpose, a U.S.
holder is, a holder, who, for U.S. federal income tax purposes, is a beneficial owner of ordinary shares and who is: (a) a citizen or
individual resident of the United States; (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes)
created or organized in or under the laws of the United States, any state thereof or the District of Columbia; (c) an estate the income
of which is subject to U.S. federal income tax regardless of its source; or (d) a trust that is subject to the primary supervision of
a court over its administration and one or more U.S. persons control all substantial decisions, or a trust that has validly elected to
be treated as a domestic trust under applicable Treasury Regulations. This summary does not address any tax consequences to persons other
than U.S. holders.
The statements in this summary are based on the current U.S. federal income tax laws
as contained in the Code, Treasury Regulations, and relevant judicial decisions and administrative guidance, all as of the date hereof,
and such authorities may be replaced, revoked or modified, possibly with retroactive effect, so as to result in U.S. federal income tax
consequences different from those discussed below. No ruling has been sought from the U.S. Internal Revenue Service, or IRS, with respect
to any U.S. federal income tax consequences described below, and there can be no assurance that the IRS will not take a contrary position
or that a court will not sustain such a position in the event of a challenge.
The following summary does not address all aspects of U.S. federal income tax consequences
that may apply to certain types of U.S. holders that are subject to special treatment, such as banks, insurance companies, tax-exempt
or governmental organizations, financial institutions, broker-dealers, dealers in securities or currencies, traders in securities that
elect to use the mark-to-market method of accounting for their securities, S corporations, partnerships or other pass-through entities
(or arrangements treated as a partnership) for U.S. federal tax purposes, regulated investment companies, real estate investment trusts,
“controlled foreign corporations” within the meaning of Section 957(a) of the Code, “passive foreign investment companies”
within the meaning of Section 1297(a) of the Code, certain expatriates, persons owning, directly, constructively or by attribution, 5%
or more, by voting power or value, of our ordinary shares, persons whose “functional currency” is not the U.S. dollar, persons
who hold ordinary shares as part of a hedging, constructive sale or conversion, straddle, or other risk-reducing transaction, former U.S.
citizens or long term residents of the United States, corporations that accumulate earnings to avoid U.S. federal income tax, persons
who hold our ordinary shares in connection with a trade or business, permanent establishment or fixed base outside the United States,
or persons that received an interest in our ordinary shares through the exercise of an option or otherwise in exchange for services.
This summary is a general summary and does not address all aspects of U.S. federal
income taxation that may be relevant to particular U.S. holders based on their particular investment or tax circumstances.
This summary relates only to U.S. federal income taxes and does not address any other
taxes, including but not limited to, U.S. state or local, or non-U.S., taxes and does not describe all of the U.S. federal income tax
consequences that may be relevant, including the special tax accounting rules under Section 451(b) of the Code, the U.S. federal non-income
tax considerations, including estate or gift tax considerations, the Medicare contribution tax on net investment income and the alternative
minimum tax.
If a partnership (including an entity or arrangement classified as a partnership for
U.S. federal income tax purposes) holds our ordinary shares, the tax treatment of a partner (including a person classified as a partner
for U.S. federal income tax purposes) will generally depend upon the status of the partner and the activities of the partnership. A partner
of a partnership holding our ordinary shares should consult its tax advisors.
This summary is not a substitute for careful tax planning. Investors
are urged to consult their own tax advisors regarding the specific U.S. federal, state, foreign and other tax consequences to them, in
light of their own particular circumstances, of the purchase, ownership and disposition of our ordinary shares and the effect of potential
changes in applicable tax laws.
104
Passive Foreign Investment Company Rules
In general, a corporation organized outside the United States will be classified as
a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year in which, after the application
of certain look-through rules with respect to income and assets of its subsidiaries, either:
| • |
at least 75% of its gross income is passive income, or |
| • |
at least 50% of the value (determined on the basis of a quarterly weighted average) of its total assets for the taxable year is attributable
to assets that produce or are held for the production of passive income. |
For this purpose, passive income generally includes, among other things, dividends,
interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from
a related person). Assets that produce or are held for the production of passive income may include cash (unless held in a non-interest
bearing account for short term working capital needs), marketable securities and other assets that may produce passive income. The 50%
passive asset test described above is generally based on the fair market value of each asset, with the value of goodwill and going concern
value determined in large part by reference to the market value of our ordinary shares, which may be volatile. Generally, in determining
whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly
or indirectly, at least a 25% interest (by value) is taken into account. Whether we are a PFIC for any taxable year will depend on the
composition of our income and the composition and value of our assets (which, may be determined in large part by reference to the market
price of the ordinary shares, which is likely to continue to fluctuate) in each year, and because this is a factual determination made
annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC in any taxable year.
Based on the composition of our income, and the composition and value of our assets,
in 2025, we believe that we were a PFIC for the taxable year ended December 31, 2025. However, the determination of whether or not we
are a PFIC is a fact-intensive determination made on an annual basis and because the applicable law is subject to varying interpretations
we cannot provide any assurance regarding our PFIC status and our U.S. counsel expresses no opinion with respect to our PFIC status for
any taxable year. In particular, our status as a PFIC in current or any future tax year is uncertain because, among other things, (i)
we may own a substantial amount of passive assets, including cash, (ii) we may not receive milestone payments under any of our collaboration
agreements, in which case, our income may be exclusively passive and (iii) the valuation of our assets that generate non-passive income
for PFIC purposes, including our intangible assets, is uncertain and may be determined in substantial part by our market capitalization,
which may vary substantially over time. Furthermore, there can be no assurance that the IRS will agree with our conclusion or that the
IRS would not successfully challenge our position. No ruling from the IRS concerning our status as a PFIC has been obtained or is currently
planned to be requested. Accordingly, we cannot provide any assurances regarding our PFIC status for the current or future taxable years.
If we are classified as a PFIC in any taxable year during a U.S. holder’s holding
period of our ordinary shares, such U.S. holder could be liable for additional taxes and interest charges upon (1) a distribution paid
during a taxable year that is greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if
shorter, the U.S. holder’s holding period for the ordinary shares, and (2) any gain recognized on a sale, exchange or other taxable
disposition, including a pledge, of the ordinary shares, whether or not we continue to be a PFIC. In these circumstances, the tax will
be determined by allocating such distribution or gain ratably over the U.S. holder’s holding period for the ordinary shares. The
amount allocated to the current taxable year (i.e., the year in which the distribution occurs, or the gain is recognized) and any year
prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount
allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable,
to ordinary income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to
the tax. In addition, non-corporate U.S. Holders will not be eligible for reduced rates of taxation on any dividends received from us,
if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year.
If we are a PFIC for any year during which a U.S. holder holds the ordinary shares,
we must generally continue to be treated as a PFIC by that holder for all succeeding years during which the U.S. holder holds the ordinary
shares, unless we cease to meet the requirements for PFIC status and the U.S. holder makes a “deemed sale” election with respect
to the ordinary shares. If such election is made, the U.S. holder will be deemed to have sold the ordinary shares it holds at their fair
market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be subject
to the consequences described above. After the deemed sale election, the U.S. holder’s ordinary shares with respect to which the
deemed sale election was made will not be treated as shares in a PFIC unless we subsequently again become a PFIC.
105
If a U.S. holder has made a qualified electing fund, or QEF election covering all
taxable years during which the holder holds ordinary shares and in which we are a PFIC, distributions and gains will not be taxed as described
above. Instead, a U.S. holder that makes a QEF election is required for each taxable year to include in income (i) the holder’s
pro rata share of ordinary earnings as ordinary income or (ii) the holder’s pro rata share of the net capital gain as capital gain,
regardless of whether such earnings or gain have in fact been distributed, for each taxable year that the entity is classified as a PFIC.
Income inclusions may exceed the amount of any distributions, which may be zero for any taxable year. If a U.S. holder makes a QEF election
with respect to us, any distributions paid by us out of our earnings and profits that were previously included in the U.S. holder’s
income under the QEF election would not be taxable to the holder. A U.S. holder will increase its tax basis in its ordinary shares by
an amount equal to any income included under the QEF election and will decrease its tax basis by any amount distributed on the ordinary
shares that is not included in the holder’s income. If a U.S. holder has made a QEF election with respect to its ordinary shares,
any gain or loss recognized by the U.S. holder on a sale or other disposition of such ordinary shares will constitute capital gain or
loss. In addition, if a U.S. holder makes a timely QEF election, our ordinary shares will not be considered shares in a PFIC in years
in which we are not a PFIC, even if the U.S. holder had held ordinary shares in prior years in which we were a PFIC.
U.S. holders should consult their tax advisors regarding making QEF elections in their
particular circumstances. If a U.S. holder does not make and maintain a QEF election for the U.S. holder’s entire holding period
for our ordinary shares by making the election for the first year in which the U.S. holder owns our ordinary shares (and for which we
are a PFIC), the U.S. holder will be subject to the adverse PFIC rules discussed above unless the U.S. holder can properly make a “purging
election” with respect to our ordinary shares in connection with the U.S. holder’s QEF election. A purging election may require
the U.S. holder to recognize taxable gain on the U.S. holder’s ordinary shares.
In order to comply with the requirements of a QEF election, a U.S. holder must receive
certain information from us. The QEF election is made on a shareholder-by-shareholder basis and can be revoked only with the consent of
the IRS. A shareholder makes a QEF election by attaching a completed IRS Form 8621, including the information provided in the PFIC annual
information statement, to a timely filed U.S. federal income tax return and by filing a copy of the form with the IRS. For any taxable
year in which we determine that we are a PFIC, we intend to make available to U.S. holders, upon request and in accordance with applicable
procedures, a PFIC Annual Information Statement with respect to such taxable year. There can be no assurance, however, that we will have
timely knowledge of our status as a PFIC in the future or that we will timely provide such information for such years.
U.S. holders should consult their tax advisors to determine whether any elections
would be available and if so, what the consequences of the alternative treatments would be in their particular circumstances.
The tax consequences that would apply if we are a PFIC would also be different from
those described above if a timely and valid “mark-to-market” election is made by a U.S. holder for the ordinary shares held
by such U.S. holder. An electing U.S. holder would generally take into account as ordinary income or loss each year an amount equal to
the difference between the U.S. holder’s adjusted tax basis in such ordinary shares and their fair market value; however, losses
would be allowed only to the extent of the excess of amounts previously included in income over ordinary losses deducted in prior years
as a result of the mark-to-market election. Any gain from a sale, exchange or other taxable disposition of the ordinary shares in any
taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other taxable disposition
would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and thereafter as
capital loss. The adjusted tax basis of a U.S. holder’s ordinary shares is increased by the amount included in gross income under
the mark-to-market regime, or is decreased by the amount of the deduction allowed under the regime. If a U.S. holder makes a mark-to-market
election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the shares are
no longer regularly traded on a qualified exchange or the IRS consents to the revocation of the election.
106
A mark-to-market election is available to a U.S. holder only for “marketable
stock.” Generally, stock will be considered marketable stock if it is “regularly traded” on a “qualified exchange”
within the meaning of applicable Treasury Regulations. A class of stock is regularly traded during any calendar year during which such
class of stock is traded, other than in de minimis quantities, on at least 15 days during each
calendar quarter. The ordinary shares will be marketable stock as long as they remain listed on a qualified exchange, such as Nasdaq,
and are regularly traded. However, we can provide no assurances that our ordinary shares will continue to be listed on a qualified exchange
or will be regularly traded. A mark-to-market election will not apply to the ordinary shares for any taxable year during which we are
not a PFIC but will remain in effect with respect to any subsequent taxable year in which we become a PFIC. U.S. holders are urged to
consult their tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in
such holder’s particular circumstances.
If we are a PFIC and, at any time, have a non-U.S. subsidiary that is classified as
a PFIC (a “lower-tier” PFIC), U.S. holders of our ordinary shares generally would be deemed to own, and also would be subject
to the PFIC rules with respect to, their indirect ownership interests in that lower-tier PFIC. If we are a PFIC and a U.S. holder of our
ordinary shares does not make a QEF election in respect of a lower-tier PFIC, the U.S. holder could incur liability for the deferred tax
and interest charge described above if either (1) we receive a distribution from, or dispose of all or part of our interest in, the lower-tier
PFIC or (2) the U.S. holder disposes of all or part of its ordinary shares. We may provide the information necessary for U.S. holders
to make QEF elections with respect to any lower-tier PFIC. A mark-to-market election under the PFIC rules with respect to our ordinary
shares would not apply to a lower-tier PFIC, and a U.S. holder would not be able to make such a mark-to-market election in respect of
its indirect ownership interest in that lower-tier PFIC. Consequently, U.S. holders of our ordinary shares could be subject to the PFIC
rules with respect to income of the lower-tier PFIC the value of which already had been taken into account indirectly via mark-to-market
adjustments. U.S. holders are urged to consult their own tax advisors regarding the issues raised by lower-tier PFICs.
Each U.S. holder who is a shareholder of a PFIC must file an annual information report
on IRS Form 8621 containing such information as the U.S. Treasury Department may require (whether or not a QEF election or a mark-to-market
election is made). The failure to file IRS Form 8621 could result in the imposition of penalties and the extension of the statute of limitations
with respect to U.S. federal income tax.
THE RULES DEALING WITH PFICS AND WITH THE QEF AND MARK-TO-MARKET
ELECTIONS ARE VERY COMPLEX AND ARE AFFECTED BY VARIOUS FACTORS IN ADDITION TO THOSE DESCRIBED ABOVE, INCLUDING OUR OWNERSHIP OF ANY NON-U.S.
SUBSIDIARIES. AS A RESULT, U.S. HOLDERS OF ORDINARY SHARES ARE STRONGLY ENCOURAGED TO CONSULT THEIR TAX ADVISORS ABOUT THE PFIC RULES
IN CONNECTION WITH THEIR PURCHASING, HOLDING OR DISPOSING OF ORDINARY SHARES.
U.S. Federal Income Tax Consequences
If We Are Not a PFIC.
The description of the U.S. federal income tax consequences of the receipt of distributions
and the sale or other taxable exchange of our ordinary shares, described in the following two sections “- Distributions”
and “- Disposition of Ordinary Shares,” apply only if we are not a PFIC in the relevant
year and our ordinary shares are not subject to the rules described above under “-Passive Foreign
Investment Company Rules”.
Distributions
Subject to the discussion under “- Passive
Foreign Investment Company Rules” above, the gross amount of any distributions with respect to our ordinary shares (including
any amounts withheld to reflect Israeli withholding taxes) will be taxable as dividends, to the extent paid out of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles. Such income (including any withheld taxes) will be includable
in a U.S. holder’s gross income as ordinary income on the day actually or constructively received. Distributions in excess of earnings
and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce (but not below zero), the
U.S. holder’s adjusted tax basis in the ordinary shares. Distributions in excess of earnings and profits and such adjusted tax basis
will generally be taxable to the U.S. holder as described below under “- Disposition of Ordinary
Shares.” However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected
that any distribution will be reported as a dividend, even if that distribution would otherwise be treated as a non-taxable return of
capital or as capital gain under the rules described above. The amount of any dividend paid by us will be treated as foreign-source dividend
income to U.S. holders, and the dividends received deduction will not be available to a U.S. holder that is taxed as a corporation as
a result.
107
With respect to non-corporate U.S. holders, certain dividends received from a “qualified
foreign corporation” that is not a PFIC may be subject to reduced rates of taxation. A qualified foreign corporation includes a
foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States which the United States
Treasury Department determines to be satisfactory for these purposes and which includes an exchange of information provision. The United
States Treasury Department has determined that the US-Israel Tax Treaty meets these requirements. A foreign corporation is also treated
as a qualified foreign corporation with respect to dividends paid by that corporation on shares that are readily tradable on an established
securities market in the United States. As discussed under “- Passive Foreign Investment Company
Rules” above, there can be no assurance that our ordinary shares will be considered readily tradable on an established securities
market in any year. If we are a qualified foreign corporation, and we are not classified as a PFIC for the taxable year in which a dividend
is paid or in the preceding taxable year (as discussed above under “- Passive Foreign Investment
Company Rules”), dividend income will generally qualify as “qualified dividend income” in the hands of individual
U.S. holders, which is generally taxed at the lower applicable long term capital gains rates, provided certain holding period and other
requirements for treatment of such dividends as “qualified dividend income” are satisfied. U.S. holders should consult their
own tax advisors regarding the availability of the lower rate for dividends paid with respect to our ordinary shares.
Although, to the extent we pay dividends in the future, we intend to pay dividends
to U.S. holders in dollars, the amount of any dividend paid in Israeli currency will equal its dollar value for U.S. federal income tax
purposes, calculated by reference to the exchange rate in effect on the date the dividend is received by the U.S. holder, regardless of
whether the Israeli currency is converted into dollars. If the Israeli currency received as a dividend are converted into United States
dollars on the date they are received, the U.S. holder generally will not be required to recognize foreign currency gain or loss in respect
of the dividend income. If the Israeli currency is not converted into dollars on the date of receipt, the U.S. holder will have a basis
in the Israeli currency equal to its dollar value on the date of receipt. Any subsequent gain or loss upon the conversion or other disposition
of the Israeli currency will be treated as ordinary income or loss, and generally will, for U.S. federal income tax purposes, be treated
as income or loss from U.S. sources.
Certain U.S. holders generally may be eligible, subject to a number of complex limitations,
to claim Israeli taxes withheld from distributions and paid over to the Israeli taxing authorities either as a deduction from gross income
or as a credit against U.S. federal income tax liability. To the extent a refund of the tax withheld is available to a U.S. holder under
Israeli law or under the US-Israel Tax Treaty, the amount of tax withheld that is refundable will not be eligible for credit against a
U.S. holder’s United States federal income tax liability. The foreign tax credit is subject to numerous complex limitations that
must be determined and applied on an individual basis. U.S. holders should consult their own tax advisors regarding the foreign tax credit
rules.
Disposition of Ordinary Shares
In general, subject to the discussion under “- Passive
Foreign Investment Company Rules”, above, a U.S. holder will recognize U.S.-source capital gain or loss upon a taxable disposition
of an ordinary share equal to the difference between the sum of the fair market value of any property and the amount of cash received
in such disposition (including the amount of any foreign taxes withheld therefrom) and the U.S. holder’s adjusted tax basis in such
share. A U.S. holder’s adjusted tax basis generally will equal the U.S. holder’s acquisition cost less any distributions treated
as a return of capital as described under “- Distributions” above. Such capital gain
or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the ordinary share is more than one year at
the time of the taxable disposition. Under current law, subject to certain exceptions (including but not limited to those described under
“- Passive Foreign Investment Company Rules” above), long-term capital gain realized
by a non-corporate U.S. holder generally will be eligible for reduced rates of tax. The deduction of capital losses may be subject to
limitation. Because gain from the sale or other taxable disposition of an ordinary share will generally be treated as U.S.-source income
and, subject to certain exceptions, Treasury Regulations generally preclude U.S. taxpayers from claiming a foreign tax credit with respect
to any non-U.S. tax imposed on gains from dispositions of shares held as capital assets unless the tax is creditable under an applicable
income tax treaty, your ability to claim a foreign tax credit with respect to Israeli tax imposed on any such sale or other taxable disposition,
if any, may be significantly limited. U.S. holders should consult their own tax advisors regarding the foreign tax credit rules with respect
to any foreign taxes withheld from a taxable disposition of ordinary shares, as well as regarding any foreign currency gain or loss in
connection with such a disposition.
108
Backup Withholding and Information Reporting
In general, information reporting will apply to dividends in respect of our ordinary
shares and the proceeds from the sale or exchange of our ordinary shares that are paid to a U.S. holder within the United States (and
in certain cases, outside the United States), unless such holder is an exempt recipient. A backup withholding tax generally applies to
such payments if the U.S. holder fails to provide a taxpayer identification number and a duly executed IRS Form W-9 or other certification
of exempt status unless the U.S. holder otherwise establishes that it is exempt from such rules.
Any amounts withheld under the backup withholding rules will be allowed as a refund
or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information is furnished to the IRS
in a timely manner.
Individuals who own “specified foreign financial assets” with an aggregate
value in excess of $50,000 may be required to file an information report on IRS Form 8938, “Statement of Specified Foreign Financial
Assets,” with respect to such assets with their tax returns. “Specified foreign financial assets” include any financial
accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained
by financial institutions: (i) stocks and securities issued by non-U.S. persons; (ii) financial instruments and contracts held for investment
that have non-U.S. issuers or counterparties; and (iii) interests in foreign entities. U.S. holders that are individuals are urged to
consult their tax advisors regarding the application of these rules to their ownership of our ordinary shares.
F. DIVIDENDS AND PAYING AGENTS
Not applicable.
G. STATEMENT BY EXPERTS
Not applicable.
H. DOCUMENTS ON DISPLAY
We are required to file reports and other information with the SEC under the Exchange
Act, and the regulations thereunder applicable to foreign private issuers. As a “foreign private issuer” we are exempt from
the rules and regulations under the Securities Exchange Act prescribing the furnishing and content of proxy statements, and our executive
officers, directors and principal shareholders are exempt from the “short-swing” profit recovery provisions contained in Section
16 of the Securities Exchange Act, though effective March 18, 2026, our executive officers and directors will become subject to reporting
obligations specified in Section 16 of the Securities Exchange Act with respect to their purchase and sale of our shares. In addition,
we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities
are registered under the Securities Exchange Act. Furthermore, as a foreign private issuer, we are also not subject to the requirements
of Regulation FD (Fair Disclosure) promulgated under the Exchange Act. Nasdaq rules generally require that companies send an annual report
to shareholders prior to the annual general meeting, however we rely upon an exception under the Nasdaq Listing Rules and follow the generally
accepted business practice for companies in Israel. Specifically, we file annual reports on Form 20-F, which contain financial statements
audited by an independent accounting firm, electronically with the SEC and post a copy on our website. We also furnish to the SEC reports
on Form 6-K containing unaudited financial information after the end of each of the first three quarters.
As a foreign private issuer, we were only required to file our SEC filings through
the SEC’s EDGAR system as of November 2002. Our periodic filings are therefore available on the SEC’s Website www.sec.gov
from that date. You may read and copy any of our SEC filings, through the SEC’s EDGAR system available on the SEC’s website.
Our SEC filings are also generally available to the public via the Israel Securities Authority’s Magna website at www.magna.isa.gov.il,
and the TASE website at http://www.maya.tase.co.il.
Any statement in this Annual Report about any of our contracts or other documents
is not necessarily complete. If the contract or document is filed as an exhibit to this Annual Report, the contract or document is deemed
to modify the description contained in this Annual Report. We urge you to review the exhibits themselves for a complete description of
the contract or document.
109
I. SUBSIDIARY INFORMATION
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including changes in interest rates and foreign
currency exchange risk and inflation.
Interest Rate Risk
As of December 31, 2025, we had approximately $145.6 million in cash, cash equivalents,
short-term bank deposits, and investment in marketable securities. We mostly invest our cash surplus in bank deposits and U.S. government
securities. Since these investments typically carry fixed interest rates or yields, financial income over the holding period is not sensitive
to changes in interest rates. For more information, see Note 2 to our 2025 consolidated financial statements.
Foreign Currency Exchange Risk and Inflation
The cost of our Israel operations, as expressed in dollars, is influenced by the extent
to which any increase in the rate of inflation in Israel is not offset (or is offset on a lagging basis) by a devaluation of the NIS in
relation to the dollar. The inflation rate in Israel was 2.6%, 3.2% and 3.0% in 2025, 2024, and 2023, respectively. The depreciation of
the dollar against the NIS was 12.5% in 2025 and the appreciation of the dollar against the NIS was 0.6% and 3.1% in 2024 and 2023, respectively.
For 2025, assuming a 10% devaluation of the dollar against the NIS, we would experience an increase in our net loss of approximately $1.8
million, while assuming a 10% appreciation of the dollar against the NIS, we would experience a decrease in our net loss of approximately
$1.5 million. A significant portion of our expenditures is employee compensation related. Salaries for Israel-based employees are paid
in NIS and may be adjusted for changes in the Israeli consumer price index, or CPI, through salary increases or adjustments. These upward
adjustments increase salary expenses in dollar terms. The depreciation/appreciation of the NIS against the dollar decreases/increases
employee compensation expenditures as expressed in dollars proportionally. Some of our other NIS based expenses are either currently adjusted
to dollars or are adjusted to the CPI. Should Moody’s, S&P Global Ratings, Fitch Ratings or other financial rating firms change
the Government of Israel’s foreign-currency and local-currency issuer ratings, this could have an impact on the value of our NIS
denominated holdings. We currently have no foreign currency derivative contracts to hedge against currency exchange risk fluctuation but
may consider entering into such contracts in the future.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15.
CONTROLS AND PROCEDURES
A. DISCLOSURE CONTROLS AND PROCEDURES
Our disclosure controls and procedures are designed to ensure that information required
to be disclosed in the reports we are required to file is recorded, processed, summarized and reported on a timely basis. Under the supervision
of our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), we conducted an
evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(f) and 15d-15(f)
promulgated under the Exchange Act. Based on this evaluation, our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
110
B. MANAGEMENT’S ANNUAL REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
Our management, with the involvement of our board of directors and audit committee,
is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial
reporting (as defined in Rules 13a-15(e) and 15(d) - 15(e) of the Exchange Act) has been designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance
with generally accepted accounting principles.
Under the supervision of our chief executive officer (principal executive officer)
and chief financial officer (principal financial officer), our management conducted an evaluation of the effectiveness of our internal
control over financial reporting, as such term is defined under Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. In making
this assessment, our management used the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this evaluation, our chief executive officer and chief financial officer have
concluded that our internal control over financial reporting was effective as of the end of the period covered by this Annual Report.
Notwithstanding the foregoing, all internal control systems no matter how well designed
have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements and can provide
only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Kost Forer Gabbay & Kasierer, a member firm of EY Global, an independent registered
public accounting firm in Israel, which has audited our financial statements for the year ended December 31, 2025, that are included
in this Annual Report, has issued an attestation report on our internal control over financial reporting as of December 31, 2025.
C. ATTESTATION REPORT OF THE REGISTERED PUBLIC
ACCOUNTING FIRM
The attestation report of Kost Forer Gabbay & Kasierer, a member firm of EY Global,
an independent registered public accounting firm in Israel, on our internal control over financial reporting as of December 31, 2025,
is provided on page F-4, as included under Item 18 of this Annual Report and is incorporated herein by reference.
D. CHANGES IN INTERNAL CONTROL OVER FINANCIAL
REPORTING
Based on the evaluation conducted by our management, with the participation of our
chief executive officer and chief financial officer, pursuant to Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, our
management (including such officers) have concluded that, there were no changes in our internal control over financial reporting that
occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 16. RESERVED
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that each of Mr. Gilead Halevy, Mr. Eran Perry
and Mr. Sanford (Sandy) Zweifach, each of whom serves on our audit committee and who meets the “independence” definition under
the Nasdaq Listing Rules, qualifies as an “audit committee financial expert” as defined in the instructions to this Item 16A
of Form 20-F. See “Item 6.A – Directors, Senior Management and Employees –
Directors and Senior Management” for a summary of Mr. Gilead Halevy, Mr. Eran Perry and Mr. Sanford (Sandy) Zweifach relevant professional
experience.
ITEM 16B. CODE
OF ETHICS
We have adopted a code of business conduct that applies to all of our employees, officers
and directors as well as a code of ethics for senior financial officers that applies to our chief executive officer, chief financial officer,
director of finance, controller, assistant controller and persons performing similar functions at the Company or our subsidiary.
The code of ethics for senior financial officers is available on our website, www.cgen.com.
However, information contained on our website does not constitute a part of this Annual Report.
111
We intend to post on our website all disclosures that are required by the rules and
regulations of the SEC or by the Nasdaq Listing Rules concerning any amendments to, or waivers from, any provision of the code of business
conduct or the code of ethics.
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents the fees billed or accrued to us by our principal accountant
for professional services rendered in the years ended December 31, 2025, and 2024:
|
2025
|
2024
|
|||||||
|
Audit Fees |
$ |
217,000 |
$ |
222,000 |
||||
|
Audit Related Fees |
$ |
15,000 |
$ |
15,000 |
||||
|
Tax Fees |
$ |
1,500 |
$ |
5,000 |
||||
|
All Other Fees |
$ |
3,000 |
$ |
3,000 |
||||
|
Total |
$ |
236,500 |
$ |
245,000 |
||||
“Audit Fees” are fees for professional services rendered by our principal
accountant in connection with the integrated audit (including review of internal control over financial reporting) of our consolidated
annual financial statements and review of our unaudited interim financial statements;
“Audit Related Fees” are fees for professional services rendered by our
principal accountant in connection with the audit and other assignments, including consultancy, comfort letters and consents with respect
to registration statements filed with the SEC;
“Tax Fees” are fees for services rendered by our principal accountant
in connection with tax compliance, tax advice and tax planning; and
“All Other Fees” are fees for other consulting services rendered by our
principal accountant to us.
Pre-Approval Policies for Non-Audit Services
Our audit committee oversees a policy and procedures for approval of audit and non-audit
services rendered by our external auditor. This policy generally provides that we will not engage our independent registered public accounting
firm to render audit or non-audit services unless the service is specifically approved in advance by our audit committee or the engagement
is entered into pursuant to the pre-approval procedure described below. Annually, our audit committee pre-approves specified types of
services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such
pre-approval is detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar
amount. All of the fees listed in the table above were approved by our audit committee.
ITEM
16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM
16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
The Nasdaq Listing Rules require companies with securities listed thereon to comply
with their corporate governance standards. As a foreign private issuer whose shares are listed on Nasdaq, we are permitted to follow certain
home country corporate governance practices instead of those followed by U.S. companies under the Nasdaq Listing Rules, including:
112
Annual Meeting of Shareholders. Consistent
with Israeli law, at annual meetings of shareholders we are not required to allow shareholders to discuss company affairs with management,
which is different from annual shareholder meeting requirements under Nasdaq Rule 5620.
Shareholder Approval. Pursuant to Israeli
law, we seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law, which
are different from the requirements for seeking shareholder approval under Nasdaq Listing Rule 5635. We seek shareholder approval in specified
situations, as required by Israeli law.
Quorum at an Adjourned General Meeting of Shareholders.
Consistent with Israeli law, generally, a quorum for an adjourned general meeting of shareholders of the Company is any two shareholders
present in person, by proxy, by proxy card or by electronic vote at such meeting. As such, the Israeli quorum requirements for an adjourned
meeting are different from the Nasdaq requirement that an issuer listed on Nasdaq have a quorum requirement that in no case be less than
33 1/3% of the outstanding shares of the company’s common voting stock.
Distribution of Annual Reports. We have chosen
to follow our home country practice in lieu of the requirements of Nasdaq Rule 5250(d)(1), relating to an issuer’s furnishing of
its annual report to shareholders. Specifically, we file annual reports on Form 20-F, which contain financial statements audited by an
independent accounting firm, electronically with the SEC and post a copy on our website.
ITEM 16H.
MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
113
ITEM 16J. INSIDER TRADING POLICIES
ITEM 16K. CYBERSECURITY
Our Head of Cybersecurity and IT, who is not a member of management, but reports to the Chief Financial Officer, a member of management, helps in identifying, assessing and managing the Company’s cybersecurity threats and risks by monitoring and evaluating our threat environment using various methods including, for example, by engaging third parties to conduct penetration tests on our behalf.
Depending on the environment and system, we implement and maintain various technical, physical, and organizational measures, processes, standards and policies designed to manage and mitigate material risks from cybersecurity threats to our Information Systems and Data, including, for example, incident response policy, business continuity plan, cybersecurity insurance, firewalls and access controls for certain environments and systems, physical security measures, and employee cybersecurity trainings.
Our overall risk assessment and management processes cover material risks from cybersecurity threats. For example, cybersecurity risk is a component in our internal auditor’s risk assessment report. Our Head of Cybersecurity and IT works with our Chief Financial Officer and relevant management members to prioritize and mitigate cybersecurity threats that are more likely to lead to a material impact to our business and meets with management, as needed, on these issues.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including, for example, professional services firms, including cybersecurity and cloud consultants, a penetration testing firm and legal counsel.
Governance
Our cybersecurity incident response policy is designed to escalate certain cybersecurity incidents to certain members of management, including our Head of Cybersecurity and IT, our Chief Financial Officer and our General Counsel. Under our cybersecurity incident response policy, those members of management will work with the Company’s incident response team member(s) to help the Company mitigate and remediate cybersecurity incidents of which they are notified. In addition, the Company’s cybersecurity incident response policy includes reporting to the audit committee of the board of directors for certain cybersecurity incidents.
114
PART III
ITEM 17. FINANCIAL STATEMENTS
See Item 18.
ITEM 18. FINANCIAL STATEMENTS
Our consolidated financial statements and related notes are included in this Annual Report beginning on page F-1.
115
ITEM 19. EXHIBITS
Index to Exhibits
|
Exhibit
Number
|
Description
|
|
1.1
|
Amended and Restated Articles of Association of Compugen, as amended (incorporated by reference to Exhibit A to Exhibit 99.1 to Compugen’s report on Form 6-K filed with the SEC on August 5, 2024 (File No. 000-30902)).
|
|
1.2
|
Memorandum of Association of Compugen, as amended (incorporated by reference to Annex A2 of Exhibit 99.4 to Compugen’s report on Form 6-K filed with the SEC on August 5, 2019 (File No. 000-30902)).
|
|
2.1
|
Description of Securities (incorporated by reference to Exhibit 2.1 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2024, filed with the SEC on March 4, 2025 (File No. 000-30902)).
|
|
4.1
|
Compugen Ltd. 2021 Employee Share Purchase Plan (incorporated by reference to Exhibit 10.1 to Compugen’s Registration Statement on Form S-8 filed with the SEC on December 12, 2020 (File No. 333-251263)).
|
|
4.2
|
Compugen Ltd. 2010 Share Incentive Plan, as amended (incorporated by reference to Exhibit 4.1 to Compugen’s Registration Statement on Form S-8, filed with the SEC on July 30, 2020 (File No.333-240182)).
|
|
4.3
|
Amended and Restated Form of Indemnification Undertaking and Exemption and Release between Compugen Ltd. and its directors and office holders (incorporated by reference to Exhibit 4.8 to Compugen’s Annual Report on Form 20-F/A for the year ended December 31, 2021, filed with the SEC on February 28, 2022 (File No. 000-30902)).
|
|
4.4
|
Office Lease Agreement (“Holon Lease”), dated March 2015, by and between Kanit Hashalom Investments Ltd. and Compugen Ltd. (incorporated by reference to Exhibit 99.2 to Compugen’s Form 6-K filed with the SEC on May 5, 2015 (File No. 000-30902)).
|
|
4.5
|
Amendment to Holon Lease made and entered into on November 26, 2015, by and between Kanit Hashalom Investments Ltd. and Compugen Ltd. (incorporated by reference to Exhibit 4.10 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2015, filed with the SEC on March 7, 2016 (File No. 000-30902)).
|
|
4.6
|
Addendum to Holon Lease made and entered into on October 14, 2020 by and between Kanit Hashalom Investments Ltd. and Compugen Ltd. (incorporated by reference to Exhibit 4.11 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on February 25, 2021 (File No. 000-30902)).
|
|
4.7@
|
License Agreement, between the Company and MedImmune Limited (“MedImmune”), entered into as of March 30, 2018 (incorporated by reference to Exhibit 10.1 to Compugen’s Form 6-K, filed with the SEC on May 9, 2018 (File No. 000-30902)).
|
|
4.8@
|
Amendment No. 1 to the License Agreement, between the Company and MedImmune, dated May 9, 2018 (incorporated by reference to Exhibit 10.1 to Compugen’s Form 6-K, filed with the SEC on August 1, 2018 (File No. 000-30902)).
|
|
4.9
|
Amendment No. 2 to the License Agreement, between the Company and MedImmune, dated September 16, 2020 (incorporated by reference to Exhibit 4.14 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on February 25, 2021 (File No. 000-30902)).
|
|
4.10#
|
Amendment No. 3 to the License Agreement, between the Company and MedImmune, dated August 4, 2021 (incorporated by reference to Exhibit 4.15 to Compugen’s Annual Report on Form 20-F/A for the year ended December 31, 2021, filed with the SEC on February 28, 2022 (File No. 000-30902)).
|
|
4.11#
|
Amendment No. 4 to the License Agreement, between the Company and MedImmune, dated December 16, 2025 (incorporated by reference to Exhibit 10.1 to Compugen’s Form 6-K, filed with the SEC on December 17, 2025 (File No. 000-30902)).
|
|
4.12#
|
License Agreement, between Compugen Ltd. and Gilead Sciences, Inc., dated December 18, 2023 (incorporated by reference to Exhibit 4.11 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2023, filed with the SEC on March 5, 2024 (File No. 000-30902)).
|
|
8.1*
|
Subsidiaries.
|
|
11(b)*
|
Insider Trading Policy
|
|
12.1*
|
Certification by Principal Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
12.2*
|
Certification by Principal Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) under the Exchange Act and Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
13.1*
|
Certification by Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b)/Rule 15d-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
15.1*
|
Consent of Kost Forer Gabbay & Kasierer, a member firm of EY Global.
|
|
97.1
|
Compugen’s Policy for Recovery of Erroneously Awarded Compensation (incorporated by reference to Exhibit 4.11 to Compugen’s Annual Report on Form 20-F for the year ended December 31, 2023, filed with the SEC on March 5, 2024 (File No. 000-30902)).
|
|
101*
|
The following financial information from Compugen Ltd.’s Annual Report on Form 20-F for the year ended December 31, 2025, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2025 and 2024; (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2025, 2024 and 2023; (iii) Statements of Changes in Shareholders’ Equity for the years ended December 31, 2025, 2024 and 2023; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023; and (v) Notes to Consolidated Financial Statements.
|
|
101.INS
|
Inline XBRL Instance Document
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
101.CAL
|
Inline XBRL Taxonomy Calculation Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Label Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
|
104
|
Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101).
|
| * |
Filed herewith.
|
| @ |
Confidential treatment has been granted by the Securities and Exchange Commission as to certain portions.
|
| # |
Portions of this exhibit (indicated by asterisks therein) have been omitted as these portions are both not material and private or confidential.
|
116
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
COMPUGEN LTD.
Signature: /s/ Dr. Eran Ophir
Name: Dr. Eran Ophir
Title: President and Chief Executive Officer, Director
Date: March 2, 2026
|
117
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2025
U.S. DOLLARS IN THOUSANDS
INDEX
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID:
|
F - 2 - F - 4
|
|
Consolidated Balance Sheets
|
F - 5 - F - 6
|
|
Consolidated Statements of Comprehensive Profit (Loss)
|
F - 7
|
|
Statements of Changes in Shareholders’ Equity
|
F - 8
|
|
Consolidated Statements of Cash Flows
|
F - 9 - F - 10
|
|
Notes to Consolidated Financial Statements
|
F - 11 - F - 44
|
- - - - - - - - - - -
 |
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
ey.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Compugen Ltd. and its subsidiary (the Company) as of December 31, 2025 and 2024, the related consolidated statements of comprehensive profit (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 2, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F - 2
|
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
ey.com
|
License Agreement with Gilead
|
Description of the matter
|
As described in Note 1 to the consolidated financial statements, in December 2023, the Company entered into a license agreement with Gilead Sciences, Inc. The Company’s obligations under the license agreement include: (i) delivery of exclusive license; (ii) certain research activities through the clearance of an IND; and (iii) research and development activities in connection with Phase 1 clinical trial. The Company recognized revenues for research and development activities for phase 1 clinical trial using the input method, based on progress of the performance obligations, which were measured by the proportion of actual costs incurred to the total costs expected to complete the agreement. Costs included in the measure of progress include direct labor and third-party costs. Collaboration revenue from research and development activities from the Company’s license agreement with Gilead, for which management used an input method, was 7.8 million for the year ended December 31, 2025.
Auditing management’s estimated measure of progress for the research and development activities in connection with phase 1 clinical trial was challenging and complex due to the assumptions used by management and high degree of auditor’s judgment required to determine the total expected costs to complete the obligations under the agreement, specifically the estimation of direct labor and third-party costs. The Company’s estimate of costs expected to be incurred in the future requires estimation of the amounts it expects to incur for research and development activities in connection with phase 1 clinical trial. In addition, changes in these estimates can have a material effect on revenue recognized.
|
|
|
How we addressed the matter in our audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the management’s collaboration revenue process. As part of our testing, we considered controls over the management’s estimation for measure of progress for the research and development activities in connection with phase 1 clinical trial, including identification of actual costs incurred and management’s estimation of total expected costs used in its measure of progress calculations, as well as controls over the completeness and accuracy of data used in the calculations.
Our audit procedures performed included, gaining an understanding of the significant assumptions used in the management’s estimates of total expected costs for the agreement and testing the completeness and accuracy of the underlying data used by the Company in its revenue recognition model. We performed inquiries with the Company’s relevant personnel for the specific development project to corroborate management’s assumptions used in the Company’s estimates of total expected costs. We evaluated changes in timeline and/or increases or decreases in the total expected costs during the year, and examined evidence supporting key inputs of the revenue recognition model. We compared the estimates of annual expected costs to actual costs incurred to evaluate management’s ability to forecast costs. We also tested the amount of incurred costs during the year and the calculation of amounts recognized under the revenue recognition model.
|
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
We have served as the Company’s auditor since 2002
|
Tel-Aviv, Israel
|
|
March 2, 2026
|
F - 3
|
|
Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A,
Tel-Aviv 6492102, Israel
|
Tel: +972-3-6232525
ey.com
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
COMPUGEN LTD.
Opinion on Internal Control over Financial Reporting
We have audited Compugen Ltd. and its subsidiary’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Compugen Ltd. and its subsidiary (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of comprehensive profit (loss), changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes and our report dated March 2, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KOST FORER GABBAY & KASIERER
A Member of EY Global
|
|
|
March 2, 2026
|
F - 4
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
|
December 31,
|
|||||||||||
|
Note
|
2025
|
2024
|
|||||||||
|
ASSETS
|
|||||||||||
|
CURRENT ASSETS:
|
|||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
|||||||
|
Short-term bank deposits
|
|
|
|||||||||
|
Investment in marketable securities
|
3, 4
|
|
|
||||||||
|
Other accounts receivable and prepaid expenses
|
5
|
|
|
||||||||
|
Total current assets
|
|
|
|||||||||
|
NON-CURRENT ASSETS:
|
|||||||||||
|
Restricted long-term bank deposits
|
|
|
|||||||||
|
Long-term prepaid expenses
|
|
|
|||||||||
|
Severance pay fund
|
|
|
|||||||||
|
Operating lease right of use asset
|
6
|
|
|
||||||||
|
Property and equipment, net
|
7
|
|
|
||||||||
|
Total non-current assets
|
|
|
|||||||||
|
Total assets
|
$
|
|
$
|
|
|||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share and per share data)
|
December 31,
|
|||||||||||
|
Note
|
2025
|
2024
|
|||||||||
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|||||||||||
|
CURRENT LIABILITIES:
|
|||||||||||
|
Trade payables
|
$
|
|
$
|
|
|||||||
|
Deferred revenues
|
|
|
|||||||||
|
Current maturity of operating lease liability
|
6
|
|
|
||||||||
|
Accrued expenses
|
|
|
|||||||||
|
Employees and related accruals
|
|
|
|||||||||
|
Total current liabilities
|
|
|
|||||||||
|
NON-CURRENT LIABILITIES:
|
|||||||||||
|
Deferred revenues
|
|
|
|||||||||
|
Operating lease liability
|
6 |
|
|
||||||||
|
Accrued severance pay
|
|
|
|||||||||
|
Total non-current liabilities
|
|
|
|||||||||
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
8
|
||||||||||
|
SHAREHOLDERS’ EQUITY:
|
9
|
||||||||||
|
Share capital:
|
|||||||||||
|
Ordinary shares of NIS
|
|
|
|||||||||
|
Additional paid-in capital
|
|
|
|||||||||
|
Accumulated other comprehensive income
|
|
|
|||||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
|||||||
|
Total shareholders’ equity
|
|
|
|||||||||
|
Total liabilities and shareholders’ equity
|
$
|
|
$
|
|
|||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE PROFIT (LOSS)
U.S. dollars in thousands (except share and per share data)
|
Year ended December 31,
|
|||||||||||||||
|
Note
|
2025
|
2024
|
2023
|
||||||||||||
|
Revenue
|
$
|
|
$
|
|
$
|
|
|||||||||
|
Cost of revenue
|
|
|
|
||||||||||||
|
Gross profit
|
|
|
|
||||||||||||
|
Operating expenses:
|
|||||||||||||||
|
Research and development expenses, net
|
|
|
|
||||||||||||
|
Marketing and business development expenses
|
|
|
|
||||||||||||
|
General and administrative expenses
|
|
|
|
||||||||||||
|
Total operating expenses
|
|
|
|
||||||||||||
|
Operating profit (loss)
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Financial and other income, net
|
12
|
|
|
|
|||||||||||
|
Profit (loss) before taxes on income
|
|
(
|
)
|
(
|
)
|
||||||||||
|
Taxes on income, net
|
10
|
|
|
|
|||||||||||
|
Net profit (loss)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||
|
Basic net profit (loss) per share
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||
|
Diluted net profit (loss) per share
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||
|
Other comprehensive profit (loss):
|
|||||||||||||||
|
Unrealized gain (loss) arising during the period from marketable securities
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||||
|
Total comprehensive profit (loss)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||
|
Weighted average number of ordinary shares used in computing basic net profit (loss) per share
|
|
|
|
||||||||||||
|
Weighted average number of ordinary shares used in computing diluted net profit (loss) per share
|
|
|
|
||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
COMPUGEN LTD. AND ITS SUBSIDIARY
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
U.S. dollars in thousands (except share data)
|
Additional paid-in
capital
|
Accumulated other comprehensive
Income (loss)
|
Accumulated
deficit
|
Total shareholders’
equity
|
|||||||||||||||||||||
|
Ordinary shares
|
||||||||||||||||||||||||
|
Number
|
Amount
|
|||||||||||||||||||||||
|
Balance as of January 1, 2023
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||
|
Issuance of shares, net
|
|
|
|
|
|
|
||||||||||||||||||
|
Share-based compensation issued to employees
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income from marketable securities
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Net loss
|
-
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Balance as of December 31, 2023
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||
|
Exercise of options
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Issuance of shares, net
|
|
|
|
|
|
|
||||||||||||||||||
|
Share-based compensation issued to employees
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Other comprehensive income from marketable securities
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Net loss
|
-
|
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
|
Balance as of December 31, 2024
|
|
|
|
|
(
|
)
|
|
|||||||||||||||||
|
Exercise of options
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Issuance of shares upon RSU vesting
|
|
(
|
)
|
|
|
|
|
|||||||||||||||||
|
Issuance of shares, net
|
|
|
|
|
|
|
||||||||||||||||||
|
Share-based compensation issued to employees
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Payments of tax withholding for share-based compensation
|
-
|
|
(
|
)
|
|
|
(
|
)
|
||||||||||||||||
|
Other comprehensive loss from marketable securities
|
-
|
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||||
|
Net profit
|
-
|
|
|
|
|
|
||||||||||||||||||
|
Balance as of December 31, 2025
|
|
$
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||
(*) Representing amount lower than $ 1.
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net profit (loss)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Adjustments required to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Depreciation
|
|
|
|
|||||||||
|
Decrease in severance pay, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Loss (gain) from property and equipment sales and disposals
|
(
|
)
|
|
|
||||||||
|
Exchange rate differences gain on cash balances
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Decrease (increase) in interest receivables from short-term bank deposits and long-term restricted deposit
|
|
(
|
)
|
|
||||||||
|
Amortization of discount and accrued interest on marketable securities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Decrease (increase) in trade receivables
|
|
|
(
|
)
|
||||||||
|
Decrease (increase) in other accounts receivable and prepaid expenses
|
|
(
|
)
|
(
|
)
|
|||||||
|
Decrease (increase) in long-term prepaid expenses
|
|
(
|
)
|
|
||||||||
|
Decrease in operating lease right of use asset
|
|
|
|
|||||||||
|
Increase (decrease) in trade payables
|
|
(
|
)
|
|
||||||||
|
Increase (decrease) in employees and related accruals
|
(
|
)
|
(
|
)
|
|
|||||||
|
Increase (decrease) in accrued expenses
|
|
(
|
)
|
|
||||||||
|
Decrease in deferred participation in R&D expenses
|
|
|
(
|
)
|
||||||||
|
Increase (decrease) in deferred revenues
|
(
|
)
|
|
|
||||||||
|
Decrease in operating lease liability
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash provided by (used in) operating activities
|
|
|
(
|
)
|
||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Proceeds from maturity of short-term bank deposits
|
|
|
|
|||||||||
|
Investment in short-term bank deposits
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from maturity of marketable securities
|
|
|
|
|||||||||
|
Investment in marketable securities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Investment in long term restricted deposit
|
(
|
)
|
(
|
)
|
|
|||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from sale of property and equipment
|
|
|
|
|||||||||
|
Net cash provided by (used in) investing activities
|
|
(
|
)
|
|
||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 9
COMPUGEN LTD. AND ITS SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Proceeds from issuance of ordinary shares, net
|
|
|
|
|||||||||
|
Proceeds from exercise of share-based awards
|
|
|
|
|||||||||
|
Payments of tax withholding for share-based compensation
|
(
|
)
|
|
|
||||||||
|
Net cash provided by financing activities
|
|
|
|
|||||||||
|
Effect of exchange rate changes on cash
|
|
|
|
|||||||||
|
Increase in cash, cash equivalents and restricted cash
|
|
|
|
|||||||||
|
Cash, cash equivalents and restricted cash at the beginning of the year
|
|
|
|
|||||||||
|
Cash, cash equivalents and restricted cash at the end of the year
|
$
|
|
$
|
|
$
|
|
||||||
|
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||||||
|
Purchase of property and equipment
|
$
|
|
$
|
|
$
|
(
|
)
|
|||||
|
Right-of-use asset obtained in exchange for operating lease liability
|
$
|
|
$
|
|
$
|
|
||||||
|
Issuance expenses of ordinary shares
|
$
|
|
$
|
|
$
|
|
||||||
|
Tax paid during the year for Taxes of income |
$
|
|
$
|
|
$
|
|
||||||
|
Reconciliation of cash, cash equivalents and restricted cash:
|
||||||||||||
|
Cash and cash equivalents
|
$
|
|
$
|
|
$
|
|
||||||
|
Restricted cash
|
|
|
|
|||||||||
|
Total cash, cash equivalents and restricted cash
|
$
|
|
$
|
|
$
|
|
||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 10
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 1:-
|
GENERAL
|
| a. |
Compugen Ltd. (the “Company”) is a clinical-stage therapeutic discovery and development company utilizing UnigenTM, Compugen’s AI/ML powered computational discovery platform, to identify novel drug targets and to develop therapeutics in the field of cancer immunotherapy. The Company’s innovative immuno-oncology pipeline consists of four clinical stage programs, COM701, COM902, rilvegostomig and GS-0321 (previously COM503). COM701, a potential first-in-class anti-PVRIG antibody, and COM902, a potential best-in-class therapeutic anti-TIGIT antibody, have been evaluated for the treatment of solid tumors as a monotherapy and in combinations of dual (PVRIG/PD-1, PVRIG/TIGIT) and triple (PVRIG/PD-1/TIGIT) blockade. The last patient in the clinical trial evaluating the triple combination treatment of COM701, COM902 and pembrolizumab (initiated in 2023), received the last dose in January 2026. Currently, the only clinical trial the Company sponsors and is conducting is a blinded randomized ovarian cancer platform trial evaluating COM701 as a single agent in maintenance therapy in relapsed platinum sensitive ovarian cancer (named MAIA-ovarian trial). Rilvegostomig, a PD-1/TIGIT bispecific antibody with a TIGIT component that is derived from Compugen’s COM902 program, is being developed by AstraZeneca pursuant to an exclusive license agreement between Compugen and AstraZeneca and is being evaluated in multiple Phase 3, Phase 2 and Phase 1 clinical trials. GS-0321 (previously COM503), Compugen’s potential first-in-class high affinity antibody, which blocks the interaction between IL-18 binding protein and IL-18, is licensed to Gilead and is being evaluated in a Phase 1 clinical trial the Company sponsors and is conducting by the Company. In addition, Compugen has an early-stage immuno-oncology therapeutic pipeline that consists of research programs aiming to address various mechanisms to enhance anti-cancer immunity.
|
| b. |
The Company is headquartered in Holon, Israel. Its clinical development activities operate from the Company’s headquarters in Israel and from its United States subsidiary, Compugen USA, Inc..
|
| c. |
The Company has incurred profits in the amount of $
|
F - 11
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 1:-
|
GENERAL (Cont.)
|
| d. |
Effective March 30, 2018, the Company entered into an exclusive license agreement with MedImmune Limited, the global biologics research and development arm of AstraZeneca (“AstraZeneca” and such agreement, as amended from time to time, the “AstraZeneca License Agreement”) to enable the development of bi-specific and multi-specific immuno-oncology antibody products. Under the terms of the AstraZeneca License Agreement, Compugen provided an exclusive license to AstraZeneca for the development of bi-specific and multi-specific antibody products derived from COM902. AstraZeneca has the right to create multiple products under this license agreement and is solely responsible for all research, development, and commercial activities under the license agreement. In connection with the AstraZeneca License Agreement, AstraZeneca developed rilvegostomig, a novel PD-/TIGIT bi-specific antibody with a TIGIT component that is derived from COM902. Rilvegostomig entered the clinic in September 2021, initiated first patient dosing in the first indication in Phase 3 study in December 2023, and first patient dosing in the second indication in Phase 3 study in May 2024. From the initial date of the AstraZeneca License Agreement until the recent amendment thereto dated December 16, 2025, Compugen received a $
On December 16, 2025, the parties to the AstraZeneca License Agreement entered into an amendment thereto whereby the Company sold to AstraZeneca a portion of the existing royalty interest in rilvegostomig for a $ |
| e. |
On December 18, 2023, the Company entered into an exclusive license agreement (the “License Agreement”) with Gilead Sciences, Inc. (“Gilead”), pursuant to which the Company granted Gilead an exclusive license under the Company’s pre-clinical antibody program against IL-18 binding protein and all intellectual property rights subsisting therein, to use, research, develop, manufacture and commercialize products, including GS-0321 (previously COM503), (“GS-0321 License”), and additional products that may be so developed by Gilead (together with GS-0321, the “Licensed Products”).
Pursuant to the License Agreement, Gilead paid the Company a one-time, upfront payment of $
|
F - 12
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 1:-
|
GENERAL (Cont.)
|
The Company is responsible for conducting the Phase 1 clinical trial for GS-0321, including handling the regulatory matters in connection therewith, and is bearing the costs of such trial (including the GS-0321 drug supply), with Gilead having the obligation to provide us its zimberelimab antibody for such trial. In certain circumstances, Gilead may assume the role of conducting the Phase 1 clinical trial.
Upon completion of the Phase 1 clinical trial for GS-0321, the Company is required to initiate the transfer of development activities related to GS-0321 to Gilead, following which, Gilead will have sole responsibility to develop and commercialize the Licensed Products.
During the term of the License Agreement, the Company is prohibited from researching, developing, making, and commercializing any compounds, molecules, products or treatment methods that are directed to IL-18 or any companion diagnostics for an IL-18 product.
Unless terminated early by a party pursuant to its terms, the License Agreement will continue in effect on a Licensed Product-by-Licensed Product and country-by-country basis until the expiration of the last royalty term in such country.
Gilead withheld at source 15 % from the upfront payment and IND clearance milestone amounts paid to the Company in January 2024 and in September 2024, respectively, and is expected to continue and withhold at source all taxes required by law from all payments payable to the Company under the License Agreement.
The License Agreement contains customary representations, warranties, covenants, and terms governing the prosecution and enforcement of certain intellectual property and issues related to technology transfer, manufacturing transfer, provisions with respect to establishment of joint steering committee and its governance covenants with respect to change of control and others.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”).
| a. |
Use of estimates:
|
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions. The Company’s management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
F - 13
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
b.
|
Financial statements in U.S. dollars:
|
The reporting and functional currency of the Company is the U.S. dollar, as the Company’s management believes that the U.S. dollar is the primary currency of the economic environment in which the Company and Compugen USA, Inc. have operated and expect to continue to operate in the foreseeable future.
Transactions and balances denominated in U.S. dollars are presented at their original amounts. Monetary accounts denominated in currencies other than the dollar are re-measured into dollars in accordance with ASC No. 830, “Foreign Currency Matters”. All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the consolidated statement of comprehensive profit (loss) as financial income or expenses, as appropriate.
|
c.
|
Basis of consolidation:
|
The consolidated financial statements include the accounts of the Company and Compugen USA, Inc. intercompany transactions and balances have been eliminated upon consolidation.
|
d.
|
Cash and Cash equivalents:
|
Cash and cash equivalents consist of cash in banks and cash equivalents. Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.
| e. |
Short-term bank deposits and restricted long-term bank deposits:
|
Short-term bank deposits include deposits with maturities of more than three months but less than one year. Bank deposits are stated at cost which approximates market values.
The Company’s restricted long-term bank deposits primarily consist of bank deposits collateralizing the Company’s operating leases.
Bank deposits as of December 31, 2025 and 2024 are in U.S. dollars and bear an annual weighted average interest rate of 4.89 % and 5.51 %, respectively.
F - 14
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
f.
|
Investments in marketable securities:
|
The Company accounts for investments in marketable securities in accordance with ASC No. 320, “Investments - Debt Securities”.
Management determines the appropriate classification of its investments at the time of purchase and reevaluates such designation at each balance sheet date. The Company classifies all of its marketable securities as available-for-sale (“AFS”). The Company classifies its marketable securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. AFS marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported in accumulated other comprehensive income (loss) in shareholders’ equity. Realized gains and losses on sale of investments are included in financial income, net.
The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization together with interest on securities is included in financial income, net.
At each reporting period, the Company evaluates whether declines in fair value below amortized cost are due to expected credit losses, as well as the Company’s ability and intent to hold the investment until a forecasted recovery occurs in accordance with ASC 326, Financial Instrument- Credit losses. Allowance for credit losses on AFS marketable securities is recognized in the Company’s consolidated statements of comprehensive profit (loss), and any remaining unrealized losses, net of taxes, are included in accumulated other comprehensive income (loss) in shareholders’ equity. No credit loss impairment was identified in the year ended December 31, 2025.
|
g.
|
Property and equipment, net:
|
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets at the following annual rates:
|
%
|
||
|
Computers, software and related equipment
|
|
|
|
Laboratory equipment and office furniture
|
|
|
|
Leasehold improvements
|
Shorter of the term of the
lease or useful life
|
F - 15
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
h.
|
Impairment of long-lived assets: |
The long-lived assets of the Company are reviewed for impairment in accordance with ASC 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset (assets group) with the future undiscounted cash flows expected to be generated by the asset (assets group). If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets group exceeds the fair value of the assets group. During the years 2025, 2024 and 2023, no impairment losses have been recorded.
|
i.
|
Leases: |
The Company accounts for its leases according to ASC 842 - Leases (“ASC 842”). The Company determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Company has a right to direct the use of the asset. The Company elected to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less. The Company elected the practical expedient to combine its lease and non-lease components for its leases.
ROU assets and lease liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured based on the discounted present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. The implicit rate within the operating leases is generally not determinable, therefore the Company uses the Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Company’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Company will exercise that option. An option to terminate the lease is considered unless it is reasonably certain that the Company will not exercise the option.
|
j.
|
Revenue recognition: |
The Company generates revenues mainly from its collaborative and license agreements. The revenues are derived mainly from upfront license payments, research and development services and contingent payments related to milestone achievements.
The Company recognizes revenue in accordance with ASC 606 – “Revenue from Contracts with Customers”.
F - 16
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
j.
|
Revenue recognition (Cont.): |
As such, the Company analyzes its contracts to assess whether they are within the scope of ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps:
| • |
Identification of the contract, or contracts, with a customer
|
| • |
Identification of the performance obligations in the contract
|
| • |
Determination of the transaction price
|
| • |
Allocation of the transaction price to the performance obligations in the contract
|
| • |
Recognition of revenue when, or as, the Company satisfies a performance obligation
|
At the contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company previously entered into the AstraZeneca License Agreement. Under the terms of the AstraZeneca License Agreement, the Company provided AstraZeneca with an exclusive license to intellectual property (“IP”) rights of the Company for the development of bi-specific and multi-specific antibody products derived from COM902. From the date of the AstraZeneca License Agreement until the recent amendment thereto dated December 16, 2025, Compugen received a $10,000 upfront payment and was eligible to receive up to $200,000 for development, regulatory and commercial milestones for the first product, of which $30,500 was received as well as tiered royalties on future product sales.
Under ASC 606, the Company determined the license to the IP to be a functional IP that has significant standalone functionality. The Company is not required to continue to support, develop or maintain the intellectual property transferred and will not undertake any activities to change the standalone functionality of the IP. Therefore, the license to the IP is a distinct performance obligation and as such revenue is recognized at the point in time that control of the license is transferred to the customer.
Future milestone payments are considered variable consideration and are subject to the variable consideration constraint (i.e. will be recognized once concluded that it is “probable” that a significant reversal of the cumulative revenues recognized under the contract will not occur in future periods when the uncertainty related to the variable consideration is resolved). Therefore, as the milestone payments are not probable, revenue was not recognized in respect to such milestone payments prior to achievement of such milestone.
F - 17
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
j.
|
Revenue recognition (Cont.): |
Sales or usage-based royalties to be received in exchange for licenses of IP are recognized at the later of when (1) the subsequent sale or usage occurs or (2) the performance obligation to which some or all of the sales or usage-based royalty has been allocated is satisfied (in whole or in part). As royalties are payable based on Net Sales, as defined in the agreement, which did not occur as of the financial statements date, the Company did not recognize any revenues from royalties.
On December 27, 2023, the fourth milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $10,000 in accordance with the criteria prescribed under ASC 606.
On May 30, 2024, the fifth milestone with respect to the first licensed product, under the AstraZeneca License Agreement was achieved and the Company recognized revenues in total amount of $5,000 in accordance with the criteria prescribed under ASC 606.
On December 16, 2025, the parties to the AstraZeneca License Agreement entered into an amendment thereto whereby the Company sold to AstraZeneca a portion of its existing royalty interest in rilvegostomig, and the Company recognized revenues in total amount of $65,000 in accordance with the criteria prescribed under ASC 606.
On December 18, 2023, the Company entered into an exclusive License Agreement with Gilead. Under the terms of the agreement, the Company granted Gilead an exclusive license under the Company’s pre-clinical antibody program against IL-18 binding protein and all intellectual property rights subsisting therein, to use, research, develop, manufacture and commercialize products derived from a Compugen pipeline program. Compugen received an upfront payment of $60,000 and an IND clearance milestone payment of $30,000 and is also eligible to receive up to approximately $758,000 additional milestone payments subject to and upon the achievement of certain development, regulatory and commercial milestones and as detailed in the agreement.
Gilead may terminate the Gilead Collaboration Agreement for convenience by giving a certain prior written notice to the Company at any time after the effective date of the agreement.
The Company concluded that Gilead is a customer and therefore revenue recognition should be accounted for in accordance with ASC 606, because the Company granted to Gilead license to its intellectual property and will provide research and development services, all of which are outputs of the Company’s ongoing activities, in exchange for consideration.
F - 18
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
j.
|
Revenue recognition (Cont.): |
The Company assessed the promises under the License Agreement and concluded that (i) the delivery of the GS-0321 License; (ii) the preclinical research and development activities towards IND approval of GS-0321 (the “IND research and development activities”) and (iii) the contingent promise to additional research and development activities in connection with Phase 1 clinical trial (the “Phase 1 research and development activities”), are capable of being distinct and are distinct within the context of the License Agreement. The Company considered that the license has standalone functionality, considered to be functional intellectual property, and is capable of being distinct. The Company also determined that the IND research and development activities and Phase 1 research and development activities could be provided by resources otherwise available to Gilead and thus are capable of being distinct. Also, the Company concluded that the Company’s contingent promise to additional research and development activities in connection with Phase 1 clinical trial represents a material right.
As a result, the Company concluded that its promise to deliver the GS-0321 License, the promise to perform IND research and development activities and Phase 1 research and development activities represented separate performance obligations in the License Agreement.
The Company also evaluated all milestones and royalties as a possible variable consideration. With respect to clinical development and regulatory milestones, based upon the high degree of uncertainty and risk associated with these potential payments, the Company concluded that all such amounts should be fully constrained and are not included in the initial transaction price as the Company cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Accordingly, the Company did not include any potential clinical development, regulatory and sales milestones and royalties in the initial transaction price.
The Company allocated the transaction price to each performance obligation on a relative estimated standalone selling price basis. The Company developed the estimated standalone selling price for the GS-0321 License based on the present value of expected future cash flows associated with the license and related clinical development and regulatory milestones. In developing such estimate, the Company applied judgement in determining the timing needed to develop the Licensed Product, the probability of success, and the discount rate. The Company developed the estimated standalone selling price for the IND research and development activities using a “cost plus” reasonable margin approach. To determine the estimated standalone selling price of the material right for the Phase 1 research and development activities obligation, the Company estimated the standalone selling price of the underlying performance obligations included in the material right and estimated the probability of the Company’s performance of such obligations.
F - 19
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
j.
|
Revenue recognition (Cont.): |
The Company determined that the GS-0321 License was a functional license since the underlying intellectual property (the “IP”) has significant standalone functionality. In addition, the Company determined that December 18, 2023, represents (i) the date at which the Company made available the IP to Gilead and (ii) the beginning of the period during which Gilead is able to use and benefit from its right to use the IP. Based upon these considerations, the Company recognized the entirety of the initial transaction price allocated to the GS-0321 License performance obligation during the year ended December 31, 2023.
Further, the IND research and development activities and Phase 1 research and development activities performance obligations are recognized over time. The Company using the input method in order to measure the progress of the services, based on the actual internal and external costs incurred, relative to total internal and external costs expected to be incurred to satisfy the performance obligation. The period over which total costs were estimated reflected the Company’s best estimate of the period over which it would perform the activities to achieve clearance of an IND application for GS-0321 and the phase 1 clinical trial. The Company determined that the input method is the best measure of progress towards satisfying the performance obligation as incurred labor effort represents work performed that corresponds with, and thereby best depicts the transfer of goods and services.
During the year ended December 31, 2025, the Company recognized $7,764 of Phase 1 services revenues, and during the year ended December 31, 2024, the Company recognized $22,864 of license, IND services and Phase 1 services revenues.
Of the $43,677 deferred revenue recorded as of December 31, 2024, the Company recognized $7,764 as revenue during the year ended December 31, 2025.
As of December 31, 2025, the Company included deferred revenues of $10,970 in current liabilities and $24,943 in non-current liabilities.
The Company’s remaining performance obligations represent contracted revenue that has not yet been recognized. As of December 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations that the Company expects to recognize as revenue was $35,913 . As of December 31, 2025, the Company expects to recognize 31 % of its remaining performance obligations as revenue over the next 12 months, and the remainder through 2029.
For additional information regarding revenues, please refer to Note 11 below.
F - 20
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
k.
|
Cost of revenues: |
Cost of revenues consists of certain royalties and milestones paid or accrued in addition to research and development services allocated in relation to Gilead license agreement.
|
l.
|
Research and development expenses, net: |
Research and development costs are charged to the statement of comprehensive profit (loss) as incurred and are presented net of the amount of any grants the Company receives for research and development in the period in which the grant was received.
As part of the process of preparing the consolidated financial statements, the Company accrues costs for pre-clinical and clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the contract research organizations or other pre-clinical or clinical trial vendors that perform the activities. In certain circumstances, the Company is required to make nonrefundable advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the nonrefundable advance payments are deferred and capitalized, and amortized as the related goods or services are provided. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense.
Amortization of participation in R&D expenses for the years ended December 31, 2025, 2024 and 2023 were $0 , $0 and $325 , respectively.
|
m.
|
Severance pay: |
The Company’s liability for severance pay for its Israeli employees is calculated pursuant to Israeli Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date and is in large part covered by regular deposits with recognized pension funds and purchases of insurance policies. The value of these deposits and policies is recorded as an asset on the Company’s balance sheet. Pursuant to Section 14 of the Israeli Severance Pay Law, for Israeli employees under this section, the Company’s contributions for severance pay have replaced its severance obligation. Upon contribution of the full amount of the employee’s monthly salary for each year of service, no additional payments are required to be made by the Company to the employee to cover severance obligation.
Further, the related obligation and amounts deposited on behalf of the employee for such obligation are not stated on the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid.
Severance expenses for the years ended December 31, 2025, 2024 and 2023 amounted to approximately $557 , $481 and $432 , respectively.
F - 21
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
n.
|
Share-based compensation: |
The Company accounts for share-based compensation to employees and non-employees in accordance with ASC 718, “Compensation - Share Compensation” (“ASC 718”), which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The Company accounts for forfeitures as they occur.
The Company recognizes compensation expenses for the value of its awards with only service-based vesting conditions granted based on the straight-line method over the requisite service period of each of the awards.
The Company selected the Black-Scholes-Merton (“Black-Scholes”) option-pricing model as the most appropriate fair value method for its share-options awards. The option-pricing model requires a number of assumptions, of which the most significant are the expected share price volatility and the expected option term. Expected volatility was calculated based on actual historical share price movements over a term that is equivalent to the expected term of granted options. The expected term of options granted is based on historical experience and represents the period of time that options granted are expected to be outstanding.
The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company used the following assumptions for options granted to employees, directors and non-employees:
|
Year ended December 31,
|
||||||
|
2025
|
2024
|
2023
|
||||
|
Employee options
|
||||||
|
Volatility
|
|
|
|
|||
|
Risk-free interest rate
|
|
|
|
|||
|
Dividend yield
|
|
|
|
|||
|
Expected life (years)
|
|
|
|
|||
|
o.
|
Concentration of credit risks: |
Financial instruments that potentially subject the Company and Compugen USA, Inc. to concentration of credit risk consist principally of cash and cash equivalents, short-term bank deposits, restricted long-term bank deposit and investment in marketable securities.
F - 22
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Cash, cash equivalents, short-term bank deposits and restricted long-term bank deposit are invested in major banks in Israel and in the United States. Generally, these deposits may be redeemed upon demand and bear minimal risk. The Company’s marketable securities consist of investments, which are highly rated by credit agencies, in government debentures.
|
p.
|
Basic and diluted profit (loss) per share: |
Basic profit (loss) per share is calculated by dividing net loss for each reporting period by the weighted average number of ordinary shares outstanding during each year. Diluted net profit (loss) per share is calculated by dividing net profit (loss) for each reporting period by the weighted average number of ordinary shares outstanding during the period, plus dilutive potential ordinary shares considered outstanding during the period in accordance with ASC 260, “Earnings per Share”.
For the year ended December 31, 2025, 389,742 outstanding options and RSUs have been included in the calculation of the diluted net profit per share. All outstanding options, RSUs and warrants for the years ended December 31, 2024 and 2023 have been excluded from the calculation of the diluted net profit (loss) per share, because all such securities are anti-dilutive for all periods presented. As of December 31, 2025, 2024 and 2023 the average number of shares related to outstanding options, RSUs and warrants excluded from the calculations of diluted net profit (loss) per share were 8,970,492 , 8,496,655 and 7,921,020 , respectively.
|
q.
|
Income taxes: |
The Company accounts for income taxes in accordance with ASC No. 740, “Income Taxes”, (“ASC 740”) which prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. As of December 31, 2025, and 2024, a full valuation allowance was provided by the Company.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740-10.
F - 23
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
r.
|
Fair value of financial instruments: |
The Company applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), pursuant to which fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputting that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.
Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The hierarchy is broken down into three levels based on the inputs as follows:
| Level 1 - |
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.
|
| Level 2 - |
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
| Level 3 - |
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying amounts of cash and cash equivalents, restricted cash, short-term bank deposits, marketable securities, restricted long-term bank deposit, other accounts receivable and prepaid expenses, trade payable and employees and related accruals and accrued expenses approximate their fair values due to the short-term maturities of such instruments.
F - 24
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
| s. |
Recently adopted accounting pronouncement:
|
|
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-09 on a prospective basis during the year ended December 31, 2025, which resulted in updated income tax disclosures. See Note 10f in the accompanying notes to the consolidated financial statements for further detail.
|
| t. |
Recently issued accounting pronouncements not yet adopted:
|
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) - Disaggregation of Income Statement Expenses. The ASU requires, among other items, additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the consolidated Statements of Operations. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the effect of adopting the ASU on its consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This amendment introduces a practical expedient for the application of the current expected credit loss (“CECL”) model to current accounts receivable and contract assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the timing of adoption and impact of this amendment on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. The update provides recognition, measurement, presentation, and disclosure requirements for government grants, including guidance for grants related to an asset and grants related to income. The amendments introduced two permitted approaches for asset-related grants: a deferred income approach or a cost accumulation approach. The guidance is effective for the Company beginning December 15, 2028, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11 to amend the guidance in Interim Reporting (Topic 270). The update provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The guidance is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. The Company is currently evaluating the impact on its consolidated financial statements disclosures.
F - 25
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 3:- |
MARKETABLE SECURITIES
|
The following is a summary of available-for-sale marketable securities as of December 31, 2025 and 2024:
|
Amortized cost
|
Gross unrealized gains
|
Gross unrealized losses
|
Fair value
|
|||||||||||||
|
As of December 31, 2025:
|
||||||||||||||||
|
Available-for-sale – matures within one year:
|
||||||||||||||||
|
U.S. Treasury
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
|
As of December 31, 2024:
|
||||||||||||||||
|
Available-for-sale – matures within one year:
|
||||||||||||||||
|
U.S. Treasury
|
$
|
|
$
|
|
$
|
|
$
|
|
||||||||
As of December 31, 2025, and 2024, the Company had no unrealized losses related to marketable securities and determined the unrealized losses are not due to credit related losses. Therefore, the Company did not record an allowance for credit losses for its available-for-sale marketable securities.
As of December 31, 2025, and 2024, all of the Company’s available-for-sale marketable securities were due within one year.
The Company had no sales of marketable securities during the years ended December 31, 2025, and 2024, and accordingly no realized gains or losses were recorded. Proceeds from maturities of available-for-sale marketable securities during the year ended December 31, 2025, and 2024 were $50,306 and $53,230 , respectively.
F - 26
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 4:- |
FAIR VALUE MEASUREMENTS
|
The Company evaluates assets and liabilities subject to fair value measurements on recurring basis to determine the appropriate level to classify them for each reporting period. There have been no transfers between fair value measurements levels during the years ended December 31, 2025, and 2024. The carrying amounts of cash and cash equivalents marketable securities, trade receivables, short-term bank deposits, restricted long-term bank deposits, other accounts receivable and prepaid expenses, trade payables and employees and related accruals approximate their fair value due to the short-term maturity of such instruments.
The following table sets forth the Company’s assets that were measured at fair values as of December 31, 2025, and 2024, by level within the fair value hierarchy:
|
Fair value measurements
as of
|
||||||||||
|
Description
|
Fair Value Hierarchy
|
December 31,
2025
|
December 31,
2024
|
|||||||
|
Assets:
|
||||||||||
|
Cash equivalents:
|
||||||||||
|
Money market funds
|
Level 1
|
$
|
|
$
|
|
|||||
|
U.S. Treasury
|
Level 2
|
$ |
|
$ |
|
|||||
|
Marketable securities:
|
||||||||||
|
U.S. Treasury
|
Level 2
|
$
|
|
$
|
|
|||||
| NOTE 5:- |
OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
|
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Prepaid expenses
|
$
|
|
$
|
|
||||
|
Government authorities
|
|
|
||||||
|
Other
|
|
|
||||||
|
$
|
|
$
|
|
|||||
F - 27
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- |
LEASES
|
The Company leases all its real estate, storage area and cars under various operating lease agreements that expire on various dates.
The Company’s operating leases have original lease periods expiring between 2021 and 2028. The offices in Israel lease include two options to renew, one of which was exercised in 2020, and the second has also been exercised and will take effect in 2026.
Lease payments included in the measurement of the lease liability comprise the fixed non-cancelable lease payments and payments for optional renewal periods where it is reasonably certain the renewal period will be exercised.
Under ASC 842, all leases, including non-cancellable operating leases, are now recognized on the balance sheet. The aggregated present value of lease payments is recorded as a long-term asset titled Operating lease right of use asset. The corresponding lease liabilities are split between current maturity of operating lease liability within current liabilities and long-term operating lease liability within long-term liabilities. The Company’s leases do not provide an implicit rate and therefore the Company uses its incremental borrowing rate based on information available on the commencement date to determine the present value of lease payments.
The following table represents the weighted-average remaining lease term and discount rate:
|
Year ended
|
Year ended
|
|||||||
|
December 31,
2025
|
December 31,
2024
|
|||||||
|
Weighted average remaining lease term
|
|
|
||||||
|
Weighted average discount (annual) rate
|
|
%
|
|
%
|
||||
Operating lease expenses were approximately $785 , $775 and $800 in the years ended December 31, 2025, 2024 and 2023, respectively.
Variable payments as CPI, included in the lease expenses, were approximately $102 , $79 and $61 in the years ended December 31, 2025, 2024 and 2023, respectively.
Cash paid for amounts included in the measurement of lease liabilities was approximately $785 , $761 and $852 in the years ended December 31, 2025, 2024 and 2023, respectively.
F - 28
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 6:- |
LEASES (Cont.)
|
Maturities of operating lease liabilities were as follows:
|
December 31, 2025
|
||||
|
2026
|
$
|
|
||
|
2027
|
|
|||
|
2028
|
|
|||
|
2029
|
|
|||
|
2030
|
|
|||
|
2031 and on
|
|
|||
|
Total operating lease payments
|
|
|||
|
Less: imputed interest
|
|
|||
|
Present value of lease liabilities
|
|
|||
|
Lease liabilities, current
|
|
|||
|
Lease liabilities, non- current
|
|
|||
|
Present value of lease liabilities
|
$
|
|
||
The above annual minimum future rental commitments include both of the period covered by both exercised options with respect to the leased facility of Compugen Ltd. through March 2026 and through March 2031, respectively.
F - 29
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 7:- |
PROPERTY AND EQUIPMENT, NET
|
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Cost:
|
||||||||
|
Computers, software and related equipment
|
$
|
|
$
|
|
||||
|
Laboratory equipment and office furniture
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
|
|
|||||||
|
Accumulated depreciation:
|
||||||||
|
Computers, software and related equipment
|
|
|
||||||
|
Laboratory equipment and office furniture
|
|
|
||||||
|
Leasehold improvements
|
|
|
||||||
|
|
|
|||||||
|
Depreciated cost
|
$
|
|
$
|
|
||||
During 2025 and 2024, a total cost of $0 and $92 , respectively and total accumulated depreciation of $0 and $92 , respectively were disposed of from the consolidated balance sheets.
During 2025 and 2024 the Company sold equipment with cost of $4 and $3 , respectively and accumulated depreciation of $4 and $2 , respectively. Gains from the sale during 2025 were $1 .
For the years ended December 31, 2025, 2024 and 2023, depreciation expenses were approximately $475 , $486 and $476 , respectively.
F - 30
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 8:- |
COMMITMENTS AND CONTINGENCIES
|
| a. |
The Company provided bank guarantees in the amount of $
|
| b. |
Under the Office of the Israel Innovation Authority of the Israeli Ministry of Industry, Trade and Labor, formerly known as the Office of the Chief Scientist (the “IIA”), the Company is not obligated to repay any amounts received from the IIA if it does not generate any income from the results of the funded research programs. If income is generated from a funded research program, the Company is committed to pay royalties at a rate of between
|
As of December 31, 2025, the Company’s aggregate contingent obligations for payments to IIA, based on royalty-bearing participation received or accrued, net of royalties paid or accrued, totaled approximately to $8,281 .
Following IIA approval that sales related to IL-18BP are excluded from royalties payment to the IIA, the Company decreased previous year royalties accrual related to revenues under the Gilead Agreement in the amount of $704 and reduced the cost of revenues for the year ended December 31, 2024, by this amount.
| c. |
On June 25, 2012, the Company entered into an Antibodies Discovery Collaboration Agreement (the “Antibodies Discovery Agreement”) with a U.S. antibody technology company (“mAb Technology Company”), providing an established source for fully human mAbs. Under the Antibodies Discovery Agreement, the mAb Technology Company will be entitled to certain royalties that could be eliminated, upon payment of certain one-time fees (all payments referred together as “Contingent Fees”). For the years ended December 31, 2025, 2024 and 2023, the Company incurred such Contingent Fees in the amounts of $
|
F - 31
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 8:- |
COMMITMENTS AND CONTINGENCIES (Cont.)
|
| d. |
Effective as of January 5, 2018, the Company entered into a Commercial License Agreement (CLA) with a European cell line development company. Under the agreement the Company is required to pay an annual maintenance fee, certain amounts upon the occurrence of specified milestones events, and
|
| e. |
Effective as of October 28, 2020, the Company entered into a collaboration agreement with a U.S. antibody discovery and optimization company for generation and optimization of therapeutic antibodies for the Company. Under the agreement the Company is required to pay service fees per services performed and certain amounts upon the occurrence of specified milestones events, and single-digit percent royalties on annual net sales with respect to each product sold that comprises or contains one or more antibodies so generated or optimized. The royalty rate is dependent upon the product type and any third-party contribution. For the years ended December 31, 2025, 2024 and 2023, the Company incurred in the research and development expenses such milestone payment in the amounts of $
|
|
NOTE 9:-
|
SHAREHOLDERS’ EQUITY
|
| a. |
Ordinary shares:
|
The ordinary shares confer upon their holders the right to attend and vote at general meetings of the shareholders. Subject to the rights of holders of shares with limited or preferred rights which may be issued in the future, the ordinary shares of the Company confer upon the holders thereof equal rights to receive dividends, and to participate in the distribution of the assets of the Company upon its winding-up, in proportion to the amount paid up or credited as paid up on account of the nominal value of the shares held by them respectively and in respect of which such dividends are being paid or such distribution is being made, without regard to any premium paid in excess of the nominal value, if any.
F - 32
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 9:-
|
SHAREHOLDERS’ EQUITY (Cont.)
|
| b. |
Issuance of shares:
|
On January 31, 2023, the Company entered into a Sales Agreement with Leerink Partners LLC (previously known as SVB Securities LLC) (“Leerink Partners”), as sales agent, pursuant to which the Company may offer and sell, from time to time through Leerink Partners, its ordinary shares through an “at the market offering” (ATM). The offer and sale of the Company’s ordinary shares, if any, are made pursuant to the base prospectus included in the Company’s shelf registration statement on Form F-3, as supplemented by a prospectus supplement pertaining to the ATM that the Company filed on April 14, 2023. Pursuant to the applicable prospectus supplement, the Company may offer and sell up to $50,000 of its ordinary shares. From the date the Company started selling ordinary shares in 2023 through its ATM and through December 31, 2025, 7,767,626 ordinary shares were issued and sold through the ATM, with proceeds to the Company of approximately $14,152 (net of $943 issuance expenses).
| c. |
Share option plan:
|
Under the Company’s 2010 Share Option Plan, as amended (the “Plan”), options and RSUs may be granted to employees, directors and non-employees of the Company and Compugen USA, Inc.
Under the 2010 Share Option Plan the Company reserved for issuance up to an aggregate of 14,395,152 options and RSUs. The Company’s board of directors last amended the Plan in August 2025, to increase the number of shares available under the 2010 Plan. As of December 31, 2025, an aggregate of 718,981 options and RSUs under the 2010 Share Option Plan of the Company were still available for future grants.
In general, options granted under the Plan vest over a four-year period and expire 10 years from the date of grant and are granted at an exercise price of not less than the fair market value of the Company’s ordinary shares on the date of grant, unless otherwise determined by the Company’s board of directors. The exercise price of the options granted under the Plan may not be less than the nominal value of the shares into which such options are exercisable, and the expiration date may not be later than 10 years from the date of grant. RSUs vest over a four-year period as well. If a grantee leaves his or her employment or other relationship with the Company, or if his or her relationship with the Company is terminated without cause (and other than by reason of death or disability, as defined in the Plan), the term of his or her unexercised options will generally expire in 90 days, unless determined otherwise by the Company.
F - 33
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 9:-
|
SHAREHOLDERS’ EQUITY (Cont.)
|
| c. |
Share option plan (Cont.):
|
Any options that are cancelled, forfeited or expired become available for future grants.
Transactions related to the grant of options to employees, directors and non-employees under the above Plan during the year ended December 31, 2025, were as follows:
|
Number of options
|
Weighted average exercise
price
|
Weighted average remaining contractual life
|
Aggregate intrinsic
value
|
|||||||||||||
|
$
|
Years
|
$
|
||||||||||||||
|
Options outstanding at beginning of year
|
|
|
|
|
||||||||||||
|
Options granted
|
|
|
||||||||||||||
|
Options exercised
|
(
|
)
|
|
|||||||||||||
|
Options forfeited
|
(
|
)
|
|
|||||||||||||
|
Options expired
|
(
|
)
|
|
|||||||||||||
|
Options outstanding at end of year
|
|
|
|
|
||||||||||||
|
Exercisable at end of year
|
|
|
|
|
||||||||||||
Weighted average fair value of options granted to employees, directors and non-employees during the years 2025, 2024 and 2023 was $0.99 , $1.20 and $0.70 per share, respectively.
Aggregate intrinsic value of exercised options by employees, directors and non-employees during the years 2025, 2024 and 2023 was $45 , $9 and $0 , respectively. The aggregate intrinsic value of the exercised options represents the total intrinsic value (the difference between the sale price of the Company’s share at the date of exercise, and the exercise price) multiplied by the number of options exercised.
The aggregate intrinsic value represents the total intrinsic value (the difference between the Company’s closing share price on the last trading day of calendar 2025 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2025. This amount is impacted by the changes in the fair market value of the Company’s shares.
As of December 31, 2025, the total unrecognized estimated compensation cost related to non-vested share options and RSUs granted prior to that date was $2,856 which is expected to be recognized over a weighted average period of approximately 2.92 years.
F - 34
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 9:-
|
SHAREHOLDERS’ EQUITY (Cont.)
|
| d. |
RSUs
|
A summary of RSUs activity for the year ended December 31, 2025, is as follows:
|
Number of RSUs
|
Weighted average grant date per value
|
|||||||
|
$
|
||||||||
|
Unvested RSUs at beginning of year
|
|
|
||||||
|
RSUs granted
|
|
|
||||||
|
RSUs vested
|
(
|
)
|
|
|||||
|
RSUs forfeited
|
(
|
)
|
|
|||||
|
RSUs net settled
|
(
|
)
|
|
|||||
|
Unvested RSUs at end of year
|
|
|
||||||
The total fair value of RSUs vested during the years 2025, 2024 and 2023 was $118 , $0 and $0 , respectively.
| e. |
The share-based compensation expenses related to options and RSUs are included as follows in the expense categories:
|
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Research and development expenses
|
$
|
|
$
|
|
$
|
|
||||||
|
Marketing and business development expenses
|
|
|
(
|
)
|
||||||||
|
General and administrative expenses
|
|
|
|
|||||||||
|
$
|
|
$
|
|
$
|
|
|||||||
F - 35
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 10:-
|
TAXES ON INCOME, NET
|
| a. |
Israeli taxation:
|
| 1. |
Tax rates applicable to the income of the Company.
|
Taxable income of the Company is subject to a corporate tax rate of 23
| 2. |
Measurement of taxable income in U.S. dollars:
|
The Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations (Principles Regarding the Management of Books of Account of Foreign Invested Companies and Certain Partnerships and the Determination of Their Taxable Income), 1986. Accordingly, results for tax purposes are measured in terms of earnings in dollars.
| 3. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”):
|
On April 1, 2005, an amendment to the Investment Law came into effect (the “Amendment 60”) that significantly changed the provisions of the Investment Law. The Amendment 60 limits the scope of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as a “Beneficiary Enterprise” including a provision generally requiring that at least 25 % of the Beneficiary Enterprise’s income will be derived from export.
Another condition for receiving the benefits under the alternative track in respect of expansion programs pursuant to Amendment 60 is a minimum qualifying investment. The Company was eligible under the terms of minimum qualifying investment and elected 2012 as its “year of election”.
Additionally, Amendment 60 enacted major changes in the manner in which tax benefits are awarded under the Investment Law so that companies no longer require Investment Center approval in order to qualify for tax benefits. However, the Investment Law provides that terms and benefits included in any certificate of approval already granted will remain subject to the provisions of the Investment Law as they were on the date of such approval.
As of December 31, 2025, there was no taxable income attributable to the Beneficiary Enterprise.
F - 36
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
TAXES ON INCOME, NET (Cont.)
|
| a. |
Israeli taxation (Cont.):
|
In January 2011, another amendment to the Investment Law came into effect (the “2011 Amendment”). According to the 2011 Amendment, the benefit tracks in the Investment Law were modified and a flat tax rate applies to the Company’s entire income subject to this amendment (the “Preferred Income”).
Once an election is made, the Company’s income will be subject to the amended tax rate of 16% from 2015 and thereafter (or 9% for a preferred enterprise located in development area A).
Commencing 2011 tax year, the Company can elect (without possibility of reversal) to apply the Amendment in a certain tax year and from that year and thereafter, it will be subject to the amended tax rates.
The Company adopted the 2011 Amendment in 2024. The Company did not adjust its deferred tax balances as of December 31, 2024.
In December 2016, the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2016 and 2017 Budget Years), 2016, which includes Amendment 73 to the Law (the “Amendment 73”) was published. According to Amendment 73, a preferred enterprise located in development area A will be subject to a tax rate of 7.5% instead of 9% effective from January 1, 2016 and thereafter (the tax rate applicable to preferred enterprises located in other areas remains at 16%).
Amendment 73 also prescribes special tax tracks for technological enterprises, which are subject to rules that were issued by the Minister of Finance in May 2017. The new tax tracks under the Amendment are as follows:
Preferred Technological Enterprise (“PTE”) - an enterprise for which total consolidated revenues of its parent company and all subsidiaries are less than NIS 10 billion in a tax year. A PTE, as defined in the Law, which is located in the center of Israel will be subject to tax at a rate of 12% on profits deriving from intellectual property (in development area A - a tax rate of 7.5%). As of December 31, 2025, the Company met the PTE requirements and updated its deferred taxes assets and liabilities.
F - 37
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
TAXES ON INCOME, NET (Cont.)
|
| a. |
Israeli taxation (Cont.):
|
| 4. |
Tax benefits under the law for the Encouragement of Industry (Taxes), 1969 (the “Encouragement Law”):
|
The Encouragement Law provides several tax benefits for industrial companies. An industrial company is defined as a company resident in Israel, at least 90% of the income of which in a given tax year exclusive of income from specified Government loans, capital gains, interest and dividends, is derived from an industrial enterprise owned by it. An industrial enterprise is defined as an enterprise whose major activity in a given tax year is industrial production activity.
Management believes that the Company is currently qualified as an “industrial company” under the Encouragement Law and, as such, is entitled to tax benefits, including: (1) deduction of purchase of know-how and patents and/or right to use a patent over an eight-year period; (2) the right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli industrial companies and an industrial holding company; (3) accelerated depreciation rates on equipment and buildings; and (4) expenses related to a public offering on the Tel-Aviv Stock exchange and on recognized stock markets outside of Israel, are deductible in equal amounts over three years.
Eligibility for benefits under the Encouragement Law is not subject to receipt of prior approval from any Governmental authority. No assurance can be given that the Israeli tax authorities will agree that the Company qualifies, or, that the Company will continue to qualify as an industrial company or that the benefits described above will be available to the Company in the future.
During 2025 we received a grant from the IIA for specific “Maagad” in the amount of approximately 58% of a total budget of approximately $130. Such grant is not subject to IIA royalties.
| 5. |
Net operating losses carryforward and capital loss:
|
As of December 31, 2025, Compugen Ltd.’s net operating losses carryforward for tax purposes in Israel amounted to approximately $381,400 . These net operating losses may be carried forward indefinitely and may be offset against future taxable income.
F - 38
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
TAXES ON INCOME, NET (Cont.)
|
| b. |
Non-Israeli subsidiary, Compugen USA, Inc.:
|
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “U.S. Tax Reform” or “TCJA”); a comprehensive tax legislation that includes significant changes to the taxation of business entities. These changes include several key tax provisions that might impact the Company, among others: (i) a permanent reduction to the statutory federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017; (ii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a territorial system (along with certain new rules designed to prevent erosion of the U.S. income tax base - “BEAT”); (iii) establishing immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits; and (iv) providing a permanent deduction to corporations generating revenues from non-US markets (known as a deduction for foreign derived intangible income - “FDII”).
As of December 31, 2025, Compugen USA, Inc. has net operating loss carryforward for federal income tax purposes of approximately $1,500 . Approximately $300 of these losses are available to offset any future U.S. taxable income of our U.S. subsidiary and will expire in the years 2027 to 2032 and the remainder is not subject to expiration. Utilization of the U.S. net operating losses may be subject to substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
Neither Israeli income taxes, foreign withholding taxes nor deferred income taxes were provided in relation to undistributed earnings of the Company’s foreign subsidiary. This is because the Company has the intent and ability to reinvest these earnings indefinitely in the foreign subsidiary and therefore those earnings are continually redeployed in those jurisdictions.
| c. |
Loss (income) before taxes is comprised as follows:
|
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Domestic (Israel)
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||
|
Foreign
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
$
|
(
|
)
|
$
|
|
$
|
|
||||||
| d. |
Taxes on income for the years ended December 31, 2025 and 2024, represent withholding taxes on the upfront payment and the IND milestone pursuant to the Gilead license agreement, write-off of tax assets and state income taxes in the United States.
|
F - 39
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
TAXES ON INCOME, NET (Cont.)
|
| e. |
Deferred taxes:
|
Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company and Compugen USA, Inc.’s deferred tax assets are comprised of operating loss carryforward and other temporary differences. Significant components of the Company and Compugen USA, Inc. deferred tax assets are as follows:
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Deferred tax asset:
|
||||||||
|
Operating loss carryforward
|
$
|
|
$
|
|
||||
|
Research and development
|
|
|
||||||
|
Accrued social benefits and other
|
|
|
||||||
|
Lease liabilities
|
|
|
||||||
|
Property and equipment
|
|
|
||||||
|
Deferred tax asset before valuation allowance
|
|
|
||||||
|
Valuation allowance
|
(
|
)
|
(
|
)
|
||||
|
Deferred tax asset after valuation allowance
|
|
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Right of use assets
|
(
|
)
|
(
|
)
|
||||
|
Deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
|
Net deferred tax assets
|
$
|
|
$
|
|
||||
The Company has provided full valuation allowances in respect of deferred tax assets resulting from operating loss carryforward and other temporary differences. Management currently believes that since the Company has a history of losses, it is more likely than not that the deferred tax regarding the operating loss carryforward and other temporary differences will not be realized in the foreseeable future.
F - 40
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 10:- |
TAXES ON INCOME, NET (Cont.)
|
| f. |
Reconciliation of the theoretical tax expense (benefit) to the actual tax expense (benefit):
|
The main reconciling items between the statutory tax rate of the Company and the effective tax rate for the years ended December 31, 2024 and 2023 are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and Compugen USA, Inc. due to the uncertainty of the realization of such tax benefits and withholding taxes on the upfront payment and the IND milestone pursuant to the Gilead license agreement.
|
Year Ended December 31, 2025
|
||||||||
|
Amount
|
Percent
|
|||||||
|
Income (loss) before income taxes
|
$
|
|
|
%
|
||||
|
Israel statutory tax rate
|
$
|
|
|
%
|
||||
|
Effect of benefitted income preferred technological enterprise in Israel
|
(
|
)
|
(
|
)%
|
||||
|
Changes in valuation allowance
|
(
|
)
|
(
|
)%
|
||||
|
Non taxable or non deductible items
|
|
|
%
|
|||||
|
Other
|
|
|
%
|
|||||
|
Foreign tax effects - United States:
|
||||||||
|
Statutory tax rate difference between the United States and Israel
|
(
|
)
|
(
|
)%
|
||||
|
State tax change in rate
|
|
|
%
|
|||||
|
Changes in valuation allowance
|
(
|
)
|
(
|
)%
|
||||
|
Other
|
|
|
%
|
|||||
|
Effective tax rate
|
$
|
|
|
%
|
||||
|
Year ended
|
||||
|
December 31, 2025
|
||||
|
Tax paid during the year for Taxes of income
|
||||
|
Domestic (Israel)
|
$
|
|
||
|
Foreign (United States)
|
|
|||
|
$
|
|
|||
| g. |
Tax assessments:
|
The Company has tax assessments through 2020 that are deemed to be final.
F - 41
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 11:- |
SEGMENTS, GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA
|
ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s business is comprised of one operating segment.
The Company’s CODM is its Chief Executive Officer (“CEO”), who reviews financial information presented on a consolidated basis.
The CODM uses consolidated net profit (loss) to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between research and development, sales and marketing, and general and administrative expenses. Segment assets that are reviewed by the CODM are reported within the consolidated balance sheet as consolidated total assets.
The following table presents selected financial information with respect to the Company’s single operating segment and includes information about segment revenues and significant segment expenses, for the years ended December 31, 2025, 2024 and 2023:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Total Revenues
|
$
|
|
$
|
|
$
|
|
||||||
|
Less:
|
||||||||||||
|
R&D expenses
|
||||||||||||
|
Preclinical
|
|
|
|
|||||||||
|
Clinical
|
|
|
|
|||||||||
|
G&A and BD
|
|
|
|
|||||||||
|
Financial income, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Taxes on income
|
|
|
|
|||||||||
|
Other segment expenses*
|
|
|
|
|||||||||
|
Net profit (loss)
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
*Other segment expense during the years ended December 31, 2025, 2024 and 2023 includes IIA royalty costs, property and equipment depreciation, participation in R&D expenses, share-based compensation and other adjustments.
Operations listed above include research and development, clinical operations, general and administrative, marketing and business development. Total revenues are attributed to geographic areas based on the location of the end customer.
F - 42
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
| NOTE 11:- |
SEGMENTS, GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA (Cont.)
|
The following represents the total revenue for the years ended December 31, 2025, 2024 and 2023 and long-lived assets as of December 31, 2025 and 2024:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Revenue from sales to customers:
|
||||||||||||
|
United Kingdom
|
$
|
|
$
|
|
$
|
|
||||||
|
United States
|
|
|
|
|||||||||
|
Total revenue
|
$
|
|
$
|
|
$
|
|
||||||
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Long-lived assets:
|
||||||||
|
Israel
|
$
|
|
$
|
|
||||
|
United States
|
|
|
||||||
|
Total long-lived assets
|
$
|
|
$
|
|
||||
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Sales to a single customer exceeding 10%:
|
||||||||||||
|
Customer A
|
|
%
|
|
%
|
|
%
|
||||||
|
Customer B
|
|
%
|
|
%
|
|
%
|
||||||
|
NOTE 12:-
|
FINANCIAL AND OTHER INCOME, NET
|
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Interest income
|
$
|
|
$
|
|
$
|
|
||||||
|
Amortization of discount on marketable securities, net
|
|
|
|
|||||||||
|
Bank fees and other finance expenses
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Foreign currency transaction adjustments
|
(
|
)
|
(
|
)
|
|
|||||||
|
Gain (loss) from sales and disposals of fixed assets
|
|
|
(
|
)
|
||||||||
|
Financial and other income, net
|
$
|
|
$
|
|
$
|
|
||||||
F - 43
COMPUGEN LTD. AND ITS SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
|
NOTE 13:-
|
RELATED PARTY BALANCES AND TRANSACTIONS
|
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Trade payables and accrued expenses
|
$
|
|
$
|
|
||||
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Amounts charged to:
|
||||||||||||
|
Research and development expenses
|
$
|
|
$
|
|
$
|
|
||||||
For the years ended December 31, 2025, 2024, and 2023 the Company received research and development services related to cancer studies in animal models, and breeding and maintenance of animals (mice) from “Ramot at Tel- Aviv University Ltd.” to support such studies from such related party. The transaction was at arm’s length.
| NOTE 14:- |
PROFIT (LOSS) PER SHARE
|
The following table sets forth the computation of basic and diluted profit (loss) per share:
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Numerator:
|
||||||||||||
|
Net profit (loss) for basic and diluted loss per share
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Denominator:
|
||||||||||||
|
Weighted average number of ordinary shares used in computing basic net profit (loss) per share
|
|
|
|
|||||||||
|
Weighted average number of ordinary shares used in computing diluted net profit (loss) per share
|
|
|
|
|||||||||
|
Basic profit (loss) per ordinary share
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
|
Diluted profit (loss) per ordinary share
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
||||
- - - - - - - - - - -
F - 44
FAQ
How did Compugen (CGEN) perform financially in 2025?
Compugen reported a net profit of about $35.3 million in 2025, after prior annual losses. The improvement was driven mainly by collaboration revenues, including substantial payments from AstraZeneca and Gilead, rather than from product sales or recurring commercial revenue.
What partnership revenues did Compugen (CGEN) generate from AstraZeneca and Gilead?
Compugen’s partnerships delivered $72.8 million of revenue in 2025. It received a $65 million additional upfront payment from AstraZeneca under an amended license and, in 2024, an aggregate $76.5 million in upfront and milestone payments from Gilead plus $5 million in milestones from AstraZeneca.
How long does Compugen (CGEN) expect its cash resources to last?
Compugen believes its current cash, cash equivalents, short-term deposits and marketable securities can fund operations into 2029 . This internal estimate excludes any potential additional funding from future partnerships or financings and assumes its current operating plans and burn-rate remain in place.
What are Compugen’s (CGEN) main clinical-stage programs?
Compugen’s pipeline features four clinical-stage programs: COM701 and COM902, both checkpoint antibodies it owns; GS-0321, an IL‑18 binding protein program licensed to Gilead; and rilvegostomig, a PD‑1/TIGIT bispecific antibody being developed by AstraZeneca under an exclusive license agreement.
What key risks does Compugen (CGEN) highlight in its business model?
Compugen cites a history of losses, heavy reliance on milestone-driven partnerships, and significant clinical, regulatory and manufacturing risks. It also stresses dependence on a small number of partners, intense immuno-oncology competition, and the fact that its Unigen AI/ML discovery platform is not yet fully proven clinically.
How much cumulative partnership revenue has Compugen (CGEN) received to date?
Compugen reports receiving a total of about $247.2 million under four partnership agreements, two of which remain in effect. This figure includes $32.0 million from an equity investment and reflects payments after $13.5 million of withholding taxes.
Compugen
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[6-K] COMPUGEN LTD Current Report (Foreign Issuer)
Dec 17, 2025
[6-K] COMPUGEN LTD Current Report (Foreign Issuer)
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[6-K] COMPUGEN LTD Current Report (Foreign Issuer)
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[6-K] COMPUGEN LTD Current Report (Foreign Issuer)