MediWound (NASDAQ: MDWD) 2025 filing outlines losses, NexoBrid focus
Filing Impact
Filing Sentiment
Form Type
20-F
Rhea-AI Filing Summary
MediWound Ltd. files its 2025 annual report on Form 20-F, detailing its burn- and wound-care business, risk profile and financial position. The company reports a net loss of $23.9 million for 2025 and an accumulated deficit of $228.9 million as of year-end.
As of December 31, 2025, MediWound had 12,835,148 ordinary shares outstanding. The filing highlights reliance on NexoBrid sales, partner Vericel in North America, government contracts for temperature-stable NexoBrid, and a new GMP facility in Yavne, Israel that reached full manufacturing capacity in 2025.
Positive
- None.
Negative
- None.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(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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For the transition period from ____________________ to ____________________
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____________________
Commission file number 001-36349
(Exact name of Registrant as specified in its charter)
Not applicable
(Translation of Registrant’s name into English)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Executive Vice President, General Counsel and Corporate Secretary
Telephone: +972 (77) 971-4100
E-mail:yaronm@mediwound.com
MediWound Ltd.
42 Hayarkon Street
Yavne , 8122745 Israel
Telephone: +
E-mail:
MediWound Ltd.
(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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Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
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: As of December 31, 2025, the registrant had 12,835,148 ordinary shares, par value NIS 0.07 per share, outstanding.
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.
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).
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 the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Non-accelerated filer ☐
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Emerging Growth Company
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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. ☐
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 statements. ☐
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 for accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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by the International Accounting Standards Board ☒ |
Other ☐
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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 ☒
MEDIWOUND LTD.
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FORM 20-F ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025 |
TABLE OF CONTENTS
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INTRODUCTION |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
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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 |
34 |
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Item 4A. UNRESOLVED STAFF COMMENTS |
68 |
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Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
68 |
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Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
80 |
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Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
97 |
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Item 8. FINANCIAL INFORMATION |
102 |
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Item 9. THE OFFER AND LISTING |
102 |
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Item 10. ADDITIONAL INFORMATION |
103 |
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Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
110 |
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Item 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
111 |
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PART II |
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Item 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
112 |
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Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
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112 |
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Item 15. CONTROLS AND PROCEDURES |
112 |
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Item 16A. AUDIT COMMITTEE FINANCIAL EXPERT |
112 |
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Item 16B. CODE OF ETHICS |
113 |
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Item 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES |
113 |
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Item 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
113 |
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Item 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
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113 |
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Item 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT |
114 |
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Item 16G. CORPORATE GOVERNANCE |
114 |
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Item 16H. MINE SAFETY DISCLOSURE |
114 |
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Item 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
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114 |
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Item 16J. INSIDER TRADING POLICIES |
115 |
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Item 16K. CYBERSECURITY |
115 |
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PART III |
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Item 17. FINANCIAL STATEMENTS |
116 |
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Item 18. FINANCIAL STATEMENTS |
116 |
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Item 19. EXHIBITS |
116 |
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SIGNATURES |
119 |
INTRODUCTION
In this annual report, the terms “MediWound,” “we,” “us,”
“our”, “our company” and “the company” refer to MediWound Ltd. and its subsidiaries.
This annual report includes other statistical, market and industry
data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe
to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information
from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we
believe that these sources are reliable, we have not independently verified the information contained in such publications. Certain estimates
and forecasts involve uncertainties and risks and are subject to change based on various factors, including those discussed under the
headings “Special Note Regarding Forward-Looking Statements” and “ITEM 3.D. Risk Factors” in this annual report.
Throughout this annual report, we refer to various trademarks,
service marks and trade names that we use in our business. Solely for convenience, the trademarks, service marks and trade names are referred
to herein without the use of ® and ™ symbols. However, the omission of such symbols is not intended to indicate, in any way,
that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks,
service marks and trade names. The “MediWound” design logo, “MediWound,” “NexoBrid,” “EscharEx”
and other trademarks or service marks of MediWound Ltd. appearing in this annual report are the property of MediWound Ltd. We have several
other trademarks, service marks and pending applications relating to our solutions. Other trademarks and service marks appearing in this
annual report are the property of their respective holders. Our use or display of other companies’ trademarks, service marks or
trade names is not intended to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to historical facts, this annual report on Form 20-F
contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the “Securities
Act”), Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995. We make forward-looking statements in this annual report that
are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results
of our business, financial condition, results of operations, liquidity, plans and objectives. In some cases, you can identify forward-looking
statements by terminology such as “believe,” “may,” “estimate,” “continue,” “anticipate,”
“intend,” “should,” “plan,” “expect,” “predict,” “potential,”
or the negative of these terms or other similar expressions. The statements we make regarding the following matters are forward-looking
by their nature:
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our commercialization, marketing and manufacturing capabilities and strategy and the ability of our marketing team to cover European
regional burn centers and units; |
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the timing and conduct of our trials of NexoBrid, EscharEx and our other pipeline product candidates, including statements regarding
the timing, progress and results of current and future preclinical studies and clinical trials, and our research and development programs;
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the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of EscharEx and our other
pipeline products; |
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our expectations regarding future growth, including our ability to develop new products; |
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our estimates regarding expenses, future revenues, capital requirements and our need for additional financing; |
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anticipated funding under our contracts with the U.S. Biomedical Advanced Research and Development Authority; |
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our ability to maintain adequate protection of our intellectual property; |
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our estimates regarding the market opportunity for NexoBrid, EscharEx and our other pipeline products; |
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our expectation regarding the duration of our inventory of intermediate drug substances and products; |
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the impact of our research and development expenses as we continue developing product candidates; and |
i
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the impact of government laws and regulations. |
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our expectations regarding the operational capacity of our factory; and |
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our expectations regarding future filing of registration statements |
The preceding list is not intended to be an exhaustive list of
all our forward-looking statements. The forward-looking statements are based on our beliefs, assumptions and expectations of future performance,
taking into consideration the information currently available to us. These statements are only predictions based upon our current expectations
and projections about future events. These statements may be found primarily in the sections of this annual report on Form 20-F entitled
“ITEM 3.D. Risk Factors,” “ITEM 4. Information on the Company,” “ITEM 5. Operating and Financial Review
and Prospects,” “ITEM 10.E. Taxation-United States Federal Income Taxation-Passive Foreign Investment Company Considerations”
and elsewhere in this annual report, including the section entitled “ITEM 4.B. Business Overview” and “ITEM 4.B. Business
Overview-Our Focus,” which contain information obtained from independent industry sources. Actual results, development and business
decisions could differ materially from those anticipated in these forward-looking statements due to various important factors, including
those risks discussed in “ITEM 3.D. Risk Factors” and information contained in other documents filed with or furnished to
the Securities and Exchange Commission.
You should not rely upon forward-looking statements as predictions
of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be
achieved or will occur. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any
reason after the date of this annual report to conform these statements to actual results or to changes in our expectations.
ii
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
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[Reserved] |
| B. |
Capitalization and Indebtedness |
Not applicable.
| C. |
Reasons for the Offer and Use of Proceeds |
Not applicable.
| D. |
Risk Factors |
Our business faces significant risks. You should
carefully consider all of the information set forth in this annual report and in our other filings with the United States Securities and
Exchange Commission (the “SEC”), including the following risk factors which we face and which are faced by our industry. Our
business, financial condition and results of operations could be materially and adversely affected by any of these risks. In that event,
the trading price of our ordinary shares would likely decline and you might lose all or part of your investment. This report also contains
forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking
statements, as a result of certain important factors including the risks described below and elsewhere in this report and our other SEC
filings. See “Special Note Regarding Forward-Looking Statements” on page i.
Risks Related to Development, Clinical Testing and Regulatory Approval
Product development is a lengthy and expensive process, with an
uncertain outcome.
We intend to develop and commercialize pipeline product candidates
based on our patented enzymatic technology platform for (i) marketing authorization of EscharEx in the U.S. and other jurisdictions and
(ii) our other pipeline products in a variety of jurisdictions across the world. However, before obtaining regulatory approval for the
sale of our pipeline product candidates in any jurisdiction, we must conduct, at our own expense, clinical studies to demonstrate that
the products are safe and effective.
Preclinical and clinical testing is expensive, is difficult to
design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials
can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the
clinical trial process. Even if preclinical or clinical trials are successful, we still may be unable to commercialize the product, as
success in preclinical trials, clinical trials or previous clinical trials does not ensure that later clinical trials will be successful.
A number of events could delay or prevent our ability to complete necessary clinical
trials for our pipeline product candidates, including:
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regulators may not authorize us to conduct a clinical trial within a country or at a prospective trial site or may require us to
change the design of a study; |
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delays may occur in reaching agreement on acceptable clinical trial terms with regulatory authorities or prospective sites, or obtaining
institutional review board or ethics committee approval or opinion; |
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our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require
us, to conduct additional trials or to abandon strategic projects; |
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the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be
slower or more difficult than we expect, or patients may not participate in necessary follow-up visits to obtain required data by us,
any of which would result in significant delays in our clinical testing process; |
1
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our third-party contractors, such as a research institute, may fail to comply with regulatory requirements or meet their contractual
obligations to us. For example, due to a deviation associated with a third-party testing lab used during the manufacturing process, our
commercial partner in the U.S., Vericel Corporation (“Vericel”), was unable to release NexoBrid into the commercial channel
until an agreement with the U.S. Food and Drug Administration (the “FDA”) was reached on this matter, resulting in a delay
of a few months in the launch of NexoBrid in the U.S.; |
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we may be forced to suspend or terminate our clinical trials if the participants are being exposed, or are thought to be exposed,
to unacceptable health risks or if any participant experiences an unexpected serious adverse event; |
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regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements; |
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undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data
prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory
agencies, and result in the recall of any approved product distributed pursuant to data determined to be fraudulent; |
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the cost of our clinical trials may be greater than we anticipate; |
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an audit of preclinical or clinical studies by regulatory authorities may reveal noncompliance with applicable protocols or regulations,
which could lead to disqualification of the results and the need to perform additional studies; |
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political unrest and wars, such as the war in Gaza and the conflict between Russia and Ukraine, which could delay or disrupt business
activity, and if such political unrest escalates or spills over to or otherwise impacts additional regions, it could also heighten many
of the other risk factors described in this annual report; |
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delays may occur in obtaining our clinical materials; and |
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epidemics or pandemics, such as the COVID-19 pandemic, which can affect the overall healthcare infrastructure, including the ability
to recruit patients, the ability to conduct studies at medical sites and the pace with which governmental agencies, such as the FDA and
foreign regulatory authorities, will review and approve regulatory submissions. |
Moreover, we do not know whether preclinical tests or clinical
trials will begin or be completed as planned or will need to be restructured. Significant delays could also shorten the patent protection
period during which we may have the exclusive right to commercialize our pipeline product candidates or could allow our competitors to
bring products to the market before we do, impairing our ability to commercialize our pipeline product candidates.
Development and commercialization of EscharEx and our pipeline product
candidates requires successful completion of the regulatory approval process, which may suffer delays or fail.
In the United States, as well as other jurisdictions, we are required
to apply for and receive marketing authorization before we can market our products, as we have already received for NexoBrid in the United
States, the European Union (“EU”) and other international markets. This process can be time-consuming and complicated and
may result in unanticipated delays. To secure marketing authorization, an applicant generally is required to submit an application that
includes the data supporting preclinical and clinical safety and efficacy as well as detailed information on the manufacturing and control
of the product, proposed labeling and other information. Before marketing authorization is granted, regulatory authorities generally require
the inspection of the manufacturing facility or facilities and quality systems (including those of third parties) at which the product
candidate is manufactured and tested, to assess compliance with strictly enforced current good manufacturing practices (“cGMP”)
and similar foreign requirements such as Good Manufacturing Practices (“GMP”) in the EU, as well as potential audits of the
non-clinical and clinical trial sites that generated the data cited in the marketing authorization application to assess compliance with
requisite good clinical practices (“GCP”).
We cannot predict how long the applicable regulatory authority
or agency will take to grant marketing authorization or whether any such authorizations will ultimately be granted. Regulatory agencies,
including the FDA and the European Medicines Agency (the “EMA”), have substantial discretion in the approval process, and
the approval process and the requirements governing clinical trials vary from country to country. The policies of the FDA, the EMA or
other regulatory authorities may change or may not be explicit, and additional government regulations may be enacted that could prevent,
limit or delay regulatory approval of EscharEx, NexoBrid or our pipeline product candidates. For instance, the regulatory landscape related
to clinical trials in the EU recently evolved. The EU Clinical Trials Regulation (“CTR”) which was adopted in April 2014 and
repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate
clinical trial application (“CTA”) to be submitted in each member state in which the clinical trial takes place, to both the
competent national health authority and an independent ethics committee, the CTR introduces a centralized process and only requires the
submission of a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent
authority and an ethics committee in each member state, leading to a single decision per member state. The assessment procedure of the
CTA has been harmonized as well, including a joint assessment by all member states concerned, and a separate assessment by each member
state with respect to specific requirements related to its own territory, including ethics rules. Each member state’s decision is
communicated to the sponsor via the centralized EU portal. Once the CTA is approved, clinical study development may proceed. The CTR transition
period ended on January 31, 2025, and all clinical trials (and related applications) are now fully subject to the provisions of the CTR.
2
The United Kingdom (“UK”) regulatory framework in relation
to clinical trials is governed by the Medicines for Human Use (Clinical Trials) Regulations 2004, as amended, which is derived from the
EU Clinical Trials Directive (as implemented into UK law, through secondary legislation). On April 28, 2025, the UK adopted an amendment
to the UK clinical trials regulations intended to support a more streamlined and flexible regulation of clinical trials, removing unnecessary
administrative burdens on trial sponsors, whilst protecting the interests of trial participants. It also intends to bring the UK regulatory
framework for clinical trials, which is still based on the EU Clinical Trials Directive, into closer alignment with the CTR. The amendment
will become applicable on April 28, 2026 following a one-year transition period.
Additionally, the EU pharmaceutical legislation has been undergoing
a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in
November 2020. The European Commission’s proposal for revision of several legislative instruments related to medicinal products
was published on April 26, 2023. The proposed changes were since discussed and negotiated by the European Parliament and the Council of
the EU as part of the EU ordinary legislative process. The European Parliament and the Council of the EU adopted their respective
positions on April 10, 2024 and June 4, 2025 and a common position on the text was agreed upon on December 11, 2025, in the context of
subsequent inter-institutional trilogue negotiations. The proposed revisions (affecting the duration of regulatory data protection and
market protection, including for orphan medicinal products, revising the eligibility for expedited pathways, etc.) remain to be formally
adopted by the two institutions, which is not anticipated before early 2026. The proposed changes are not expected to become applicable
before 2028. The revisions may have a significant impact on the biopharmaceutical industry in the long term. If we are slow or unable
to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory
compliance, we may lose any marketing authorization that we may have obtained and we may not achieve or sustain profitability. We also
cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive
action, either in the United States or abroad. If such actions impose constraints on the FDA’s ability to engage in oversight and
implementation of activities in the normal course, or if we are slow or unable to adapt to changes in existing requirements or the adoption
of new requirements or policies, or if we are unable to maintain regulatory compliance, we may be subject to enforcement action and our
business may be negatively impacted.
In addition, any regulatory approval that we will receive may also
contain requirements for potentially costly post-marketing testing, including Phase IV clinical trials, and surveillance to monitor the
safety and efficacy of the product candidate. For example, as part of the EMA regulatory approval process, we agreed to provide further
data from a post-marketing U.S. Phase III clinical trial of NexoBrid, which served to address this post-marketing commitment to EMA. Once
a product is approved, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising,
promotion, import, export and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements
include submission of safety and other post-marketing information and reports, registration and continued compliance with cGMP and similar
foreign requirements and GCP for any clinical trials that we conduct post-approval. Although our manufacturing facility is cGMP-certified,
we may face difficulties in obtaining regulatory approval for the manufacturing and quality control process of our pipeline product candidates.
Any delays or failures in obtaining regulatory and marketing authorization
for EscharEx in the United States, or for NexoBrid or our pipeline product candidates worldwide, would adversely affect our business,
prospects, financial condition and results of operations.
3
Even though the FDA has approved NexoBrid for
eschar removal in patients with deep partial thickness and/or full thickness thermal burns, we are facing extensive and ongoing regulatory
requirements and obligations and may be required for additional requirements for EscharEx and for any product candidates for which we
plan to obtain approval.
Any regulatory approvals that we have received for NexoBrid and
may receive for NexoBrid, EscharEx or any of our product candidates will require the submission of reports to regulatory authorities and
surveillance to monitor the safety and efficacy of the product, may contain significant limitations related to use restrictions for specified
age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements.
For example, the FDA-approved label for NexoBrid includes certain warnings and precautions regarding hypersensitivity reactions, pain
management, proteolytic injury to non-target tissue and coagulopathy.
In addition, the manufacturing processes, labeling, packaging,
distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for NexoBrid are and will remain
subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information
and reports, registration, as well as on-going compliance with cGMPs, and similar foreign requirements and GCPs for any clinical trials
that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic,
unannounced inspections by the FDA and other regulatory authorities for compliance with cGMP regulations and standards and similar foreign
requirements. If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated
severity or frequency, or problems with the facilities where the product is manufactured, a regulatory authority may impose restrictions
on that product, the manufacturing facility or us, including requiring recall or withdrawal of the product from the market or suspension
of manufacturing.
In addition, later discovery of previously unknown adverse events
or other problems with our products, manufacturers or manufacturing processes or failure to comply with regulatory requirements, may yield
various results, including:
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restrictions on manufacturing such products; |
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restrictions on the labeling or marketing of products; |
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restrictions on product manufacturing, distribution or use; |
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requirements to conduct post-marketing studies or clinical trials; |
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warning letters or untitled letters; |
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withdrawal of the products from the market; |
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refusal to approve pending applications or supplements to approved applications that we submit; |
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recall of products; |
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fines, restitution or disgorgement of profits or revenues; |
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suspension or withdrawal of marketing authorizations; |
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refusal to permit the import or export of our products; |
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product seizure; or |
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injunctions or the imposition of civil or criminal penalties. |
Further, the policies of the FDA and other regulatory authorities
may change, and additional government regulations may be enacted that could impose extensive and ongoing regulatory requirements and obligations
on any product candidate for which we obtain marketing authorization. We also cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.
Changes in funding or disruptions at FDA and
other government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership
and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner
or at all, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely,
which could negatively impact our business.
The ability of the FDA and foreign regulatory authorities to review
and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory,
and policy changes, particularly in light of changes to the presidential administration, the FDA’s and foreign regulatory authorities’
ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s
and foreign regulatory authorities’ ability to perform routine functions. Average review times at the FDA and foreign regulatory
authorities have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research
and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and
other agencies such as the EMA may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary
regulatory authorities, which would adversely affect our business. For example, over the last several years, including most recently in
October to November of 2025, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had
to furlough critical FDA employees and stop critical activities.
4
Separately, in response to the COVID-19 pandemic a few years ago,
the FDA postponed most inspections of domestic and foreign manufacturing facilities at various points. Even though the FDA resumed standard
inspection operations, the FDA has continued to monitor and implement changes to its inspectional activities to ensure the safety of its
employees and those of the firms it regulates, and any emergence of a new pandemic may lead to further inspectional or administrative
delays. Regulatory authorities outside the United States have adopted similar restrictions or other policy measures in response to the
COVID-19 pandemic. If a prolonged government shutdown occurs once again, or if global health concerns prevent the FDA or other regulatory
authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability
of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse
effect on our business. These disruptions have delayed execution of certain governmental contracts which may adversely impact our financial
results.
NexoBrid, EscharEx or our pipeline product
candidates may cause unanticipated and undesirable side effects or have other properties, which are currently unknown to us.
NexoBrid, EscharEx and all of our current pipeline product candidates
rely on our patented enzymatic platform technology, although their specific formulations or mode of applications may vary. Like most pharmaceutical
products, our approval labels for NexoBrid in the United States, Europe and other international markets list certain side effects. If
we or others identify previously unknown problems with NexoBrid, EscharEx or their underlying proteolytic enzymes, including adverse events
of unanticipated severity or frequency, problems with our manufacturers or manufacturing processes, or failure to comply with regulatory
requirements, the following consequences, among others, may result, including, without limitation:
| • |
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory
product recalls; |
| • |
fines, warning letters or holds on clinical trials; |
| • |
harm to our reputation, reduced demand for our products and loss of market acceptance; |
| • |
refusal by the applicable regulatory authority to approve pending applications or supplements to approved applications filed by us,
or suspension or revocation of product license approvals; |
| • |
product seizure or detention, or refusal to permit the import or export of products; and |
| • |
injunctions or the imposition of civil or criminal penalties. |
Any of these events could prevent us from achieving or maintaining
market acceptance of NexoBrid, and future market acceptance of EscharEx, our pipeline product candidates or future product candidates,
which would adversely affect our business, prospects, financial condition and results of operations.
Regulatory approval for EscharEx, NexoBrid, and other pipeline product
candidates is and may be limited to specific indications and conditions for which clinical safety and efficacy have been demonstrated,
and the prescription of off-label uses could adversely affect our business.
The marketing authorization for NexoBrid in the EU and other international
markets is limited to the treatment of deep partial- and full-thickness burns. In the United States, the marketing authorization for NexoBrid
is limited to eschar removal in patients with deep partial thickness and/or full thickness thermal burns. Any additional regulatory approval
of NexoBrid for severe burns and any regulatory approval we may receive for any of our pipeline product candidates in the future, would
be limited to those specific indications for which such pipeline product candidate had been deemed safe and effective by the FDA, EMA,
or another regulatory authority. Additionally, labeling restrictions in the U.S. and EU limit the manner in which a product may be used.
For example, NexoBrid’s label in the U.S. and EU provides that it may only be used in specialized burns centers or by burn specialists
and that it is not to be applied to more than 30% and 15% of the patient’s total body surface area, respectively. If physicians
prescribe the medication for unapproved, or “off-label,” uses or in a manner that is inconsistent with the manufacturer’s
labeling, it could produce results such as reduced efficacy or other adverse effects, and the reputation of our products in the marketplace
may suffer. In addition, should any of our future products have a significant price difference and if they are used interchangeably, off-label
uses may cause a decline in our revenues or potential revenues. Furthermore, while physicians may choose to prescribe treatments for uses
that are not described in the product’s labeling and for uses that differ from those approved by regulatory authorities, we cannot
promote the products for any indications other than those that are specifically approved by the European Commission, the FDA or other
regulatory authorities. Regulatory authorities restrict communications by companies on the subject of off-label use. If our promotional
activities fail to comply with these regulations or guidelines, we may be subject to enforcement actions by those authorities. In the
United States, “off-label promotion” by pharmaceutical companies has resulted in significant litigation under the Federal
False Claims Act, violations of which may result in substantial civil penalties and fines as well as exclusion from government health
care programs. More generally, failure to follow the rules and guidelines of regulatory agencies relating to promotion and advertising,
such as that promotional materials not be false or misleading, can result in refusal to approve a product, the suspension or withdrawal
of an approved product from the market, product recalls, fines, disgorgement of money, operating restrictions, injunctions or criminal
prosecution.
5
Risks Related to Manufacturing
We may not be able to expand our production
or processing capabilities or satisfy future demand.
Our global demand for NexoBrid surpasses the current manufacturing
capabilities. We are currently seeking to expand our manufacturing capabilities in order to increase our capacity to manufacture NexoBrid
and future product candidates and satisfy near term demand. Construction of the new GMP-compliant state-of-the-art manufacturing facility
in Yavne, Israel has been completed as of August 2024, with commissioning completed. The facility has reached full operational capacity
at the end of 2025, increasing manufacturing output sixfold. Commercial availability will depend on securing the necessary regulatory
approvals. However, we cannot guarantee that we will be able to obtain the requisite approvals, including meeting regulatory and quality
requirements, or if we do, that the facility will satisfy additional growing demand. Conversely, there can be no assurance that even if
we obtain a new facility, demand for our products will increase proportionately to the increased production capability. Furthermore, we
cannot assure that this or similar projects will be implemented in a timely and cost-efficient manner, and that our current production
will not be adversely affected by the operational challenges of implementing the expansion project.
If our manufacturing facility in Yavne, Israel
was to suffer a serious accident, or if a force majeure event were to materially affect our ability to operate and produce NexoBrid, EscharEx
and our pipeline product candidates, all of our manufacturing capacity could be shut down for an extended period.
We currently rely on a single manufacturing site in Yavne, Israel,
and we expect that all of our revenues in the near future will be derived from products manufactured at this site. Additionally, all the
clinical batches supply for our Phase III study with EscharEx are being manufactured in this site. If this site were to suffer an accident
or a force majeure event such as war, missile or terrorist attack, earthquake, major fire or explosion, major equipment failure or power
failure lasting beyond the capabilities of our backup generators or similar event, our revenues would be materially adversely affected
and any of our clinical trials could be materially delayed. In this situation, our manufacturing capacity could be shut down for an extended
period, we could experience a loss of raw materials, work in process or finished goods inventory and our ability to operate our business
would be harmed. In addition, in any such event, the reconstruction of our manufacturing facility and storage facilities, and obtaining
regulatory approval for the new facilities could be time-consuming. During this period, we would be unable to manufacture NexoBrid, EscharEx
or our pipeline product candidates. In addition, we currently a have limited inventory of NexoBrid that we can supply to our customers
if we are unable to further manufacture NexoBrid.
We are subject to a number of other manufacturing
risks, any of which could substantially increase our costs and limit the supply of NexoBrid, EscharEx and our pipeline product candidates.
The process of manufacturing NexoBrid, EscharEx and our pipeline
product candidates is complex, highly regulated and subject to the risk of product loss due to contamination, equipment failure or improper
installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes or quality
requirements for our products could result in reduced production yields, product defects and other supply disruptions. If microbial, viral
or other contaminations are discovered in NexoBrid, EscharEx or our pipeline product candidates or in the manufacturing facilities in
which NexoBrid, EscharEx or our pipeline product candidates are or will be made, such manufacturing facilities may need to be closed to
investigate and remedy the contamination.
6
We may experience any contaminations, major equipment failures,
or other similar manufacturing problems of such magnitude, any adverse developments affecting manufacturing operations for NexoBrid, EscharEx
or our pipeline product candidates which may result in additional shipment delays, inventory shortages, lot failures, withdrawals or recalls,
or other interruptions in the supply of NexoBrid, EscharEx or our pipeline product candidates. We may also have to take inventory write-offs
and incur other charges and expenses for our products that fail to meet specifications, undertake costly remediation efforts, or seek
costlier manufacturing alternatives.
Our ability to continue manufacturing and distributing
our products depends on our continued adherence to cGMP regulations.
The manufacturing processes for our products are governed by detailed
cGMP and similar foreign regulations, both for our marketed products in the EU and the U.S. and product candidates in clinical testing
in the U.S., EU and Israel. Failure by our manufacturing and quality operations unit to adhere to established regulations or to meet a
specification or procedure set forth in cGMP and similar foreign requirements could require that a product or material be rejected and
destroyed. Our adherence to cGMP and similar foreign regulations and the effectiveness of our quality control systems are periodically
assessed through inspections of our manufacturing facility by regulatory authorities. Such inspections could result in deficiency citations,
which would require us to take action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If critical
deficiencies are noted or if we are unable to prevent recurrences, we may have to recall products or suspend operations until appropriate
measures can be implemented. Since cGMP and similar foreign regulations reflect ever-evolving standards, we need to regularly update our
manufacturing processes and procedures to comply with cGMP and similar foreign regulations. These changes may cause us to incur additional
costs and may adversely impact our profitability. For example, more sensitive testing assays (if and when they become available, or due
to the discontinuation of the availability of the disposables currently used in production) may be required, or existing procedures or
processes may require revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of NexoBrid
or launch of a new product.
We depend on a sole supplier to obtain our
intermediate drug substance, bromelain SP, which is necessary for the production of our products.
We currently procure bromelain SP, a key substance starting material
in the manufacturing of NexoBrid, EscharEx and our pipeline product candidates, from a single supplier, Challenge Bioproducts Corporation
Ltd. (“CBC”). CBC’s manufacturing facilities are located in Taiwan (i.e., the Republic of China) and it uses proprietary
methods to manufacture bromelain SP. Our supply agreement with CBC has no fixed expiration date and can be voluntarily terminated by us,
with at least six months’ advance written notice, or by CBC, with at least 24 months’ advance written notice. Although we
have a contractual right to procure this material from other suppliers, subject to payment of a one-time, non-material licensing fee to
CBC, procuring this material from any other source would require time and effort which may interrupt our supply of bromelain SP and may
cause an interruption of the supply of NexoBrid, EscharEx and our pipeline product candidates to the marketplace and for future clinical
trials or other development purposes. Regulatory authorities could require that we conduct additional studies in support of a new supplier,
which could result in significant additional costs or delays. Furthermore, there can be no assurance that we would be able to procure
alternative supplies of bromelain SP at all or at comparable quality or competitive prices or upon fair and reasonable contractual terms
and conditions. Although we believe that we currently store sufficient inventory of bromelain SP in our warehouse with additional inventory
stored exclusively for us at CBC’s warehouse to continue full capacity operations for approximately two years, this inventory may
prove insufficient, and any interruption or failure to source additional bromelain SP from CBC or other third parties in a timely manner,
or at all, would adversely affect our business, prospects, financial condition and results of operations.
In addition, we rely on CBC to successfully scale-up its CBC’s
manufacturing facilities in order to meet future demand of our products pipelines. If CBC will not be able to obtain the requisite approvals,
including meeting regulatory and quality requirements or will not be able to scale-up its manufacturing facility in a timely manner, then
we may not be able to satisfy demand for our future products.
Our sole supplier of intermediate drug substance,
bromelain SP, is located in Taiwan, which exposes us to risks that harm our ability to manufacture NexoBrid, EscharEx and our pipeline
product candidates and substantially harm our business.
The manufacturing facilities of CBC, our sole supplier of bromelain
SP, a key substance as starting material in the manufacturing of NexoBrid, EscharEx and our pipeline product candidates, are located in
Taiwan. We believe one of the most significant risks associated with these
facilities being located in Taiwan is the risk that production may be interrupted or limited due to strains on the local infrastructure.
In addition, facilities located in Taiwan may be adversely affected by tensions, hostilities or trade disputes involving China, the United
States or other countries. There is considerable potential political instability in Taiwan related
to its disputes with China. Although we do not do business in North Korea, any future increase in
tensions between South Korea and North Korea, such as an outbreak or escalation of military hostilities,
or between Taiwan and China, could materially adversely affect our operations in Asia or the global
economy, which in turn may seriously harm our business.
In addition, if CBC experiences any closures and labor shortages as a result of rising
tensions between the People’s Republic of China and Taiwan, we may face difficulty sourcing bromelain SP, which could negatively
affect our revenues.
7
Risks Related to Commercialization
Our revenue growth depends initially on our
ability to successfully commercialize NexoBrid and EscharEx.
We currently have a marketing authorization in the United States,
the European Economic Area (“EEA”) (which consists of the 27 EU member states plus Norway, Liechtenstein, Switzerland and
Iceland), UK, Israel, Russia, Ukraine, South Korea, Taiwan, United Arab Emirates, Japan, India and Australia for a single product, NexoBrid
for eschar removal in patients with deep partial thickness and/or full thickness thermal burns, which we refer to as severe burns. We
are currently relying, for a significant portion of our revenues from sales of products, on sales of NexoBrid in the U.S., Europe and
in other international markets for the treatment of severe burns. We anticipate that, for at least the next several years, our ability
to generate revenues and become profitable will depend on the commercial success of NexoBrid in these markets, primarily in the U.S.,
as well as on potential initial contribution related to EscharEx in the coming years. There can be no assurance that EscharEx will receive
regulatory approval in any jurisdiction, be successfully commercialized, or generate meaningful revenues. If we are unable to obtain approval
for or successfully commercialize EscharEx, our future growth prospects would be limited and our business, financial condition and results
of operations could be materially adversely affected.
The commercialization success of NexoBrid in
the U.S. is dependent on the actions of our partner Vericel.
On May 6, 2019, we entered into an exclusive license and supply agreements with Vericel
Corporation (“Vericel”) to commercialize NexoBrid in all countries of North America (the “Vericel License Agreement”).
In accordance with the Vericel License Agreement, Vericel paid us $17.5 million in cash as an upfront payment at the execution of the
Vericel License Agreement and an additional milestone payment of $7.5 million upon the achievement of Biologics License Application (“BLA”)
approval for NexoBrid. Vericel is obligated to pay us up to $125 million, in the aggregate, upon attainment of certain sales milestones.
Vericel is also obligated to pay us tiered royalties on net sales of NexoBrid ranging from mid-high single-digit to mid-teen percentages,
subject to certain customary reductions. The success of our business depends largely on Vericel’s success in commercializing NexoBrid.
If Vericel fails to devote adequate resources to commercialization efforts, fails to comply with applicable regulatory requirements, or
otherwise does not perform its obligations under the Vericel License Agreement, our revenues from NexoBrid could be materially adversely
affected. In addition, If Vericel will not be able to obtain future governmental procurement and development funding from BARDA and does
not retain us as a subcontractor under such arrangements, our anticipated revenues related to NexoBrid could be adversely impacted.
We are dependent on our contract with MTEC/DoW
to fund our development activities for NexoBrid for field use in the United States. If these contracts will be suspended or terminated,
it will adversely impact our future revenues.
In February 2022, the Company entered into a contract with the
U.S. Department of War (the “DoW”) through the Medical Technology Enterprise Consortium (MTEC) to advance the development
of a temperature-stable formulation of NexoBrid for field-care burn treatment for the U.S. Army. This contract was subsequently amended
multiple times throughout 2023–2025 to expand funding, bringing the total contract value to $17 million.
Additionally, in October 2023, the Company was awarded $1.2 million
in direct funding from MTEC to further support the development of the temperature-stable NexoBrid formulation.
As of December 31, 2025, the total funding received from the DoW
and MTEC amounts to $18.2 million.
MTEC/DoW may terminate their respective contracts at any time,
at their convenience, without any further funding obligations. There can be no assurances that MTEC/DoW will not terminate the contract.
Changes in government budgets and agendas may result in a decreased and de-prioritized emphasis on supporting the development of NexoBrid
for field use. Any reduction or delay in MTEC/DoW funding may force us to suspend the program or seek alternative funding, which may not
be available on non-dilutive terms, terms favorable to us or at all. Furthermore, any such reduction, delay or termination could adversely
affect our future revenues from development services.
8
The commercial success of NexoBrid, EscharEx and our pipeline product
candidates will depend upon their degree of market acceptance.
NexoBrid, EscharEx and our pipeline product candidates may not
gain market acceptance by physicians and their teams, healthcare payors, patients and others in the medical community. Although many physicians
in burn centers throughout Europe, the United States and other international markets have used NexoBrid for severe burns as part of our
clinical trials or since NexoBrid’s commercial launch in Europe, and other international markets, we cannot guarantee that use of
NexoBrid will be accepted in the market. We need to successfully integrate NexoBrid into the overall treatment of burns in burn centers.
If NexoBrid, EscharEx and our pipeline product candidates do not achieve an adequate level of acceptance, we may not generate revenue
and we may not achieve or sustain profitability. The degree of market acceptance of NexoBrid in U.S., Europe and in other international
countries where we receive marketing authorization, and of EscharEx and our pipeline product candidates, will depend on a number of factors,
some of which are beyond our control, including:
| • |
the willingness of physicians, burn care teams and hospital administrators to administer our products and the acceptance of our products
as part of the medical department routine; |
| • |
the consent of hospitals, nursing homes, physicians offices, wound clinics or any other sites of care to fund/purchase EscharEx or
the ability to obtain sufficient third party coverage for EscharEx; |
| • |
the ability to offer NexoBrid, EscharEx and our pipeline product candidates for sale at an attractive value; |
| • |
the efficacy and potential advantages of NexoBrid, EscharEx and our pipeline product candidates relative to current standard of care
(“SOC”); |
| • |
the prevalence and severity of any side effects; and |
| • |
the efficacy, potential advantages and timing of introduction to the market of alternative treatments. |
Failure to achieve market acceptance for NexoBrid, EscharEx or
any of our pipeline product candidates, if and when they are approved for commercial sale, will have a material adverse effect on our
business, financial condition and results of operations.
We may be unsuccessful in commercializing our
products due to unfavorable pricing regulations or third-party coverage and reimbursement policies.
We cannot predict the pricing and reimbursement of NexoBrid, EscharEx
or our pipeline product candidates. The regulations that govern marketing authorizations, pricing and reimbursement for new products vary
widely from country to country, among regions within some countries and among some hospitals. In some foreign jurisdictions, including
the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In other countries, coverage negotiations must
occur at the regional or hospital level in order to be included in the hospital formulary. Pricing negotiations with governmental authorities
at the regional or hospital level can take considerable time after the receipt of marketing authorization for a product candidate. Additionally,
while we are executing a country-specific market access strategy, which includes pricing and/or reimbursement targets for NexoBrid in
most of Europe, we cannot guarantee that we will receive favorable hospital, regional or national funding or pricing and reimbursement.
As a result, even after obtaining regulatory approval for a product in a particular country, we may be subject to price regulations or
denied or limited by reimbursement or formulary inclusion, which may delay or limit our commercial launch of the product and negatively
impact the revenue we are able to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability
to recoup our investment in NexoBrid, EscharEx or our pipeline product candidates, even after obtaining regulatory approval.
Additionally, we cannot be sure that coverage and reimbursement
will be available for NexoBrid, EscharEx or any pipeline product candidate that we commercialize in the future, and, if reimbursement
is available, whether the level of reimbursement will be adequate. Coverage and reimbursement may affect the demand for, the price of,
or the budget allocated for reimbursement for any product for which we obtain marketing authorization. Obtaining coverage and adequate
reimbursement for our products may be particularly difficult because of the higher prices often associated with products administered
under the supervision of a physician. If coverage and reimbursement are not available or are available only at limited levels, we may
not be able to successfully commercialize NexoBrid, EscharEx or any pipeline product candidate that we successfully develop. Eligibility
for reimbursement does not guarantee that any product will be paid for in all cases or at a rate that covers our costs. Interim payments
for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according
to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that
are already reimbursed and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory
discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently
restrict imports of products from countries where they may be sold at lower prices than in certain other countries, such as the United
States.
9
In the United States, third-party payors often rely on the coverage
policies and payment limitations imposed by Medicare and other government payors, in setting their own coverage policies and reimbursement
rates. NexoBrid is typically administered in the hospital outpatient setting, and all items and services paid under the Medicare hospital
outpatient prospective payment system, or OPPS, are assigned to payment groups called Ambulatory Payment Classifications, or APCs, which
group together items and services that are similar clinically and in terms of resource use. Reimbursement for professional services performed
by physicians are reported using CPT codes and based on a different payment methodology. Effective January 1, 2024, CMS granted transitional
pass-through, or TPT, payment status for NexoBrid under HCPCS code J7353 (“Anacaulase-bcdb, 8.8% gel, 1 gram”). This status
is granted by CMS to facilitate access to innovative drugs and biological agents whose cost is “not insigifncant” related
to the hospital outpatient prospective payment for the procedures or services associated with the new drug or biological agent. NexoBrid’s
TPT status, however, expires on December 31, 2026. Our inability to promptly obtain coverage and profitable payment rates from hospital
budget, government-funded and private payors for NexoBrid, EscharEx or any pipeline product candidate could have a material adverse effect
on our operating results, our ability to raise capital needed to commercialize products and our overall financial condition.
Recently enacted and future legislation in
the United States may increase the difficulty and cost for us to commercialize NexoBrid and seek marketing authorizations for and, if
approved, commercialize EscharEx and our pipeline product candidates in the United States and in foreign jurisdictions and affect the
prices at which our products may be sold.
The United States and several other jurisdictions are considering,
or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that may affect the
ability to sell NexoBrid, EscharEx or any of our pipeline product candidates profitably, if approved. We cannot predict the initiatives
that may be adopted in the future. The continuing efforts of hospitals, governments, insurance companies, managed care organizations and
other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:
| • |
the market acceptance or demand for NexoBrid, EscharEx or any of our pipeline product candidates, if approved; |
| • |
the ability to set a price that we believe is fair for NexoBrid, EscharEx or any of our pipeline product candidates, if approved;
|
| • |
our ability to generate revenues and achieve or maintain profitability; |
| • |
the level of taxes that we are required to pay; and |
| • |
the availability of capital. |
Among policy makers and payors in the United States and elsewhere,
there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving
quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has
been significantly affected by major legislative initiatives. In March 2010, the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act (the “ACA”) was signed into
law and intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against
fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the
health industry and impose additional health policy reforms.
Among the provisions of the ACA of importance to our potential product candidates are
the following:
| • |
an annual, non-deductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs; |
10
| • |
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of
the average manufacturer price for branded and generic drugs, respectively; |
| • |
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs
that are inhaled, infused, instilled, implanted or injected; |
| • |
extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid
managed care organizations; |
| • |
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional
individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty
Level, thereby potentially increasing manufacturers’ Medicaid rebate liability; |
| • |
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; |
| • |
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and |
| • |
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research. |
Since its enactment, there have been judicial, executive and congressional
challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the
ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in
its current form.
In addition, other legislative changes have been proposed and adopted
since the Affordable Care Act was enacted. These changes included aggregate reductions to Medicare payments to providers, which went into
effect in April 2013 and, due to subsequent legislative amendments, will stay in effect through 2032, with the exception of a temporary
suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. In January 2013, the American Taxpayer
Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, and increased
the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result
in additional reductions in Medicare and other healthcare funding, which could negatively impact the market for NexoBrid, EscharEx and
our other product candidates, if approved, and, accordingly, our financial operations.
There has been heightened governmental scrutiny recently over the
manner in which drug manufacturers set prices for their marketed products, which have resulted in several Congressional inquiries and
proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In March 2021, the American
Rescue Plan Act of 2021 was signed into law, which eliminated the statutory cap on drug manufacturers’ Medicaid drug rebate liability
for single source and innovator multiple source drugs, beginning January 1, 2024. The rebate was previously capped at 100% of a drug’s
average manufacturer price. In August 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the
IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject
to a cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023);
and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025). CMS has published the negotiated
prices for the initial ten drugs, which went into effect in 2026, and the subsequent 15 drugs, which will first be effective in 2027,
as well as the next set of 15 drugs that will be subject to negotiation, although the drug price negotiation program is currently subject
to legal challenges. The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions
through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs
are implemented. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the impact of the IRA on our
business.
More recently, the One Big Beautiful Bill Act, which was enacted in July 2025, imposes
significant reductions in the funding of the Medicaid program. Such reductions are expected to decrease the number of persons enrolled
in Medicaid and reduce the services covered by Medicaid, which could adversely affect our sales of any product candidate that we commercialize.
11
The current Presidential administration is pursuing a two-fold strategy to reduce drug
costs in the U.S. While it is unclear whether and how such policies will be implemented, the proposed policies are likely to have a negative
impact on the pharmaceutical industry and on our ability to receive adequate revenues for our products and any additional product candidates
we develop, if approved. As part of this strategy, President Trump has proposed imposing significant tariffs on pharmaceutical manufacturers
that do not adopt pricing policies such as most favored nation pricing, which would tie the price for drugs in the U.S. to the lowest
price in a group of other countries. In response, multiple manufacturers have reportedly entered into confidential pricing agreements
with the federal government. In addition, the Trump administration is pursuing traditional regulatory pathways to impose drug pricing
policies, and published two proposed regulations in December 2025, referred to as Globe and Guard. If finalized, these regulations
would implement mandatory payment models under which manufacturers of eligible drugs would be required to pay rebates to the federal government
on a portion of the units of their drugs that are reimbursed by Medicare, with the rebate amount based on most favored nation pricing.
While the impact of the Globe and Guard proposed regulations, if finalized, cannot yet be determined, it is likely to be significant.
Even regulatory proposals or executive actions that are ultimately deemed unlawful could negatively impact the U.S. pharmaceutical sector
and our business. In addition, pharmaceutical pricing and marketing has long been the subject of considerable discussion in Congress
and among policymakers, and it is possible that Congress could enact additional laws that negatively affect the pharmaceutical industry.
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, restrictions on certain product access, marketing cost disclosure, drug price reporting and other transparency
measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have enacted legislation
creating so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these
states.
We expect that other possible healthcare reform measures 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 drugs. Legislative and regulatory
proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be sure
whether additional legislative changes will be enacted, or whether the FDA or comparable regulations, guidance or interpretations will
be changed, or what the impact of such changes on the marketing authorizations of our product candidates, if any, may be. In addition,
increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing authorization,
as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In the EU, similar developments may affect our ability to profitably
commercialize our product candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative
developments at the EU or member state level may result in significant additional requirements or obstacles that may increase our operating
costs. The delivery of healthcare in the EU, including the establishment and operation of health services and the pricing and reimbursement
of medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers
have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context.
In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement
of medicines by relevant health service providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to
develop and market products, this could prevent or delay marketing authorization of our product candidates, restrict or regulate post-approval
activities and affect our ability to commercialize our product candidates, if approved. In markets outside of the United States and EU,
reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific
products and therapies.
In December 2021, Regulation No 2021/2282 on Health Technology
Assessment (“HTA”) amending Directive 2011/24/EU, was adopted. The Regulation entered into force in January 2022 and has been
applicable since January 2025, with phased implementation based on the type of product, i.e. oncology and advanced therapy medicinal products
as of 2025, orphan medicinal products as of 2028, and all other medicinal products by 2030. The Regulation intends to boost cooperation
among EU member states in assessing health technologies, including new medicinal products, and provide the basis for cooperation at the
EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures
across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the
highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification
of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual
EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology,
and making decisions on pricing and reimbursement.
12
We face competition from the existing standard
of care, and we are furthermore subject to the risk that potential changes in medical practice and technology, or the development by our
competitors of products, treatments or procedures that are similar, more advanced, safer or more effective than ours, will render our
product candidates obsolete.
The medical, biotechnology and pharmaceutical industries are intensely
competitive and subject to significant technological and practice changes. We may face competition from many different sources with respect
to NexoBrid, EscharEx and our pipeline product candidates or any product candidates that we may seek to develop or commercialize in the
future. Possible competitors may be medical practitioners, pharmaceutical and wound care companies, academic and medical institutions,
governmental agencies and public and private research institutions, among others. Should any competitor’s product candidates receive
regulatory or marketing authorization prior to ours, they may establish a strong market position and be difficult to displace, or may
diminish the need for our products.
Our commercial opportunity could be reduced or eliminated if our
competitors develop and commercialize products, treatments or procedures that are safer, more effective, have fewer or less severe side
effects, are more convenient or are less expensive than any product that we may develop. In addition, we face competition from the current
standard of care for eschar removal in severe burns, which includes surgery, where eschar removal can occur by tangential excision, dermabrasion
or hydro jet, and non-surgical alternatives, such as topical medications applied to the eschar to facilitate the natural healing process.
In chronic and other hard-to-heal wounds, we expect to face competition from current standard of care for debridement via sharp debridement
from the current non-surgical standard of care, either enzymatic debridement, primarily Smith & Nephew Plc’s SANTYL®,
a collagenase-based product indicated for debriding chronic dermal ulcers and severely burned areas, or autolytic debridement, or from
a myriad of other devices that mechanically remove dead tissue from wounds. Many of our current or future competitors may have significantly
greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing approved products than we may have. Mergers and acquisitions in the pharmaceutical and biotechnology
industries or wound care markets may result in even more resources being concentrated among a smaller number of our competitors. For example,
Healthpoint Biotherapeutics, which marketed SANTYL, was acquired by Smith & Nephew Plc in 2012. Smaller and other early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These
companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites
and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
Risks Related to Our Financial Position and Need for Additional Capital
If we fail to manage our growth effectively, our business could
be disrupted.
Our future financial performance and ability to successfully commercialize
our products and to compete effectively will depend, in part, on our ability to manage any future growth effectively. We have made and
expect to continue to make significant investments to enable our future growth through, among other things, new product development, clinical
trials for new indications, expansion of our marketing and sales infrastructure and continued exploring for potential business development
opportunities. The global demand for NexoBrid currently surpasses our current manufacturing capabilities. We are currently expanding our
manufacturing capabilities in order to increase our capacity to manufacture NexoBrid and satisfy near term demand. Towards that end we
initiated a facility scale-up in 2022 to meet the growing global demand for NexoBrid. Our new GMP-compliant state-of-the-art manufacturing
facility was completed as of August 2024. The facility has reached full operational capacity by the end of 2025, increasing manufacturing
output sixfold. Commercial availability will depend on securing the necessary regulatory approvals. In addition, we anticipate the need
to expand manufacturing capabilities for EscharEx to meet market demands upon regulatory approval. Scaling up production for EscharEx
will require substantial resources and be subject to regulatory clearance. Beyond manufacturing, we must also be prepared to expand
our workforce and train, motivate and manage additional employees as the need for additional personnel arises. Even following expansion,
our facilities, personnel, systems, procedures and controls may not be adequate to support our future operations, or we may expand, but
then fail to grow our sales of NexoBrid or our pipeline product candidates sufficiently to support such operational growth. Any failure
to manage future growth effectively could have a material adverse effect on our business and results of operations.
13
We have a history of net losses. We expect
to continue to incur substantial and increasing net losses in the coming years, and we may never achieve or maintain profitability.
We have incurred significant net losses, including a net loss of
$23.9 million for the year ended December 31, 2025 and $30.2 million for the year ended December 31, 2024. As of December 31, 2025, we
had an accumulated deficit of $228.9 million. We may incur substantial net losses in the coming years. These losses and negative cash
flows have had, and will continue to have, an adverse effect on our shareholder’s equity and working capital.
We expect to incur significant expenses and increasing operating
losses in the coming years.
We anticipate that our expenses and future capital requirements
may increase if and as we:
| • |
accelerate our clinical development activities, particularly with respect to our clinical development of EscharEx for the debridement
of chronic and other hard-to-heal wounds and our clinical trials for our other pipeline product candidates; |
| • |
further scale-up the manufacturing process for NexoBrid; |
| • |
seek regulatory and marketing authorizations for our products and any pipeline product candidate that successfully completes clinical
trials; |
| • |
initiate additional preclinical or other studies for NexoBrid, EscharEx and our pipeline product candidates, and seek to identify
and validate new products; |
| • |
commercialize NexoBrid and any pipeline product candidates for which we obtain marketing authorization; |
| • |
make pre-commercialization activities for EscharEx; |
| • |
acquire rights to other product candidates and technologies; |
| • |
change or add suppliers; |
| • |
maintain, expand and protect our intellectual property portfolio; |
| • |
attract and retain skilled personnel; and |
| • |
experience any delays or encounter issues with any of the above. |
We maintain cash, cash equivalents and bank deposits at financial
institutions in Israel and Germany. Our funds at these institutions exceed insured limits and some are not insured at all. Although we
spread our cash, cash equivalents and bank deposits among several financial institutions in order to reduce the risks associated with
maintaining all of our balances at one financial institution, in the event of failure of any financial institution where we maintain our
cash and cash equivalents or bank deposits, there can be no assurance that we would be able to access uninsured funds in such financial
institution in a timely manner or at all. Any inability to access or delay in accessing these funds could prevent us from paying our operating
expenses and meeting our future capital requirements and thereby adversely affect our business and financial position.
We have needed in the past and may need in the future additional
capital, which has in the past and may in the future cause dilution to our existing shareholders, restrict our operations or require us
to relinquish rights to our pipeline product candidates or intellectual property. If additional capital is not available, we may have
to delay, reduce or cease operations.
We may seek additional funding in the future, which may consist
of equity offerings, private placements, collaborations, licensing arrangements or any other means to develop our pipeline product candidates,
increase our commercial manufacturing capabilities, operate our sales and marketing capabilities or other general corporate purposes.
Our prior registered equity offerings and private placements diluted
then-existing shareholders, and to the extent that we raise additional capital through, for example, the sale of equity or convertible
debt securities under our shelf registration statement, our existing shareholders’ ownership interest will be further diluted, and
the terms may include liquidation or other preferences that adversely affect our shareholders’ rights. The incurrence of indebtedness
or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in certain restrictive
covenants, such as limitations on our ability to incur additional debt or to issue additional equity, limitations on our ability to acquire
or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our
ordinary shares to decline. Securing additional financing may also divert our management’s attention from our day-to-day activities,
which may adversely affect our ability to develop and commercialize NexoBrid, EscharEx and our pipeline product candidates.
14
Additional funding may not be available to us on acceptable terms,
or at all. In the event that we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept
unfavorable terms, including relinquishing or licensing to a third party our rights to product candidates or intellectual property that
we otherwise would seek to develop or commercialize ourselves or reserve for future potential arrangements when we might be able to achieve
more favorable terms.
If we are unable to raise additional capital when required or on
acceptable terms, we may be required to:
| • |
delay, scale back or discontinue the development, manufacturing scale-up or commercialization of NexoBrid, EscharEx or our pipeline
product candidates; |
| • |
seek additional corporate partners for NexoBrid, EscharEx or one or more of our pipeline product candidates on terms that are less
favorable than might otherwise be available; or |
| • |
relinquish or license to additional parties, on unfavorable terms, our rights to NexoBrid, EscharEx or our pipeline product candidates
that we otherwise would seek to develop or commercialize ourselves. |
| • |
any such consequence will have a material adverse effect on our business, operating results and prospects and on our ability to develop
our pipeline product candidates. |
We believe that our existing cash and cash equivalents, short-term
and restricted bank deposits will be sufficient to fund our operations and capital expenditure for at least twelve months from the date
of this report. Our estimates may prove to be wrong, and we could use our available capital resources sooner than we currently expect.
Further, changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than
we currently anticipate, and we may need to seek additional funds sooner than planned.
We make business decisions based on forecasts of future sales of
our products and pipeline product candidates that may be inaccurate.
Our market estimates are based on many assumptions, including,
but not limited to, reliance on external market research, our own internal research, population estimates, estimates of disease diagnostic
rates, treatment trends, and market estimates by third parties. Any of these assumptions can materially impact our forecasts and we cannot
be assured that the assumptions are accurate. If the market for any of our products or product candidates is less than this data would
suggest, the potential sales for the product or pipeline product candidates in question could be adversely affected, and our inventories
and net losses could increase.
Because of the numerous risks and uncertainties associated with
biopharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of future expenses
or when, or if, we will be able to achieve or maintain profitability. We have financed our operations primarily through the sale of equity
securities, licensing agreements and government grants. The size of our future net losses will depend, in part, on the rate of growth
or contraction of our expenses and the level and rate of growth, if any, of our revenues. If we are unable to successfully commercialize
NexoBrid, EscharEx or one or more of our pipeline product candidates or if revenue from NexoBrid, EscharEx or any pipeline product candidate
that receives marketing authorization is insufficient, we will not achieve profitability. Even if we do achieve profitability, we may
not be able to sustain or increase profitability.
Exchange rate fluctuations between the U.S.
dollar and the Israeli shekel, the Euro and other non-U.S. currencies may negatively affect our earnings.
The dollar is our functional and reporting currency. However, a
significant portion of our operating expenses are incurred in Israeli shekels and Euros. As a result, we are exposed to the risks that
the shekel may appreciate relative to the dollar, or, if the shekel instead devalues relative to the dollar, that the inflation rate in
Israel may exceed such rate of devaluation of the shekel, or that the timing of such devaluation may lag behind inflation in Israel. In
any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely
affected. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the shekel against
the dollar. For example, the shekel appreciated significantly relative to the dollar, on average, by 12.5% in 2025, after having depreciated
by 0.4% in 2024 and by 3.1% in 2023, thereby increasing, in 2025, the U.S. dollar cost of our shekel-denominated expenses. The Euro also
appreciated significantly relative to the dollar in 2025 on average, by 11.3%, thereby increasing the U.S. dollar cost of our Euro-denominated
expenses. If the dollar or Euro cost of our operations in Israel increases, our dollar-measured results of operations will be adversely
affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.
To the extent that we receive revenues from sales in certain countries,
such as in the Asia Pacific region, where our sales are expected to be denominated in dollars, a strengthening of the dollar in relation
to other currencies could make our products less competitive in those foreign markets and collection of receivables more difficult. For
further information, see “ITEM 11. Quantitative and Qualitative Disclosures About Market Risk” elsewhere in this annual report.
15
Risks Related to Healthcare Laws and Other Legal Compliance Matters
Certain of our business practices could become
subject to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens. Failure to comply with applicable law
or an adverse decision in lawsuits may result in adverse consequences to us.
The laws governing our conduct in the United States and in foreign
jurisdictions are enforceable by criminal, civil and administrative penalties. In the United States, violations of laws such as the Federal
Food, Drug and Cosmetic Act (the “FDCA”), the Public Health Service Act, the Federal False Claims Act, provisions of the U.S.
Social Security Act, including the “Anti-Kickback Statute,” or any regulations promulgated under their authority, may result
in significant administrative, civil and criminal sanctions, jail sentences, fines or exclusion from federal and state programs, as may
be determined by the U.S. Department of Justice, the Office of Inspector General of the U.S. Department of Health and Human Services (the
“OIG”), the Centers for Medicare & Medicaid Services, (the “CMS”) other regulatory authorities and the courts.
There can be no assurance that our activities will not come under the scrutiny of regulators and other government authorities or that
our practices will not be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators”
under federal or state false claims laws.
The federal Anti-Kickback Statute prohibits, among other things,
knowingly and will fully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly
or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or arranging for or recommending the purchase,
lease or order of any good, facility, item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare
programs. The term “remuneration” has been broadly interpreted to include anything of value. Although there are a number of
statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, the exceptions and safe harbors are
drawn narrowly. Practices that involve remuneration that may be alleged to be intended to induce prescribing, purchases or recommendations
may be subject to scrutiny if they do not qualify for an exception or safe harbor.
For example, even common business arrangements, such as discounted
terms and volume incentives for customers in a position to recommend or choose drugs and devices for patients, such as physicians and
hospitals, can result in substantial legal penalties, including, among other things, exclusion from Medicare and Medicaid programs if
not carefully structured to comply with applicable requirements. Also, certain business practices, such as payment of consulting fees
to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare providers and
financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid
any possibility of unlawfully inducing healthcare providers to prescribe or purchase particular products or rewarding past prescribing.
Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct
per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based
on a cumulative review of all its facts and circumstances. Several courts have interpreted the statute’s intent requirement to mean
that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the Anti-Kickback
Statute has been violated. In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to
violate it in order to have committed a violation. Violations of the federal Anti-Kickback Statute may result in significant civil monetary
penalties for each violation, plus up to three times the remuneration involved. Moreover, a claim including items or services resulting
from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False
Claims Act. Accordingly, civil penalties for such conduct can further be assessed under the federal False Claims Act. Violations can also
result in criminal penalties, including criminal fines and imprisonment. Similarly, violations can result in exclusion from participation
in government healthcare programs, including Medicare and Medicaid.
Significant enforcement activity has also taken place under federal
and state false claims act statutes. Violations of the federal False Claims Act can result in treble damages, and a penalty for each false
claim submitted for payment. Pharmaceutical, device and other healthcare companies have been prosecuted under these laws for, among other
things, allegedly providing free products to customers with the expectation that the customers would bill federal programs for the product.
Companies have been prosecuted for causing false claims to be submitted because of the companies’ marketing of products for unapproved,
and thus non-covered, uses. The government may further prosecute conduct constituting a false claim under the criminal False Claims Act.
The criminal False Claims Act prohibits the making or presenting of a claim to the government knowing such claim to be false, fictitious,
or fraudulent and, unlike the civil False Claims Act, requires proof of intent to submit a false claim.
16
The federal False Claims Act, as well as certain state false claims
acts, also permits relators to file complaints in the name of the United States (and if applicable, particular states). These relators
may be entitled to receive up to 30% of total recoveries and have been active in pursuing cases against pharmaceutical companies. Where
practices have been found to involve improper incentives to use products, the submission of false claims, or other improper conduct, government
investigations and assessments of penalties against manufacturers have resulted in substantial damages and fines. In addition, to avoid
exclusion from participation in federal healthcare programs, many manufacturers have been required to enter into Corporate Integrity Agreements
that prescribe allowable corporate conduct and impose reporting and disclosure obligations by the manufacturer to the government. Failure
to satisfy requirements under the FDCA can also result in a variety of administrative, civil and criminal penalties, including injunctions
or consent decrees that prescribe allowable corporate conduct.
The federal Health Insurance Portability and Accountability Act
of 1996, or HIPAA, created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing,
or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully
embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and
knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent
statement in connection with the delivery of or payment for healthcare benefits, items or services. Like the Anti-Kickback Statute, a
person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Additionally, there has been a recent trend of increased federal
and state regulation of payments and transfers of value provided to healthcare professionals and/or entities. The ACA, among other things,
imposed annual reporting requirements on certain manufacturers of drugs, devices, biologicals and medical supplies for payments and other
transfers of value provided by them, directly or indirectly, to physicians (defined to include doctors, dentists, optometrists, podiatrists
and chiropractors), certain non-physician practitioners (physician assistants, nurse practitioners, clinical nurse specialists, certified
registered nurse anesthetists, anesthesiologist assistants, and certified nurse midwives), and teaching hospitals, as well as ownership
and investment interests held by physicians and their family members. A manufacturer’s failure to submit timely, accurately and
completely the required information for all payments, transfers of value or ownership or investment interests may result in significant
civil monetary penalties.
In addition, we are subject to analogous state and foreign laws
and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving
healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that
require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the governments or otherwise restrict payments that may be made to healthcare providers. For instance, payments
made to physicians in certain EU member states must be publicly disclosed. Moreover, agreements with physicians must often be subject
of prior notification and/or approval by the physician’s employer, their competent professional organization, and/or the competent
authorities of the individual EU member states, state and foreign laws that require drug manufacturers to report information related to
payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws
requiring the registration of pharmaceutical sales representatives.
Efforts to ensure that our business arrangements with third parties
will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities
will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable
fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other
governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including,
without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and
Medicaid, and the curtailment or restructuring of our operations, which could have a material adverse effect on our business. If any of
the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable
laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare
programs, which could also materially affect our business.
17
As a public company with securities registered under the U.S. Securities
Exchange Act of 1934, as amended (the “Exchange Act”), we are subject to the U.S. Foreign Corrupt Practices Act (the “FCPA”).
The FCPA and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to
officials for the purpose of obtaining or retaining business. While we continue to maintain and enhance internal policies mandating compliance
with these anti-bribery laws, we may operate in parts of the world that have experienced governmental corruption to some degree and in
certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact
with doctors and hospitals, some of which may be state controlled, in a manner that is different than in the United States. Our internal
control policies and procedures may not be sufficient to effectively protect us against reckless or criminal acts committed by our employees
or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect
on our financial condition, results of operations and cash flows.
Actual or perceived failures to comply with
applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business,
results of operations, and financial condition.
The global data protection landscape is rapidly evolving, and we
are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, disclosure,
retention, and security of personal information, such as information that we may collect in connection with clinical trials. Implementation
standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact
future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty
in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer use and share personal information,
necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost
of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure
by us to comply with federal, state or foreign laws or regulations, our internal policies and procedures or our contracts governing our
processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third
parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
In the United States, HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act of 2009 and its implementing regulations, or collectively HIPAA, imposes, among other
things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.
While we do not believe that we are currently acting as a covered entity or business associate under HIPAA and thus are not directly regulated
under HIPAA, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy
principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive
individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s
requirements for disclosure of individually identifiable health information. Certain states have also adopted comparable privacy and security
laws and regulations, some of which may be more stringent than HIPAA. Such laws and regulations will be subject to interpretation by various
courts and other governmental authorities, thus creating potentially complex compliance issues for us and our customers and strategic
partners. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”)
requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain
disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; (ii)
receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of
certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process
California resident personal information on the business’s behalf. Additional compliance investment and potential business process
changes may be required. Similar laws have passed in other states and are continuing to be proposed at the state and federal level, reflecting
a trend toward more stringent privacy legislation in the United States. The enactment of such laws could have potentially conflicting
requirements that would make compliance challenging.
Furthermore, the Federal Trade Commission (“FTC”) and
many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use,
dissemination and security practices that appear to be unfair or deceptive. For example, according to the FTC, failing to take appropriate
steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation
of Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate
in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available
tools to improve security and reduce vulnerabilities.
18
In the event that we are subject to or affected by HIPAA, the CCPA,
or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely
affect our financial condition.
We are subject to data privacy and security laws in the EU as well
as the EEA and UK, including Regulation 2016/679, or the General Data Protection Regulation (the “EU GDPR”) and the United
Kingdom General Data Protection Regulation (the “UK GDPR”) (the EU GDPR and UK GDPR together referred to as the “GDPR”),
with respect to our collection, control, processing, sharing, disclosure and other use of personal data of individuals located in the
EEA or in the context of our activities within the EEA. In addition, some of the personal data we process in respect of clinical trial
participants is special category or sensitive personal data under the GDPR, and subject to additional compliance obligations and to local
law derogations. The GDPR went into effect in May 2018, and companies that must comply with the GDPR face increased compliance obligations
and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to
€20 million / £17.5 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. In addition
to fines, a breach of the GDPR may result in regulatory investigations, reputational damage, orders to cease/ change our data processing
activities, enforcement notices, assessment notices (for a compulsory audit) and/ or civil claims (including class actions). Among other
requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide
adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms
between the EEA and the United States remains uncertain. Case law from the Court of Justice of the EU (“CJEU”) states that
reliance on the standard contractual clauses, or SCCs - a standard form of contract approved by the European Commission as an adequate
personal data transfer mechanism - alone may not necessarily be sufficient in all circumstances and that transfers must be assessed on
a case-by-case basis.
As supervisory authorities issue further guidance on personal data
export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional
costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among
countries and regions in which we operate, it could affect the manner in which we operate our business, the geographical location or segregation
of our relevant systems and operations, and could adversely affect our financial results.
As we continue to expand into other foreign countries and jurisdictions, we may be subject
to additional laws and regulations that may affect how we conduct business. In Israel, where we are incorporated and have significant
operations, including one of our corporate headquarters, we are subject to the Israeli Privacy Protection Law, 5741-1981, as amended (“PPL”),
and its regulations, including the Israeli Privacy Protection Regulations (Data Security), 5777-2017 (the “Data Security Regulations”).
In addition, the Privacy Protection Regulations (Provisions Regarding Information Transferred to Israel from the European Economic Area),
5784-2023 (“EU Transfer Regulations”), were enacted in 2023 and provide, in certain cases, additional rights to data subjects
from the European Economic Area and Israel. The PPL and its regulations impose obligations regarding how personal data is processed, maintained,
transferred, disclosed, accessed, and secured.
A material amendment to the PPL, the Protection of Privacy (Amendment No. 13)
Law, 5784-2024 (“Amendment 13”), was approved by the Israeli Parliament in August 2024 and took effect on August 14, 2025.
Among other things, Amendment 13 expanded the Privacy Protection Authority's investigation authority and the monetary sanctions that can
be imposed for breach of the PPL and its regulations, to substantial amounts that may reach in certain cases millions of NIS. Amendment
13 also introduces additional obligations for parties that process personal data, which may require us to modify our data practices and
policies, appoint a data protection officer, and incur substantial costs to adjust our privacy and data protection practices in Israel.
Therefore , significant changes to the PPL and its regulations may necessitate adjustments to our data protection and security practices.
Non-compliance with the PPL and its regulations could result in
enforcement actions by the Israeli Privacy Protection Authority, litigation (including class actions), and fines and penalties. The Israeli
Privacy Protection Authority may initiate administrative inspection proceedings from time to time. If such inspection procedure reveals
irregularities with respect to our compliance with the PPL, we may need to take remedial actions to rectify such irregularities, which
may increase our costs, in addition to our exposure to fines, penalties and litigation. We will continue to evaluate the application of
these regulations and requirements.
Our business and operations may suffer in the
event of information technology system failures, cyberattacks or deficiencies in our cybersecurity.
We collect and maintain information in digital form that is necessary
to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business.
In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual
property, proprietary business information and personal information of customers and our employees and contractors. It is critical that
we do so in a secure manner to maintain the confidentiality, integrity and availability of such confidential information. We have implemented
physical and electronic security measures to protect our proprietary information, maintain standard operation procedures and conduct business
continuity and disaster recovery simulations, penetration testing and train our employees. However, we cannot provide assurances that
our data protection and security measures will be fully implemented or complied with, will not be breached or will provide adequate protection
for our confidential information or information technology systems.
19
Our information technology systems and those of our third-party
service providers, strategic partners and other contractors or consultants are vulnerable to attack and damage or interruption from computer
viruses and malware (e.g. ransomware), misconfigurations, “bugs” or other vulnerabilities, malicious code, natural disasters,
terrorism, war, telecommunication and electrical failures, hacking, cyberattacks, phishing attacks, worms/trojans and other social engineering
schemes, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported
actors. We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors
may or could have access to our confidential information. Data breaches, cyber-attacks and other similar incidents are increasing in frequency,
levels of persistence, sophistication and intensity and are evolving in nature. Moreover, geopolitical tensions, particularly the Hamas-Israel
and the Russia-Ukraine conflicts, have contributed to a surge in cyber-attacks targeting Israeli companies and products globally, posing
a threat to critical infrastructure.
There is a risk that third parties may obtain and improperly utilize
our proprietary information to our competitive disadvantage. Attacks upon information technology systems are increasing in their frequency,
levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with
a wide range of motives and expertise. We may also face increased cybersecurity risks due to our reliance on internet technology and the
number of our employees continue to work remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not
recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.
We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately
investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques – including artificial intelligence
– that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. We may not be able
to detect or prevent the unauthorized use of our confidential information or take appropriate and timely steps to enforce our intellectual
property rights.
We and certain of our service providers are from time to time subject
to cyberattacks and security incidents. While we do not believe that we have experienced any significant system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of
our development programs and our business operations, whether due to a loss, corruption or unauthorized disclosure of our trade secrets,
personal information or other proprietary or sensitive information or other similar disruptions. It could also expose us to risks, including
an inability to provide our services and fulfill contractual demands, and could cause management distraction and the obligation to devote
significant financial and other resources to mitigate such problems. If a security breach or other incident were to result in the unauthorized
access to or unauthorized use, disclosure, release or other processing of personal information, it may be necessary to notify individuals,
governmental authorities, supervisory bodies, the media and other parties pursuant to privacy and security laws, and the costs associated
with the investigation, remediation and potential notification of the breach to counter-parties and data subjects could be material. Furthermore,
federal, state and international laws and regulations can expose us to enforcement actions and investigations by regulatory authorities,
and potentially result in regulatory penalties, fines and significant legal liability, if our information technology security efforts
fail. Any adverse impact to the availability, integrity or confidentiality of our or third-party systems or confidential information can
result in legal claims or proceedings (such as class actions), regulatory investigations and enforcement actions, fines and penalties,
negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration
or remediation and future compliance costs. To the extent that any disruption or security breach were to result in a loss of, or
damage to, our data or systems, or inappropriate disclosure of confidential or proprietary or personal information, we could incur liability,
including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, our competitive
position could be harmed and the further development and commercialization of our products and services could be delayed. There can be
no assurance that our cybersecurity risk management program and processes, including our policies, controls or procedures, will be fully
implemented, complied with or effective in protecting our systems and information.
20
Laws and regulations affecting government contracts
make it more costly and difficult for us to successfully conduct our business.
We must comply with numerous laws and regulations relating to the
formation, administration and performance of government contracts, which can make it more difficult for us to retain our rights under
our BARDA contracts. These laws and regulations affect how we conduct business with government agencies. Among the most significant government
contracting regulations that affect our business are:
| • |
the Federal Acquisition Regulations (“FAR”) and agency-specific regulations supplemental to the FAR, which comprehensively
regulate the procurement, formation, administration and performance of government contracts; |
| • |
business ethics and public integrity obligations, which govern conflicts of interest and the hiring of former government employees,
restrict the granting of gratuities and funding of lobbying activities and include other requirements such as the Anti-Kickback Statute
and Foreign Corrupt Practices Act; |
| • |
export and import control laws and regulations; and |
| • |
laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes
and the exportation of certain products and technical data. |
Any material changes in applicable laws and regulations could restrict
our ability to maintain our BARDA contracts or obtain new contracts with the U.S. federal government.
We could be subject to product liability lawsuits, which could result
in costly and time-consuming litigation and significant liabilities.
The development of biopharmaceutical products involves an inherent
risk of product liability claims and associated adverse publicity. Our products may be found to be harmful or to contain harmful substances.
This exposes us to substantial risk of litigation and liability or may force us to discontinue production of certain products. Our product
liability insurance in countries where NexoBrid is sold may not insure us against all claims that may be asserted against us. Product
liability insurance is costly and often limited in scope. There can be no assurance that we will be able to obtain or maintain insurance
on reasonable terms or to otherwise protect ourselves against potential product liability claims that could impede or prevent commercialization
of NexoBrid, EscharEx or our pipeline product candidates. Furthermore, a product liability claim could damage our reputation, whether
or not such claims are covered by insurance or are with or without merit. A product liability claim against us or the withdrawal of a
product from the market could have a material adverse effect on our business or financial condition. Furthermore, product liability lawsuits,
regardless of their success, would likely be time-consuming and expensive to resolve and would divert management’s time and attention,
which could seriously harm our business.
We are subject to extensive environmental,
health and safety, and other laws and regulations.
Our business involves the controlled use of chemicals. The risk
of accidental contamination or injury from these materials cannot be eliminated. If an accident, spill or release of any such chemicals
or substances occurs, we could be held liable for resulting damages, including for investigation, remediation and monitoring of the contamination,
including natural resource damages, the costs of which could be substantial. We are also subject to numerous environmental, health and
workplace safety laws and regulations, including those governing laboratory procedures. Although we maintain workers’ compensation
insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from the use of these materials,
this insurance may not provide adequate coverage against potential liabilities. Additional or more stringent laws and regulations affecting
our operations may be adopted in the future. We may incur substantial capital costs and operating expenses and may be required to obtain
consents to comply with any of these or certain other laws or regulations and the terms and conditions of any permits required pursuant
to such laws and regulations, including costs to install new or updated pollution control equipment, modify our operations or perform
other corrective actions at our respective facilities. In addition, fines and penalties may be imposed for noncompliance with environmental,
health and safety and other laws and regulations or for the failure to have, or comply with the terms and conditions of, required environmental
or other permits or consents.
The enactment of legislation implementing changes
in tax legislation or policies in different geographic jurisdictions could materially impact our business, financial condition and results
of operations.
We conduct business globally and file income tax returns in multiple
jurisdictions. Our consolidated effective income tax rate could be materially adversely affected by several factors, including: changing
tax laws, regulations and treaties, or the interpretation thereof (such as the One Big Beautiful Bill Act signed into law in the United
States on July 4, 2025 which, among other changes, codifies certain key changes including the treatment of U.S. R&D expenses, increasing
the interest expense deduction limits, and modifying the rules applicable to Foreign Derived Deduction Eligible Income (FDDEI) (formerly
Foreign Derived Intangible Income); tax policy initiatives and reforms in effect and under consideration (such as those related to the
Organization for Economic Co-Operation and Development’s (“OECD”) Base Erosion and Profit Shifting, or BEPS, project,
the European Commission’s state aid investigations and other initiatives); the practices of tax authorities in jurisdictions in
which we operate; the resolution of issues arising from tax audits or examinations and any related interest or penalties. Moreover, in
2015, the Organization for Economic Co-operation and Development (“OECD”) released various reports under its Base Erosion
and Profit Shifting (“BEPS”) action plan to reform international tax systems and prevent tax avoidance and aggressive tax
planning. These actions aim to standardize and modernize global corporate tax policy, including cross-border taxes, transfer-pricing documentation
rules and nexus-based tax incentive practices which in part are focused on challenges arising from the digitalization of the economy.
The reports have a very broad scope including, but not limited to, neutralizing the effects of hybrid mismatch arrangements, limiting
base erosion involving interest deductions and other financial payments, countering harmful tax practices, preventing the granting of
treaty benefits in inappropriate circumstances and imposing mandatory disclosure rules. It is the responsibility of OECD members to consider
how the BEPS recommendations should be reflected in their national legislation. Many countries are beginning to implement legislation
and other guidance to align their international tax rules with the OECD’s BEPS recommendations, for example, by signing up to the
Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (“MLI”) which currently has been signed by
over 100 jurisdictions, including Israel, who deposited its instrument of ratification to implement the MLI on September 13, 2018.
21
The MLI implements some of the measures that the BEPS initiative
proposes to be transposed into existing treaties of participating states. Such measures include the inclusion in tax treaties of one,
or both, of a “limitation-on-benefit” (“LOB”) rule and a “principal purposes test” (“PPT”)
rule. The application of the LOB rule or the PPT rule could deny the availability of tax treaty benefits (such as a reduced rate of withholding
tax) under tax treaties. In addition, the OECD has been working on proposals, commonly referred to as “BEPS 2.0,” which would
make important changes to the international tax system, by allocating taxing rights in respect of certain profits of multinational enterprises
above a fixed profit margin to the jurisdictions within which they carry on business (subject to threshold rules) and imposing a minimum
effective tax rate on certain multinational enterprises. The rules for a global minimum tax have been implemented in a number of jurisdictions
with effect from 2024. In response to concerns raised by the United States, the OECD recently finalized a “side-by-side” approach,
under which certain U.S.- parented multinational enterprises may be exempt from certain aspects of the global minimum tax rules.
It is not entirely clear how this side-by-side agreement will be implemented by each participating jurisdiction. As a result, these rules
remain under negotiation and continues to evolve. There have been and are likely to be significant changes in the tax legislation of various
OECD jurisdictions during the period of implementation of BEPS or BEPS 2.0. While certain BEPS initiatives are in the final stages of
approval and/or implementation, we cannot comprehensively predict their outcome or what impact they will have on our tax obligations and
operations or our financial statements, up to their final enactment in national and international legislation. Such legislative initiatives
may materially and adversely affect our plans to expand internationally and may negatively impact our financial condition, tax liability
or results of operations and could increase our administrative efforts. Such changes may include (but are not limited to) the taxation
of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends, royalties and interest
paid.
We are unable to predict what tax reforms may be proposed or enacted
in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation,
regulations, policies or practices in jurisdictions in which we operate, could increase the estimated tax liability that we have expensed
to date and paid or accrued on our consolidated financial statements, and otherwise affect our future results of operations, cash flows
in a particular period and overall or effective tax rates in the future in countries where we have operations, reduce post-tax returns
to our shareholders and increase the complexity, burden and cost of tax compliance. Significant changes or developments in U.S. laws and
policies, such as laws and policies surrounding international trade, foreign affairs, manufacturing and development and investment in
the territories and countries where we or our customers operate, can materially adversely affect our business, results of operations,
and financial condition. The U.S. government has imposed (in certain cases, subject to deferral) significant tariffs on imports from certain
jurisdictions and indicated the likely imposition of or significant increases in tariffs on goods imported into the United States from
many other jurisdictions in the future, which could lead to corresponding punitive actions by the countries with which the U.S. trades.
Tariffs imposed by the U.S. government are the subject of litigation and, in some cases, have been struck down by U.S. federal courts,
including by the U.S. Supreme Court. We are currently unable to predict whether any such changes will occur and, if so, the ultimate impact
on business or our vendors, and or contracts with BARDA and the DoW.
22
Risks Related to Our Intellectual Property Rights
Our success depends in part on our ability
to obtain and maintain protection for the intellectual property relating to, or incorporated into, our technology and products.
Our commercial success depends in part on our ability to obtain
and maintain patent protection and trade secret protection for our intellectual property and proprietary technologies, our products and
their uses, as well as our ability to operate without infringing upon the proprietary rights of others. We rely on a combination of patents,
trademark and trade secret laws, non-disclosure and confidentiality agreements, licenses, assignments of invention agreements and other
restrictions on disclosure and use to protect our intellectual property rights.
As of December 31, 2025, we had been granted a total of over 80
patents, of which 37 are in force, and have 13 pending patent applications. The family of patents that covers NexoBrid specifically includes
2 granted patents that are in force worldwide. EscharEx is covered in 22 patents in force. However, there can be no assurance that patent
applications relating to our products, processes or technologies will result in patents being issued, that any patents that have been
issued will be adequate to protect our intellectual property or that we will enjoy patent protection for any significant period of time.
Additionally, any issued patents may be challenged by third parties, and patents that we hold may be found by a judicial authority to
be invalid or unenforceable. Other parties may independently develop similar or competing technology or design around any patents that
may be issued to or held by us. Our current patents will expire or they may otherwise cease to provide meaningful competitive advantage,
and we may be unable to adequately develop new technologies and obtain future patent protection to preserve our competitive advantage
or avoid adverse effects on our business.
Our patent protection may be limited, subjecting
us to challenges by competitors.
At present, we consider our patents relating to our enzymatic platform
technology, which underlies NexoBrid, EscharEx and our current pipeline product candidates, to be material to the operation of our business
as a whole. Our patents which cover NexoBrid claim specific mixtures of proteolytic enzymes, methods of producing such mixtures and methods
of treatment using such mixtures. Although the protection achieved is significant for NexoBrid, EscharEx and our pipeline product candidates,
when looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited
than the protection provided by patents which claim chemical structures that were previously unknown. If our patents covering NexoBrid
in various jurisdictions were subject to a successful challenge or if a competitor were able to successfully design around them, our business
and competitive advantage could be significantly affected.
In addition, the patent landscape in the biotechnology field is
highly uncertain and involves complex legal, factual and scientific questions, and changes in either patent laws or in the interpretation
of patent laws in the United States and other countries may diminish the value and strength of our intellectual property or narrow the
scope of our patent protection. In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology
or products or enforce our patents due to lack of information about the exact use of our process by third parties. Even if patents are
issued to us, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to
prevent competitors from using similar technology or marketing similar products, or limit the length of time our technologies and products
have patent protection. In addition, we are a party to a license agreement with Mark Klein, that imposes various obligations upon us as
a licensee, including the obligation to make milestone and royalty payments contingent on the sales of NexoBrid. If we fail to comply
with these obligations, the licensor may terminate the license, in which event we might not be able to market any product that is covered
by the licensed intellectual property, including NexoBrid.
In order to preserve and enforce our patents and other intellectual
property rights, we may need to assert claims or file lawsuits against third parties. Such lawsuits could entail significant costs to
us and divert our management’s attention from developing and commercializing our products. Lawsuits may ultimately be unsuccessful
and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed, invalidated or held to
be unenforceable.
The timing of a patent application, grant,
and expiration may put us at a disadvantage compared to our competitors.
Our material patents also may not afford us protection against
competitors with similar technology. Because patent applications in the United States and many other jurisdictions are typically not published
until 18 months after their filing, if at all, and because publications of discoveries in scientific literature often lag behind actual
discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their
issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in
such patent applications. As a result, the patents we own and license may be invalidated in the future, and the patent applications we
own and license may not be granted. For example, if a third party has also filed a patent application covering an invention similar to
one covered in one of our patent applications, we may be required to participate in an adversarial proceeding known as an “interference
proceeding,” declared by the U.S. Patent and Trademark Office or its foreign counterparts, to determine priority of invention. The
costs of these proceedings could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated
patent position. In addition, if a third party prevails in such a proceeding and obtains an issued patent, we may be prevented from practicing
technology or marketing products covered by that patent. Additionally, patents and patent applications owned by third parties may prevent
us from pursuing certain opportunities such as entering into specific markets or developing certain products. Finally, we may choose to
enter into markets where certain competitors have patents or patent protection over technology that may impede our ability to compete
effectively.
23
We may not be able to protect our intellectual
property rights in all jurisdictions.
Effective protection of our intellectual property rights may be
unavailable or limited in some countries, and even if available, we may fail to pursue or obtain necessary intellectual property protection
in such countries, because filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the
world would be prohibitively expensive. In addition, the legal systems of certain countries do not favor the aggressive enforcement of
patents and other intellectual property rights, and the laws of certain foreign countries do not protect our rights to the same extent
as the laws of the United States. As a result, our intellectual property may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours. Competitors may use our technologies in jurisdictions where we have not obtained
patent protection to develop their own products, and we may be unable to prevent such competitors from importing such infringing products
into territories where we have patent protection but where enforcement is not as strong as in the United States or into jurisdictions
in which we do not have patent protection. These products may compete with our product candidates and our patents and other intellectual
property rights may not be effective or sufficient to prevent them from competing in those jurisdictions.
Eleven of the currently issued NexoBrid patents have expired in
November 2025. One of our two U.S. patents for NexoBrid was granted a 5-year patent term extension, and consequently, it will expire in
2030. The other U.S. patent is set to expire in 2029. However, because of the extensive time required for development, testing and regulatory
review of a potential product, and although such delays may entitle us to patent term extensions, it is possible that, before NexoBrid
can be commercialized in additional international jurisdictions and/or before any of our future products can be commercialized, any related
patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of the patent.
The international PCT patent applications relating to EscharEx were filed on January 30, 2017. National phase applications corresponding
to these PCT applications were filed in several jurisdictions and the expiration date of the 22 patents that were issued and are in force
is January 30, 2037, absent patent-term adjustment and/or extensions. Our pending and future patent applications may not lead to the issuance
of patents or, if issued, the patents may not provide us with any competitive advantage. We also cannot guarantee that:
| • |
any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented,
challenged or abandoned; |
| • |
our intellectual property rights will provide competitive advantages or prevent competitors from making or selling competing products;
|
| • |
our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will
not be limited by our agreements with third parties; |
| • |
any of our pending or future patent applications will be issued or have the coverage originally sought; |
| • |
our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may
be weak; or |
| • |
we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect
royalties or other payments. |
We may be unable to identify all past or future
unauthorized uses of our intellectual property.
Additionally, unauthorized use of our intellectual property may
have occurred or may occur in the future. Any failure to identify unauthorized use of, and otherwise adequately protect, our intellectual
property could adversely affect our business, including by reducing the demand for our products. Any reported adverse events involving
counterfeit products that purport to be our products could harm our reputation and the sale of our products. Moreover, if we are required
to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time-consuming, force
us to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result
in lower revenue and higher expenses.
24
In addition to patented technology, we rely
on our unpatented proprietary technology, trade secrets, processes and know-how.
We rely on proprietary information, such as trade secrets, know-how
and confidential information, to protect intellectual property that may not be patentable or that we believe is best protected by means
that do not require public disclosure. We generally seek to protect this proprietary information by entering into confidentiality agreements,
or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, contractors,
scientific advisors and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements
may be breached or otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information,
may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information.
We have limited control over the protection of trade secrets used by our suppliers and service providers and could lose future trade secret
protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known
or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, scientific
advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the related
rights or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope
of our and relevant third parties’ proprietary rights and failure to obtain or maintain protection for our proprietary information
could adversely affect our competitive business position. In addition, if a third party is able to establish that we are using their proprietary
information without their permission, we may be required to obtain a license to such information or, if such a license is not available,
re-design our products to avoid any such unauthorized use or temporarily delay or permanently stop manufacturing or sales of the affected
products. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our
trade secrets.
Some of our employees were previously employed at universities
or other biotechnology or pharmaceutical companies, including potential competitors. While we take steps to prevent our employees from
using the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have
inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s
former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could
result in substantial costs to us or be distracting to our management. If we fail to defend any such claims successfully, in addition
to paying monetary damages, we may lose valuable intellectual property rights or personnel.
If we are unable to protect our trademarks
from infringement, our business prospects may be harmed.
We own trademarks that identify “MediWound,” “NexoBrid”
and “EscharEx,” among others, and have registered these trademarks in certain key markets. Although we take steps to monitor
the possible infringement or misuse of our trademarks, it is possible that third parties may infringe, dilute or otherwise violate our
trademark rights. Any unauthorized use of our trademarks could harm our reputation or commercial interests. In addition, our enforcement
against third-party infringers or violators may be unduly expensive and time-consuming, and the outcome may be an inadequate remedy.
We may be subject to claims that we infringe,
misappropriate or otherwise violate the intellectual property rights of third parties.
Our development, marketing or sale of NexoBrid, EscharEx or our
pipeline product candidates may infringe or be accused of infringing one or more claims of an issued patent to which we do not hold a
license or other rights. We may also be subject to claims that we are infringing, misappropriating or otherwise violating other intellectual
property rights, such as trademarks, copyrights or trade secrets. Third parties could therefore bring claims against us or our strategic
partners that would cause us to incur substantial expenses, including litigation costs or costs associated with settlement, and, if successful
against us, could cause us to pay substantial damages. Further, if such a claim were brought against us, we could be forced to temporarily
delay or permanently stop manufacturing our sales of NexoBrid, EscharEx or our pipeline product candidates that are the subject of the
suit.
If we are found to be infringing, misappropriating or otherwise
violating the patent or other intellectual property rights of a third party, or in order to avoid or settle claims, we may choose or be
required to seek a license from a third party and be required to pay license fees or royalties or both, which could be substantial. These
licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive,
which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing
a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened claims, we or our strategic
partners are unable to enter into licenses on acceptable terms.
25
There have been substantial litigation and other proceedings regarding
patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition, to the extent that we gain
greater visibility and market exposure as a public company in the United States, we face a greater risk of being involved in such litigation.
In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference,
opposition, re-examination and similar proceedings before the U.S. Patent and Trademark Office and its foreign counterparts, regarding
intellectual property rights with respect to NexoBrid, EscharEx or our pipeline product candidates. The cost to us of any patent litigation
or other proceeding, even if resolved in our favor, could be substantial. A negative outcome could result in liability for monetary damages,
including treble damages and attorneys’ fees if, for example, we are found to have willfully infringed a patent. A finding of infringement
could prevent us from developing, marketing or selling a product or force us to cease some or all of our business operations. Some of
our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially
greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could
have a material adverse effect on our ability to compete in the marketplace, and patent litigation and other proceedings may also absorb
significant management time.
Under applicable employment laws, we may not
be able to enforce covenants not to compete.
We generally enter into non-competition agreements with our employees.
These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors
or clients for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees
work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants
developed while working for us. For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings
of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material
interests of the employer which have been recognized by the courts, such as the protection of a company’s trade secrets or other
intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting
from the expertise of our former Israeli employees or consultants and our ability to remain competitive may be diminished. As to our U.S.
operations, on the U.S. federal level, there was movement in 2023 by federal agencies to make noncompete agreements unenforceable in general.
The Federal Trade Commission proposed a new rule to ban employers nationwide from using non-compete agreements with their employees and
independent contractors, and the General Counsel of the National Labor Relations Board issued a memo in March 2023 opining that many types
of non-compete and non-solicitation restrictions unlawfully interfere with employees’ protected rights under Section 7 of the National
Labor Relations Act. If any of these proposed new U.S. federal restrictions becomes effective, or if any state in which we have operations
continues to expand restrictions or bans the use of non-compete restrictions, that could adversely impact our ability to protect our investment
in our key employees in our U.S. locations, and harm our competitive position.
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.
A significant portion of our intellectual property has been developed
for us by our employees in the course of their employment. Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived
by an employee in the course and as a result of or arising from his or her employment with a company are regarded as “service inventions,”
which belong to the employer, absent a specific agreement between the employee and employer giving the employee proprietary rights. The
Patent Law also provides under Section 134 that if there is no agreement between an employer and an employee as to whether the employee
is entitled to consideration for service inventions, and to what extent and under which conditions, the Israeli Compensation and Royalties
Committee, or the Committee, a body constituted under the Patent Law, shall determine these issues. Section 135 of the Patent Law provides
criteria for assisting the Committee in making its decisions. According to case law handed down by the Committee, an employee’s
right to receive consideration for service inventions is a personal right and is entirely separate from the proprietary rights in such
invention. Therefore, this right must be explicitly waived by the employee. A decision handed down in May 2014 by the Committee clarifies
that the right to receive consideration under Section 134 can be waived and that such waiver can be made orally, in writing or by behavior
like any other contract. The Committee will examine, on a case by case basis, the general contractual framework between the parties, using
interpretation rules of the general Israeli contract laws. Further, the Committee has not yet determined one specific formula for calculating
this remuneration, nor the criteria or circumstances under which an employee’s waiver of his right to remuneration will be disregarded.
Similarly, it remains unclear whether waivers by employees in their employment agreements of the alleged right to receive consideration
for service inventions should be declared as void being a depriving provision in a standard contract. We generally enter into assignment-of-invention
agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their
employment or engagement with us. Although our employees have agreed to assign to us service invention rights and have specifically waived
their right to receive any special remuneration for such service inventions beyond their regular salary and benefits, we may face claims
demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional
remuneration or royalties to our current or former employees or be forced to litigate such claims, which could negatively affect our business.
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Risks Related to an Investment in Our Ordinary Shares
The market price of our ordinary shares may
be subject to fluctuation and you could lose all or part of your investment.
Our ordinary shares were first offered publicly in our IPO in March
2014 at a price of $98.00 per share (as adjusted for the reverse stock split), and our ordinary shares have subsequently traded as high
as $135.17 per share and as low as $7.10 per share through December 31, 2025. The market price of our ordinary shares on the Nasdaq Global
Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not limited to:
| • |
actual or anticipated variations in our and our competitors’ results of operations and financial condition; |
| • |
market acceptance of our products; |
| • |
general economic, market and geopolitical conditions and other factors, including factors unrelated to our operating performance;
|
| • |
the mix of products that we sell and related services that we provide; |
| • |
changes in earnings estimates or recommendations by securities analysts, if our ordinary shares continue to be covered by analysts;
|
| • |
publication of the results of preclinical or clinical trials for NexoBrid, EscharEx or any of our pipeline product candidates;
|
| • |
failure by us to achieve a publicly announced milestone; |
| • |
delays between our expenditures to develop and market new or enhanced products and the generation of sales from those products;
|
| • |
development of technological innovations or new competitive products by others; |
| • |
announcements of technological innovations or new products by us; |
| • |
regulatory developments and the decisions of regulatory authorities as to the marketing of our current products or the approval or
rejection of new or modified products; |
| • |
developments concerning intellectual property rights, including our involvement in litigation; |
| • |
changes in our expenditures to develop, acquire or license new products, technologies or businesses; |
| • |
changes in our expenditures to promote our products; |
| • |
changes in the structure of healthcare payment systems; |
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our sale or proposed sale, or the sale by our significant shareholders, of our ordinary shares or other securities in the future;
|
| • |
changes in key personnel; |
| • |
success or failure of our research and development projects or those of our competitors; and |
| • |
the trading volume of our ordinary shares. |
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These factors and any corresponding price fluctuations may materially
and adversely affect the market price of our ordinary shares and result in substantial losses being incurred by our investors. In the
past, following periods of market volatility, public company shareholders have often instituted securities class action litigation. If
we were involved in securities litigation, it could impose a substantial cost upon us and divert the resources and attention of our management
from our business.
Future sales of our ordinary shares could reduce
the market price of our ordinary shares.
If we or our existing shareholders, our directors or their affiliates
or certain of our executive officers, sell a substantial number of our ordinary shares in the public market, the market price of our ordinary
shares could decrease significantly. The perception in the public market that we or our shareholders might sell our ordinary shares could
also depress the market price of our ordinary shares and could impair our future ability to obtain capital, especially through an offering
of equity securities.
We have made significant offerings of our ordinary shares in the
past and may do so again in the future. For example, The SEC declared effective our shelf registration statements on Form F-3 on April
22, 2019, June 3, 2022, September 9, 2024, and March 27, 2025. In our latest F-3, from March 27, 2025, we registered offerings of up to
$125,000,000 in various securities and the resale of up to 1,266,141 ordinary shares.
Sales by us or our shareholders of a substantial number of ordinary
shares in the public market could cause the market price of our ordinary shares to decline or could impair our ability to raise capital
through a future sale of, or pay for acquisitions using, our equity securities.
In addition, as of March 1, 2026, 1,281,242 ordinary shares were
subject to outstanding option and RSU awards granted to employees and office holders under our share incentive plans, including 834,268
ordinary shares issuable under currently exercisable share options and RSUs. We have filed registration statement on Form S-8 registering
the issuance of all such ordinary shares issuable under our share incentive plans. As of March 1, 2026, 433,039 shares are available for
future awards under our 2024 Share Incentive Plan. Shares included in such registration statements on Form S-8 may be freely sold in the
public market upon issuance, except for shares held by affiliates, who have certain restrictions on their ability to sell.
Because the 2014 Equity Incentive Plan (“2014 Plan”)
expired in March 2024, we adopted a new share incentive plan—the 2024 Share Incentive Plan (the “2024 Plan”) - and obtained
our shareholders’ approval for that plan at an extraordinary general meeting of shareholders that took place in December 2024. Outstanding
grants under the 2014 Plan will remain subject to the 2014 Plan even after the expiration of that plan, but any ordinary shares available
under the 2014 Plan as of the adoption of the 2024 Plan, or that subsequently become available under the 2014 Plan due to the expiration,
cancellation, forfeiture or other surrender of outstanding grants under the 2014 Plan (up to 1,158,641 ordinary shares in total), are
(or will become) available for new grants under the 2024 Plan.
Upon its effectiveness, the 2024 Plan had a total of 280,375
ordinary shares reserved and initially available for issuance, consisting entirely of 580,375 shares that were rolled over from the 2014
Plan. On February 19, 2026, we increased by 300,000 ordinary shares reserved for issuance under the 2024 Plan, and it now has 580,375
ordinary shares reserved and initially available for issuance. Out of that initial pool of shares, the number of ordinary shares that
may be issued upon the exercise of incentive stock options within the meaning of Section 422 of the Code is capped at 580,375.
In addition to the foregoing 580,375 ordinary shares initially
available under the 2024 Plan, up to 1,158,641 ordinary shares that underlie outstanding awards under the 2014 Plan may become available
for issuance under the 2024 Plan. Similarly, ordinary shares from among the 580,375 shares reserved under the 2024 Plan that become subject
to an award and are ultimately not issued (for any reason) will become available once again under the 2024 Plan.
As a foreign private issuer, we are permitted
to, and actually do, follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements.
As a foreign private issuer, we are permitted to, and do, follow
certain home country corporate governance practices instead of those otherwise required under the Nasdaq Stock Market listing rules for
domestic U.S. issuers. For instance, we follow home country practice in Israel with regard to the (i) quorum requirement for shareholder
meetings and (ii) shareholder approval for certain transactions other than a public offering involving issuances of a 20% or more interest
in the company. See “ITEM 16G. Corporate Governance.” We may in the future elect to follow home country practices in Israel
with regard to other matters as well, such as the formation and composition of the nominating and corporate governance committee, separate
executive sessions of independent directors and the requirement to obtain shareholder approval for certain dilutive events (such as for
the establishment or amendment of certain equity-based compensation plans, issuances that will result in a change of control of the company,
and certain acquisitions of the stock or assets of another company). Following our home country governance practices as opposed to the
requirements that would otherwise apply to a U.S. company listed on the Nasdaq Global Market may provide less protection to you than what
is accorded to investors under the Nasdaq Stock Market listing rules applicable to domestic U.S. issuers. See “ITEM 16G. Corporate
Governance.”
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As a foreign private issuer, we are not subject
to the provisions of Regulation FD or U.S. proxy rules and are exempt from filing certain Exchange Act reports.
As a foreign private issuer, we are exempt from certain rules under
the Exchange Act and U.S. proxy rules. We are not required under the Exchange Act to file annual and current reports and financial statements
with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, and we are
generally exempt from filing quarterly reports with the SEC. Moreover, we are not required to comply with Regulation FD, which prohibits
the selective disclosure of material non-public information to, among others, broker-dealers and holders of a company’s securities
under circumstances in which it is reasonably foreseeable that the holder will trade in the company’s securities on the basis of
the information. In addition, our principal shareholders are exempt from the reporting requirements, and our officers, directors, and
principal shareholders are exempt from the “short-swing" profit recovery provisions of Section 16 of the Exchange Act and the related
rules with respect to their purchases and sales of our ordinary shares. Even though we intend to comply voluntarily with Regulation FD,
these exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
For so long as we qualify as a foreign private issuer, we are not
required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement applicable to emerging growth
companies to disclose the compensation of our Chief Executive Officer and other two most highly compensated executive officers on an individual,
rather than an aggregate, basis. Nevertheless, the regulations promulgated under the Israeli Companies Law, 5759-1999 (the “Israeli
Companies Law”) require us to disclose the annual compensation of our five most highly compensated officers on an individual, rather
than on an aggregate, basis. See “ITEM 6.B. Compensation.” Under the Companies Law regulations, this disclosure is required
to be included in the proxy statement for our annual meeting of shareholders each year, which we furnish to the SEC under cover of a Report
of Foreign Private Issuer on Form 6-K. Because of that disclosure requirement under Israeli law, we are also including such information
in this annual report, pursuant to the disclosure requirements of Form 20-F. As a result of the exemptions accorded to us as a foreign
private issuer, you may not receive as much information in as timely of a manner as you would if we were a U.S. domestic company.
Changes to our status as a foreign private issuer or a reduction
to the leniencies accorded to foreign private issuers could increase our compliance costs.
Under current SEC rules, we would lose our foreign private issuer
status if a majority of our outstanding ordinary shares are held of record by U.S. shareholders and we fail to meet additional requirements
necessary to avoid loss of foreign private issuer status. Our status as a foreign private issuer is currently subject to an annual review
and will be tested again as of June 30, 2026 (the last business day of our second fiscal quarter of 2026). Although we have elected to
comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory and significantly
increase our regulatory and compliance costs. If we lose our foreign private issuer status, we will be required to file periodic reports
and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available
to a foreign private issuer. For example, if we were to lose our foreign private issuer status based on our annual review in 2026,
then beginning on December 31, 2026, we would be required to file both an annual report in respect of 2026 and quarterly reports in respect
of each of the quarters of 2027. We would also be required to follow U.S. proxy disclosure requirements, including the requirement to
disclose 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. 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.
On June 4, 2025, the SEC issued a concept release soliciting comments
on potential revisions to the foreign private issuer definition and/or the accommodations accorded to foreign private issuers. The SEC
is considering several possible changes, including requiring foreign private issuers to have minimum non-U.S. trading volume or maintain
a foreign (non-U.S.) exchange listing (neither of which we currently have), or be incorporated in jurisdictions with robust regulatory
frameworks. If the SEC amends the conditions to being a foreign private issuer and we cannot meet the new conditions, we would become
subject to the more stringent requirements applicable to U.S. domestic issuers. If the SEC substantially reduces the accommodations accorded
to foreign private issuers, then even if we maintain our status as a foreign private issuer, we would still be subject to more stringent
requirements. Either of those outcomes could significantly increase our compliance costs and require substantial changes to our practices.
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We have never paid cash dividends on our share
capital, and we do not anticipate paying any cash dividends in the foreseeable future.
We have never declared or paid cash dividends on our share capital,
nor do we anticipate paying any cash dividends on our share capital in the foreseeable future. We currently intend to retain all available
funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our ordinary
shares will be an investor’s sole source of gain for the foreseeable future. In addition, Israeli law limits our ability to declare
and pay dividends, and may subject our dividends to Israeli withholding taxes. See “ITEM 8.A. Consolidated Statements and Other
Financial Information-Dividend Policy,” “ITEM 10.B. Articles of Association-Dividend and liquidation rights” and “ITEM
10.E. Taxation-Israeli Tax Considerations and Government Programs.”
If we are unable to satisfy the requirements
of Section 404 of the Sarbanes-Oxley Act, or if our internal control over financial reporting or our disclosure controls and procedures
are not effective, investors may lose confidence in the accuracy and the completeness of the reports we furnish or file with the SEC,
the reliability of our financial statements may be questioned and our share price may suffer.
We are required to comply with the internal control, evaluation
and certification requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Pursuant to Section
404(a) of the Sarbanes-Oxley Act, we are required to furnish a report by management on the effectiveness of our internal control over
financial reporting. Because we have become an accelerated filer (as would be the case if we were furthermore to qualify as a large accelerated
filer), we are required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act.
To maintain the effectiveness of our disclosure controls and procedures
and our internal control over financial reporting, we expect that we will need to continue to enhance existing, and implement new, financial
reporting and management systems, procedures and controls to manage our business effectively and support our growth in the future. The
process of evaluating our internal control over financial reporting requires an investment of substantial time and resources, including
by our Chief Financial Officer and other members of our senior management. The determination and any remedial actions required could divert
internal resources and take a significant amount of time and effort to complete and could result in us incurring additional costs that
we did not anticipate, including the hiring of outside consultants.
Irrespective of compliance with Section 404, any failure of our
internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may
experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation
of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively
or efficiently, it could adversely affect our operations, financial reporting or results of operations. Further, if our internal controls
over financial reporting are not effective, the reliability of our financial statements may be questioned and our share price may suffer.
If equity research analysts do not continue
to publish research or reports about our business or if they issue unfavorable commentary or downgrade our ordinary shares, the price
of our ordinary shares could decline.
The trading market for our ordinary shares relies in part on the
research and reports that equity research analysts publish about us and our business. We do not have control over these analysts and we
do not have commitments from them to write research reports about us. The price of our ordinary shares could decline if no research reports
are published about us or our business, or if one or more equity research analysts downgrades our ordinary shares or if those analysts
issue other unfavorable commentary or cease publishing reports about us or our business.
Expectations, regulations and relating to environmental,
social and governance (ESG) matters may impose additional costs and expose us to new risks.
There is an increasing focus from certain investors, clients, regulators,
employees and other key stakeholders or third parties concerning environmental, social and governance (“ESG”) factors, including
those relating to climate change, supply chain matters and human capital management. Such increased scrutiny may result in increased costs,
increased risk of litigation or reputational damage relating to our ESG practices or performance, enhanced compliance or disclosure obligations,
or other adverse impacts on our business, financial condition or results of operations. Additionally, the emphasis on ESG matters has
resulted and may result in the adoption of new laws and regulations, including new reporting requirements in various jurisdictions such
as the United States, European Union, Australia, Singapore, and others. Our failure to comply with any applicable rules or regulations
could lead to penalties and adversely impact our reputation, customer attraction and retention, access to capital and employee retention.
Such ESG matters may also impact our suppliers, customers and business partners, which may augment or cause additional impacts on our
business, financial condition or results of operations
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Furthermore, the intensifying effects of climate change present
physical, liability, and transition risks with both macro and micro implications for companies and financial markets. Events such as floods,
droughts, wildfires and severe storms could, among other things, disrupt our operations, including by damaging or destroying our facilities
or those of our suppliers, which may cause us to suffer losses and additional costs to maintain or resume operations or as a result of
supply chain-related delays or cancellations, which could have an adverse impact on our business and results of operations. In addition,
implementing changes to mitigate risks associated with such events may result in substantial short- and long-term additional operational
expenses, which may materially affect our profitability.
Our U.S. shareholders may suffer adverse tax
consequences if we are characterized as a passive foreign investment company.
Generally, if for any taxable year 75% or more of our gross income
is passive income, or at least 50% of the average quarterly value of our assets (which may be determined in part by the market value of
our ordinary shares, which is subject to change) are held for the production of, or produce, passive income, we would be characterized
as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. Based on our current estimates of our
gross income and gross assets and the nature of our business, we do not believe we were classified as a PFIC for the taxable year ended
December 31, 2025. There can be no assurance that we will not be considered a PFIC for the current or any future taxable year. PFIC status
is determined as of the end of the taxable year and depends on a number of factors, including the value of a corporation’s assets
and the amount and type of its gross income. Furthermore, the value of our gross assets is likely to be determined in large part by reference
to our market capitalization. As such, a decline in the value of our ordinary shares or an increase in the value of our passive assets
(including cash and short term investments), for example, may result in our becoming a PFIC. If we are characterized as a PFIC, our U.S.
shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary
income, rather than as capital gain, the loss of the preferential rate that may be applicable to dividends received on our ordinary shares
by individuals who are U.S. Holders (as defined in “ITEM 10.E. Taxation-United States Federal Income Taxation”), and having
interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some of the
adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares.
However, we do not intend to provide the information necessary for U.S. holders to make qualified electing fund elections if we are classified
as a PFIC. See “ITEM 10.E. Taxation-United States Federal Income Taxation-Passive Foreign Investment Company Considerations.”
Risks Primarily Related to our Operations in Israel
Conditions in Israel could materially and adversely affect our business.
We are incorporated under Israeli law, and our cGMP certified sterile
manufacturing facility and our research and development facilities are located in Yavne, in central/southern Israel. Many of our employees,
including management members, operate from our headquarters located in Israel. In addition, our officers and one director are residents
of Israel. Our employees, including management members operate from our offices that are located in Yavne, in central/southern Israel.
In addition, our officers and one director are residents of Israel. Accordingly, political, economic, and military conditions in Israel
and the surrounding region may directly affect our business and operations.
Israel has been involved in various defensive wars during the last
few years in response to, or in preemption of, Middle East terrorist or state-sponsored attacks on civilian targets in Israel. In late
February 2026, Israel and the United States preemptively attacked Iran, in order to eliminate Iran's nuclear and ballistic missile capabilities,
and to target the Islamic fundamentalist regime governing Iran, which has threatened Israel's existence. As part of this conflict, Iran
launched missile attacks throughout Israel. This war followed upon similar conflicts in June 2025, and April 2024 and October 2024, during
which Iran launched ballistic missile attacks against Israel, and Israel conducted strikes against Iranian military and nuclear infrastructure.
The direct conflicts with Iran ran parallel to, and followed upon, a two-year war (from October 2023 until October 2025) during which
Israel was attacked by Hamas and Hezbollah, terrorist groups sponsored by Iran operating out of the Gaza Strip and Lebanon, respectively.
and declared war in response, which included ground operations in the Gaza Strip and southern Lebanon. Other Iranian-sponsored terrorist
organizations in the Middle East, including the Houthi terrorist group in Yemen, have also attacked Israel with various types of missiles
and drones as part of these conflicts, and Israel has responded with air force attacks. Nearby in the region, the fall of the Assad regime
in Syria led Israel to conduct limited military operations targeting Iranian military assets and infrastructure linked to Hezbollah and
other Iran-supported groups.
Although the wars and related regional military developments have
not materially impacted our business or operations as of the date of this report, any intensification of hostilities or opening of additional
fronts to the conflicts could have a negative impact on both global and regional conditions and may adversely affect our business, financial
condition, and results of operations.
31
During, the wars with
Iran and/or its sponsored terrorist groups, a limited number of our workforce in Israel have been called into active duty (and have generally
been released after a period of time), and others have been providing support to family members engaged in the war. If present or future
conflicts escalate, our employees may be called up for additional reserve duty sooner than expected, additional employees may be called
for service, and such persons may be absent for an extended period of time. This may materially and adversely affect our business operations,
including product development, and our ability to meet our customers’ expectations and our contractual obligations towards customers
and vendors, and could cause our competitive position to be impacted and our sales to decrease. Parties with whom we have agreements involving
performance in Israel could also claim that they are not obligated to perform their commitments under those agreements pursuant to force
majeure provisions in such agreements due to the security situation in Israel.
The intensity and duration
of the current or future hostilities, as well as their economic impact on our business and operations and on Israel’s economy in
general, is difficult to predict. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s
economic standing. For example, in August 2024, Fitch downgraded Israel’s Long-Term Foreign-Currency Issuer Default Rating
to ‘A’ from ‘A+’ and in September 2024 Moody’s downgraded Israel’s credit rating to ‘Baa1’
from ‘A2’. While we cannot directly point to negative consequences of these downgrades, if further downgrades from ratings
agencies were to follow, such downgrades may negatively affect our business or our ability to conduct our operations.
The hostilities with
Iran, Hamas, Hezbollah and other terrorist organizations or countries now and in the past have included and may include terror, missile
and drone attacks. During the wars, hostilities have caused damage to private and public facilities, infrastructure, utilities, and telecommunication
networks. In addition, Israeli companies have been subject to extensive cyber attacks, which could lead to increased costs, risks to employee
safety, and challenges to business continuity, with potential financial losses. In the event that our facilities are damaged as
a result of an armed attack, our immediate ability to maintain business continuity may be impaired, and we would likely suffer substantial
direct and indirect costs, that may not be recoverable from our commercial insurance. Although the Israeli government currently covers
the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot be assured that such government
coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have
a material adverse effect on our business.
Provisions of Israeli law and our articles
of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the terms of such a transaction
are favorable to us and our shareholders.
Israeli corporate law regulates mergers, requires tender offers
for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant
shareholders and regulates other matters that may be relevant to such types of transactions. For example, a merger may not be consummated
unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar
of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger.
In addition, a majority of each class of securities of the target company must approve a merger. Moreover, a tender offer for all of a
company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at
least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not
have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98%
of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender
offer, may, at any time within six months following the completion of the tender offer, petition an Israeli court to alter the consideration
for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal
rights. See “ITEM 10.B. Articles of Association-Acquisitions Under Israeli law” for additional information.
Furthermore, Israeli tax considerations may make potential transactions
unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders
from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect
to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a
number of conditions, including, a holding period of two years from the date of the transaction during which sales and dispositions of
shares of the participating companies are subject to certain restrictions. 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 disposition of the shares has occurred.
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These and other similar provisions could delay, prevent or impede
an acquisition of our company or our merger with another company, even if such an acquisition or merger would be beneficial to us or to
our shareholders.
We have received Israeli government grants
for certain research and development activities. The terms of those grants require us to satisfy specified conditions and to pay penalties
in addition to repayment of the grants upon certain events.
Our research and development efforts have been financed in part
through grants from the Israeli Innovation Authority (“IIA”), formerly operating as the Israeli Office of the Chief Scientist
(the “OCS”). The total gross amount of grants actually received by us from the IIA, including accrued interest (or such other
interest rate that the IIA may set in the future) and net of royalties actually paid as of December 31, 2025, totalled approximately $14.2
million and the amortized cost (using the interest method) of the liability as of that date totalled approximately $8.1 million. As of
December 31, 2025, we had accrued and paid net royalties to the IIA in an amount of $2.4 million. As of December 31, 2018, we determined
that we will no longer be supported by the IIA. As a result, since 2020 we did not submit applications for IIA grants and we do not plan
to submit in 2026.
The IIA grants that we have received are repayable by payment of
royalties from the sale of products developed as part of the programs for which grants were received. Our obligation to pay these royalties
is contingent on our actual sale of such products and services. In the absence of such sales, no payment of such royalties is required.
Even following full repayment of any IIA grants, we must nevertheless continue to comply with the requirements of the Encouragement of
Research, Development and Technological Innovation in the Industry Law, 5744-1984 (formerly known as the Law for the Encouragement of
Industrial Research and Development, 5744-1984), and related regulations (collectively, the “Innovation Law”). When a company
develops know-how, technology or products using IIA grants, the terms of these grants and the Innovation Law restrict the transfer outside
of Israel of such know-how, and the manufacturing or manufacturing rights of such products, technologies or know-how, without the prior
approval of the IIA. Therefore, if aspects of our technologies are deemed to have been developed with IIA funding, the discretionary approval
of an IIA committee would be required for any transfer to third parties outside of Israel of know-how or manufacturing or manufacturing
rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose certain conditions
on any arrangement under which it permits us to transfer technology or development out of Israel.
The transfer of IIA-supported technology or know-how or manufacturing
or manufacturing rights related to aspects of such technologies outside of Israel may involve the payment of significant penalties and
other amounts, depending upon the value of the transferred technology or know-how, the amount of IIA support, the time of completion of
the IIA-supported research project and other factors. If our products are manufactured outside of Israel, assuming we receive prior approval
from the IIA for the foreign manufacturing, we may be required to pay increased royalties. The increase in royalties depends on the manufacturing
volume that is performed outside of Israel. These restrictions and requirements for payment may impair our ability to sell our technology
assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology
outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel
of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are
required to pay to the IIA.
It may be difficult to enforce a judgment of
a U.S. court against us, our officers and directors or the Israeli experts named in this annual report in Israel or the United States,
to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.
We are incorporated in Israel. All of our executive officers and
three of our directors listed in this annual report reside outside of the United States, and most of our assets and most of the assets
of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including
a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and
may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United
States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based
on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim.
In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is 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 by expert witnesses, 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. As a result of the difficulty associated with enforcing a judgment against us
in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.
33
Your rights and responsibilities as a shareholder
will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S.
companies.
Since we are incorporated under Israeli law, the rights and responsibilities
of our shareholders are governed by our articles of association 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 the company’s articles of association, an increase of the company’s
authorized share capital, a merger of the company and approval of related 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 the company or has another power with respect to the company, has a duty to act in fairness towards the company.
However, Israeli law does not define the substance of this duty of fairness. See “ITEM 6.C. Board Practices.” Some of the
parameters and implications of the provisions that govern shareholder behavior have not been clearly determined. 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. Additionally, the quorum requirements for meetings of our shareholders are lower than is customary for domestic issuers.
As permitted under the Companies Law, pursuant to our articles of association, the quorum required for an ordinary meeting of shareholders
will consist of at least two shareholders present in person, by proxy or by other voting instrument in accordance with the Companies Law,
who hold at least 25% of our outstanding ordinary shares. For an adjourned meeting at which a quorum is not present, the meeting may generally
proceed irrespective of the number of shareholders present at the end of half an hour following the time fixed for the meeting.
Item 4. INFORMATION
ON THE COMPANY
| A. |
History and Development of the Company |
Our History
Our legal name is MediWound Ltd. and our commercial name is MediWound.
We are a company limited by shares organized under the laws of
the State of Israel. MediWound was founded and incorporated in January 2000. We are registered with the Israeli Registrar of Companies.
Our registration number is 51-289494-0. Our principal executive offices are located at 42 Hayarkon Street, Yavne 8122745, Israel, and
our telephone number is +972 (77)-971-4100.
Our agent for service of process in the United States is Puglisi
& Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, and its telephone number is +1 (302) 738-6680.
The SEC maintains an internet site that contains reports, proxy
and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov. Our
website address is www.MediWound.com. Information contained on, or that can be accessed through, our website does not constitute a part
of this annual report and is not incorporated by reference herein. We have included our website address in this annual report solely for
informational purposes.
Principal Capital Expenditures
For a description of our principal capital expenditures and divestitures,
see ITEM 5. “Operating and Financial Review and Prospects-Liquidity and Capital Resources” and Note 15A(3) to our consolidated
financial statements included elsewhere in this annual report.
34
| B. |
Business Overview |
We are a global leader in next-generation enzymatic therapeutics
focused on non-surgical tissue repair. Our solutions selectively remove non-viable hazardous tissue while preserving healthy tissue, offering
a safer and more effective alternative to traditional methods. With robust in-house research, development, and manufacturing capabilities,
the company produces and commercializes cutting-edge biologics for wound and burn care that exceed existing standards of care, improve
patient outcomes, and reduce healthcare costs by eliminating the need for surgical interventions.
Our flagship product, NexoBrid, is a topically administered biological
orphan drug that enzymatically removes eschar while preserving viable tissue in patients with deep partial- and full-thickness thermal
burns. It is approved for use in more than 40 countries, including the United States, in the European Union Japan and Australia.
EscharEx®
is a bromelain-based, bioactive enzymatic therapy in advanced clinical development for the debridement of chronic and hard-to-heal wounds.
Designed for topical, once-daily application, EscharEx has demonstrated a favorable safety profile and effective wound bed preparation
in multiple Phase II trials. The therapy has shown the ability to remove non-viable tissue, promote granulation tissue, and reduce bioburden
and biofilm. A global Phase III study in venous leg ulcers (VLUs) is currently underway, and a Phase II clinical study in diabetic foot
ulcers (DFUs) is planned to be initiated in the second half of 2026. EscharEx has shown clinical advantages over the leading enzymatic
debridement product and targets a substantial global market opportunity.
Our pipeline also includes MW005, a topical therapeutic for the
treatment of basal cell carcinoma that has demonstrated positive results in a Phase I/II study.
We manufacture NexoBrid and our product candidates in our cGMP
certified sterile manufacturing facility at our headquarters in Yavne, Israel.
Key Recent Developments
NexoBrid
In November 2025, commissioning of the expanded NexoBrid manufacturing
facility was completed. The expanded NexoBrid manufacturing facility is now fully operational, increasing production capacity sixfold
to support growing global demand; market availability remains subject to completion of regulatory reviews and approvals, which are expected
in 2026.
In 2025, we received an additional $3.6 million in funding from
the DoW to advance development of a room temperature-stable formulation of NexoBrid. The supplemental funding will support expanded CMC
activities, enhancement of in-house manufacturing capabilities and initial preparations for a clinical trial.
In September 2025, the Therapeutic Goods Administration approved
NexoBrid for use in Australia in both adult and pediatric burn patients, expanding approved markets to 45 countries worldwide.
EscharEx
In February 2025, we initiated VALUE, a global, pivotal Phase III
trial evaluating EscharEx for the treatment of VLUs, in which 216 patients across 40 sites in the United States and Europe will be enrolled.
The majority of the sites are already active. The co-primary endpoints are the incidence of complete debridement and facilitation of wound
closure. An interim sample size assessment will be conducted after 65% of patients complete treatments, enabling adaptive adjustments
as needed. Interim assessment and enrollment completion are expected by year-end 2026.
In addition to the VALUE study, we plan to initiate a randomized, head-to-head Phase
II study in VLU patients in 2026, comparing EscharEx to collagenase SANTYL®
ointment, approved by the FDA for debriding chronic dermal ulcers , and other non-surgical standard of care.
During 2025 through the date of this report, we expended our strategic research collaborations
and the EscharEx program is supported by leading global wound care companies, including Coloplast, B. Braun, Convatec, Essity, Mölnlycke,
Solventum, and MiMedx, reflecting strong industry validation of the program.
Following constructive and aligned regulatory feedback on trial
design and development strategy from both the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA),
the Company plans to initiate a Phase II study of EscharEx in DFUs in the second half of 2026.
In November 2025, an independent global consulting firm estimated
a peak sales opportunity of approximately $831 million for EscharEx.
35
In January 2026 we announced that a prospective, single-arm investigator-initiated
trial (IIT) to evaluate the safety and efficacy of EscharEx in pressure ulcers is planned to initiate in the second half of 2026
MW005
In July 2023, we announced positive results in our U.S. Phase I/II
study of MW005 for the treatment of basal cell carcinoma. Fifteen patients were treated with MW005 and completed the study. Results showed
MW005 was well-tolerated, with a high level of patient compliance. Based on clinical assessments, eleven out of fifteen patients achieved
complete clearance of their BCCs; the majority of these patients also had histologically confirmed complete clearance.
Securities
Purchase Agreement
In September 2025, we entered into a Securities Purchase Agreement
(the “SPA”) with certain purchasers, in connection with the offer and sale (the “Offering”) of 1,734,105 of our
ordinary shares, par value NIS 0.07 per share (the “Ordinary Shares”). The purchase price of the Ordinary Share was $17.30,
and the Offering was made pursuant to a “shelf” registration statement on Form F-3, declared effective by the SEC on March
27, 2025. The Offering closed on September 30, 2025 and the gross proceeds we received were approximately $30.0 million. We intend to
use the net proceeds from the Offering primarily to support EscharEx’s pre-commercial activities, to enhance its large-scale manufacturing
capabilities and for general corporate purposes. H.C. Wainwright & Co., LLC (“Wainwright”) acted as the exclusive placement
agent for the Offering.
Our Focus:
Burn Care
Burns are a significant global health concern, causing severe physical
and psychological harm while placing considerable burdens on patients and healthcare systems. Immediate and effective removal of necrotic
tissue is crucial to reducing infection risk and ensuring optimal healing; however, traditional surgical methods can be invasive and imprecise.
NexoBrid, our innovative enzymatic debridement therapy, addresses this unmet need by selectively removing non-viable tissue while preserving
healthy skin. By offering a less invasive alternative to surgery, NexoBrid promotes faster healing, reduces complications, and improves
the overall quality of burn care for patients around the world.
NexoBrid, a concentrate of proteolytic enzymes enriched in bromelain,
is a topically administered biological orphan drug that enzymatically removes eschar while preserving viable tissue in patients with deep
partial- and full-thickness thermal burns. It is approved in more than 45 countries, including the United States, European Union, Japan
and Australia. NexoBrid has been investigated in hundreds of patients across more than 22 countries and four continents in ten completed
Phase II, Phase III and post-marketing clinical studies. Over 16,000 burn patients have been treated with NexoBrid in the market since
2013 and the safety and efficacy data reported from post-marketing data sources are consistent with the data available from clinical trials
and no new safety signals have been observed. There have been hundreds of presentations and several award-winning abstracts of NexoBrid
in international and national scientific conferences, as well as about 150 peer-reviewed papers, resulting in the support of burn specialists
and key opinion leaders. Awareness of NexoBrid continues to grow through our marketing efforts in countries where the drug is approved.
Burn Wounds
Burns are life threatening and debilitating traumatic injuries
causing considerable morbidity and mortality. A burn may result from thermal, electrical or chemical means that destroy the skin to varying
depths. According to Critical Care, an international clinical medical journal, burns are also among the most expensive traumatic injuries
because of long and costly hospitalization, rehabilitation and wound and scar treatment.
Most burn injuries involve part of or the entire thickness of the
skin and in some cases, the deeper subcutaneous fat tissue or underlying structures. The severity of the burn depends on three main factors:
| • |
The extent of the surface that the burn occupies is usually referred to as percent of total body surface area (“TBSA”).
A burn on an adult’s entire palm would generally amount to 1% TBSA, and the average hospitalized patient has a burn covering approximately
9% TBSA. Burns covering more than 15-20% TBSA usually require hospitalization and may result in dehydration, shock and increased risk
of mortality. |
| • |
The depth of the burn, referred to in terms of “degree” is generally classified into four categories: |
36
| ○ |
Superficial or first-degree burns. Such burns do not penetrate
the basal membrane and usually heal naturally. |
| ○ |
Dermal/partial thickness or second-degree burns. Such burns are
characterized by varying amounts of damaged dermis and can be further subdivided into superficial and deep partial-thickness burns. Superficial
partial-thickness burns may heal spontaneously after removal of the covering thin eschar. Conversely, deep partial-thickness burns are
often difficult for physicians to accurately diagnose before eschar removal and may progress and transform into full-thickness burns if
not debrided in a timely manner, depending on the magnitude of latent tissue death of the surrounding skin. |
| ○ |
Full thickness or third-degree burns. Such burns are characterized
by death of the entire dermal tissue down to the subcutaneous fat and must be debrided and treated by autografting, which is the process
of harvesting skin from healthy donor sites on a patient’s body and transplanting it on the post-debridement, clean wound bed.
|
| ○ |
Fourth-degree burns. Such burns, which are rare, extend beyond
the subcutaneous fat tissue into the underlying structures, such as muscle or bone, and also require debridement and further substantial
treatment. |
| • |
Other factors include the age of the victim, the body part where the burn occurred and any co-morbidities of the patient. For example,
some patients may require hospitalization regardless of the TBSA or degree of the burn, such as children, the elderly or victims with
burns to the extremities, joints or head/neck area or with co-morbidities such as smoke inhalation, diabetes or obesity. |
When patients are hospitalized for a severe burn, the first step
in the treatment after patient stabilization and resuscitation is usually eschar removal. The eschar is the burned tissue in the wound,
which is deprived of blood and isolated from all natural systemic defense mechanisms. Eschar removal is an essential first step in the
treatment of patients with severe burns, allowing for:
| • |
the prevention of local infection, sepsis (a systemic inflammatory response caused by severe infection) and additional damage to
surrounding viable tissue; and |
| • |
the initiation of the body’s healing process and scar prevention. |
In addition to minimizing the possibility of additional complications,
once the eschar is removed, a physician may properly diagnose the true extent of the trauma by a direct visual assessment of the clean
wound bed. An informed treatment strategy can be decided upon only if the depth of the burn and extent of the tissue damage is known.
Diagnosis of burn depth is difficult, especially because the burn commonly changes its appearance during the first days after injury due
to burn progression. Burns that are initially difficult to classify due to the presence of eschar are referred to as “indeterminate”
burns. This ambiguity can delay the assessment of the burn depth and formulation of proper treatment. Unless the burns are life-threatening,
definitive treatment is postponed for several days post-injury until diagnosis is clearer, when burn progression by death of the surrounding
and underlying tissue has already occurred and ended. During this delay, local and systemic effects of post-burn inflammation and bacterial
contamination can occur. Therefore, earlier, selective eschar removal is essential to prevent eschar-related complications and to allow
the physician to reach an informed decision on further treatment.
Currently, there are two main treatment modalities for debridement:
| • |
Surgical debridement |
| ○ |
Surgical debridement predominantly includes tangential excision, a procedure in which a surgeon amputates the entire dead tissue
mass, layer after layer, down to healthy, viable tissue. The excision is extended into healthy intact tissue to make sure that no trace
of the eschar remains, resulting in up to an estimated 30-50% of healthy tissue being excised during this procedure. Other methods include
dermabrasion, in which a mechanically powered, hand-held rotating abrading cylinder is used to slowly scrape off tissue, and hydro surgery,
in which a high-pressure flow of water abrades the tissue. These alternative methods have attempted to limit the trauma associated with
tangential excision, but entail spray of contaminated eschar or take a significantly longer time to complete than tangential excision.
|
37
| ○ |
The benefits of surgical eschar removal are that it is usually fast and effective. Disadvantages include the significant trauma of
the procedure, associated blood loss, risk of surgery in delicate areas of the body such as hands, added costs, and, most importantly,
the loss of viable tissue that necessitates additional surgical procedures for harvesting skin from healthy donor sites and autografting.
|
| ○ |
Due to the disadvantages of surgery in extensive burns some surgeons limit their debriding surgery to only a part of the affected
area in a single session (15-30% TBSA in most centers), thus delaying full debridement by days. After several days, complications related
to eschar contamination may begin and some of the benefits of the earlier debridement may not be realized. On the other hand, when excising
burns immediately, all suspected necrotic tissue will be excised, inevitably resulting in over-excision, especially in “indeterminate”
burns, as after surgical excision, the remaining skin often no longer has any spontaneous healing potential and will heal only by autografting.
|
| • |
Non-surgical debridement |
| ○ |
Non-surgical debridement includes many different treatment options that do not require direct surgical removal of the skin to remove
eschar. With non-surgical debridement, the eschar is naturally, but slowly, removed by contaminant microorganisms, tissue autolysis, or
self-decomposition, and the inflammatory process that may lead to serious local and systemic complications. In seeking to facilitate such
natural processes, topical medication, anti-microbial agents, enzymes and biological/chemical applications are often applied onto the
eschar. |
| ○ |
The benefits of this approach are that it is non-surgical, reduces trauma to the patient and is easier to apply. Disadvantages include
numerous dressing changes and mechanical scraping with limited debridement efficacy. This prolongs the eschar removal process, which may
lead to death of the tissue surrounding the initial burn wound, causing partial-thickness wounds to transform into full-thickness wounds
and forming granulation tissue that may develop into heavy scars. |
As demonstrated in our clinical trials, NexoBrid combines the advantages
of surgical and non-surgical debridement modalities by providing rapid and effective eschar removal while not harming viable tissue. This
allows for earlier direct visual assessment of the burn wound in order to formulate proper treatment.
Market Opportunity
Severe burns require specialized care in hospitals or burn centers.
In the United States, approximately 40,000 patients with burn injuries are hospitalized each year, including many with severe burns treated
in specialized burn centers; data from Europe suggest variable national hospitalization rates for severe burns and suggest a simple aggregate
total comparable to the U.S. figure. The prevalence of patients with severe burns is even higher in emerging economies. For example, approximately
400,000 patients are hospitalized every year with burns in India according to a study conducted by IMS Health. The severe burn patients
are predominantly treated by specialists in approximately 250 burn centers in Europe and the United States, as well as at burn units of
large hospitals in Europe. We believe these patients can benefit from NexoBrid’s effective and selective, non-surgical eschar removal.
In addition to our current marketing of NexoBrid in Europe and
the United States, we have signed local distribution agreements for distribution of NexoBrid in Europe, Asia-Pacific countries, and the
Middle East. Beyond its commercial applications, we believe NexoBrid has the potential to play a critical role in burn mass casualty incidents
(“BMCI”), which occur when emergency medical resources are overwhelmed by the number and severity of casualties. BMCI events
can arise from various emergencies, including terrorist attacks, natural disasters, fires, and explosions. A specific type of BMCI is
a mass burn casualty disaster, which the American Burn Association defines as an event where the number of burn victims exceeds the capacity
of local burn centers to provide optimal care. In such scenarios, patient backlogs may delay treatment, exacerbating clinical outcomes.
Non-surgical eschar removal methods that are both rapid and selective—such as NexoBrid—have the potential to alleviate the
burden on healthcare systems during BMCI events. By enabling eschar removal without harming viable tissue, NexoBrid may reduce the time,
labor, and resource constraints associated with traditional surgical debridement, allowing more patients to receive timely treatment.
In the event of a BMCI, healthcare professionals can administer NexoBrid directly at the patient’s bedside, without requiring a
surgical team or operating room facilities. Clinical studies have demonstrated that NexoBrid effectively removes eschar in a single four-hour
application with statistical significance. Once the acute phase of treatment is completed, wounds can be covered with available materials
and further managed once BMCI-related bottlenecks are alleviated. NexoBrid has been recognized by the U.S. Biomedical Advanced Research
and Development Authority (“BARDA”) as a medical countermeasure for burn treatment in BMCI scenarios. Additionally, The World
Health Organization (WHO) has recently recognized enzymatic debridement as a validated treatment for burn injuries. This recognition,
featured in the WHO’s Standards and Recommendations for BMCI guidelines for emergency medical teams, highlights NexoBrid’s
critical role in emergency preparedness. It also bolsters efforts to implement strategic stockpiling plans within the European Union through
the Health Emergency Preparedness and Response Authority (HERA).
38
Governmental Support
BARDA
In September 2015, we were awarded the BARDA contract (the “BARDA
Contract”) for treatment of thermal burn injuries. This contract was amended several times over the years to extend its term until
September 2025 and its total value, up to a total amount of $175 million comprised of up to $110 million to support research and development
activities and up to $65 million to procure NexoBrid for U.S. emergency preparedness.
The BARDA Contract provided funding and technical support for the
pivotal U.S. Phase III clinical study (DETECT), the randomized, controlled pivotal clinical trial for use in the pediatric population
(CIDS), the marketing approval registration process for NexoBrid as well as its procurement and availability under the expanded access
treatment protocol (NEXT) in the U.S.
As of December 31, 2025, the Company has recognized a cumulative
total of $99.8 million in revenues from development services, and an additional $16.5 million for procurement of NexoBrid for U.S. emergency
preparedness.
The BARDA Contract expired in September 2025.
DoW and MTEC contracts
In February 2022, the Company entered into a contract with the
DoW through the Medical Technology Enterprise Consortium (MTEC) to advance the development of a temperature-stable formulation of NexoBrid
for field-care burn treatment for the U.S. Army. This contract was subsequently amended multiple times throughout 2023–2025 to expand
funding, bringing the total contract value to $17.0 million.
Additionally, the Company was awarded $1.2 million in direct funding
from MTEC to further support the development of the temperature-stable NexoBrid formulation. This MTEC Contract expired in December 2025.
As of December 31, 2025, the total funding from the DoW and MTEC
is $18.2 million.
As of December 31, 2025, the Company has recognized a cumulative
total of $15.0 million in revenues from development services the DoW and MTEC contracts.
The MTEC contract may be terminated by MTEC at any time at MTEC’s
discretion.
NexoBrid Clinical History
The active ingredient of NexoBrid is a concentrate of proteolytic
enzymes enriched in bromelain extracted from pineapple stems. Proteolysis is a breakdown of proteins into smaller building blocks, polypeptides
or amino acids. Our research and development strategy is centered around our validated proteolytic enzyme platform technology, focused
on next-generation bio-active therapies for burn and wound care and biological medicinal products for tissue repair. For each indication,
our research and development team further develops and optimizes our enzymatic platform technology, creating unique and differentiated
products meeting separate needs based on the specific indication, which is the basis for NexoBrid, EscharEx and all other pipeline product
candidates. One vial of NexoBrid containing 2 grams of concentrate of proteolytic enzymes enriched in bromelain is sufficient for treating
a burn wound area of 1% total body surface area (“TBSA”). We developed NexoBrid to fulfill the previously unmet need for a
non-surgical effective and selective debriding agent that combines the efficacy and speed of surgery with the non-invasiveness of non-surgical
methods. NexoBrid enhances the ability of physicians to conduct an earlier direct visual assessment of the burn depth to reach an informed
decision on further treatment as well as to reduce the surgical burden and achieve a favorable long-term patient outcome.
NexoBrid has been investigated in hundreds of patients across 22
countries and four continents in ten completed Phase II and Phase III and post-marketing clinical studies. While we are marketing our
product for the removal of eschar in burn wounds under the name “NexoBrid,” in clinical trials the product has been referred
to as “Debridase” and “Debrase.”
39
The following table sets forth information regarding the completed
clinical trials of NexoBrid:
|
Trial 1 |
Trial 2 |
Trial 3 |
Trial 4 |
Trial 5 |
Trial 6 |
Trial 7 |
Trial 8 |
Trial 9 |
Trial 10 |
Trial 11 | |
|
Study Type |
Retrospective Phase II Investigator initiated |
Dose range Phase II |
Prospective Phase II IND/FDA |
Phase II IND/FDA |
Phase III EMA |
Phase IIIb EMA |
Phase II EMA |
Post approval safety study EMA |
Phase III IND/FDA |
Phase III IND/FDA |
Expanded Access Protocol
|
|
Design |
Data collected from files of patients treated with NexoBrid
|
Parallel, controlled, observer- blind, randomized, single-center
|
Parallel, controlled, observer- blind, three-arm, randomized, multi-center |
Parallel, controlled, open label, three-arm, randomized, single-center
|
Parallel, controlled, open label, two-arm, randomized, multi-center
|
Parallel, controlled, blinded, two-arm, multi-center |
Open label, single-arm, multi-center |
Observational retrospective data collection |
Parallel, controlled, open label, three-arm, randomized, multi-center
|
multicenter, multinational, randomized, controlled, open-label
study in children |
open-label, single-arm treatment protocol in adults and children
|
|
Main Objectives |
Safety and efficacy |
Comparison of efficacy and safety |
Safety and efficacy |
Safety |
Safety Efficacy |
Long-term scar assessment Quality of life |
Safety and pharmacokinetics Efficacy |
Effectiveness of the risk minimization activities |
Safety Efficacy |
Safety Efficacy |
Safety Efficacy |
|
Wound Types |
Deep partial/full thickness thermal burns |
Deep partial /full thickness thermal burns |
Deep partial /full thickness thermal burns |
Deep partial /full thickness thermal burns |
Deep partial/ full thickness thermal burns |
Scar formation |
Deep partial/full thickness thermal burns |
Burns which were treated with NexoBrid in the market |
Deep partial/ full thickness thermal burns |
Deep partial/ full thickness thermal burns |
Deep partial/ full thickness thermal burns |
|
Number of Patients |
154 |
20 |
140 |
30 |
182 |
89 |
36 |
160 |
175 |
145 |
239 |
|
Study Length |
1985-2000 |
2002-2005 |
2003-2004 |
2006-2007 |
2006-2009 |
2011 |
2009-2015 |
2017-2019 |
2015-2020 |
2015-2023 |
2019-2024 |
|
Location |
Israel |
Israel |
International |
United States |
International |
International |
International |
Europe |
International |
International |
United States |
Wound Care
Chronic wounds, such as DFUs and VLUs, pose significant challenges
to patients and healthcare providers, often leading to infections, reduced mobility, and diminished quality of life. EscharEx, our enzymatic
debridement therapy in development, is designed to address this unmet need by selectively removing necrotic tissue while preserving healthy
tissue, thereby facilitating faster and more effective wound healing. With its targeted action and gentle application, if successfully
developed, EscharEx has the potential to offer a novel alternative to traditional debridement methods, ultimately improving outcomes and
reducing the burden of chronic wounds.
40
Chronic and Other Hard-to-Heal
Wounds
The chronic and other hard-to-heal wound market consists of a broader
addressable population of more than 14 million patients in Europe and the United States alone suffering from chronic wounds such as VLUs,
DFUs, pressure ulcers and additional patients suffering from surgical/traumatic hard-to-heal wounds. Chronic and other hard-to-heal wounds
represent a $25 billion burden to the U.S. healthcare system. Chronic and hard-to-heal wounds are caused by impairment in the biochemical
and cellular healing processes due to local or systemic conditions and generally can take several weeks to heal, if not longer. Such wounds
can lead to significant morbidity, including pain, infection, impaired mobility, hospitalization, reduced productivity, amputation and
mortality. In each of the various wound types, the presence of the eschar and/or other devitalized tissue is a frequent cause for “chronification”
of wounds and the removal of this non-viable material is the key step to commence healing. The non-viable material needs to be removed
to prevent further deterioration of the wound that may result in additional adverse patient outcomes. If not effectively treated, these
wounds can lead to potentially severe complications including further infection, osteomyelitis, fasciitis, amputation and mortality. Most
advanced wound care therapies, including negative pressure wound therapy, such as V.A.C. Therapy, and skin substitutes such as Apligraf
and Dermagraft and human amniotic tissue products, are complementary to our lead product candidate, EscharEx, as these products require
a clean wound bed to effectively heal a wound. Four common chronic and other hard-to-heal wounds are:
| • |
Venous leg ulcers. VLUs develop as a result of vascular insufficiency, or the inability for
the vasculature of the leg to return blood back toward the heart properly. Based on our comprehensive market research study on EscharEx
that involved around 100 healthcare professionals in the U.S. and Europe, which was presented by us on January 2025, by 2028 there will
be approximately 1.7 million VLUs. Approximately 68%, or 1.16 million, of those VLU wounds will require debridement. These ulcers usually
form on the sides of the lower leg, above the ankle and below the calf, and are slow to heal and often recur if preventative steps are
not taken. The risk of VLUs can increase as a result of a blood clot forming in the deep veins of the legs, obesity, smoking, lack of
physical activity or work that requires many hours of standing. |
| • |
Diabetic foot ulcers. Diabetes can lead to a reduction in blood flow, which can cause patients
to lose sensation in their feet and may prevent them from noticing injuries, sometimes leading to the development of DFUs, which are open
sores or ulcers on the feet that may take several weeks to heal, if ever. Based on our comprehensive market research study, which was
presented by us on January 2025 on EscharEx that involved around 100 healthcare professionals in the U.S., by 2028 there will be 2.4 million
DFUs in the United States, of which approximately 1.82 million will undergo debridement. |
| • |
Pressure ulcers. Pressure ulcers, also known as pressure sores, or bed sores, are injuries
to the skin or the tissue beneath the skin caused by pressure applied to the skin and subsequent death of the tissue as a result of the
reduced blood supply. These often occur in patients who are hospitalized or confined to a chair or bed, and usually form over bony areas,
where there is little cushion between the bone and the skin, such as heels, elbows, the sacral area, and back of the head. Annually, 2.5
million pressure ulcers are treated in the United States. |
| • |
Surgical/traumatic wounds. Surgical wounds form as a result of various types of surgical
procedures such as investigative or corrective, minor or major, open (traditional) or minimal access surgery, elective or emergency, and
incisions (simple cuts) or excision (removal of tissue), among others. Traumatic wounds form as a result of cuts, lacerations or puncture
wounds, which have caused damage to the skin and underlying tissue. Severe traumatic wounds may require surgical intervention to close
the wound and stabilize the patient. Surgical/traumatic hard-to-heal wounds develop for various reasons, such as local surgical complications,
suboptimal closure techniques, presence of foreign materials, exposed bones or tendons and infection. In the United States, millions receive
post-surgical wound care annually. |
Market Opportunity
Currently, surgery (sharp debridement) is generally considered
a first-line option. Sharp debridement is an effective method to debride a wound. However, this method requires surgically skilled physicians
performing surgery with patients, many times under anesthesia, which in elderly patients with various co-morbidities is accompanied with
a higher risk of local and systemic complications. Surgery may also involve hemorrhage which could be more difficult to control due to
a high incidence of use of anticoagulants in this population. Surgery on wounds may very easily become infected, with the infection propagating
to surrounding soft and bone tissues ending in life threatening major complication or amputation. Very often even minor, limited sharp
debridement exposes other sensitive tissue, such as tendons, deep vessels/nerves and bones that may become infected or may be severely
damaged, necessitating additional, more extensive debridement or even amputation. Due to these limitations, chronic wounds are treated
by conservative methods, with autolytic and enzymatic debridement being the most commonly-used non-sharp methods. This includes a collagenase-based
enzymatic debriding ointment, hydrogels and other topical dressings, which require numerous application sessions over a long duration
(6-12 weeks) to achieve a clean wound bed, if they achieve this at all. Thus, there is an unmet medical need for a non-surgical rapid
and effective debridement agent for all care settings. Given the high demand for an effective non-surgical debridement technique and the
clinical data generated to date, EscharEx has the potential to expand the current use of enzymatic debridement across all sites of care
and achieve substantial market share. As documented in the Phase II study described below, EscharEx significantly improved the rate of
complete debridement after few once-daily applications, thus potentially facilitating rapid wound debridement without the need for surgery.
Based on market research conducted by Alira Health, EscharEx’s total addressable market (TAM) in the U.S. was assessed at $2.5 billion.
An updated market access and pricing assessment conducted by an independent global consulting firm estimated a peak sales opportunity
of approximately $831 million for EscharEx. This estimate reflects some incremental value generated by health-economic benefits considerations.
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Governmental support
In July 2024, we were awarded a €2.5 million grant from the
European Innovation Council (EIC) Accelerator program to support the clinical and regulatory advancement of EscharEx for the treatment
of diabetic foot ulcers (DFUs). Following a successful evaluation process, we entered into discussions with respect to a potential additional
€13.75 million equity investment component under the EIC Accelerator program; however, these discussions did not result in an equity
investment.
EscharEx Clinical History
EscharEx is a topical agent being developed for debridement of
chronic wounds, in order to fulfill an unmet need for a non-surgical rapid and effective debridement option. EscharEx is based on the
same active substance as NexoBrid but differs in other aspects, such as in formulation and presentation. Based on our current pre-clinical
studies, EscharEx demonstrated even higher potency in lower doses, which could further contribute to EscharEx’s potential efficacy
and tolerability. EscharEx has been designed in accordance with the current treatment workflow and reimbursement programs, providing a
non-surgical easy-to-use, potent product for daily application, which we believe will enhance patient compliance and improve quality of
care. Based on the feedback received from different stakeholders, we believe that EscharEx can address the unmet medical need for a non-surgical
rapid and effective product, and has a potential to achieve substantial market share.
EscharEx is more differentiated from NexoBrid, which further limits
the chances for competition between the two products.
In February 2025 we announced the initiation of VALUE, a global,
pivotal Phase III trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs). The VALUE study is targeting 216 patients
across approximately 40 sites in the U.S. and Europe, the majority of which are active and recruiting. The pre-specified interim sample-size
assessment and enrollment completion are expected by year-end 2026.
In addition to the VALUE study, we plan to initiate a randomized,
head-to-head Phase II study in VLU patients in 2026, comparing EscharEx to collagenase SANTYL®
ointment, approved by the FDA for debriding chronic dermal ulcers , and other non-surgical standard of care.
Following constructive and aligned regulatory feedback on trial
design and development strategy from both the U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA),
the Company plans to initiate a Phase II study of EscharEx in DFUs in the second half of 2026.
During 2025 through the date of this report we expended our strategic research collaborations
and the EscharEx program is supported by leading global wound care companies, including Coloplast, B. Braun, Convatec, Essity, Mölnlycke,
Solventum, and MiMedx, reflecting strong industry validation of the program.
In January 2026 we announced that a prospective, single-arm investigator-initiated trial
(IIT) to evaluate the safety and efficacy of EscharEx in pressure ulcers is planned to initiate in the second half of 2026.
Ongoing clinical trials
Phase III Pivotal Trial of EscharEx for Venous Leg Ulcers
In February 2025 we initiated VALUE, a global, pivotal Phase III
trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs).
The VALUE study is a global, multicenter, prospective, randomized,
double-blind, placebo-controlled trial with an adaptive design, that will be conducted across 40 sites in the U.S. and Europe, with the
majority of sites already active. Its primary objective is to evaluate the efficacy and safety of EscharEx in achieving effective debridement
and preparing the wound bed for healing in VLUs. The study will enroll 216 patients, randomized 1:1 to receive either EscharEx or placebo.
Patients will undergo up to eight daily applications over two weeks, followed by ten weeks of standardized wound management. Patients
achieving wound bed preparation—defined as complete debridement and full coverage with granulation tissue—will receive a cellular/tissue-based
product (CTP) or an autograft. Those achieving complete wound closure will be monitored for an additional 12 weeks.
The study co-primary endpoints are the incidence of complete debridement
and the facilitation of wound closure. Secondary endpoints include the incidence of complete healthy granulation tissue, time to complete
debridement, time to wound bed prepared and incidence of complete wound closure. Safety and tolerability of EscharEx will be assessed
throughout the trial. An interim sample size assessment will occur after 65% of patients complete treatments, enabling adaptive adjustments
as needed.
42
To support the trial, we have established strategic research collaborations
with Essity, Solventum, Mölnlycke, and MIMEDX. These industry leaders will provide advanced products to ensure consistent wound management
across all study sites and optimize patient outcomes.
Completed
clinical trials
We completed a first Phase II feasibility study in Israel for chronic
and other hard-to-heal wounds. In January 2017 we completed and announced the final results of a second Phase II prospective study in
Israel and Europe. In November 2017, we announced the final results of a second cohort of the second Phase II study. Based on the completed
studies, we believe that our product candidate may be effective for debridement of chronic and other hard-to-heal wounds.
First Phase II feasibility study-Israel
This first Phase II feasibility study was conducted in Israel to
study the efficacy of our technology on chronic and other hard-to-heal wounds. The study assessed 24 patients at two sites. The results
showed that our technology demonstrated positive efficacy results in debriding various chronic and other hard-to-heal wound etiologies,
such as VLUs, DFUs, pressure sores and trauma on diseased skin.
Second Phase II study-Israel/EU - First Cohort
This second Phase II study was a prospective, controlled, assessor-blinded,
randomized, multi-center Phase II study in Israel and Europe. The study objectives were to evaluate the efficacy and safety of EscharEx
in comparison to the Gel Vehicle at a ratio of 2:1 for the treatment of a variety of chronic and other hard-to-heal wounds in three etiologies:
DFUs, VLUs and post-surgical or traumatic hard-to-heal wounds.
The primary endpoint assessed incidence of complete non-viable
tissue removal (debridement) at the end of the debridement period (within up to 10 daily applications) and the secondary endpoints assessed
various efficacy and safety endpoints, including wound bed preparation and wound healing.
In January 2017 we reported final results of the first cohort of
73 patients. The average wound age in the EscharEx arm was more than double (72.8 weeks)
that of the gel vehicle group (30.8 weeks). The average wound size was 33.6 cm2 in the EscharEx arm vs. 25.8 cm2 in the gel vehicle group.
Despite the larger wounds and that wounds treated with EscharEx were older than wounds treated with gel vehicle (72.8 vs. 30.8 weeks),
the study met its primary endpoint. EscharEx demonstrated a statistically significantly higher incidence of complete debridement at the
end of the debridement period. Patients treated with EscharEx demonstrated a higher incidence of complete debridement (55% or 27/49) compared
with patients treated with the hydrogel6 vehicle (29% or 7/24) with p=0.047.
Predefined sub-group analyses showed that 50% of patients with
DFUs treated with EscharEx (8/16) achieved complete debridement at the end of the debridement period compared with 14.3% of patients with
DFUs treated with hydrogel vehicle (1/7). In addition, 62.5% of patients with VLUs treated with EscharEx (10/16) achieved complete debridement
at the end of the debridement period compared with 25% of patients with VLUs treated with hydrogel vehicle (2/8). Post hoc analysis showed
that 56.3% of patients with VLU or DFU in the EscharEx group had complete debridement at the end of the debridement period compared with
20.0% in hydrogel vehicle group (p=0.028).
The study included secondary endpoints that provide further insight into number of efficacy
and safety parameters. The secondary endpoint of time to complete debridement demonstrated a clear trend (p=0.075) that strongly suggests
that not only was there a difference in the incidence of debridement, as demonstrated by the primary endpoint, but that debridement occurred
earlier in the group treated by EscharEx. The advantage in time to complete debridement was corroborated by the statistically significant
post hoc result in the subgroup of patients with VLUs or DFUs that were treated with EscharEx (p=0.024).
43
Post hoc analysis showed that of patients who achieved complete
debridement in the EscharEx group, 93% (25/27) completed the debridement within 7 days (4-5 applications on average).
The overall patient demographics were comparable across both arms.
No deleterious effect on wound healing was observed and no material differences were found in reported adverse events. The overall safety
data were comparable between the arms.
Second Phase II study-Israel/EU - Second Cohort
After successfully completing the first cohort of the study which
included 73 patients recruited in 15 clinical sites, we initiated a second cohort of patients to evaluate safety and tolerability over
extended periods of application. In this second cohort, we recruited 38 patients from two etiologies, either VLUs or DFUs, over extended
periods of application (24-72 hours) with up to eight applications, randomizing the patients to two study arms EscharEx or gel vehicle
at a ratio of 2:1. The primary objective was to assess safety.
EscharEx met its primary safety endpoint in this cohort, and the
overall patient demographics and wound baseline characteristics were comparable across the arms in the second cohort. No related systemic
adverse events were reported and adverse events related to local application were mild to moderate, reversible and resolved during the
trial. Vital signs, pain scores, infection rates, laboratory parameters and blood loss were comparable between the two arms of the trial.
Overall, no material safety concerns were identified.
EscharEx U.S. Phase II Study in Venous Leg Ulcer (VLU) Patients
In December 2019, we initiated a U.S. Phase II adaptive design
clinical study of EscharEx for the treatment of VLUs. The study was a multicenter, prospective, randomized, placebo-controlled, adaptive
design study, evaluating the safety and efficacy of EscharEx in debridement of VLUs compared to gel vehicle (placebo control) and non-surgical
standard-of-care of either enzymatic or autolytic debridement (NSSOC). The study enrolled 120 patients, with 119 treated at approximately
20 clinical sites, primarily in the U.S. Study participants were treated with either EscharEx (n=46), gel vehicle control (n=43), or non-surgical
standard-of-care (n=30), with a three-month follow-up. The single primary endpoint was incidence of complete debridement (non-viable tissue
removal), clinically assessed, within up to 8 treatment applications during the assessment period (within 14 days), compared to gel vehicle
placebo control. Secondary and exploratory endpoints assessed time to achieve complete debridement, reduction of pain, reduction of wound
area, granulation tissue and wound quality of life, enabling evaluation of clinical benefits compared to both gel vehicle and NSSOC. Incidence
and time to achieve wound closure were assessed as safety measurements.
In May 2022 we announced our results from this study. The study
met its primary endpoint with a high degree of statistical significance, demonstrating that patients treated with EscharEx had a statistically
significant higher incidence of complete debridement during the 14-day measurement period within up to 8 applications compared to gel
vehicle (EscharEx: 63% (29/46) vs. gel vehicle: 30% (13/43), p-value=0.004). EscharEx efficacy results remained statistically significant
compared to gel vehicle after adjusting for pre-specified covariates ascribed to patient baseline characteristics, wound size, wound age
and region.
44
The study met key secondary and exploratory endpoints. Patients
treated with EscharEx had a statistically significant higher incidence of complete debridement, during the same 14-day measurement period,
compared to patients treated by non-surgical standard-of-care (“NSSOC”) (EscharEx: 63% (29/46) vs. NSSOC: 13% (4/30)) and
the time to achieve complete debridement was significantly shorter. Estimated median time to complete debridement was 9 days for patients
treated with EscharEx and 59 days for patients treated with NSSOC (p-value=0.016). On average, complete debridement was achieved after
3.6 applications of EscharEx compared to 12.8 applications with NSSOC. Patients treated with EscharEx demonstrated significantly higher
incidence of greater than 75% granulation tissue at the end of the treatment period compared to gel vehicle (p-value <0.0001). Favorable
trends were observed in wound area reduction and reduction of pain compared to gel vehicle.
In addition, the study showed that EscharEx was well tolerated,
and the overall safety results were comparable between the arms as assessed by the data safety monitoring board. Importantly, there were
no observed deleterious effects on wound closure and no material differences in reported adverse events. Estimated time to complete wound
closure was 64 days for patients treated with EscharEx compared to 78 days for patients treated with NSSOC.
Post-hoc analyses from this study assessed the incidence and time
to wound bed completely covered with granulation tissue. The incidence of achieving complete debridement and complete cover of the wound
bed with granulation tissue (i.e., wound bed preparation, WBP) during the daily treatment period was 50.0% for EscharEx vs. 25% for the
Gel Vehicle (p-value= 0.01) and 10% for NSSOC (p-value< 0.0001). The estimated median time to achieve WBP was 11
days for EscharEx vs. 85 days for the Gel Vehicle (p-value= 0.002) and 63 days for the NSSOC (p-value= 0.0106). Furthermore,
it was shown that patients reaching WBP in the study are 4 times more likely to achieve wound closure (p=0004).
45
Post-hoc analyses from this study assessed the incidence and time
to complete debridement, complete granulation, and wound closure in patients treated with EscharEx (n=46) compared to a sub-group of patients
who were treated with SANTYL® (n=8). Baseline characteristics (age, gender, wound age, wound size) were comparable in both groups.
The incidence of complete debridement during the daily treatment period (the first two weeks of the study) was 63.0% (95% CI=47.5-76.8)
for EscharEx vs. 0% for SANTYL®; p=0.001. The estimated median time to achieve complete debridement during the study was 9 days (95%
CI=5-15 days) for EscharEx vs. not achieved for SANTYL® (95% CI=22-Not Applicable); p=0.023. The incidence of achieving complete
debridement and complete cover of the wound bed with granulation tissue (i.e., wound bed preparation, WBP) during the daily treatment
period was 50.0% (95% CI = 34.9%-65.1%) for EscharEx vs. 0% for SANTYL®; p=0.015. The incidence of achieving WBP throughout the study
was 78.3% (95% CI = 63.6-89.1) for EscharEx vs. 37.5% for SANTYL® (95% CI=8.5-75.5); p=0.03. The estimated median time to achieve
WBP was 11 days (95% CI =7-50 days) for EscharEx vs. not achieved for SANTYL® (95% CI=22-Not Applicable); p=0.014. 15 of the 46 patients
(32.6%) treated with EscharEx completely closed their wounds during the study, compared to 2 out of 8 patients (25%) treated with SANTYL®
(NSS). In those patients who achieved complete wound closure, the average time to wound closure was 48.4 days (SD=23.5) for EscharEx vs.
76.0 days (SD=2.8) for SANTYL®; p=0.05. Patient reported applicational pain was comparable in both groups. The safety results and
overall incidence of adverse wound reactions were comparable between arms.
(1) Comparable incidence of adverse wound reactions identified
EscharEx Pharmacology Study
In May 2022, we announced positive results from our U.S. Phase
II pharmacology study of EscharEx for debridement of lower leg ulcers. The study was a prospective, open label, single-arm study, conducted
at three U.S. clinical sites. The study evaluated the clinical performance, safety, and pharmacology effect of EscharEx in the debridement
of lower leg ulcers (VLUs and DFUs). The study evaluated the safety and efficacy of debridement as measured by incidence of, and time
to complete debridement. In addition, the study evaluated the pharmacological effects of EscharEx as measured by the changes from baseline
to end of treatment period in (1) wound biofilm presence in wound biopsies, (2) bacterial burden measured by MolecuLight® fluorescence
images, and (3) biomarkers of wound healing and inflammation in wound fluid. Twelve patients with either VLUs or DFUs were enrolled in
the study. Patients were treated with up to eight daily applications of EscharEx and then continued follow-up for 2 weeks. Punch biopsies
and wound fluids were collected prior to the first, and after the last treatment. Biofilm presence was analyzed from wound biopsies. Wound
fluids were analyzed to evaluate biomarkers of wound healing and inflammation, i.e., MMPs, cytokines, chemokines, growth factors and HNE.
Fluorescent imaging was used during treatment to measure wound size and bacterial load. Fluorescent imaging was also utilized to identify
the highest fluorescence area to obtain the biopsy. EscharEx demonstrated safe and effective debridement with a few daily applications.
In addition, evaluation of wounds’ tissue samples (biopsies) and fluorescence images, indicated reduction of wound area, biofilm
and bacterial bioburden following the treatment with EscharEx.
Seventy percent of patients achieved complete debridement during
the course of treatment within up to 8 applications. On average, complete debridement was achieved after 3.9 applications of EscharEx.
Additionally, an average reduction of 35% in wound size was achieved by the end of the 2-week follow-up period. In all patients that were
positive for biofilm at baseline, the biofilm was reduced substantially to single individual microorganisms or completely removed by the
end of treatment. Seven patients had positive red fluorescence (indicative of bacteria) at baseline and average red fluorescence was reduced
from 1.69 cm2 pre-treatment to 0.60 cm2 post treatment. Biomarker analysis from wound fluid safety data showed that EscharEx was well-tolerated.
46
The development of EscharEx for the debridement of chronic and
other hard-to-heal wound indications is in Phase II studies, and there is no certainty that EscharEx will achieve all of the objectives
of the trials as required or that the FDA will allow at this stage to initiate further studies or that we will successfully complete the
development to obtain a marketing authorization for EscharEx. See “ITEM 3.D. Risk Factors-Development and commercialization of EscharEx
and our pipeline product candidates requires successful completion of the regulatory approval process, which may suffer delays or fail.”
Non-Melanoma
Skin Cancer
MW005 is a topically applied biological product candidate for the
treatment of non-melanoma skin cancers, based on the same active substance of NexoBrid and EscharEx, a concentrate of proteolytic enzymes
enriched in bromelain. The clinical development plan of MW005 is supported by the results from several toxicological and other preclinical
studies, as well as vast clinical experience from NexoBrid and EscharEx, which share the same API.
In July 2023, we announced the final results of this study. Fifteen
patients were treated with MW005 and completed the study. Results showed MW005 was well-tolerated, with a high level of patient compliance.
Based on clinical assessments, eleven out of fifteen patients achieved complete clearance of their BCCs; the majority of these patients
also had histologically confirmed complete clearance.
Although we have conducted preclinical trials, the development
of MW005 for non-melanoma skin cancer indications is still in its preliminary phase and there is no certainty that it will achieve all
the aims of the trials as required and/or successfully complete the approval process for such indication. See “ITEM 3.D. Risk Factors-Development
and commercialization of EscharEx and our pipeline product candidates requires successful completion of the regulatory approval process,
which may suffer delays or fail.”
Research and Development
Our research and development strategy is centered around our validated
proteolytic enzyme platform technology, focused on next-generation protein-based therapies for burn and wound care, and for tissue repair,
which underlies NexoBrid and EscharEx, into additional product candidates for high-value indications. For more information regarding our
research and development expenses, see “ITEM 5.C. Research and Development, Patents and Licenses, etc.”
Pre-Clinical and Clinical Studies
We conduct clinical studies and preclinical studies to support
the efficacy and safety of our products and their ingredients and to extend and validate their benefits for human health. Preclinical
studies allow us to substantiate the safety of our products and obtain preliminarily indications of their pharmacological and safety profile.
As of the date hereof, we have conducted more than 50 non-GLP and GLP preclinical studies. All pre-clinical safety and toxicology studies
were conducted according to the principles of Good Laboratory Practices (“GLP”), and thirteen clinical studies, according
to the principles of Good Clinical Practices (“GCP”), for NexoBrid, EscharEx and our pipeline product candidates. As a result,
we have developed significant experience in planning, designing, executing, analyzing and publishing clinical studies. Our research and
development team manages our clinical studies and coordinates the project planning, trial design, execution, outcome analyses and clinical
study report submission. During the design, execution and analyses of our studies, our research and development team consults with key
opinion leaders and top-tier consultants in the relevant field of research to optimize both design and execution, as well as to strengthen
the scientific, medical and regulatory compliance level of the investigational plan. Our clinical studies have been conducted in collaboration
with leading medical and research centers throughout the world.
47
Manufacturing, Supply and Production
We operate a manufacturing facility in Yavne, Israel. This facility
allows us to manufacture sterile biopharmaceutical products, such as NexoBrid. The facility is designed to meet current cGMP requirements
and similar foreign requirements, as certified by the U.S., EU member states competent authorities, the Israeli Ministry of Health, South
Korean ministry of health and Japanese ministry of health. Our facility is subject to audits for reassessment of cGMP compliance and similar
foreign requirements, which are performed periodically by regulatory authorities. In addition, other regional applicable authorities may
also need to inspect our plant to confirm it meets all regulatory requirements in order to obtain marketing authorization in these jurisdictions.
Applicable changes in our production processes for NexoBrid must be approved by the EMA and similar authorities in other jurisdictions.
The global demand for NexoBrid surpasses our current manufacturing
capabilities. We are expanding our manufacturing capabilities in order to increase our capacity to manufacture NexoBrid and satisfy near
term demand. In July 2023, we signed a turnkey scale-up agreement (the “Scale-up Agreement”) to establish, commission, and
validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. Construction of the new GMP-compliant state-of-the-art manufacturing
facility was completed as of August 2024, with commissioning completed in November 2025, 2025. The facility has reached full operational
capacity, increasing manufacturing output sixfold. Commercial availability will depend on securing the necessary regulatory approvals.
The starting material used by us in the manufacturing of NexoBrid
and our other product candidates is bromelain SP, which is derived from pineapple plant stems. We have entered into an agreement with
CBC, dated January 11, 2001, as amended, pursuant to which CBC uses proprietary methods to manufacture bromelain SP and supplies us with
this intermediate drug substance in bulk quantities. According to the terms of the agreement, CBC shall not and shall not permit related
companies or a third party to, manufacture, use, supply or sell the raw materials for the use or production of a product directly or indirectly
competing with any of our products. Our supply agreement with CBC has no fixed expiration date and can be voluntarily terminated by us,
with at least six months’ advance written notice, or by CBC, with at least 24 months’ advance written notice.
Upon obtaining bromelain SP from CBC, we further process it into
the drug substance and then into the drug product to finally create the powder form of NexoBrid. The necessary inactive ingredients contained
in NexoBrid, or the excipients, are readily available and generally sold to us by multiple suppliers. In addition to this powder, we manufacture
a sterile gel substance by combining water for injections produced by us at our facility and additional excipients.
Marketing, Sales and Distribution
We commercialize globally NexoBrid via multiple sales channels:
Europe
In Europe and Israel, we sell NexoBrid, primarily through our own
sales force consisting of a sales and marketing team of specialized and knowledgeable sales representatives in Europe, focusing on leading
burn centers and Key Opinion Leaders (KOL) management. We have obtained national reimbursement for NexoBrid in Belgium, Italy, and Greece
and we continue to locally execute our market access strategy for most of Europe to obtain procurement by burn centers and hospitals as
part of their budget, or under local, regional or national reimbursement, depending on the specific process required in each country.
We believe that additional burn units in large hospitals as well as smaller hospitals will follow the treatment trends once established
by the burn centers. See “-Government Legislation and Regulation-Coverage and Reimbursement.” Furthermore, we have established
additional distribution channels through local partners to extend outreach in EU (France, Switzerland, Greece, Malta, Bulgaria and Cyprus,),
where NexoBrid is already approved for marketing as part of the European marketing authorization. Additionally, we expanded NexoBrid’s
European market presence by establishing a collaboration with PolyMedics Innovations (PMI) for the promotion of NexoBrid in Germany, Austria,
Belgium, the Netherlands and Luxembourg. In addition to receiving marketing authorization for NexoBrid in the EU, key opinion leaders
in the burn care field worldwide are already aware of NexoBrid’s efficiency in removing eschar due to hundreds of scientific presentations
and several award-winning abstracts at international and national conferences and about 120 peer-reviewed papers.
48
North
America
Vericel License and Supply Agreements
On May 6, 2019, we entered into exclusive license and supply agreements
with Vericel to commercialize NexoBrid in all countries of North America (which we refer to as the “Territory”).
License Agreement.
We entered into the Vericel License Agreement pursuant to which
we granted Vericel an exclusive license, with the right to grant sublicenses, to develop and commercialize NexoBrid and any improvements
of NexoBrid (the “Licensed Product”) in the Territory.
Pursuant to the terms of the Vericel License Agreement, Vericel
will have exclusive control regarding the commercialization of Licensed Products in the Territory and must use commercially reasonable
efforts to commercialize Licensed Products within the Territory. We and Vericel have made customary representations and warranties and
have agreed to certain customary covenants, including confidentiality and indemnification.
Within 10 days of signing the Vericel License Agreement, Vericel
paid us an upfront fee of $17.5 million (the “Upfront Payment”) and upon the U.S. regulatory approval of the BLA for NexoBrid
Vericel paid us $7.5 million. Vericel is obligated to pay us up to $125 million, in the aggregate, upon attainment of certain sales milestones.
The first sales milestone of $7.5 million is triggered when annual net sales of the Licensed Products in the Territory exceed $75 million.
Vericel is also obligated to pay us tiered royalties on net sales of Licensed Products at rates ranging from mid-high single-digit to
mid-teen percentages, subject to certain customary reductions, as well as a percentage of gross profits on committed purchases by BARDA
and a royalty on additional sales to BARDA. The royalties will expire on a product-by-product and country-by-country basis upon the latest
to occur of (i) twelve years following the first commercial sale of such Licensed Product in such country, (ii) the earliest date on which
there are no valid claims of MediWound patent rights covering such Licensed Product in such country, and (iii) the expiration of the regulatory
exclusivity period for such Licensed Product in such country (the “Royalty Term”). Such royalties are subject to reduction
in the event that (a) Vericel must license additional third-party intellectual property in order to develop, manufacture or commercialize
a Licensed Product, or (b) biosimilar competition occurs with respect to the Licensed Product in any country within the Territory. After
the expiration of the applicable royalties for the Licensed Product in any country within the Territory, the license for such Licensed
Product in such country would become a fully paid-up, royalty-free, perpetual and irrevocable license.
The Vericel License Agreement expires on the date of expiration
of all royalty obligations due under the agreement unless earlier terminated in accordance with its terms. Either party may terminate
the agreement upon the failure of the other party to comply with its material obligations under the agreement if that failure is not remedied
within certain specified cure periods or in the event of a party’s insolvency. In addition, Vericel may terminate the agreement
upon a 150-day written notice to us.
Supply Agreement.
On May 6, 2019, concurrently with our entry into the License Agreement,
we entered into a supply agreement with Vericel (the “Supply Agreement”) pursuant to which we are obligated to supply Vericel
with NexoBrid for sale in the Territory on an exclusive basis for the first five years of the term of the Supply Agreement. The Supply
Agreement requires us to take steps to ensure that our manufacturing capacity meets Vericel’s demand for NexoBrid. In addition,
after the exclusivity period or upon supply failure, Vericel will be permitted to establish an additional or alternate source of supply.
Pursuant to the Supply Agreement, we will supply NexoBrid to Vericel
based on Vericel’s fixed orders on a unit price basis. After a specified period, the unit price, on an annual basis, may be increased
based on the United States Producer Price Index for Chemical Manufacturing published by the Bureau of Labor Statistics.
The Supply Agreement’s initial term is five years (the “Initial
Term”), with Vericel required to provide us with notice regarding whether it plans to extend the Initial Term for an additional
two years by the third anniversary of the Supply Agreement. In May 2022, Vericel notified us on its election to extend the Initial Term
for an additional 2 years until 2026. After the Initial Term and optional two-year extension, Vericel, at its sole discretion, may choose
to extend the Supply Agreement’s term for additional one-year periods for a potential total term of fifteen years.
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In September 2023, NexoBrid was launched in the U.S. by Vericel.
The Supply Agreement will automatically terminate upon the expiration
or termination of the License Agreement. Either party may terminate the Supply Agreement upon the failure of the other party to comply
with its material obligations under the Supply Agreement if such failure is not remedied within certain specified cure periods. After
the Initial Term, Vericel may terminate the Supply Agreement upon 12 months’ prior written notice to us, and we may terminate the
Supply Agreement upon 36 months prior written notice to Vericel.
BARDA
Pursuant to the First BARDA Contract, BARDA has completed the procurement
of NexoBrid valued at $16.5 million, for emergency stockpile as part of the HHS mission to build national preparedness for public health
medical emergencies. BARDA purchased inventory is being managed by MediWound under vendor managed inventory.
Under our exclusive license and supply agreements with Vericel,
we will receive a double-digit royalty on any additional future BARDA purchases of NexoBrid. Please see “Vericel License and Supply
Agreements” above.
Other
International Markets
In other international markets, we sell NexoBrid through local
distributors with which we have distribution agreements, focusing on Asia Pacific, EMEA and CEE. We have signed local distribution agreements
for distribution in India, Bangladesh, Sri Lanka, Japan, Australia, New-Zealand, Singapore Vietnam, Philippines, Taiwan and United Arab
Emirates.
Our distributors in Russia, South Korea, Taiwan, Japan, India the
United Arab Emirates and Australia have obtained marketing authorization. Our additional distributors have filed or are in the process
of filing for market authorization in their respective territories and are expected to launch NexoBrid after receipt of local regulatory
approval, which may take a year or more to be granted, and, consequently, may occur in certain markets during 2026.
For a breakdown of our consolidated revenues by geographic markets
and by categories of operations for the years ended December 31, 2023, 2024 and 2025, please see “ITEM 5.A Operating and Financial
Review and Prospects-Operating Results.”
Intellectual Property
Our intellectual property and proprietary technology are important
to the development, manufacture and sale of NexoBrid, EscharEx and our future pipeline product candidates. We seek to protect our intellectual
property, core technologies and other know-how through a combination of patents, trademarks, trade secrets, non-disclosure and confidentiality
agreements, licenses, assignments of invention and other contractual arrangements with our employees, consultants, partners, suppliers,
customers and others. Additionally, we rely on our research and development program, clinical trials, know-how and marketing and distribution
programs to advance our products and product candidates. As of December 31, 2025, we had been granted a total of over 80 patents, of which
37 are in force and have 13 pending patent applications. The family of patents that covers NexoBrid specifically includes 2 granted patents
worldwide that are in force. EscharEx is covered by 22 patents in force worldwide.
The main patents for our proteolytic enzyme technology which underlies
NexoBrid, EscharEx and our current pipeline product candidates have been issued in Europe, the United States and other international markets.
Our patents which cover NexoBrid claim specific mixtures of proteolytic enzymes, methods of producing such mixtures and methods of treatment
using such mixtures. Although the protection achieved is significant for NexoBrid, EscharEx and our pipeline product candidates, when
looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited
than the protection provided by patents which claim chemical structures which were previously unknown. Absent patent-term extensions,
one NexoBrid patent is set to expire in 2029 in the United States and another one in the United States that was set to expire in 2025
was granted a 5-year Patent Term Extension and will expire in 2030. The NexoBrid patents issued in Europe and in other foreign jurisdictions
have expired in 2025. The patents relating to EscharEx will expire on January 30, 2037, absent any patent-term adjustment and/or extensions.
While our policy is to obtain patents by application, license or
otherwise, to maintain trade secrets and to seek to operate without infringing on the intellectual property rights of third parties, technologies
related to our business have been rapidly developing in recent years. Additionally, patent applications that we may file or license from
third parties may not result in the issuance of patents, and our issued patents and any issued patents that we may receive in the future
may be challenged, invalidated or circumvented. For example, we cannot predict the extent of claims that may be granted or enforceable
in our patents nor can we be certain of the priority of inventions covered by pending third-party patent applications filed in the U.S.
If third parties prepare and file patent applications that also claim technology or therapeutics to which we have rights, we may have
to participate in proceedings to determine priority of invention, which could result in substantial costs to us, even if the eventual
outcome is favorable to us. Moreover, because of the extensive time required for clinical development and regulatory review of a product
we may develop, it is possible that, before NexoBrid can be commercialized in additional jurisdictions and/or before any of our future
products can be commercialized, related patents will expire a short period following commercialization, thereby reducing the advantage
of such patent. Loss or invalidation of certain of our patents, or a finding of unenforceability or limited scope of certain of our intellectual
property rights, could have a material adverse effect on us. See “ITEM 3.D. Risk Factors - Our success depends in part on our ability
to obtain and maintain protection for the intellectual property relating to, or incorporated into, our technology and products.”
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In addition to patent protection, we also rely on trade secrets,
including unpatented know-how, technology innovation, drawings, technical specifications and other proprietary information in attempting
to develop and maintain our competitive position. We also rely on protection available under trademark laws, and we currently hold various
registered trademarks, including “MediWound,” “NexoBrid” and “EscharEx” in various jurisdictions,
including the United States, the EU and Israel.
Klein License Agreement
In September 2000, we signed an exclusive license agreement, as
amended in June 2007, with Mark Klein, a third party, for use of certain patents and intellectual property (the “Klein License Agreement”).
Under the Klein License Agreement, we received an exclusive license to use the third party’s patents and intellectual property to
develop, manufacture, market and commercialize NexoBrid and its pipeline product candidates for the treatment of burns and other wounds.
The claims of such patents are directed to a process of preparing a mixture of escharase and proteolytic enzymes and cover the underlying
proteolytic mixture of escharase and proteolytic enzymes prepared by that specific process. Pursuant to the Klein License Agreement, we
are obligated to keep accounting records related to the sales of NexoBrid and its pipeline product candidates and pay royalties as discussed
below. The Klein License Agreement may be terminated by Mark Klein, subject to notice and dispute resolution provisions of the Klein License
Agreement, in the event of our breach, bankruptcy petition, insolvency or failure to achieve a development milestone within six months
of a target date. We have already achieved all development milestones under the Klein License Agreement.
As consideration under the Klein License Agreement, we paid an
aggregate amount of $1.0 million following the achievement of certain development milestones. In addition, we undertook to pay royalties
of 1.5-2.5% from revenues, 10% of royalties received from sublicensing and 2% of lump-sum payments received from sublicensing up to $1
million and 4% above $1 million, in each case relating to products based on the licensed patents and intellectual property, for a term
of 10-15 years, as applicable, from the date of the first commercial delivery in a major country. In addition, under the Klein License
Agreement, we agreed to pay a one-time lump-sum amount of $1.5 million upon reaching aggregate revenues of $100 million from the sale
of such products.
Competition
The medical, biotechnology and pharmaceutical industries are intensely
competitive and subject to significant technological change and changes in practice. While we believe that our innovative technology,
knowledge, experience and scientific resources provide us with competitive advantages, we may face competition from many different sources
with respect to NexoBrid, EscharEx, and our existing pipeline product candidates or any product candidates that we may seek to develop
or commercialize in the future. Possible competitors may include medical practitioners, pharmaceutical and wound care companies, academic
and medical institutions, governmental agencies and public and private research institutions, among others. Any product that we successfully
develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
In addition, we face competition from the current SOC. The current
SOC for eschar removal in severe burns is surgery, where eschar removal can be performed by tangential excision, dermabrasion or hydro
jet, or non-surgical alternatives, such as applying topical medications to the eschar to facilitate the natural healing process. Consequently,
we face competition from traditional surgical procedures and topical agents. However, based on our clinical trials, we believe that NexoBrid
has a sustainable competitive advantage over the current non-surgical alternatives and is less invasive than surgery in removing eschar
in patients with burn wounds. See “-NexoBrid Clinical History” for the results of our clinical trials. Although we are in
the clinical and preclinical phases for our pipeline product candidates for debridement of chronic and other hard-to-heal wounds and treatment
of low-risk basal cell carcinoma and connective tissue disorders and other indications, respectively, if one of our pipeline product candidates
receives approval in the future, we would compete with traditional surgery and existing non-surgical and other treatments. In chronic
and other hard-to-heal wounds, we expect to face competition from current standard of care for debridement by sharp debridement or from
the current non-surgical standard of care, either enzymatic debridement, primarily Smith & Nephew Plc’s SANTYL, a collagenase-based
ointment, approved by the FDA for debriding chronic dermal ulcers. SANTYL is currently the market-leading enzymatic debridement
product, with more than $370 million in estimated annual sales in the United States.
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In addition to the currently available products, other products
may be introduced to debride chronic and other hard-to-heal wounds or treat superficial and nodular basal cell carcinoma and connective
tissue disorders during the time that we engage in necessary development. Accordingly, if one of our pipeline product candidates is approved,
our main challenge in the market would be to educate physicians seeking alternatives to surgery or less effective non-surgical methods
to use our product instead of already existing treatments. While we are still in the development stages, based on our studies, we believe
that our pipeline product candidates will be more effective than the current non-surgical alternatives and less invasive than surgery
in removing non-viable material in chronic and other hard-to-heal wounds or in tumor resection and may be comparable or perhaps better
than currently available treatments for connective tissue disorders.
NexoBrid received orphan drug status in the United States on August
20, 2003 for debridement of deep partial- and full-thickness burns in hospitalized patients. In the United States, a sponsor that develops
an orphan drug has marketing exclusivity for seven years post-approval by the FDA, which was granted in 2023. The exclusive marketing
rights in both regions are subject to certain exceptions, including the development of a clinically significant benefit over the prevalent
SOC. Once the market exclusivity for our orphan indication expires in a given jurisdiction, for example, most recently in Europe, subject
to other protections such as patents, we could face competition from other companies that may attempt to develop other products for the
same indication.
Seasonality
Our results of operations historically have not been subject to seasonal variations.
Government Legislation and Regulation
Our business is subject to extensive government regulation. Regulation
by governmental authorities in the United States, the EU and other jurisdictions is a significant factor in the development, manufacture
and marketing of NexoBrid and in ongoing research and development activities.
European Union
The approval process of medicinal products in the EU generally
involves satisfactorily completing each of the following:
| • |
laboratory tests, animal studies and formulation studies all performed in accordance with the applicable EU GLP or GMP regulations;
|
| • |
submission to the relevant authorities of a CTA, which must be approved before human clinical trials may begin; |
| • |
performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed
indication; |
| • |
submission to the relevant competent authorities of a marketing authorization application (“MAA”), which includes the
data supporting preclinical and clinical safety and efficacy as well as detailed information on the manufacture and composition and control
of the product development and proposed labeling as well as other information; |
| • |
inspection by the relevant national authorities of the manufacturing facility or facilities and quality systems (including those
of third parties) at which the product is produced, to assess compliance with strictly enforced GMP; |
| • |
potential audits of the non-clinical and clinical trial sites that generated the data in support of the MAA; and |
| • |
review and approval by the relevant competent authority of the MAA before any commercial marketing, sale or shipment of the product.
|
Quality/preclinical studies
In order to assess the potential safety and efficacy of a product,
tests include laboratory evaluations of product characterization, analytical tests and controls, as well as studies to evaluate toxicity
and pharmacological effects in animal studies. The conduct of the preclinical tests and formulation of the compounds for testing must
comply with the relevant EU regulations and requirements. The results of such tests, together with relevant manufacturing control information
and analytical data, are submitted as part of the CTA. Non-clinical studies are performed to demonstrate the health or environmental safety
of new biological substances. Non-clinical studies must be conducted in compliance with the principles of GLP as set forth in EU Directive
2004/10/EC. In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported
and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational
process and the conditions for non-clinical studies. These GLP standards reflect the OECD requirements.
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Clinical trial approval
Clinical development is often described as consisting of four temporal
phases (Phase I-IV). See, for example, the EMA’s note for guidance on general considerations for clinical trials (CPMP/ICH/291/95).
| • |
Phase I (Most typical kind of study: Human Pharmacology); |
| • |
Phase II (Most typical kind of study: Therapeutic Exploratory); |
| • |
Phase III (Most typical kind of study: Therapeutic Confirmatory); and |
| • |
Phase IV (Variety of Studies: Therapeutic Use). |
Studies in Phase IV are all studies other than routine surveillance
performed after drug approval and are related to the approved indication.
The phase of development provides an inadequate basis for classification
of clinical trials because one type of trial may occur in several phases. The phase concept is a description, not a set of requirements.
The temporal phases do not imply a fixed order of studies since for some drugs in a development plan the typical sequence will not be
appropriate or necessary.
Clinical trials of medicinal products in the EU must be conducted
in accordance with EU and national regulations and the International Council for Harmonization of Technical Requirements for Pharmaceuticals
for Human Use (“ICH”) guidelines on GCP as well as the applicable regulatory requirements and the ethical principles that
have their origin in the Declaration of Helsinki. If the sponsor of the clinical trial is not established within the EU, it must appoint
an EU entity to act as its legal representative. The sponsor must take out a clinical trial insurance policy, and in most EU member states,
the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial. The regulatory
landscape related to clinical trials in the EU has been subject to recent changes. The EU Clinical Trials Regulation (“CTR”)
which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. Unlike directives,
the CTR is directly applicable in all EU member states without the need for member states to further implement it into national law. The
CTR notably harmonizes the assessment and supervision processes for clinical trials throughout the EU via a Clinical Trials Information
System, which contains a centralized EU portal and database.
While the EU Clinical Trials Directive required a separate CTA
to be submitted in each member state in which the clinical trial takes place, to both the competent national health authority and an independent
ethics committee, much like the FDA and IRB respectively, the CTR introduces a centralized process and only requires the submission of
a single application for multi-center trials. The CTR allows sponsors to make a single submission to both the competent authority and
an ethics committee in each member state, leading to a single decision per member state. The CTA must include, among other things, a copy
of the trial protocol and an investigational medicinal product dossier containing information about the manufacture and quality of the
medicinal product under investigation. The assessment procedure of the CTA has been harmonized as well, including a joint assessment by
all member states concerned, and a separate assessment by each member state with respect to specific requirements related to its own territory,
including ethics rules. Each member state’s decision is communicated to the sponsor via the centralized EU portal. Once the CTA
is approved, clinical study development may proceed.
The CTR transition period ended on January 31, 2025, and all clinical
trials (and related applications) are now fully subject to the provisions of the CTR.
Medicines used in clinical trials must be manufactured in accordance
with GMP. Other national and EU-wide regulatory requirements may also apply.
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Marketing authorization
Authorization to market a product in the EU member states proceeds
under one of four procedures: a centralized authorization procedure, a mutual recognition procedure, a decentralized procedure or a national
procedure. Marketing authorization may be granted only to an applicant established in the EU. Through our wholly-owned German subsidiary,
we received approval for NexoBrid pursuant to the centralized authorization procedure.
The centralized procedure provides for the grant of a single marketing
authorization, issued by the European Commission based on the opinion of the EMA’s Committee for Medicinal Products for Human Use
(“CHMP”), that is valid throughout the EU and the EEA countries, and including Norway, Iceland and Lichtenstein. The centralized
procedure is compulsory for medicines produced by certain biotechnological processes, products designated as orphan medicinal products,
advanced therapy medicinal products (“ATMPs”) and products with a new active substance indicated for the treatment of certain
diseases, and is optional for products which constitute a significant therapeutic, scientific, or technical innovation or for which a
centralized process is in the interest of patients. Products that have received orphan designation in the EU, such as NexoBrid, will qualify
for this centralized procedure, under which each product’s MAA is submitted to the EMA. Under the centralized procedure in the EU,
the maximum time frame for the evaluation of an MAA by the EMA is 210 days (excluding clock stops, when additional written or oral information
is to be provided by the applicant in response to questions asked by the Committee of Medicinal Products for Human Use). In general, if
the centralized procedure is not followed, there are three alternative procedures where applications are filed with one or more members
state medicines regulators, each of which will grant a national marketing authorization:
| • |
Mutual recognition procedure. If an authorization has been granted by one-member state,
or the Reference Member State, an application may be made for mutual recognition in one or more other member states, or the Concerned
Member State(s). |
| • |
Decentralized procedure. The decentralized procedure may be used to obtain a marketing
authorization in several European member states when the applicant does not yet have a marketing authorization in any country. |
| • |
National procedure. Applicants following the national procedure will be granted a marketing
authorization that is valid only in a single member state. Furthermore, this marketing authorization is not based on recognition of another
marketing authorization for the same product awarded by an assessment authority of another member state. If marketing authorization in
only one-member state is preferred, an application can be filed with the national competent authority of a member state. The national
procedure can also serve as the first phase of a mutual recognition procedure. |
It is not always possible for applicants to follow the national
procedure. In the case of medicinal products in the category for which the centralized authorization procedure is compulsory, that procedure
must be followed. In addition, the national procedure is not available in the case of medicinal product dossiers where the same applicant
has already obtained marketing authorization in one of the other EU member state or has already submitted an application for marketing
authorization in another member state and the application is under consideration. In the latter case, applicants must follow a mutual
recognition procedure.
After a medicine has been authorized and launched, it is a condition
of maintaining the marketing authorization that all aspects relating to its quality, safety and efficacy must be kept under review. Sanctions
may be imposed for failure to adhere to the conditions of the marketing authorization. In extreme cases, the authorization may be revoked,
resulting in withdrawal of the product from sale.
Period of authorization and renewals
Under the above-described procedures, in order to grant the marketing
authorization, the EMA or the competent authorities of the EU member states make an assessment of the risk benefit balance of the product
on the basis of scientific criteria concerning its quality, safety and efficacy. Marketing authorization is valid for an initial five-year
period and may be renewed thereafter on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority
of the authorizing member state. To this end, the marketing authorization holder shall provide the EMA or other applicable competent authority
a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing
authorization was granted, at least six months before the end of the initial five-year period. Once renewed, the marketing authorization
is valid for an unlimited period, unless the EMA or other applicable competent authority decides, on justified grounds relating to pharmacovigilance,
to proceed with one additional five-year renewal. Any authorization which is not followed by the actual placing of the drug on the EU
market (in case of centralized procedure) or on the market of the authorizing member state within three years after authorization shall
cease to be valid.
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Regulatory data protection
Without prejudice to the law on the protection of industrial and
commercial property, some marketing authorizations benefit from an “8+2(+1)” year period of regulatory protection. During
the first eight years from the grant of the innovator company’s marketing authorization, data exclusivity applies. If granted, the
data exclusivity period prevents generic or biosimilar applicants from relying on the pre-clinical and clinical trial data contained in
the dossier of the reference product when applying for a generic or biosimilar MA in the EU during a period of eight years from the date
on which the reference product was first authorized in the EU. After the eight years have expired, a generic company can make use of the
preclinical and clinical trial data of the originator in their regulatory applications but still cannot market their product until the
end of the 10 year market exclusivity period. An additional one year of market exclusivity can be obtained if, during the first eight
years of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications which, during
the scientific evaluation prior to their approval, are determined to bring a significant clinical benefit in comparison with existing
therapies. However, there is no guarantee that a product will be considered by the EU’s regulatory authorities to be a new chemical
or biological entity, and products may not qualify for data exclusivity. Under the current rules, a third party may reference the preclinical
and clinical data of the reference product beginning eight years after first approval, but the third party may market a generic version
only after 10 (or 11) years have lapsed.
There is a special regime for biosimilars, or biological medicinal
products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product, for example,
because of differences in raw materials or manufacturing processes. For such products, the results of appropriate preclinical or clinical
trials must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types
of biological product. There are no such guidelines for complex biological products, such as gene or cell therapy medicinal products,
and so it is unlikely that biosimilars of those products will currently be approved in the EU. However, guidance from the EMA states that
they will be considered in the future in light of the scientific knowledge and regulatory experience gained at the time.
Additional data protection can be applied for when an applicant
has complied with all requirements as set forth in an approved PIP.
Post-Approval Requirements
Similar to the United States, both marketing authorization holders
and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA, the European Commission and/or the
competent regulatory authorities of the member states. The holder of a marketing authorization must establish and maintain a pharmacovigilance
system and appoint an individual qualified person for pharmacovigilance who is responsible for the establishment and maintenance of that
system, and oversees the safety profiles of medicinal products and any emerging safety concerns. Key obligations include expedited reporting
of suspected serious adverse reactions and submission of periodic safety update reports (“PSURs”).
All new MAA must include a risk management plan (“RMP”)
describing the risk management system that the company will put in place and documenting measures to prevent or minimize the risks associated
with the product. The regulatory authorities may also impose specific obligations as a condition of the marketing authorization. Such
risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs,
or the conduct of additional clinical trials or post-authorization safety studies.
Failure to comply with the aforementioned EU and member state laws
may result in administrative, civil or criminal penalties. These penalties could include delays or refusal to authorize the conduct of
clinical trials, or to grant marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal or variation
of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions,
injunctions, suspension of licenses, fines and criminal penalties. These penalties could include delays or refusal to authorize the conduct
of clinical trials, or to grant the marketing authorization, product withdrawals and recalls, product seizures, suspension, withdrawal
or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing or clinical trials,
operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.
The aforementioned EU rules are generally applicable in the EEA.
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Brexit and
the Regulatory Framework in the United Kingdom
Following the end of the Brexit transition period on January
1, 2021, and the implementation of the Windsor Framework on January 1, 2025, the United Kingdom (“UK”) is not generally subject
to EU laws in respect of medicines. The EU laws that have been transposed into UK law through secondary legislation remain applicable
in the UK, however, new legislation such as the (EU) CTR is not applicable in Great Britain. Under the Medicines and Medical Devices
Act 2021, the Secretary of State or an ‘appropriate authority’ has delegated powers to amend or supplement existing regulations
in the area of medicinal products and medical devices. This allows new rules to be introduced in the future by way of secondary legislation,
which aims to allow flexibility in addressing regulatory gaps and future changes in the fields of human medicines, clinical trials and
medical devices. As of January 1, 2021, the Medicines and Healthcare products Regulatory Agency (“MHRA”) is the UK’s
standalone medicines and medical devices regulator. As a result of the Northern Ireland Protocol, different rules applied in Northern
Ireland than in England, Wales, and Scotland, together, Great Britain (“GB”); which continued to follow the EU regulatory
regime. However, on January 1, 2025, a new arrangement called the “Windsor Framework” came into effect and reintegrated Northern
Ireland under the regulatory authority of the MHRA with respect to medicinal products. The Windsor Framework removes EU licensing processes
and EU labelling and serialization requirements in relation to Northern Ireland and introduces a UK-wide licensing process for medicines.
MAs in the UK are governed by the Human Medicines Regulations (SI
2012/1916), as amended. All existing EU MAs for centrally authorized products were automatically converted or grandfathered into UK MAs,
effective in GB (only), free of charge on January 1, 2021, unless the MA holder chose to opt-out. Under the terms of the Windsor Framework,
these MAs became valid for the whole of the UK from January 1, 2025. In order to use the centralized procedure to obtain an MA that will
be valid throughout the EEA, companies must be established in the EEA. Therefore, since Brexit, companies established in the UK can no
longer use the EU centralized procedure and instead an EEA entity must hold any centralized MAs. In order to obtain a UK MA to commercialize
products in the UK, an applicant must be established in the UK and must follow one of the UK national authorization procedures or one
of the remaining post-Brexit international cooperation procedures. Applications are governed by the Human Medicines Regulations (SI 2012/1916)
and are made electronically through the MHRA Submissions Portal. The MHRA has introduced changes to national licensing procedures, including
procedures to prioritize access to new medicines that will benefit patients, a 150-day assessment (subject to clock-stops) and a rolling
review procedure. In addition, since January 1, 2024, the MHRA may rely on the International Recognition Procedure (“IRP”)
when reviewing certain types of MAAs. Pursuant to the IRP, the MHRA will take into account the expertise and decision-making of trusted
regulatory partners (e.g., the regulators in Australia, Canada, Switzerland, Singapore, Japan, the U.S.A. and the EU). The MHRA will conduct
a targeted assessment of IRP applications but retain the authority to reject applications if the evidence provided is considered insufficiently
robust. The IRP allows medicinal products approved by such trusted regulatory partners that meet certain criteria to undergo a fast-tracked
MHRA review to obtain and/or update an MA in the UK or Great Britain. Applications should be decided within a maximum of 60 days
if there are no major objections identified that cannot be resolved within such 60-day period and the approval from the trusted regulatory
partner selected has been granted within the previous 2 years or if there are such major objections identified or such approval hasn’t
been granted within the previous 2 years within 110 days. Applicants can submit initial MAAs to the IRP but the procedure can also be
used throughout the lifecycle of a product for post-authorization procedures including line extensions, variations and renewals. In the
UK, the initial duration of an MA is five years and following renewal will be valid for an unlimited period unless the MHRA decides on
justified grounds relating to pharmacovigilance, to proceed with only one additional five-year renewal. Any authorization which is not
followed by the actual placing of the product on the market in the UK within three (3) years shall cease to be in force.
There is no pre-MA orphan designation in the UK. Instead, the MHRA
reviews applications for orphan designation in parallel to the corresponding MA application. The criteria are essentially the same, but
have been tailored for the market, i.e., the prevalence of the condition in the UK, rather than the EU, must not be more than five in
10,000. Should an orphan designation be granted, the period or market exclusivity will be set from the date of first approval of the product
in the UK.
Data Privacy and Security Laws
Numerous state, federal and foreign laws, regulations, and standards
govern the collection, use, access to, confidentiality and security of health-related and other personal information, and could apply
now or in the future to our operations or the operations of our partners. In the United States, numerous federal and state laws and regulations,
including data breach notification laws, health information privacy and security laws and consumer protection laws and regulations govern
the collection, use, disclosure, and protection of health-related and other personal information. In addition, certain laws govern the
privacy and security of personal data, including health-related data in the EU/EEA and in other foreign jurisdictions. Privacy and security
laws, regulations, and other obligations are constantly evolving, may conflict with each other to complicate compliance efforts, and can
result in investigations, proceedings, or actions that lead to significant civil and/or criminal penalties and restrictions on data processing.
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Manufacturing
The manufacturing of authorized drugs, for which a separate manufacturer’s
license is mandatory, must be conducted in strict compliance with the EMA’s GMP requirements and comparable requirements of other
regulatory bodies, which mandate the methods, facilities and controls used in manufacturing, processing and packing of drugs to assure
their safety and proper identification. The EMA monitors compliance with its GMP requirements through mandatory registration of facilities
and inspections of those facilities. The EMA has a coordinating role for these inspections while the responsibility for carrying them
out rests with the competent authority of the member state under whose responsibility the manufacturer falls. Failure to comply with these
requirements could interrupt supply and result in delays, unanticipated costs and lost revenues, and could subject the applicant to potential
legal or regulatory action, including but not limited to warning letters, suspension of manufacturing, seizure of product, injunctive
action or possible civil and criminal penalties. In January 2013, the EU and Israel signed the Protocol on Conformity Assessment and Acceptance
of Industrial Products (the “ACAA”), which covers medicinal products. The ACAA provides for mutual recognition of the conclusions
of inspections of compliance of manufacturers and importers with the principles and guidelines of EU GMP and equivalent Israeli cGMP.
Certification of the conformity of each batch to its specifications by either the importer or the manufacturer established in Israel or
in the EU shall be recognized by the other party without re-control at import from one party to the other.
Marketing and promotion
The marketing and promotion of authorized medicinal products, including
industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are
strictly regulated in the EU, notably under Directive 2001/83 and subject to laws concerning promotion of medicinal products, interactions
with physicians, misleading and comparative advertising and unfair commercial practices. The applicable legislation aims to ensure that
information provided by holders of marketing authorizations regarding their products is truthful, balanced and accurately reflects the
safety and efficacy claims validated by the EMA or by the applicable national authority of the authorizing member state. All advertising
and promotional activities for the product must be consistent with the approved summary of product characteristics, and therefore all
off-label promotion is prohibited. Direct-to-consumer advertising of prescription medicines is also prohibited in the EU. Although general
requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations
in each member state and can differ from one country to another. Failure to comply with these requirements can result in adverse publicity,
warning letters, mandated corrective advertising and potential civil and criminal penalties.
United States
Review and approval of biologics
In addition to EU regulations, NexoBrid is marketed as a biologic
product in the United States for eschar removal in patients with deep partial thickness and/or full thickness thermal burns and is therefore
subject to various U.S. regulations. In the United States, the FDA regulates biologics under the Federal, Food, Drug and Cosmetic Act
(“FDCA”), the Public Health Service Act, and their respective implementation regulations. Biologics require the submission
of a BLA and licensure by the FDA prior to being marketed in the United States. The process of obtaining regulatory approvals and the
subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial
time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the product development process,
approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions as well as enforcement
actions brought by the FDA, the U.S. Department of Justice or other governmental entities. Possible sanctions may include the FDA’s
refusal to approve pending BLAs or supplements, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government
contracts, restitution, disgorgement and civil or criminal penalties.
The process required by the FDA prior to marketing and distributing
a biologic in the United States generally involves the following:
| • |
completion of laboratory tests, animal studies and formulation studies in compliance with the FDA’s GLP and GMP regulations,
as applicable; |
| • |
submission to the FDA of an investigational new drug application (“IND”), which must become effective before clinical
trials may begin; |
| • |
approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated;
|
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| • |
performance of adequate and well-controlled clinical trials in accordance with GCP to establish the safety and efficacy of the product
for each indication; |
| • |
preparation and submission to the FDA of a BLA; |
| • |
satisfactory completion of an FDA advisory committee review, if applicable; |
| • |
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components
thereof, are produced to assess compliance with cGMP requirements, and to assure that the facilities, methods and controls are adequate
to preserve the product’s safety, purity and potency, and of selected clinical investigation sites to assess compliance with GCP;
and |
| • |
payment of user fees and FDA review and approval of the BLA to permit commercial marketing of the product for particular indications
for use in the United States. |
Preclinical studies
Preclinical studies include laboratory evaluation of product chemistry,
toxicity and formulation, as well as animal studies to assess the potential safety and efficacy of the product candidate. Preclinical
safety tests must be conducted in compliance with FDA regulations regarding good laboratory practices. The results of the preclinical
tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND which must become effective
before clinical trials may commence. Some preclinical testing may continue even after the IND is submitted.
Clinical trials in support of a BLA
Clinical trials involve the administration of an investigational
product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other
things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical
trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the study, the parameters
to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent
protocol amendments must be submitted to the FDA as part of the IND. An IND automatically becomes effective 30 days after receipt by the
FDA, unless before that time the FDA raises concerns or questions related to a proposed clinical trial and places the trial on clinical
hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.
In addition, an IRB representing each institution participating
in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must
conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol
and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. Information
about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination
on their website, ClinicalTrials.gov.
For purposes of BLA approval, clinical trials are typically conducted
in three sequential phases, which may overlap or be combined. In the United States, the three phases are generally described as follows:
| Phase I: |
The investigational product is initially introduced into healthy human subjects or patients with the target disease or condition
and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication
of its effectiveness and to determine optimal dosage. |
| Phase II: |
The investigational product is administered to 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.
|
| Phase III: |
The investigational product is administered to an expanded patient population, generally at geographically dispersed clinical trial
sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for
approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.
|
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In some cases, the FDA may require, or companies may voluntarily
pursue, additional clinical trials after a product is approved to gain more information about the product. These so-called Phase IV studies
may be made a condition to approval of the BLA.
Progress reports detailing the results of the clinical trials must
be submitted at least annually to the FDA and more frequently if serious adverse events occur. Phase I, Phase II and Phase III clinical
trials may not be completed successfully within any specified period, or at all. Furthermore, 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 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 IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.
Submission of a BLA to the FDA
The results of the preclinical studies and clinical trials, together
with other detailed information, including information on the manufacture, control and composition of the product, are submitted to the
FDA as part of a BLA requesting approval to market the product candidate for a proposed indication. Under the Prescription Drug User Fee
Act (PDUFA), as amended, applicants are required to pay user fees to the FDA for reviewing a BLA. These user fees, as well as the annual
program fees required for approved products, can be substantial. Each BLA submitted to the FDA for approval is typically reviewed for
administrative completeness and reviewability within 60 days following submission of the application. If found complete, the FDA will
“file” the BLA, which triggers a full review of the application. The FDA may refuse to file any BLA that it deems incomplete
or not properly reviewable at the time of submission. The FDA’s established goals are to review and act on standard applications
within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after
the FDA accepts the application for filing. In both standard and priority reviews, the review process is often significantly extended
by FDA requests for additional information or clarification. The FDA reviews a BLA to determine, among other things, whether a product
is safe, pure and potent and the facility in which it is manufactured, processed, packed, or held meets standards designed to assure the
product’s continued safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application
review questions.
Before approving a BLA, the FDA generally inspects the facilities
at which the product is manufactured or facilities that are significantly involved in the product development and distribution process,
and will not approve the product unless cGMP compliance is satisfactory. Additionally, before approving a BLA, the FDA will typically
inspect one or more clinical sites to assure compliance with GCP. If the FDA determines that the application, manufacturing process or
manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing
or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application
does not satisfy the regulatory criteria for approval. After the FDA evaluates a BLA and conducts inspections of manufacturing facilities
where the investigational product will be produced, the FDA may issue an approval letter or a Complete Response letter. An approval letter
authorizes commercial marketing of the product with specific prescribing information for specific indications. A Complete Response letter
will describe all of the deficiencies that the FDA has identified in the BLA, except that where the FDA determines that the data supporting
the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections,
testing submitted product lots, and/or reviewing proposed labeling. In issuing the Complete Response letter, the FDA may recommend actions
that the applicant might take to place the BLA in condition for approval, including requests for additional information or clarification.
The FDA may deny approval of a BLA if applicable statutory or regulatory
criteria are not satisfied, or may require additional testing or information, which can delay the approval process. FDA approval of any
application may include many delays or may never be granted. If a product is approved, the approval will impose limitations on the indicated
uses for which the product may be marketed, will require that warning statements be included in the product labeling, may impose additional
warnings to be specifically highlighted in the labeling (e.g., a Black Box Warning), which can significantly affect promotion and sales
of the product, may require that additional studies be conducted following approval as a condition of the approval and may impose restrictions
and conditions on product distribution, prescribing or dispensing. For example, the FDA may approve the BLA with a Risk Evaluation and
Mitigation Strategy, or REMS, to ensure the benefits of the product outweigh its risks. A REMS is a safety strategy to manage a known
or potential serious risk associated with a product and to enable patients to have continued access to such medicines by managing their
safe use. A REMS program may be required to include various elements, such as a medication guide or patient package insert, a communication
plan to educate healthcare providers of the drug’s risks, or other elements to assure safe use, such as limitations on who may prescribe
or dispense the drug, dispensing only under certain circumstances, special monitoring and the use of patient registries. Once a product
is approved, marketing the product for other indicated uses or making certain manufacturing or other changes requires FDA review and approval
of a supplemental BLA or a new BLA, which may require additional clinical data. In addition, further post-marketing testing and surveillance
to monitor the safety or efficacy of a product may be required. Also, product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if safety or manufacturing problems occur following initial marketing. In addition, new government requirements
may be established that could delay or prevent regulatory approval of our product candidates under development.
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Post-approval requirements
Any biologic products for which we receive FDA approvals are subject
to pervasive continuing regulation by the FDA. Certain requirements include, among other things, record-keeping requirements, reporting
adverse experiences with the product, providing the FDA with updated safety and efficacy information annually or more frequently for specific
events, product sampling and distribution requirements, complying with certain electronic records and signature requirements and complying
with FDA promotion and advertising requirements. These promotion and advertising requirements include, among others, standards for direct-to-consumer
advertising, prohibitions against promoting drugs for uses or in patient populations that are not described in the drug’s approved
labeling, known as “off-label use,” and other promotional activities, such as those considered to be false or misleading.
Failure to comply with FDA requirements can have negative consequences, including the immediate discontinuation of noncomplying materials,
adverse publicity, enforcement letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal
penalties. Such enforcement may also lead to scrutiny and enforcement by other government and regulatory bodies. Although physicians may
prescribe legally available drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses. As a result,
“off-label promotion” has formed the basis for litigation under the Federal False Claims Act, violations of which are subject
to significant civil fines and penalties.
The manufacturing of NexoBrid, EscharEx and our pipeline product
candidates are and will be required to comply with applicable FDA manufacturing requirements contained in the FDA’s cGMP regulations.
NexoBrid is manufactured at our production plant in Yavne, Israel, which is cGMP certified. The FDA’s cGMP regulations require,
among other things, quality control and quality assurance, as well as the corresponding maintenance of comprehensive records and documentation.
Biologic manufacturers and other entities involved in the manufacture and distribution of approved drugs and biologics are also required
to register their establishments and list any products they make with the FDA and to comply with related requirements in certain states.
These entities are further subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP
and other laws. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control
to maintain cGMP compliance. In addition, a BLA holder must comply with post-marketing requirements, such as reporting of certain adverse
events. Such reports can present liability exposure, as well as increase regulatory scrutiny that could lead to additional inspections,
labeling restrictions or other corrective action to minimize further patient risk. Discovery of problems with a product after approval
may result in serious and extensive restrictions on the product, manufacturer or holder of an approved BLA, as well as lead to potential
market disruptions. These restrictions may include recalls, fines, warning letters, or untitled letters, clinical holds on clinical studies,
refusal of the FDA to approve pending applicants or supplements to approved applications, product seizure or detention, or refusal to
permit the import or export of products, suspension or revocation of a product license approval until the FDA is assured that quality
standards can be met, and continuing oversight of manufacturing by the FDA under a “consent decree,” which frequently includes
the imposition of costs and continuing inspections over a period of many years, as well as possible withdrawal of the product from the
market. In addition, changes to the manufacturing process generally require prior FDA approval before being implemented. Other types of
changes to the approved product, such as adding new indications and additional labeling claims, are also subject to further FDA review
and approval. The FDA also may impose a number of post-approval requirements as a condition of approval of a BLA. For example, the FDA
may require post-marketing testing, or Phase IV testing, as well as REMS and/or surveillance to monitor the effects of an approved product
or place other conditions on an approval that could otherwise restrict the distribution or use of NexoBrid.
Orphan designation and exclusivity
On August 20, 2003, NexoBrid received orphan drug designation in
the United States. Under the Orphan Drug Act, the FDA may designate a drug product as an “orphan drug” if it is intended to
treat a rare disease or condition, meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which
there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment
of the disease or condition will be recovered from sales of the product. A company must request orphan product designation before submitting
a BLA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan drug designation
does not convey any advantage in or shorten the duration of the regulatory review and approval process.
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If a product with orphan status receives the first FDA approval
for the disease or condition for which it has such designation, the product will be entitled to orphan product exclusivity. Orphan product
exclusivity means that FDA may not approve any other applications for the same product for the same approved use or indication within
such rare disease or condition for seven years, except in certain limited circumstances, such as a showing of clinical superiority to
the product with orphan drug exclusivity. Competitors may receive approval of different products for the same approved use or indication
within such rare disease or condition for which the orphan product has exclusivity and may obtain approval for the same product but for
any use or indication within a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing
authorization for a disease or condition broader than that designated in its orphan product application, it may not be entitled
to exclusivity. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs
of patients with the rare disease or condition.
Expedited Development and Review Programs
The FDA offers a number of expedited development and review programs
for qualifying product candidates. The fast track program is intended to expedite or facilitate the process for reviewing new products
that meet certain criteria. Specifically, new products are eligible for fast track designation if they are intended to treat a serious
or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. Fast
track designation applies to the combination of the product and the specific indication for which it is being studied. The sponsor of
a fast track product has opportunities for frequent interactions with the review team during product development and, once a BLA is submitted,
the product may be eligible for priority review. A fast track product may also be eligible for rolling review, where the FDA may consider
for review sections of the BLA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for
the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and determines that the schedule is acceptable,
and the sponsor pays any required user fees upon submission of the first section of the BLA.
A product intended to treat a serious or life-threatening disease
or condition may also be eligible for breakthrough therapy designation to expedite its development and review. A product can receive breakthrough
therapy designation if preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing
therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
The designation includes all of the fast track program features, as well as more intensive FDA interaction and guidance beginning as early
as Phase I and an organizational commitment to expedite the development and review of the product, including involvement of senior managers.
Any marketing application for a biologic submitted to the FDA for approval, including a product with a fast track designation and/or breakthrough
therapy designation, may be eligible for other types of FDA programs intended to expedite the FDA review and approval process, such as
priority review and accelerated approval. A product is eligible for priority review if it has the potential to provide a significant improvement
in the treatment, diagnosis or prevention of a serious disease or condition compared to marketed products. For products containing new
molecular entities, priority review designation means the FDA’s goal is to take action on the marketing application within six months
of the 60-day filing date, compared with ten months under standard review.
Additionally, products studied for their safety and effectiveness
in treating serious or life-threatening diseases or conditions may receive accelerated approval upon a determination that the product
has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured
earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality
or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative
treatments. As a condition of accelerated approval, the FDA will generally require the sponsor to perform adequate and well-controlled
post-marketing clinical studies to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical
benefit. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials, which
could adversely impact the timing of the commercial launch of the product.
In 2017, FDA established a new regenerative medicine advanced therapy,
or RMAT, designation as part of its implementation of the 21st Century Cures Act, which was signed into law in December 2016. To qualify
for RMAT designation, the product candidate must meet the following criteria: (1) it qualifies as a RMAT, which is defined as a cell therapy,
therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products, with
limited exceptions; (2) it is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and (3)
preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such a disease or condition.
Like fast track and breakthrough therapy designation, RMAT designation provides potential benefits that include more frequent meetings
with FDA to discuss the development plan for the product candidate and eligibility for rolling review and priority review. Products granted
RMAT designation may also be eligible for accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely
to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites, including through expansion to
additional sites. Once approved, when appropriate, the FDA can permit fulfillment of post-approval requirements under accelerated approval
through the submission of clinical evidence, clinical studies, patient registries, or other sources of real world evidence such as electronic
health records; through the collection of larger confirmatory datasets; or through post-approval monitoring of all patients treated with
the therapy prior to approval.
Fast track designation, breakthrough therapy designation, priority review, accelerated
approval, and RMAT designation do not change the standards for approval but may expedite the development or approval process.
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Pediatric studies and exclusivity
Under the Pediatric Research Equity Act of 2003, a BLA or supplement
thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in
all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product
is safe and effective. Sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline
of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver
requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then
review the information submitted, consult with each other and agree upon a final plan. The FDA or the applicant may request an amendment
to the plan at any time. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some
or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.
Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in the FDASIA.
Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation.
Separately, in the event the FDA issues a Written Request for pediatric
data relating to a product, a BLA sponsor who submits such data may be entitled to pediatric exclusivity. Pediatric exclusivity is another
type of non-patent marketing exclusivity in the United States which, if granted, provides for the attachment of an additional six months
of marketing protection to the term of any existing exclusivity, including other non-patent and orphan exclusivity. This six-month exclusivity
may be granted if a BLA sponsor submits pediatric data that fairly respond to the Written Request from the FDA for such data. The data
do not need to show that the product is effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly
respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and
accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover
the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which
the FDA cannot accept or approve another application.
Patent term restoration and extension
A patent claiming a new drug product may be eligible for a limited
patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman Act”), which
permits a patent restoration of up to five years for the patent term lost during product development and the FDA regulatory review. The
restoration period granted is typically one-half the time between the effective date of an IND and the submission date of a BLA, plus
the time between the submission date of a BLA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining
term of a patent past a total of fourteen years from the product’s approval date. Only one patent applicable to an approved drug
product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in
question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals.
The U.S. Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation
with the FDA.
Biosimilars and reference product exclusivity
The Patient Protection and Affordable Care Act, as amended by the
Health Care and Education Reconciliation Act (collectively, the “ACA”), which was signed into law in 2010, includes a subtitle
called the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), which created an abbreviated approval pathway
for biological products that are biosimilar to or interchangeable with an FDA-approved reference biological product.
Biosimilarity, which requires that there be no clinically meaningful
differences between the biological product and the reference product in terms of safety, purity, and potency, can be shown through analytical
studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference product
and the product must demonstrate that it can be expected to produce the same clinical results as the reference product in any given patient
and, for products that are administered multiple times to an individual, the biologic and the reference biologic may be alternated or
switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive
use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products,
as well as the processes by which such products are manufactured, pose significant hurdles to implementation of the abbreviated approval
pathway that are still being worked out by the FDA.
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Under the BPCIA, an application for a biosimilar product may not
be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the
approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was
first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product
if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and
well-controlled clinical trials to demonstrate the safety, purity and potency of their product.
The BPCIA also created certain exclusivity periods for biosimilars
approved as interchangeable products. At this juncture, it is unclear whether products deemed “interchangeable” by the FDA
will, in fact, be readily substituted by pharmacies, which are governed by state pharmacy law. The BPCIA is complex and continues to be
interpreted and implemented by the FDA. In addition, recent government proposals have sought to reduce the 12-year reference product exclusivity
period. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation.
As a result, the ultimate impact, implementation, and meaning of the BPCIA remains subject to significant uncertainty.
Review and Approval of Drug Products Outside
the European Union and the United States
In addition to the above regulations, we must obtain approval of
a product by the comparable regulatory authorities of foreign countries outside of the EU and the United States before we can commence
clinical trials or marketing of NexoBrid in those countries. The approval process varies from country to country and the time may be longer
or shorter than that required for FDA or EU approval. In addition, the requirements governing the conduct of clinical trials, product
licensing, pricing and reimbursement vary greatly from country to country. In all cases, clinical trials are conducted in accordance with
GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.
If we fail to comply with applicable regulatory requirements, we
may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products,
operating restrictions and criminal prosecution.
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement
status of any products for which we obtain regulatory approval. In the United States, EU and other markets, sales of any products for
which we receive regulatory approval for commercial sale will depend to a large extent on the availability of reimbursement from third-party
payors. Third-party payors include governments, government health administrative authorities, managed care providers, private health insurers
and other organizations. The process for determining whether a payor will provide coverage for a drug product may be separate from the
process for setting the price or reimbursement rate that the payor will pay for the drug product. Third-party payors may limit coverage
to specific drug products on an approved list, or formulary, which might not include all of the drug products approved for a particular
indication by the FDA, European Commission or National Ministries of Health. Third-party payors are increasingly challenging the price
and examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy.
We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of EscharEx,
in addition to the costs required to obtain the FDA or other Ministry of Health approvals. Additionally, EscharEx may not be considered
medically necessary or cost-effective. A payor’s decision to provide coverage for a drug product does not guarantee that an adequate
reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient
to realize an appropriate return on our investment in product development.
In the United States, we sell NexoBrid to hospitals, and when used
on Medicare patients, all items and services are paid under the Medicare hospital outpatient prospective payment system, or OPPS, and
assigned to payment groups called Ambulatory Payment Classifications, or APCs, which group together items and services that are similar
clinically and in terms of resource use. Reimbursement for professional services performed by physicians are reported using CPT codes
and based on a different payment methodology. Effective January 1, 2024, CMS granted transitional pass-through, or TPT, payment status
for NexoBrid under HCPCS code J7353 (“Anacaulase-bcdb, 8.8% gel, 1 gram”). This status is granted by CMS to facilitate access
to innovative drugs and biological agents whose cost is “not insigifncant” related to the hospital outpatient prospective
payment for the procedures or services associated with the new drug or biological agent. NexoBrid’s TPT status expires on December
31, 2026.
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We believe the overall escalating cost of medical products and
services being paid for by the government and private health insurance has led to, and will continue to lead to, increased pressures on
the healthcare and pharmaceutical industry to reduce the costs of products and services. All third-party reimbursement programs are developing
increasingly sophisticated methods of controlling healthcare costs through prospective reimbursement and capitation programs, group purchasing,
redesign of benefits, and exploration of more cost-effective methods of delivering healthcare.
In addition to uncertainties surrounding coverage policies, there
are periodic changes to reimbursement levels. Third-party payors regularly update reimbursement amounts and also from time to time revise
the methodologies used to determine reimbursement amounts. This includes routine updates to payments to physicians and hospitals for procedures
during which our products are used. These updates could directly impact the demand for our products.
In the EU, pricing and reimbursement schemes vary widely from country
to country and often within regions or provinces of countries. Some countries may limit the annual budget of coverage or request that
the company participate in the cost above certain use levels or for treatments perceived as unsuccessful and impose monitoring processes
on the use of the product. Some countries and hospitals may require inclusion into the hospital formulary for payment from the hospital
budget. Some countries and hospitals may require the completion of additional studies that compare the cost-effectiveness of a particular
drug candidate to currently available therapies. For example, the EU provides options for its member states to restrict the range of medicinal
products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human
use. This Health Technology Assessment (“HTA process”) which is currently governed by the national laws of the individual
EU member states, is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic
and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. The
outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal
products by the competent authorities of individual EU Member States. On December 15, 2021, the Health Technology Regulation (“HTA
Regulation”) was adopted. The Regulation entered into force in January 2022 and has been applicable since January 2025, with phased
implementation based on the type of product, i.e. oncology and advanced therapy medicinal products as of 2025, orphan medicinal products
as of 2028, and all other medicinal products by 2030. The HTA Regulation intends to boost cooperation among EU member states in assessing
health technologies, including new medicinal products, and provide the basis for cooperation at EU level for joint clinical assessments
in these areas.
Further, EU member states may approve a specific price for a drug
product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the drug product on the
market. Other member states allow companies to fix their own prices for drug products, but monitor and control company profits. The downward
pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers
are being erected to the entry of new products. In addition, in some countries, cross-border imports from low-priced markets exert competitive
pressure that may reduce pricing within a country. Any country that has price controls or reimbursement limitations for drug products
may not allow favorable reimbursement and pricing arrangements. Historically, products launched in the EU do not follow price structures
of the United States and generally prices tend to be significantly lower.
Healthcare Reform
In the United States, the ACA substantially changed the way healthcare
is financed by both governmental and private insurers and significantly impacted the pharmaceutical industry. The ACA contains a number
of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and abuse provisions,
which will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment
for performance initiatives and improvements to the physician quality reporting system and feedback program. Additionally, the ACA:
| • |
increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%; |
| • |
requires collection of rebates for drugs paid by Medicaid managed care organizations; and |
64
| • |
imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs”
to specified federal government programs. |
Since its enactment, there have been judicial, executive and congressional
challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the
ACA brought by several states without specifically ruling on the constitutionality of the ACA. Thus, the ACA will remain in effect in
its current form.
There has been heightened governmental scrutiny recently over the
manner in which drug manufacturers set prices for their marketed products, which have resulted in several Congressional inquiries and
proposed bills designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for drug products. In March 2021, the American
Rescue Plan Act of 2021 was signed into law, which eliminated the statutory cap on drug manufacturers’ Medicaid drug rebate liability,
which was previously set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs,
beginning January 1, 2024. In August 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law. Among other things, the IRA
requires manufacturers of certain drugs to engage in price negotiations with Medicare, with prices that can be negotiated subject to a
cap; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023);
and replaces the Part D coverage gap discount program with a new discounting program (which began in 2025). CMS has published the negotiated
prices for the initial ten drugs, which went into effect in 2026, and the subsequent 15 drugs, which will first be effective in 2027,
as well as the next set of 15 drugs that are subject to price negotiation, although the Medicare drug price negotiation program is currently
subject to legal challenges. The IRA permits the Secretary of the Department of Health and Human Services to implement many of these provisions
through guidance, as opposed to regulation, for the initial years. HHS has and will continue to issue and update guidance as these programs
are implemented. For that and other reasons, it is currently unclear how the IRA will be effectuated, or the impact of the IRA on our
business. We expect that additional U.S. federal healthcare reform measures will be adopted in the future, any of which could limit the
amounts that the U.S. federal government will pay for healthcare products and services, which could result in reduced demand for our products
or additional pricing pressures.
More recently, the One Big Beautiful Bill Act, which was enacted in July 2025, imposes
significant reductions in the funding of the Medicaid program. Such reductions are expected to decrease the number of persons enrolled
in Medicaid and reduce the services covered by Medicaid, which could adversely affect our sales of any product candidate that we commercialize.
The current Presidential administration is pursuing a two-fold
strategy to reduce drug costs in the U.S. While it is unclear whether and how such policies will be implemented, the proposed policies
are likely to have a negative impact on the pharmaceutical industry and on our ability to receive adequate revenues for our products and
product candidates, if approved. As part of this strategy, President Trump has proposed imposing significant tariffs on pharmaceutical
manufacturers that do not adopt pricing policies such as most favored nation pricing, which would tie the price for drugs in the U.S.
to the lowest price in a group of other countries. In response, multiple manufacturers have reportedly entered into confidential pricing
agreements with the federal government. In addition, the Trump administration is pursuing traditional regulatory pathways to impose drug
pricing policies, and published two proposed regulations in December 2025, referred to as Globe and Guard. If finalized, these regulations
would implement mandatory payment models under which manufacturers of eligible drugs would be required to pay rebates to the federal government
on a portion of the units of their drugs that are reimbursed by Medicare, with the rebate amount based on most favored nation pricing.
While the impact of the Globe and Guard proposed regulations, if finalized, cannot yet be determined, it is likely to be significant.
Even regulatory proposals or executive actions that are ultimately deemed unlawful could negatively impact the U.S. pharmaceutical sector
and our business. In addition, pharmaceutical pricing and marketing has long been the subject of considerable discussion in Congress
and among policymakers, and it is possible that Congress could enact additional laws that negatively affect the pharmaceutical industry.
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, restrictions on certain product access, marketing cost disclosure, drug price reporting and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing. Some states have enacted legislation creating
so-called prescription drug affordability boards, which ultimately may attempt to impose price limits on certain drugs in these states.
65
Healthcare Law and Regulation
Healthcare providers, physicians and third-party payors play a
primary role in the recommendation and prescription of drug products that are granted marketing authorization. Arrangements with healthcare
providers, third-party payors and other customers are subject to broadly applicable fraud and abuse and other healthcare laws and regulations.
Such restrictions under applicable federal, state and foreign healthcare laws and regulations, include the following:
| • |
the federal healthcare Anti-Kickback Statute prohibits, among other things, persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual
for, or the purchase, order or recommendation of, any good or service for which payment may be made, in whole or in part, under a federal
healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific
intent to violate it in order to have committed a violation; |
| • |
the federal False Claims Act imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals
or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent
or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government
may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false
or fraudulent claim for purposes of the False Claims Act; |
| • |
HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements
relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge
of the statute or specific intent to violate it in order to have committed a violation; |
| • |
the federal false statements statute prohibits 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; |
| • |
the federal physician payment transparency requirements under the Affordable Care Act require certain manufacturers of drugs, devices
and medical supplies to report to Centers for Medicare & Medicaid Services information related to payments and other transfers of
value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other non-physician practitioners
such as physician assistants and nurse practitioners, and teaching hospitals and physician ownership and investment interests; |
| • |
analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.
|
Violations of any of these laws or any other governmental laws
and regulations that may apply include, without limitation, significant civil, criminal and administrative penalties, damages, fines,
imprisonment, exclusion of products from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual
damages, reputational harm, diminished profits and the curtailment or restructuring of our operations.
Some state laws require pharmaceutical companies to comply with
the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government
in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or
marketing expenditures. Additionally, certain state and local laws require the registration of pharmaceutical sales representatives.
Environmental, Health and Safety Matters
We are subject to extensive environmental, health and safety laws
and regulations in a number of jurisdictions, primarily Israel, governing, among other things: the use, storage, registration, handling,
emission and disposal of chemicals, waste materials and sewage; chemicals, air, water and ground contamination; air emissions and the
cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals,
waste materials and sewage. Our operations at our Yavne manufacturing facility use chemicals and produce waste materials and sewage. Our
activities require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental
Protection and the Ministry of Health. The Ministry of Environmental Protection and the Ministry of Health, local authorities and the
municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations.
66
These laws, regulations and permits could potentially require the
expenditure by us of significant amounts for compliance or remediation. If we fail to comply with such laws, regulations or permits, we
may be subject to fines and other civil, administrative or criminal sanctions, including the revocation of permits and licenses necessary
to continue our business activities. In addition, we may be required to pay damages or civil judgments in respect of third-party claims,
including those relating to personal injury (including exposure to hazardous substances we use, store, handle, transport, manufacture
or dispose of), property damage or contribution claims. Some environmental, health and safety laws allow for strict, joint and several
liability for remediation costs, regardless of comparative fault. We may be identified as a responsible party under such laws. Such developments
could have a material adverse effect on our business, financial condition and results of operations.
In addition, laws and regulations relating to environmental, health
and safety matters are often subject to change. In the event of any changes or new laws or regulations, we could be subject to new compliance
measures or to penalties for activities which were previously permitted. For instance, new Israeli regulations were promulgated in 2012
relating to the discharge of industrial sewage into the sewer system. These regulations establish new and potentially significant fines
for discharging forbidden or irregular sewage into the sewage system.
Properties
Our principal executive offices are located at 42 Hayarkon Street,
Yavne 8122745, Israel. We have leased these facilities from a third party. The lease agreement will expire in 2035, with an option for
a further three year extension until 2038. The facilities consist of approximately 32,300 square feet of space, and the yearly lease fee
is approximately $720,000. These facilities house our administrative headquarters, our research and development laboratories and our manufacturing
plant for our products.
In July 2023, we entered into a turnkey scale-up agreement with
Biopharmax Group Ltd. to bolster our manufacturing infrastructure and support our long-term growth trajectory. The objective of this agreement
was to establish, commission, and validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. The venture aimed to increase
our production capacity significantly, and has expanded to six times the capacity, aligning with our strategic plan to meet the escalating
global demand for NexoBrid. The new facility, located in Yavne, Israel, equipped with fully operational clean rooms, is exclusively designed
for NexoBrid production. It complies with stringent regulations from the GMP, FDA, EMA, Israeli Ministry of Health, and relevant Israeli
regulatory bodies. An estimated $13.1 million is invested in the project. During 2024 we completed the construction of the expended NexoBrid
manufacturing facility and completed commissioning in 2025, commissioning of the expanded NexoBrid manufacturing facility was successfully
completed. Commercial availability will depend on securing the necessary regulatory approvals.
We leased approximately 4,000 square feet of additional office
space in Gan Rave, Israel, pursuant to a two-year lease agreement that commenced on January 1, 2024 and was expired effective March 31,
2025. The annual rent under the lease was approximately $120,000, the majority of which was reimbursed by DoW.
In May 2025, we entered into a new lease agreement for approximately
10,800 square feet of office and laboratory space in Gan Rave, Israel. The lease has a five-year term and includes options to extend for
an additional two years. Annual rent under the new lease is approximately $210,000, subject to adjustment based on changes in the Israeli
Consumer Price Index. The leased premises are intended to support the continued growth and expansion of our operations. In addition, In
September 2025, we entered into a new lease agreement for approximately 2,000 square feet of storage in Yavne, Israel, close to the main
office. The agreement is for two years with options for an additional two years. The additional leased area is needed to support the Company
in extending its activity. The annual fee for this agreement is approximately $30,000 linked to the index.
| C. |
Organizational Structure |
The legal name of our company is MediWound Ltd. and we are organized
under the laws of the State of Israel. Our corporate structure consists of MediWound Ltd., our Israeli parent company, and the following
subsidiaries: (i) MediWound Germany GmbH, our active wholly-owned subsidiary, which was incorporated on April 16, 2013 under the laws
of the Federal Republic of Germany (ii) MediWound US, Inc., a wholly-owned subsidiary, which was incorporated on December 8, 2020 under
the laws of the State of Delaware and (iii) MediWound UK Limited, our inactive wholly-owned subsidiary, which was incorporated on July
26, 2004 under the laws of England.
| D. |
Property, Plants and Equipment |
See “ITEM 4.B. Business Overview-Properties”, “ITEM
4.B. Business Overview-Manufacturing, Supply and Production” and “ITEM 4.B. Business Overview-Environmental, Health and Safety
Matters”.
67
Item 4A. UNRESOLVED STAFF
COMMENTS
None.
Item 5. OPERATING AND FINANCIAL
REVIEW AND PROSPECTS
| A. |
Operating Results |
The information contained in this section should
be read in conjunction with our consolidated financial statements for the year ended December 31, 2025 and related notes, and the information
contained elsewhere in this annual report. Our financial statements have been prepared in accordance with IFRS, as issued by the IASB.
Company Overview
We are a biopharmaceutical company that develops, manufactures,
and commercializes novel, cost effective, biotherapeutic, non-surgical solutions for tissue repair and regeneration. Our strategy leverages
our breakthrough enzymatic technology platform into diversified portfolio of biotherapeutics across multiple indications to pioneer solutions
for unmet medical needs. Our current portfolio is focused on next-generation protein-based therapies for burn care, wound care and tissue
repair.
Our first innovative biopharmaceutical product, NexoBrid is a topically
administered, biological orphan drug for the enzymatic removal of eschar in patients with deep partial- and full-thickness thermal burns.
It selectively removes non-viable tissue while preserving viable tissue and is approved for use in adults and pediatric patients in 45
countries, including the United States, European Union, and Japan.
We commercialize NexoBrid globally through multiple sales channels.
We sell NexoBrid to burn centers in the EU, UK and Israel, primarily through our direct sales force, focusing on key burn centers and
KOLs. In the United States, we entered into exclusive license and supply agreements with Vericel Corporation (Nasdaq: VCEL) to commercialize
NexoBrid in North America. We have established local distribution channels in multiple international markets, focusing on Asia Pacific,
EMEA, CEE and LATAM, which local distributors are also responsible for obtaining local marketing authorization within the relevant territories.
EscharEx, our next-generation enzymatic therapy under development,
is a bromelain-based, bioactive enzymatic therapy in advanced clinical development for the debridement of chronic and hard-to-heal wounds.
Designed for topical, once-daily application, EscharEx has demonstrated a favorable safety profile and effective wound bed preparation
in multiple Phase II trials. The therapy has shown the ability to remove non-viable tissue, promote granulation tissue, and reduce bioburden
and biofilm. In February 2025 we initiated the VALUE, a global, pivotal Phase III trial evaluating EscharEx for the treatment of
venous leg ulcers (VLUs). The VALUE study is a global, multicenter, prospective, randomized, double-blind, placebo-controlled trial with
an adaptive design, that will be conducted across 40 sites in the U.S. and Europe, with the majority of sites already active. Its primary
objective is to evaluate the efficacy and safety of EscharEx in achieving effective debridement and preparing the wound bed for healing
in VLUs. The study will enroll 216 patients, randomized 1:1 to receive either EscharEx or placebo. The study co-primary endpoints are
the incidence of complete debridement and the facilitation of wound closure. Secondary endpoints include the incidence of complete healthy
granulation tissue, time to complete debridement, time to wound bed prepared and incidence of complete wound closure. Safety and tolerability
of EscharEx will be assessed throughout the trial. An interim sample size assessment will occur after 65% of patients complete treatments,
enabling adaptive adjustments as needed. The interim assessment and enrollment completion are expected by year-end 2026.
To support the trial, we have established strategic research collaborations
with Essity, Solventum, Mölnlycke, and MIMEDX. These industry leaders will provide advanced products to ensure consistent wound management
across all study sites and optimize patient outcomes.
We manufacture NexoBrid and our product candidates in our cGMP
certified sterile manufacturing facility at our headquarters in Yavne, Israel.
As of December 31, 2025, we had cash and cash equivalents and short
term and restricted bank deposits of $53.6 million. Our revenues were $17.0 million and $20.2 million in 2025 and 2024, respectively.
Our net operating loss was $25.3 million and $19.4 million in 2025 and 2024, respectively. We had an accumulated deficit of $228.9 million
as of December 31, 2025. We expect to incur significant expenses and operating losses in the coming years, as research and development
activities are central to our operations, which will offset by cash inflows from NexoBrid.
68
We expect to continue to invest in our research and development
efforts, including in respect of our EscharEx planned clinical trials, as well as the clinical development and trials of our other pipeline
product candidates. In addition, we expect to continue to advance NexoBrid as a standard of care, and expand its commercial reach in international
markets, including for potential use as a medical countermeasure during mass casualty events.
Key Components of Statements of Operations
Revenues
Sources of revenues. We
derive revenues from sales of NexoBrid to burn centers and hospitals burn units in USA, Europe, Japan and Israel as well as to local distributors
in other countries in accordance with distribution agreements we have in place, which also include revenues from licenses.
We generate revenues from development services provided to BARDA,
and to DoW/MTEC.
Our ability to generate additional, more significant revenues will
depend on the successful commercialization of NexoBrid and our ability to scale up the production.
Cost of Revenues
Our total cost of revenues includes expenses for the manufacturing
of NexoBrid, including: the cost of raw materials; employee-related expenses, including salaries, equity based-compensation and other
benefits and related expenses, lease payments, utility payments, depreciation, changes in inventory of finished products, royalties and
other manufacturing expenses including adjustment for inventory impairment. These expenses are partially reduced by (i) an allocation
of manufacturing costs associated with research and development and Scale-Up activities to research and development expenses, and (ii)
the capitalization of certain manufacturing costs as property and equipment in connection with the establishment and expansion of our
Scale-Up facility.
Cost of revenues includes costs associated with the research and
development services provided to BARDA and MTEC, including salaries and related expenses, clinical trials, sub-contractors and external
advisors.
Operating Expenses
Research and Development Expenses
Research and development activities are central to our business
model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages
of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development
costs to increase significantly for the foreseeable future as EscharEx progresses in its clinical program in the U.S. and our other pipeline
product candidates’ progress in clinical trials. However, we do not believe that it is possible at this time to accurately project
total program-specific expenses to reach commercialization. There are numerous factors associated with the successful development of any
of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with
accuracy at this time based on our stage of development. Additionally, future commercial and regulatory factors beyond our control will
affect our clinical development programs and plans. Our actual spending could differ as our plans change and we invest in other drugs
or potentially reduce our anticipated funding on research for existing products. Research and development expenses consist primarily of
compensation for employees engaged in research and development activities, including salaries, equity-based compensation, benefits and
related expenses, clinical trials, contract research organization sub-contractors, development materials, external advisors and the allotted
cost of our manufacturing facility for research and development purposes.
Selling and Marketing Expenses
Selling and marketing expenses consist primarily of compensation
expenses for personnel engaged in sales and marketing, including salaries, equity based-compensation and benefits and related expenses,
as well as promotion, marketing, market access, medical, and sales and distribution activities. These expenses are primarily comprised
of costs related to our subsidiary in Germany, which is focused on marketing NexoBrid in EU, and costs related to maintain marketing authorization.
69
General and Administrative Expenses
General and administrative expenses consist principally of compensation
for employees in executive and administrative functions, including salaries, equity-based compensation, benefits and other related expenses,
professional consulting services, including legal and audit fees, as well as costs of office and overhead.
Financial Income/Financial Expense
Financial income includes interest income, revaluation of financial
instruments and exchange rate differences. Financial expense consists primarily of revaluation of financial instruments, revaluation of
lease liabilities and exchange rate differences. The market interest due on government grants received from the IIA is also considered
a financial expense, and is recognized beginning on the date we receive the grant until the date on which the grant is expected to be
repaid as part of the revaluation to fair value of liabilities in respect of government grants.
Taxes on Income
The standard corporate tax rate in Israel is 23%.
We do not generate taxable income in Israel, as we have historically
incurred operating losses resulting in carry forward tax losses and other temporarily differences from R&D expenses totalling approximately
$213.0 million as of December 31, 2025. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax
years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward
tax losses.
Under the Law for the Encouragement of Capital Investments, 5719-1959
(the “Investment Law”), we have been granted “Beneficiary Enterprise” status, which provides certain benefits,
including tax exemptions and reduced corporate tax rates. Income not eligible for Beneficiary Enterprise benefits is taxed at the regular
corporate tax rate. The benefit entitlement period starts from the first year that the Beneficiary Enterprise first earns taxable income,
and is limited to 12 years from the year in which the company requested to have tax benefits apply.
Comparison of Period to Period Results of Operations
We are providing within this section a supplemental discussion
that compares our historical statement of operations data in accordance with IFRS, as issued by the IASB. The below table and the below
discussion provide data for each of the years ended December 31, 2025 and 2024. The below discussion of our results of operations omits
a comparison of our results for the years ended December 31, 2024 and 2023. In order to view that discussion, please see “ITEM 5.
Operating and Financial Review and Prospects-A. Operating Results- Comparison of Period to
Period Results of Operations- Year Ended December 31, 2024 Compared to
Year Ended December 31, 2023” in our Annual Report on Form 20-F for the year ended December 31, 2024, which we filed with the SEC
on March 19, 2025.
|
Years Ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
(in thousands) |
||||||||
|
Condensed statements of operations data: |
||||||||
|
Revenues |
$ |
16,959 |
$ |
20,222 |
||||
|
Cost of revenues
|
13,705 |
17,588 |
||||||
|
Gross profit |
3,254 |
2,634 |
||||||
|
Operating expenses: |
||||||||
|
Research and development
|
14,320 |
8,878 |
||||||
|
Selling and marketing
|
5,765 |
4,936 |
||||||
|
General and administrative
|
8,448 |
8,202 |
||||||
|
Other (income) expenses
|
(13 |
) |
18 |
|||||
|
Operating loss |
(25,266 |
) |
(19,400 |
) | ||||
|
Financial income (expenses), net
|
1,556 |
(10,763 |
) | |||||
|
Loss before taxes on income
|
(23,710 |
) |
(30,163 |
) | ||||
|
Taxes on income
|
(169 |
) |
(61 |
) | ||||
|
Net loss |
$ |
(23,879 |
) |
$ |
(30,224 |
) | ||
70
Year Ended December 31, 2025
Compared to Year Ended December 31, 2024
Revenues
|
Years Ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
(in thousands) |
||||||||
|
Revenues from sale of products |
$ |
5,769 |
$ |
6,832 |
||||
|
Revenues from development services |
10,800 |
13,135 |
||||||
|
Revenues from license agreements and royalties
|
390 |
255 |
||||||
|
16,959 |
20,222 |
|||||||
We generated total revenues of approximately $17.0 million for
the year ended December 31, 2025 compared to approximately $20.2 million for the year ended December 31, 2024. The change is primarily
attributable to the U.S. government shutdown, which resulted in delays in budget approvals and the initiation of new contractual agreements
as well as lower product sales by Vericel.
Revenues from sale of products
Revenues from sales of products in 2025 were $5.8 million, a 15%
decrease compared to $6.8 million in 2024 mainly driven by decreased revenues from Vericel.
Revenues from development services
Revenues from development services in 2025 were $10.8 million,
a 18% decrease compared to $13.1 million in 2024. The decrease mainly is driven by the U.S. government shutdown, which resulted in delays
in budget approvals and the initiation of new contractual agreements.
Revenues from license agreements and royalties
In 2025, revenues from license agreements and royalties were $0.4
million compared to $0.3 million in 2024, the increase mainly driven by increased royalties from Vericel.
Our revenues, as reported in our consolidated financial statements,
are based on the location of the customers, as shown in the below table:
|
Year ended December 31 |
||||||||
|
2025 |
2024 |
|||||||
|
USA (see also note 18a, 18b, 18c) |
11,784 |
15,463 |
||||||
|
Germany |
817 |
824 |
||||||
|
Italy |
1,002 |
817 |
||||||
|
Spain |
1,291 |
840 |
||||||
|
Rest of the world |
2,065 |
2,278 |
||||||
|
16,959 |
20,222 |
|||||||
71
DoW/MTEC contributed 33% and 34% of the Company’s total revenues
in 2025 and 2024 respectively. BARDA contributed 30% and 31% of the Company’s total revenues in 2025 and 2024 respectively. Vericel
contributed 6% and 12% of the Company’s total revenues in 2025 and 2024 respectively.
Costs and Expenses
Cost of revenues
|
Years Ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
(in thousands) |
||||||||
|
Cost of revenues from sales of products
|
$ |
4,727 |
$ |
6,440 |
||||
|
Cost of revenues from development services
|
8,946 |
11,128 |
||||||
|
Cost of revenues from license agreements and royalties
|
32 |
20 |
||||||
|
13,705 |
17,588 |
|||||||
Cost of revenues as a percentage of total revenues decreased from
87% for 2024 to 81% for 2025.
Cost of revenues from sales of products as a percentage of revenues
from sales of products decreased to approximately 82% for the year ended December 31, 2025, from approximately 94% in the year ended
December 31, 2024. The decrease is mainly due to a favourable change in revenue mix. Cost of revenues from development services as a percentage
of revenues from development services was approximately 83% in the year ended December 31, 2025, compared to approximately 85% in the
year ended December 31, 2024. The change is primarily driven by activity linked to operating expenses with higher margin.
Cost of revenues from license agreements and royalties as a percentage
of revenues from license agreements was 8% in the year ended December 31, 2025 compared to approximately 8% in the year ended December
31,2024.
Research and development expenses,
Research and development expenses increased by 61% from approximately
$8.9 million in the year ended December 31, 2024 to approximately $14.3 million in the year ended December 31, 2025, mainly due to costs
associated with the EscharEx VALUE Phase III trial.
Selling and marketing expenses
Selling and marketing expenses increased by 17% in 2025 compared
to 2024, from approximately $4.9 million in the year ended December 31, 2024 to approximately $5.8 million in the year ended December
31, 2025. The increase is mainly due to higher Marketing Authorization Holder expenses.
General and administrative expenses
General and administrative expenses increased by 3% in 2025 compared
to 2024 from approximately $8.2 million in the year ended December 31, 2024 to approximately $8.4 million in the year ended December 31,
2025. The increase primarily reflects foreign exchange rate fluctuations and additional headcount to support the Company’s growth.
72
|
Financial income, net |
Years Ended December 31, |
|||||||
|
2025 |
2024 |
|||||||
|
(in thousands) |
||||||||
|
Financial income |
$ |
4,017 |
$ |
2,048 |
||||
|
Financial expenses |
(2,461 |
) |
(12,811 |
) | ||||
|
1,556 |
(10,763 |
) | ||||||
Financial income
Financial income increased from approximately $2.0 million in the
year ended December 31, 2024 to approximately $4.0 million in the year ended December 31, 2025. The increase was primarily driven by $2.2
million financial income from the revaluation of warrants.
Financial expense
Financial expenses decreased from approximately $12.8 million for
the year ended December 31, 2024 to approximately $2.5 million for the year ended December 31, 2025. The decrease was primarily attributable
to the recognition of financial income from the revaluation of warrants in 2025, compared to financial expenses recorded from the revaluation
of warrants in 2024.
| B. | Liquidity and Capital Resources |
Our primary uses of cash are to fund working capital requirements,
manufacturing costs, research and development activities related to EscharEx and other products candidates, capital expenditure requirements,
as well as sales and marketing activities associated with the commercialization of NexoBrid in Europe.
Primary Cash Sources
In recent years, we have funded our operations from a combination
of sources, including:
|
(i) |
revenues from sales of NexoBrid to burn centers and hospitals burn units in USA, Europe,
Japan and Israel as well as to local distributors in other countries in accordance with distribution agreements we have in place, which
also include revenues from licenses. |
|
(ii) |
revenues from development services provided to BARDA, and to DoW/MTEC; |
|
(iii) |
government grants |
|
(iv) |
public and private offerings of our securities; and |
|
(v) |
exercise of series A Warrants |
Recent Public and Private Securities Offerings
On February 3, 2023, we entered into a securities purchase agreement
(the “2023 Securities Purchase Agreement”) with the purchasers listed on the signature pages thereto (the “2023 Purchasers”),
in connection with the offer and sale of 1,964,286 ordinary shares (the “2023 Offering”). The purchase price per ordinary
share was $14.00. The 2023 Offering closed on February 7, 2023. The gross proceeds from the 2023 Offering were approximately $27.5 million.
On July 15, 2024, we entered into a share purchase agreement (the
“2024 Share Purchase Agreement”) with the purchasers listed on the signature pages thereto (the “2024 Purchasers”),
for the offer and sale of 1,453,488 ordinary shares at a purchase price per share of $17.20 (the “2024 Offering”). The gross
proceeds from the 2024 Offering were $25 million.
Along with our entry into the 2024 Share Purchase Agreement, we
entered into a registration rights agreement with the 2024 Purchasers (the “2024 Registration Rights Agreement”), providing
the 2024 Purchasers customary registration rights with respect to the ordinary shares to be issued to them pursuant to the 2024 Offering
and any additional Registrable Securities, as defined therein.
On September 9, 2024, the SEC declared effective our shelf registration
statement on Form F-3, which registered the resale of 1,453,488 shares.
73
On March 27, 2025, the SEC declared effective our shelf registration
statement on Form F-3, and registered offerings of up to $125,000,000 in various securities and the resale of up to 1,266,141 ordinary
shares.
On September 29, 2025, we entered into a securities purchase agreement
(the “2025 Securities Purchase Agreement”) with certain purchasers (the “2025 Purchasers”), in connection with
the offer and sale of 1,734,105 ordinary shares (the “2025 Offering”). The purchase price per ordinary share was $17.30. The
2025 Offering closed on September 30, 2025. The Gross proceeds from the 2025 Offering were approximately $30.0 million.
H.C. Wainwright & Co., LLC (“Wainwright”) acted
as the exclusive placement agent for the 2025 Offering. Upon closing of the 2025 Offering, we paid Wainwright a cash transaction fee equal
to 7.0% of the aggregate gross proceeds from the 2025 Offering (or 1.75% to 5% in the case of certain designated investors). We also agreed
to pay Wainwright for its role as exclusive placement agent in the 2025 Offering a non-accountable expense allowance of $85,000.00 and
clearing fees of $15,950.00.
Recent Government Grant
In July 2024, we were awarded a €2.5 million grant from the
European Innovation Council (EIC) Accelerator program to support the clinical and regulatory advancement of EscharEx for the treatment
of diabetic foot ulcers (DFUs). Following a successful evaluation process, we entered into discussions with respect to a potential additional
€13.75 million equity investment component under the EIC Accelerator program; however, these discussions did not result in an equity
investment. In December 2024, we received the first payment of Euro 1.1 million from the grant component.
In 2025, we received an additional $3.6 million in funding from
the U.S. DoW to advance development of a room-temperature stable formulation of NexoBrid. The supplemental funding will support expanded
CMC activities, enhancement of in-house manufacturing capabilities and initial preparations for a clinical trial.
Overall Outlook
We believe that our existing cash and cash equivalents, short-term
and restricted bank deposits of $53.6 million as of December 31, 2025, will be sufficient to fund its operations and capital expenditure
for at least twelve months from the date of issuance of our consolidated financial statements included in this annual report.
Our future capital requirements will depend on many factors, including
our revenue growth, timing of milestone payments, the timing and extent of our spending on research and development efforts, and international
expansion. We may also seek to invest in or acquire complementary businesses or technologies. To the extent that existing cash and cash
from operations are insufficient to fund our future activities, we may need to raise additional funding through debt and equity financing.
Additional funds may not be available on favourable terms or at all.
The accompanying consolidated financial statements have been prepared
on a basis which assumes that the Company will continue as a going concern. From inception to December 31, 2025, the Company has incurred
cash outflows from operations, losses from operations, and has an accumulated deficit of $228.9 million.
Cash Flows
The following table summarizes our consolidated statement of cash
flows for the periods presented. The below discussion beneath the table omits a description of our cash flows for the year ended December
31, 2024. In order to view that discussion, please see “ITEM 5. Operating and Financial Review and Prospects Liquidity and Capital
Resources” in our Annual Report on Form 20-F for the year ended December 31, 2024, which we filed with the SEC on March 19, 2025:
|
Year Ended December 31, |
||||||||
|
2025 |
2024 |
|||||||
|
Net cash provided by (used in): |
||||||||
|
Operating activities
|
$ |
(16,121 |
) |
$ |
(13,624 |
) | ||
|
Investing activities
|
(17,950 |
) |
(8,397 |
) | ||||
|
Financing activities
|
29,620 |
19,394 |
||||||
74
Net cash used in operating activities
Net cash used in all periods resulted primarily from our net loss
adjusted for non-cash items and changes in components of working capital. Adjustments of non-cash items include depreciation and amortization,
share-based compensation, revaluation of warrants and changes in assets and liabilities items.
Net cash used in operating activities increased to approximately
$16.1 million in the year ended December 31, 2025 compared to net cash used in operating activities of approximately $13.6 million in
the year ended December 31, 2024, primarily as a result of adjustment of non-cash items from revaluation of warrants, offset by lower
operational net loss.
Net cash used in investing activities
Net cash used in investing activities primarily derives from investment
in short term banks deposits and from purchases of property and equipment mainly related to scaling up our production facility, offset
by interest received from short term bank deposit. Net cash used in investing activities was $18.0 million in the year ended December
31, 2025, compared to $8.4 million provided during the year ended December 31, 2024, primarily result from investment in short- term bank
deposits.
Net cash provided by financing activities
Net cash provided by financing activities consists of proceeds
from the issuance of shares and from exercise of warrants and share options, offset primarily by the repayment of lease liability and
liabilities in respect of Teva. For the year ended December 31, 2025, net cash provided by financing activities was $29.6 million, compared
to $19.4 million for the year ended December 31, 2024. The increase was primarily attributable to higher proceeds from the issuance of
shares and the exercise of warrants and share options, as well as lower repayments of liability in respect of Teva in 2024.
Israeli Corporate-Level Tax Considerations and Government Programs
The following is a brief summary of the material Israeli tax laws
applicable to us, and certain Israeli Government programs that benefit us and therefore impact our results of operations and financial
condition. To the extent that the discussion is based on new tax legislation that has not yet been subject to judicial or administrative
interpretation, we cannot assure you that the appropriate tax authorities or the courts will accept the views expressed in this discussion.
The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative
interpretations of Israeli law, which change could affect the tax consequences described below.
General Corporate Tax Structure in Israel
Generally, Israeli companies are subject to a corporate tax on
their taxable income. Effective January 1, 2018 and thereafter, the corporate tax rate is 23%. However, the effective tax rate payable
by a company that derives income from an Approved Enterprise, a Beneficiary Enterprise, a Preferred Enterprise or Technology Enterprise
(as discussed below) may be considerably less. Capital gains derived by an Israeli company are generally subject to the prevailing regular
corporate tax rate.
Law for the Encouragement of Industry (Taxes),
5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969 (the
“Industry Encouragement Law”), provides several tax benefits for “Industrial Companies.”
The Industry Encouragement Law defines an “Industrial Company”
as an Israeli resident-company which was incorporated in Israel, of which 90% or more of its income in any tax year, other than income
from certain government loans, is derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”,
in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961 (the “Ordinance”).
An “Industrial Enterprise” is defined as an enterprise whose principal activity in a given tax year is industrial production.
The following tax benefits, among others, are available to Industrial
Companies:
| • |
amortization of the cost of purchased a patent, rights to use a patent, and know-how, which are used for the development or advancement
of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised; |
| • |
under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies controlled by it;
and |
75
| • |
expenses related to a public offering are deductible in equal amounts over a three year period commencing on the year of the offering.
|
Eligibility for benefits under the Industry Encouragement Law is
not contingent upon approval of any governmental authority.
We believe that we currently qualify as an Industrial Company within
the meaning of the Industry Encouragement Law. However, there can be no assurance that we will continue to qualify as an Industrial Company
or that the benefits described above will be available in the future.
Law for the Encouragement of Capital Investments,
5719-1959
The Investment Law provides certain incentives for capital investments
in production facilities (or other eligible assets).
The Investment Law was significantly amended several times during
recent years, with the three most significant changes effective as of April 1, 2005 (the “2005 Amendment”), as of January
1, 2011 (the “2011 Amendment”), and as of January 1, 2017 (the “2017 Amendment”). Pursuant to the 2005 Amendment,
tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force
but any benefits granted subsequently are subject to the provisions of the amended Investment Law. Similarly, the 2011 Amendment introduced
new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However,
companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue to enjoy
such benefits, provided that certain conditions are met, or elect instead, irrevocably, to forego such benefits and have the benefits
of the 2011 Amendment apply. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.
Prior to 2011, we did not utilize any of the benefits for which we were eligible under the Investment Law.
The following is a summary of the Investment Law subsequent to
its amendments as well as the relevant changes contained in the new legislation.
Tax Benefits Subsequent to the 2005 Amendment
The 2005 Amendment applies to new investment programs and investment
programs commencing after 2004, but does not apply to investment programs approved prior to April 1, 2005 (“Approved Enterprise”).
The 2005 Amendment provides that terms and benefits included in any certificate of approval that was granted before the 2005 Amendment
became effective (April 1, 2005) will remain subject to the provisions of the Investment Law as in effect on the date of such approval.
Pursuant to the 2005 Amendment, the Israeli Authority for Investments and Development of the Israeli Ministry of Economy (the “Investment
Center”) will continue to grant Approved Enterprise status to qualifying investments. The 2005 Amendment, however, limits the scope
of enterprises that may be approved by the Investment Center by setting criteria for the approval of a facility as an Approved Enterprise.
The 2005 Amendment provides that Approved Enterprise status will
only be necessary for receiving cash grants. As a result, it is no longer necessary for a company to obtain the advance approval of the
Investment Center in order to receive the tax benefits previously available under the alternative benefits track. Rather, a company may
claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax
benefits set forth in the 2005 Amendment. Companies or programs under the new provisions receiving these tax benefits are referred to
as Beneficiary Enterprises. Companies that have a Beneficiary Enterprise, are entitled to approach the Israel Tax Authority for a pre-ruling
regarding their eligibility for tax benefits under the Investment Law, as amended. Tax benefits are available under the 2005 Amendment
to production facilities (or other eligible facilities), which are generally required to derive more than 25% of their business income
from export to specific markets with a population of at least 14 million in 2012 (such export criteria will further increase in the future
by 1.4% per annum). In order to receive the tax benefits, the 2005 Amendment states that a company must make an investment which meets
certain conditions, including exceeding a minimum investment amount specified in the Investment Law. Such investment allows a company
to receive “Beneficiary Enterprise” status, and may be made over a period of no more than three years ending in the year in
which the company chose to have the tax benefits apply to its Beneficiary Enterprise. Where the company requests to apply the tax benefits
to an expansion of existing facilities, only the expansion will be considered to be a Beneficiary Enterprise and the company’s effective
tax rate will be the weighted average of the applicable rates. In this case, the minimum investment required in order to qualify as a
Beneficiary Enterprise is required to exceed a certain percentage of the value of the company’s production assets before the expansion.
The extent of the tax benefits available under the 2005 Amendment
to qualifying income of a Beneficiary Enterprise depends on, among other things, the geographic location in Israel of the Beneficiary
Enterprise. The location will also determine the period for which tax benefits are available. Such tax benefits include an exemption from
corporate tax on undistributed income for a period of between two to ten years, depending on the geographic location of the Beneficiary
Enterprise in Israel, and a reduced corporate tax rate of between 10% to 25% for the remainder of the benefits period, depending on the
level of foreign investment in the company in each year. A company qualifying for tax benefits under the 2005 Amendment which pays a dividend
out of income attributed to its Beneficiary Enterprise during the tax exemption period will be subject to corporate tax in respect of
the amount of the dividend distributed (grossed-up to reflect the pre-tax income that it would have had to earn in order to distribute
the dividend) at the corporate tax rate that would have otherwise been applicable. Dividends paid to Israeli shareholders out of income
attributed to a Beneficiary Enterprise (or out of dividends received from a company whose income is attributed to a Beneficiary Enterprise)
are generally subject to withholding tax at source at the rate of 15% (in the case of non-Israeli shareholders - subject to the receipt
in advance of a valid certificate from the ITA allowing for a reduced tax rate, 15% or such lower rate as may be provided in an applicable
tax treaty, applicable to dividends and distributions out of income attributed to a Beneficiary Enterprise). The reduced rate of 15% is
limited to dividends and distributions out of income attributed to a Beneficiary Enterprise during the benefits period and actually paid
at any time up to 12 years thereafter, except with respect to a qualified Foreign Investment Company (as such term is defined in the Investment
Law), in which case the 12-year limit does not apply.
76
The benefits available to a Beneficiary Enterprise are subject
to the fulfillment of conditions stipulated in the Investment Law and its regulations. If a company does not meet these conditions, it
would be required to refund the amount of tax benefits, as adjusted by the Israeli consumer price index, and interest, or other monetary
penalties.
We currently have Beneficiary Enterprise programs under the Investment
Law, which we believe will entitle us to certain tax benefits. The majority of any taxable income from our Beneficiary Enterprise programs
(once generated) would be tax exempt for a period of ten years commencing in the year in which we will first earn taxable income relating
to such enterprises, subject to the 12-year limitation from the year the company chose to have its tax benefits apply.
Tax Benefits Under the 2011 Amendment
The 2011 Amendment canceled the availability of the tax benefits
granted under the Investment Law prior to 2011 and, instead, introduced new tax benefits for income generated by a “Preferred Company”
through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition
of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among
other things, Preferred Enterprise status and is controlled and managed from Israel. The tax benefits under the 2011 Amendment for a Preferred
Company meeting the criteria of the law include, among others, a reduced corporate tax rate of 15% for preferred income attributed to
a Preferred Enterprise in 2011 and 2012, unless the Preferred Enterprise was located in a specified development zone, in which case the
rate was 10%. Under the 2011 Amendment, such corporate tax rate was reduced in 2013 from 15% and 10%, respectively, to 12.5% and 7%, respectively,
and then increased to 16% and 9%, respectively, in 2014 and thereafter until 2016. Pursuant to the 2017 Amendment, in 2017 and thereafter,
the corporate tax rate for Preferred Enterprise which is located in a specified development zone was decreased to 7.5%, while the reduced
corporate tax rate for other development zones remains 16%. Income attributed to a Preferred Company from a “Special Preferred Enterprise”
(as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to reduced tax rates of 8%, or
5% if the Special Preferred Enterprise is located in a certain development zone. As of January 1, 2017, the definition of “Special
Preferred Enterprise” includes less stringent conditions. Dividends paid to Israeli shareholders out of preferred income attributed
to a Preferred Enterprise or to a Special Preferred Enterprise are generally subject to withholding tax at source at the rate of 20% (in
the case of non-Israeli shareholders - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax
rate, 20%, or such lower rate as may be provided in an applicable tax treaty(. However, if such dividends are paid to an Israeli company,
no tax is required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the
aforesaid will apply).
The 2011 Amendment also provided transitional provisions to address
companies already enjoying existing tax benefits under the Investment Law. These transitional provisions provide, among other things,
that: unless an irrevocable request is made to apply the provisions of the Investment Law as amended in 2011 with respect to income to
be derived as of January 1, 2011, a Beneficiary Enterprise can elect to continue to benefit from the benefits provided to it before the
2011 Amendment came into effect, provided that certain conditions are met.
We have examined the possible effect, if any, of these provisions
of the 2011 Amendment on our financial statements and have decided, at this time, not to opt to apply the new benefits under the 2011
Amendment. There can be no assurance that we will comply with the conditions required to remain eligible for benefits under the Investment
Law in the future or that we will be entitled to any additional benefits thereunder.
77
New Tax benefits under the 2017 Amendment that
became effective on January 1, 2017.
The 2017 Amendment was enacted as part of the Economic Efficiency
Law that was published on December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provides new tax benefits for
two types of “Technology Enterprises,” as described below, and is in addition to the other existing tax beneficial programs
under the Investment Law.
The 2017 Amendment provides that a technology company satisfying
certain conditions will qualify as a “Preferred Technology Enterprise” and will thereby enjoy a reduced corporate tax rate
of 12% on income that qualifies as “Preferred Technology Income,” as defined in the Investment Law. The tax rate is further
reduced to 7.5% for a Preferred Technology Enterprise located in development zone A. In addition, a Preferred Technology Company will
enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefitted Intangible Assets”
(as defined in the Investment Law) to a related foreign company if the Benefitted Intangible Assets were acquired from a foreign company
on or after January 1, 2017 for at least NIS 200 million, and the sale receives prior approval from the Israeli Innovation Authority (the
“IIA”).
The 2017 Amendment further provides that a technology company satisfying
certain conditions will qualify as a “Special Preferred Technology Enterprise” and will thereby enjoy a reduced corporate
tax rate of 6% on “Preferred Technology Income” regardless of the company’s geographic location within Israel. In addition,
a Special Preferred Technology Enterprise will enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain
“Benefitted Intangible Assets” to a related foreign company if the Benefitted Intangible Assets were either developed by Special
Preferred Technology Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from
IIA. A Special Preferred Technology Enterprise that acquires Benefitted Intangible Assets from a foreign company for more than NIS 500
million will be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law. Dividends
distributed by a Preferred Technology Enterprise or a Special Preferred Technology Enterprise, to Israeli shareholders paid out of Preferred
Technology Income, are generally subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders - subject
to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided
in an applicable tax treaty. However, if such dividends are paid to an Israeli company, no tax is required to be withheld (although, if
such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid will apply). If such dividends are
distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other
conditions are met, the withholding tax rate will be 4% (or a lower under the tax treaty, if applicable, subject to the receipt in advance
of a valid certificate from the Israeli Tax Authority allowing for a reduced tax rate).
| C. | Research and Development, Patents and Licenses, etc. |
Our research and development strategy is centered on developing
our patented proteolytic enzyme technology, which underlies NexoBrid and EscharEx, into additional products for high value indications.
Our research and development team is located at our facilities in Yavne and Gan-Rave, Israel, and consists of 35 employees as of December
31, 2025 and is supported by highly experienced consultants in various research and development disciplines.
We have received government grants (which are subject to repayment
in manner of royalties from future sales) as part of the NexoBrid and EscharEx research and development programs approved by the IIA.
The total gross amount of grants actually received by us from the IIA, including accrued interest and net of royalties actually paid,
totaled approximately $14.1 million as of December 31, 2025 and the amortized cost (using the interest method) of the liability totaled
approximately $8.5 million and $8.3 million as of December 31, 2025 and 2024, respectively. Because the repayment of IIA grants is in
the form of future royalties, the balance of the commitments to the IIA is presented as an amortized liability on our balance sheet. As
of December 31, 2025, we had accrued and paid royalties to the IIA totaling $2.5 million.
We received funds from BARDA in accordance with the terms of our
BARDA contracts. As of December 31, 2025 the Company has recognized a cumulative total of $99.8 million in revenues from development services
from BARDA for its participation in NexoBrid’s research and development programs.
We received funds from DoW and MTEC in accordance with the terms
of our DoW and MTEC contracts. As of December 31, 2025 the Company has recognized a cumulative total of $15.0 million in revenues from
development services from DoW and MTEC for its participation in the program to develop NexoBrid as a non-surgical solution for field-care
burn treatment for the U.S. Army. For a description of our research and development policies for the last three years, see “ITEM
4.B. Business Overview-Research and Development.”
78
| D. | Trend Information |
We continue to closely monitor macro-economic conditions, including
the headwinds caused by supply chain problems, inflation, increased interest rates and other trends that have been adversely impacting
economic activity on a global scale. We have been assessing, on an ongoing basis, the implications of those global conditions for our
operations, supply chain, liquidity, cash flow and product orders, and will act in an effort to mitigate adverse consequences as needed.
To the extent inflation increases our costs and expenses, we could consider price increases to offset those cost pressures.
Specific developments that may potentially impact our operating
performance in an adverse manner include:
| • |
potential reluctancy of central banks in Europe and the U.S. to reduce interest rates for fear of an uptick in inflation, which lack
of action would leave interest rates at their current relatively high levels and thereby maintain current unfavorable credit/financing
conditions for our customers who purchase our products; |
| • |
potential contraction of economic activities and recessionary conditions that could arise as a result of the maintenance of relatively
high interest rates and a decrease in consumer demand; |
| • |
the continued depreciated value of the Euro relative to the U.S. dollar, which may have an adverse impact on the U.S.- denominated
value of our European-derived revenues for purposes of our financial statements; and |
|
• |
the increase and potential future increase in tariffs imposed by the U.S. government
on foreign countries, or by foreign countries on the U.S., which could broadly adversely impact the country-specific or regional economies
into which our products are sold, thereby decreasing our customers’ demand for our products and resulting in a decrease in our revenues.
|
We cannot provide any assurances as to the extent of our resilience
to the adverse impact of these specific developments in future periods.
Other than the foregoing and as disclosed elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to the present
time that are reasonably likely to have a material adverse effect on our net revenue, income, profitability, liquidity or capital resources,
or that would cause the disclosed financial information to be not necessarily indicative of future operating results or financial condition.
| E. | Critical Accounting Estimates |
Our consolidated financial statements are prepared in conformity
with IFRS, as issued by the IASB. The preparation of these historical financial statements in conformity with IFRS requires management
to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets, liabilities and contingencies
as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. We evaluate
our assumptions and estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that
we believe to be reasonable under the circumstances, the results of which form the basis for making 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. Our critical accounting estimates are described in Note 2 to our consolidated financial statements included
elsewhere in this annual report.
79
Item 6. DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES
| A. | Directors and Senior Management |
The following table sets forth the name, age and position of each
of our executive officers and directors as of March 5, 2026:
|
Name |
Age |
Position | ||
|
Executive Officers |
||||
|
Ofer Gonen |
53 |
Chief Executive Officer | ||
|
Shmulik Hess |
53 |
Chief Operating Officer & Chief Commercial Officer | ||
|
Ety Klinger |
64 |
Chief Medical Officer | ||
|
Hani Luxenburg |
53 |
Chief Financial Officer | ||
|
Yaron Meyer |
47 |
Executive Vice President, General Counsel and Corporate Secretary | ||
|
Directors |
||||
|
Nachum Shamir (2)(3)(5) |
71 |
Chairman of the Board of Directors | ||
|
Vickie R. Driver (1)(4)(5) |
72 |
Director | ||
|
David Fox (2)(3)(5) |
68 |
Director | ||
|
Shmuel Rubinstein (1)(4)(5) |
86 |
Director | ||
|
Stephen T. Wills (1)(2)(4)(5) |
69 |
Director |
| (1) |
Member of our audit committee. |
| (2) |
Member of our compensation committee. |
| (3) |
Member of our nominating and governance committee. |
| (4) |
Member of our research and development committee. |
| (5) |
Independent director under the listing rules of the Nasdaq Stock Market. |
Executive Officers
Ofer Gonen has served
as Chief Executive Officer of MediWound Ltd. since July 2022. He has over 20 years of senior executive, corporate development, and investment
experience in the biopharmaceutical and life sciences sectors. Prior to joining MediWound, Mr. Gonen served as Chief Executive Officer
of Clal Biotechnology Industries Ltd. (TASE: CBI) and as a managing partner at Anatomy Medical Technology Fund. He is a co-founder of
Cactus Acquisition Corp. 1 (Nasdaq: CCTS) and ARTE Venture Group. Mr. Gonen has served as a director of several public and private life
sciences companies, including Gamida Cell Ltd. (Nasdaq: GMDA), Anchiano Therapeutics Ltd. (Nasdaq: ANCN), Elicio Therapeutics, Inc. (Nasdaq:
ELTX), and MediWound Ltd. He previously served on the boards of Colbar LifeScience Ltd. and Cadent Therapeutics, Inc., which were acquired
by Johnson & Johnson and Novartis, respectively. Mr. Gonen holds a B.Sc. in Physics, Mathematics, and Chemistry from the Hebrew University
of Jerusalem and an M.A. in Economics and Finance from Tel Aviv University. He is a graduate of the Talpiot program of the Israeli Defense
Forces.
Shmulik Hess has served
as our Chief Operating Officer since December 2023. Dr. Hess has over two decades of extensive expertise in drug development and commercial
operations in healthcare. Prior to joining MediWound, he served as Chief Executive Officer at Tabby Therapeutics, Enlivex Therapeutics
(Nasdaq: ENLV), and Valin Technologies. Formerly, Dr. Hess served as a global operations executive at SciGen Ltd (acquired by VBI Vaccines).
Dr. Hess is the inventor of multiple patents and author of numerous publications in peer reviewed scientific journals. He received his
Ph.D. in Pharmaceutical Science from the Hebrew University, Israel and was a research fellow at Harvard-MIT Health Sciences and Technology
(HST).
Ety Klinger has served
as our Chief Medical Officer since January 2026. Prior to that she served as our Chief Research and Development Officer from May 2014.
Prior to joining MediWound, Dr. Klinger was Vice President of Research and Development at Proteologics Ltd since July 2011, where she
was responsible for discovery projects in the ubiquitin system, conducted in collaboration with GlaxoSmithKline plc and Teva. Prior to
this, Dr. Klinger served for 17 years in numerous leadership positions at Teva’s global innovative R&D division and served as
Teva’s Board representative at various biotechnology companies. Dr. Klinger was a key member of the Copaxone®
development team. As a project leader she led the chemistry, manufacture and control, preclinical, clinical and post marketing R&D
activities of various innovative treatments for multiple sclerosis (MS), autoimmune and neurological diseases. From 2006 to 2011, as a
Senior Director at Teva, Dr. Klinger was a member of Teva’s global innovative R&D management team. From 2006 to 2008, she served
as the Head of MS and Autoimmune Diseases at Teva, and led the Life Cycle Management (LCM) of innovative R&D. Dr. Klinger holds a
B.Sc. in Biology from the Hebrew University in Jerusalem, a M.S. and a Ph.D. in Biochemistry from Tel Aviv University and an MBA degree
from Tel Aviv University and Northwestern University.
80
Hani Luxenburg has
served as our Chief Financial Officer since May 2023. Ms. Luxenberg has over two decades of progressive leadership experience managing
financial and accounting operations. Prior joining MediWound, Ms. Luxenburg served as Chief Financial Officer at BIRD Aerosystems. Prior
to that, she held senior finance roles at AstraZeneca, Alvarion Technologies Ltd., and Ernst & Young. Ms. Luxenburg is a certified
public accountant and holds a Bachelor of Arts in Economics and Accounting from the University of Haifa, along with a Bachelor of Law
from IDC Herzliya. In addition, she is a member of the Israel Bar Association.
Yaron Meyer has served
as our Executive Vice President since March 2019 and as our General Counsel and Corporate Secretary since December 2013. He brings extensive
legal experience in the biotechnology sector, with a strong focus on corporate law, public company operations, capital markets and corporate
governance. Before joining the company, he was Corporate Secretary at Clal Biotechnology Industries Ltd. (CBI) from 2008 to 2013. From
November 2010 to November 2013, he served as the General Counsel and Corporate Secretary of D Pharm Ltd. From April 2008 to May 2010,
he served as a legal counsel of Clal Industries Ltd. From May 2005 to April 2008, he worked as an associate at Shibolet & Co. Advocates.
Mr. Meyer holds an LL.B. degree from Haifa University, Israel.
Directors
Nachum Shamir has
served as Chairman of our board of directors since August 2022. Mr. Shamir most recently the Chairman, and Chief Executive Officer of
Luminex Corporation from 2014 through its sale to DiaSorin S.p.A.(“DiaSorin”) in 2021. Additionally, Mr. Shamir has served
as President and Chief Executive Officer of Given Imaging from 2006 through its sale to Covidien (now Medtronic) in 2014. Mr. Shamir currently
serves on the Board of Directors of Stereotaxis (NYSE: STXS) and SSI Diagnostica, a private-equity owned diagnostics company. Mr. Shamir
holds a Bachelor of Science degree from the Hebrew University of Jerusalem and a Master of Public Administration from Harvard University.
Vickie R. Driver has served
as a member of our Board since May 2017. Dr. Driver is board certified in foot surgery by the American Board of Podiatric Surgery and
is a Fellow at the American College of Foot and Ankle Surgeons, licensed in Rhode Island. Her career as a podiatric physician and surgeon
has included a special emphasis on limb preservation and wound healing in her medical practice, as well as, research and education. Dr.
Driver has been a Professor of Surgery in the Department of Orthopedics at Brown University (Clinical) since 2014. She has served for
9 years on the Board of Directors for the Association for the Advancement of Wound Care (“AAWC”), and recently completed her
tenure as President for this international organization. Dr. Driver is also the chair of Wound Care Experts and U.S. Food and Drug Administration
(“FDA”) Clinical Endpoints Project. She has just been named to serve as member at large to the Board of Directors of the Wound
Healing Society (“WHS”) and Board Member to the Critical Limb Ischemia (“CLI”) Global Society. In addition, she
serves on multiple national and international clinical committees that focus on preventing limb loss and improving wound healing in the
high risk population. She has served as an investigator for more than 70 important multi center randomized clinical trials, as well as
developed and supervised multiple research fellowship training programs. She has served and chaired multiple committees for large national
and international pivotal clinical trials and has authored over 120 publications and abstracts. Dr. Driver is credited with the development
and directorship of multiple major multidisciplinary Limb Preservation- Wound Healing Centers of Excellence, including Military/VA, Hospital
and University based programs. Since 2015, she has served as Director, Translational Medicine, Wound Healing at the Novartis Institute
for Biomedical Research. Dr. Driver received a Doctorate of Podiatric Medicine and Surgery from the California College of Podiatric Medicine
and Surgery and a Masters in Medical Education from Samuel Merritt University.
Mr. David Fox has served
as a member of our Board since April 2020. Mr. Fox is the founder and principal of MG30 LLC, investing in legal tech, life sciences, artificial
intelligence and technology software, and is a venture partner in Antiportfolio Fund investing in legal tech. He is an advisor to multiple
public and private companies. Mr. Fox was a partner at Kirkland & Ellis LLP. He served as a member of its Global Executive Management
Committee until 2019. Prior to joining Kirkland, Mr. Fox was a partner with Skadden, Arps, Slate, Meagher & Flom LLP, where he was
a member of its top governing committee. Mr. Fox is a member of the Executive Committee at the Park Avenue Armory and Chairman of the
Leadership Council of New Alternatives for Children, which provides support to families caring for medically fragile children. In addition,
Mr. Fox is a member of the Executive Committee and is an honorary fellow of the Hebrew University, Jerusalem. He holds an LL.B. degree
from the Hebrew University of Jerusalem, Israel.
Shmuel Rubinstein has
served as a member of our board since August 2023. Mr. Rubinstein brings a distinguished record of leadership in the pharmaceutical and
biotechnology sectors to our board. Mr. Rubinstein currently serves as Chairman of Trima Pharma and as a director at Strata Skin Sciences
(Nasdaq: SSKN), Medison Biotech Keystone Dental and additional private companies. Additionally, Mr. Rubinstein has previously served as
a director in Kamada Pharmaceuticals (Nasdaq: KMDA), Clal Biotechnology Industries (TASE: CBI) and Exalenz Bioscience, which was acquired
by Meridian Bioscience. Mr. Rubinstein also held the position of CEO at Taro Pharmaceuticals (Nasdaq: TARO), which was subsequently acquired
by SUN Pharma.
Stephen T. Wills has served
as a member of our Board since May 2017, and served as Chairman of our Board from October 2017 until August 2022, during which time he
served as Chairman of our board from May 2019 until August 2022. Mr. Wills serves as Chief Financial Officer (since 1997) and Chief Operating
Officer (since 2011) of Palatin Technologies, Inc. (NYSE: PTN), a biopharmaceutical company developing targeted, receptor specific peptide
therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. He has also served as Chief Financial
Officer of of Cactus Acquisition Corp. 1 Limited (Nasdaq: CCTS), a special purpose acquisition company, from November 2021 to March
2023. Mr. Wills served on the boards of Gamida Cell Ltd. (Nasdaq: GMDA), a leading cellular and immune therapeutics company from March 2019
through June 2024, when Gamida was acquired by Highbridge Capital Management (chairman of the audit committee, compensation and finance
committee member) and of Amryt Pharma, a biopharmaceutical company focused on developing and delivering treatments to help improve lives
of patients with rare and orphan diseases, from September 2019 through April 2023, when Amryt was acquired by Chiesi Farmaceutici (chairman
of audit committee and member of the compensation and finance committee). Mr. Wills also served on the board of trustees and executive
committee of The Hun School of Princeton, a college preparatory day and boarding school from 2013 to 2024, and its chairman from June
2018 to June 2024. Mr. Wills, a certified public accountant, earned his Bachelor of Science in accounting from West Chester University,
and a Master of Science in taxation from Temple University.
There are no family relationships among any of our executive officers
or directors.
There are no arrangements or understandings with major shareholders,
customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
81
| B. | Compensation |
Compensation of Directors and Executive Officers
The table below reflects the compensation granted to our five most
highly compensated officers during or 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.
|
Name and Position |
Salary & Social Benefits (1) |
Bonus |
Share-Based Payment (2) |
Other Compensation (3) |
Total |
|||||||||||||||
|
(thousand U.S. dollars) (4) |
||||||||||||||||||||
|
Ofer Gonen, Chief Executive Officer |
634 |
200 |
1,056 |
- |
1,890 |
|||||||||||||||
|
Shmulik Hess, Chief Operations Officer & Chief Commercial Officer
|
340 |
79 |
307 |
7 |
733 |
|||||||||||||||
|
Hani Luxenburg, Chief Financial Officer |
314 |
73 |
259 |
33 |
679 |
|||||||||||||||
|
Ety Klinger, Chief Research & Development Officer
|
320 |
74 |
182 |
34 |
610 |
|||||||||||||||
|
Yaron Meyer, Executive Vice President, General Counsel & Corporate
Secretary |
272 |
58 |
165 |
7 |
502 |
|||||||||||||||
| (1) |
Represents the officer’s gross salary plus payment of mandatory social benefits made by the company on behalf of such officer.
Such benefits may include, to the extent applicable to the executive, payments, contributions and/or allocations for savings funds (e.g.,
Managers’ Life Insurance Policy), education funds (referred to in Hebrew as “keren hishtalmut”), pension, severance,
risk insurances (e.g., life or work disability insurance) and payments for social security. |
| (2) |
Represents the equity-based compensation expenses recorded in the company’s consolidated financial statements for the year
ended December 31, 2025 based on the options’ grant date fair value in accordance with accounting guidance for equity-based compensation.
|
| (3) |
Represents the other benefits to such officer, which includes either or both of (i) car expenses, including lease costs, gas and
maintenance, provided to the officers, (ii) vacation benefits and (iii) severance payment. |
| (4) |
Converted (i) from NIS into U.S. dollars at the rate of NIS 3.45 = U.S.$1, based on the average representative rate of exchange between
the NIS and the U.S. dollar in the year ended December 31, 2025 as reported by the Bank of Israel in the year ended December 31, 2025.
|
The aggregate compensation and equity-based compensation and other
payments expensed by us and our subsidiaries to our directors and executive officers with respect to the year ended December 31, 2025
was $5.4 million. As of December 31, 2025, options to purchase 860,743 ordinary shares, exercisable at a weighted average exercise price
of $14.4 per share, and restricted share units (“RSUs”) that may be settled for 41,401 ordinary shares, in each case granted
to our directors and executive officers, were outstanding under our equity incentive plans. We do not have any written agreements with
any director for benefits upon the termination of such director’s relationship with our company or its subsidiaries.
Employment Agreements with Executive Officers
We have entered into written employment agreements with all of
our executive officers, which include standard provisions for a company in our industry regarding non-competition/solicitation, confidentiality
of information and assignment of inventions. Except for Ofer Gonen, our Chief Executive Officer, our executive officers will not receive
benefits upon the termination of their respective employment with us, other than payment of salary and benefits (and limited accrual of
vacation days) during the required notice period for termination of their employment, which varies for each individual. Upon termination
of his employment, Mr. Gonen is entitled to a one-time termination payment of six months of salary.
82
Directors’ Service Contracts
Other than with respect to our directors that are also executive
officers, there are no arrangements or understandings between us, on the one hand, and any of our directors, on the other hand, providing
for benefits upon termination of their service as directors of our company.
Share Incentive Plans
2014 Equity Incentive Plan
In March 2014, we adopted and obtained shareholder approval for
our 2014 Equity Incentive Plan, which was amended as of December 18, 2018 (the “2014 Plan”). The 2014 Plan provides for the
grant of options, restricted shares, RSUs and other share-based awards to our and our subsidiaries’ and affiliates’ directors,
employees, officers, consultants and advisors, among others and to any other person whose services are considered valuable to us or them,
to continue as service providers, to increase their efforts on our behalf or behalf of a subsidiary or affiliate and to promote the success
of our business. Following the approval of the 2014 Plan by the Israeli tax authorities, we are only granting options or other equity
incentive awards under the 2014 Plan, which shares will be rolled over to a new share incentive plan— the 2024 Share Incentive Plan—
that we have adopted.
The 2014 Plan is administered by our board of directors or by a
committee designated by the board of directors, which determine, subject to Israeli law, the grantees of awards and the terms of the grant,
including exercise prices, vesting schedules, acceleration of vesting and the other matters necessary in the administration of the 2014
Plan. The 2014 Plan enables us to issue awards under various tax regimes, including, without limitation, pursuant to Sections 102 and
3(i) of the Ordinance, as discussed under “-2003 Share Incentive Plan” above, and under Section 422 of the U.S. Internal Revenue
Code of 1986, as amended (the “Code”).
Options granted under the 2014 Plan to U.S. residents may qualify
as “incentive stock options” within the meaning of Section 422 of the Code, or may be non-qualified. The exercise price for
“incentive stock options” must not be less than the fair market value on the date on which an option is granted, or 110% of
the fair market value if the option holder holds more than 10% of our share capital.
We granted awards under the 2014 Plan under the capital gains track
of Section 102(b)(2) of the Ordinance only to our employees, directors and officers who are not controlling shareholders and are considered
Israeli residents.
Awards under the 2014 Plan may be granted until ten years from
the date on which the 2014 Plan was approved by our board of directors.
Options granted under the 2014 Plan generally vest over three or
four years commencing on the date of grant, such that 33% or 25%, respectively, vests annually on the anniversary of the date of grant.
Options, other than certain incentive share options, that are not exercised within ten years from the grant date expire, unless otherwise
determined by our board of directors or its designated committee, as applicable. Share options that qualify as “incentive stock
options” and are granted to a person holding more than 10% of our voting power will expire within five years from the date of the
grant. In the event of the death of a grantee while employed by or performing service for us or a subsidiary or within three months thereafter,
or the termination of a grantee’s employment or services for reasons of disability, the grantee, or in the case of death, his or
her legal successor, may exercise options that have vested prior to termination within a period of one year from the date of disability
or death. If we terminate a grantee’s employment or service for cause, all of the grantee’s vested and unvested options will
expire on the date of termination. If a grantee’s employment or service is terminated for any other reason, the grantee may exercise
his or her vested options within three months of the date of termination. Any expired or unvested options return to the pool for reissuance.
In the event of a merger or consolidation of our company or a sale of all, or substantially all, of our shares or assets or other transaction
having a similar effect on us, then without the consent of the option holder, our board of directors or its designated committee, as applicable,
may but is not required to (i) cause any outstanding award to be assumed or an equivalent award to be substituted by such successor corporation,
or (ii) in case the successor corporation refuses to assume or substitute the award (a) provide the grantee with the option to exercise
the award as to all or part of the shares or (b) cancel the options against payment in cash in an amount determined by the board of directors
or the committee as fair in the circumstances. Notwithstanding the foregoing, our board of directors or its designated committee may upon
such event amend or terminate the terms of any award, including conferring the right to purchase any other security or asset that the
board of directors shall deem, in good faith, appropriate. Our board of directors or its designated committee may, in its discretion,
approve that any awards granted under the 2014 Plan shall be subject to additional conditions in the case of a merger or a consolidation.
Restricted share awards are ordinary shares that are awarded to
a participant subject to the satisfaction of the terms and conditions established by the board of directors or a committee designated
by the board of directors. Until such time as the applicable restrictions lapse, restricted shares are subject to forfeiture and may not
be sold, assigned, pledged or otherwise disposed of by the participant who holds those shares. Generally, if a grantee’s employment
or service is terminated for any reason prior to the expiration of the time when the restrictions lapse, shares that are still restricted
will be forfeited.
83
2024 Share Incentive Plan
Because the 2014 Plan expired in March 2024, we adopted a new share
incentive plan—the 2024 Share Incentive Plan (the “2024 Plan”) - and obtained our shareholders’ approval for that
plan at an extraordinary general meeting of shareholders that took place in December 2024. Outstanding grants under the 2014 Plan will
remain subject to the 2014 Plan even after the expiration of that plan, but any ordinary shares available under the 2014 Plan as of the
adoption of the 2024 Plan, or that subsequently become available under the 2014 Plan due to the expiration, cancellation, forfeiture or
other surrender of outstanding grants under the 2014 Plan (up to 1,158,641 ordinary shares in total), are (or will become) available for
new grants under the 2024 Plan.
Authorized Shares. Upon
its effectiveness, the 2024 Plan had a total of 280,375 ordinary shares reserved and initially available for issuance, consisting entirely
of 280,375 shares that were rolled over from the 2014 Plan. On February 19, 2026, we increase by 300,000 ordinary shares reserved for
issuance under the 2024 Plan, and it now has 580,375 ordinary shares reserved and initially available for issuance, Out of that initial
pool of shares, the number of ordinary shares that may be issued upon the exercise of incentive stock options within the meaning of Section 422
of the Code is capped at 580,375.
In addition to the foregoing 580,375 ordinary shares initially
available under the 2024 Plan, up to 1,158,641 ordinary shares that underlie outstanding awards under the 2014 Plan may become available
for issuance under the 2024 Plan. Similarly, ordinary shares from among the 580,375 shares reserved under the 2024 Plan that become subject
to an award and are ultimately not issued (for any reason) will become available once again under the 2024 Plan.
In keeping with the recommendation of institutional shareholder
and proxy advisory groups, the 2024 Plan does not contain an “evergreen” provision that provides for an automatic annual
increase in the number of ordinary shares available under the plan. Instead, we will request shareholder approval for any increase in
the pool of shares available under the 2024 Plan.
Administration. A
duly authorized committee of our board of directors (which, based on prior authorization by our board, is our compensation committee),
or, in the absence of any such committee, the board itself, will administer the 2024 Plan. Under the 2024 Plan, the administrator has
the authority, subject to applicable law, to interpret the terms of the 2024 Plan and any award agreements or awards granted thereunder,
designate recipients of awards, determine and amend the terms of awards and take all actions and make all other determinations necessary
for the administration of the 2024 Plan.
Eligibility. The
2024 Plan provides for granting awards under various tax regimes, including, without limitation, in compliance with Section 102 of
the Ordinance and Section 3(i) of the Ordinance, and, for awards granted to our United States
employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422
of the Code and Section 409A of the Code.
Awards. The
2024 Plan provides for the grant of share options (including incentive stock options and nonqualified stock options), ordinary shares,
restricted shares, restricted share units and other share-based awards to employees, directors, officers, consultants, advisors
and any other persons or entities who provides services to the company or any parent, subsidiary or affiliate thereof, subject to the
terms and conditions of the 2024 Plan. Options granted under the 2024 Plan to our employees who are U.S. residents may qualify as
incentive stock options or may be non-qualified stock options.
Grant and Exercise. All
awards granted pursuant to the 2024 Plan will be evidenced by an award agreement in a form approved, from time to time, by the administrator
in its sole discretion. Unless otherwise determined by the administrator and stated in the award agreement, and subject to the conditions
of the 2024 Plan, awards vest and become exercisable under the following schedule: 25% of the shares covered by the award, on the first
anniversary of the vesting commencement date determined by the administrator (and in the absence of such determination, the date on which
such award was granted), and 6.25% of the shares covered by the award at the end of each subsequent three-month period thereafter
over the course of the following three years; provided that the grantee remains continuously as an employee or provides services
to the company throughout such vesting dates. The exercise period of an award will be ten years from the date of grant of the award,
unless otherwise determined by the administrator and stated in the award agreement.
84
Termination of Employment. In
the event of termination of a grantee’s employment or service with the company or any of its affiliates (including by reason of
death, disability or retirement), different rules apply as to the length of time during which all vested and exercisable awards held
by such grantee as of the date of termination may be exercised after such date of termination. In the case of termination due to death
during employment or service for the company or any of its affiliates, or within the three month period (or such longer period of time
as determined by the board, in its discretion) after the date of termination, any outstanding awards shall automatically vest (to the
extent not yet vested).
Any awards which are unvested as of the date of such termination
(other than in the case of death, as described above) or which are vested but not then exercised within the applicable period following
such date, will terminate and the shares covered by such awards shall again be available for issuance under the 2024 Plan.
Notwithstanding any of the foregoing, if a grantee’s employment
or services with us or any of our affiliates is terminated for “cause” (as defined in the 2024 Plan), all outstanding awards
held by such grantee (whether vested or unvested) will terminate on the date of such termination and the shares covered by such awards
shall again be available for issuance under the 2024 Plan. In the case of termination for cause, any shares issued upon exercise or (if
applicable) vesting of awards, shall be deemed to be irrevocably offered for sale to us.
Adjustments due to Transactions. The
2024 Plan provides for appropriate adjustments to be made to the plan and to outstanding awards under the plan in the event of a share
split, reverse share split, share dividend, distribution, recapitalization, combination, reclassification of our shares, or any similar
recapitalization events.
In the event of any type of merger, consolidation, similar transaction
with or into another corporation, exchange of shares, a business combination, a reorganization, a spin-off or other corporate divestiture
or division, or other similar occurrences, any adjustments as determined by the compensation committee may be made without the need for
a consent of any holder of an award.
With respect to the distribution of a cash dividend to all holders
of ordinary shares, the compensation committee shall have the authority to determine, without award holder consent, that the exercise
price of any award that is outstanding and unexercised on the record date of such distribution, shall be reduced by an amount equal to
the per share gross dividend amount distributed by us. The compensation committee may determine that the exercise price following such
reduction shall be not less than the par value of a share. The approval of our shareholders will need to be obtained for that reduction
in exercise price.
In the event of a sale of all, or substantially all, of our
ordinary shares or assets, a merger, consolidation amalgamation, or similar transaction, or certain changes in the composition of the
board of directors, or liquidation or dissolution, or such other transaction or circumstances that the Board determines to be a relevant
transaction, then the compensation committee shall make determinations with respect to the treatment of awards in accordance with certain
pre-set criteria, which depend upon whether the consideration in such transaction consists of shares, other securities and/or cash.
Amendment and Termination. The
board may suspend, terminate, modify or amend the 2024 Plan at any time; provided that no termination or amendment of the 2024 Plan shall
affect any then outstanding award unless expressly provided by the board. Shareholder approval of any amendment to the 2024 Plan will
be obtained to the extent necessary to comply with applicable law. The administrator at any time and from time to time may modify
or amend any award theretofore granted under the 2024 Plan, including any award agreement, whether retroactively or prospectively.
Limitation on Option/Other
Award Repricing. The 2024 Plan generally allows us to reprice options that we grant under the plan only
if we obtain shareholder approval. However, the exercise price per share of an existing award
may be reduced by the compensation committee by the amount of a dividend that we declare on our ordinary shares while the award is outstanding.
That would enable a grantee to benefit from a dividend that we declare and that all of our shareholders receive.
85
The following table provides information regarding the outstanding
options to purchase our ordinary shares, and RSUs held by each of our directors and executive officers who beneficially owns greater than
1% of our ordinary shares (after including shares underlying options or RSUs) as of March 1, 2026:
|
Name |
Number of Options |
Number of RSUs |
Grant Date |
Exercise Price - $ |
Vested Options/RSU’s |
Expiration Date | ||||||
|
Ofer Gonen |
85,714 |
07/06/2022 |
14.42 |
75,000 |
06/06/2032 | |||||||
|
35,714 |
07/06/2022 |
0 |
31,249 |
|||||||||
|
86,000 |
31/05/2023 |
11.89 |
59,125 |
30/05/2033 | ||||||||
|
94,273 |
26/02/2024 |
12.73 |
47,136 |
25/02/2034 | ||||||||
|
11,784 |
26/02/2024 |
0 |
5,892 |
|||||||||
|
68,000 |
11/02/2025 |
18.54 |
17,000 |
10/02/3035 | ||||||||
|
8,500 |
11/02/2025 |
0 |
2,125 |
| C. | Board Practices |
Board of Directors
Authorities
Under the Israeli Companies Law, the management of our company
is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically
granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual
responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of,
our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers are also
appointed by our board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with
them.
Composition
Under our articles of association, our board of directors must
consist of at least five and not more than nine directors, including, to the extent then required to appoint them, at least two external
directors, who may be required to be appointed under the Israeli Companies Law. At any time the minimum number of directors (other than
the external directors) shall not fall below three. Other than external directors, for whom special election requirements apply under
the Israeli Companies Law when they are required to be elected, as detailed below, the Israeli Companies Law and our articles of association
provide that directors are elected annually at the general meeting of our shareholders by a vote of the holders of a majority of the voting
power represented present and voting, in person or by proxy, at that meeting. We have only one class of directors.
We have elected under the Israeli Companies Law regulations to
opt-out from compliance with Israeli law requirements related to appointment of external directors and audit and compensation committee
composition (as described under “External Directors” below). Consequently, we must comply with listing rule that requires
having a majority of independent directors on our board of directors. Our board of directors has determined that all current directors
are independent under the Nasdaq Stock Market listing rules such that we comply with the Nasdaq majority independence rule.
Under the Israeli Companies Law, our board of directors must determine
the minimum number of directors who are required to have accounting and financial expertise. In determining the number of directors required
to have such expertise, our board of directors must consider, among other things, the type and size of the company and the scope and complexity
of its operations. Our board of directors has determined that the minimum number of directors of our company who are required to have
accounting and financial expertise is one.
Nominations and Election
In accordance with the Nasdaq listing rules, we have appointed
a committee of the board of directors that is authorized to recommend to our board, for nomination for election by our shareholders,
director nominees. Please see “Committees of the Board of Directors— Nominating and Governance Committee” below for
more information.
Under the Israeli Companies Law and our articles of association,
nominees for directors may also be proposed by any shareholder holding at least 1% of our outstanding voting power. However, any such
shareholder may propose a nominee only if a written notice of such shareholder’s intent to propose a nominee has been given to our
Secretary (or, if we have no such Secretary, our Chief Executive Officer). Pursuant to our Articles of Association, any such notice must
include certain information, including, among other things, a description of all arrangements between the nominating shareholder and the
proposed director nominee(s) and any other person pursuant to which the nomination(s) are to be made by the nominating shareholder, the
consent of the proposed director nominee(s) to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring
that there is no limitation under the Israeli Companies Law preventing their election, and that all of the information that is required
under the Israeli Companies Law to be provided to us in connection with such election has been provided. Under the Israeli Companies Law
regulations, any such shareholder nomination must be delivered to our registered Israeli office within seven days after we publish notice
of our upcoming annual general meeting of shareholders (or within 14 days after we publish a preliminary notification of an upcoming annual
general meeting).
86
In addition, our articles of association allow our board of directors
to appoint directors to fill vacancies on our board of directors for a term of office equal to the remaining period of the term of office
of the director(s) whose office(s) have been vacated.
We are not a party to, and are not aware of, any voting agreements
among our shareholders. In addition, there are no family relationships among our executive officers and directors.
External Directors
Under the Israeli Companies Law, the boards of directors of companies,
whose shares are publicly traded, including companies with shares traded in the United States, are generally required to include at least
two members who qualify as external directors.
However, under regulations promulgated under the Israeli Companies
Law, Israeli public companies whose shares are traded on certain U.S. stock exchanges, such as the Nasdaq Global Market, and that lack
a controlling shareholder (as defined below) are exempt from the requirement to appoint external directors. Any such company is also exempt
from the Israeli Companies Law requirements related to the composition of the audit and compensation committees of the Board. Eligibility
for these exemptions is conditioned on compliance with U.S. stock exchange listing rules related to majority Board independence and the
composition of the audit and compensation committees of the Board, as applicable to all listed domestic U.S. companies. Eligibility is
furthermore conditioned on our election of a female or male director at any time when we hold elections of directors and the Board is
then composed of solely male or solely female members.
On December 5, 2022, in light of our Board’s determination
that Clal Biotechnology Industries Ltd. was no longer a “controlling shareholder” of our company under the Israeli Companies
Law definition (provided further below), the Board elected, pursuant to the Israeli Companies Law regulations, to exempt our company from
compliance with the (i) requirement to appoint external directors, and (ii) required composition of the audit committee and compensation
committees of the Board under the Israeli Companies Law. At the time that it made that election, our Board affirmatively determined that
we meet the conditions for exemption from the external director requirement, including that a majority of the members of our Board, along
with each of the members of the audit and compensation committees of the Board, are independent under the Nasdaq Listing Rules. Our Board
has confirmed subsequently in an ongoing manner that we continue to fulfill those conditions for exemption from the Israeli Companies
Law requirements related to (i) the appointment of external directors, and (ii) the composition of the audit committee and compensation
committees of the Board.
Our election to exempt our company from compliance with the external
director and related requirements can be reversed at any time by our Board, in which case we would need to hold a shareholder meeting
to once again appoint external directors, whose election would be for a three-year term. The election of each external director would
require a majority vote of the shares present and voting at a shareholders meeting, provided that either:
• the majority voted in favor of election includes a majority
of the shares held by non-controlling shareholders who do not have a personal interest in the election of the external director (other
than a personal interest not deriving from a relationship with a controlling shareholder) that are voted at the meeting, excluding abstentions,
which we refer to as a disinterested majority; or
• the total number of shares held by non-controlling, disinterested
shareholders (as described in the previous bullet-point) voted against the election of the director does not exceed two percent (2%) of
the aggregate voting rights in the company.
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The term “controlling shareholder” is defined in the
Israeli Companies Law as a shareholder with the ability to direct the activities of the company, other than by virtue of being an office
holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of the voting rights in a company
or has the right to appoint the majority of the directors of the company or its general manager (i.e., its CEO).
Leadership Structure of the Board
In accordance with the Israeli Companies Law and our articles of
association, our board of directors is required to appoint one of its members to serve as chairman of the board of directors. Our board
of directors has appointed Homi Shamir to serve as chairman of the board of directors.
Committees of the Board of Directors
Audit Committee
Israeli Companies Law composition requirements
Under the Israeli Companies Law, we are required to have an audit
committee comprised of at least three directors. To the extent we are then required to appoint external directors, this committee must
include all of the external directors, one of whom must serve as chairman of the committee. There are additional requirements as to the
composition of the audit committee under the Israeli Companies Law. However, when we elected to exempt our company from the external director
requirement, we concurrently elected to exempt our company from all of such requirements (which exemption is conditioned on our fulfillment
of all Nasdaq listing requirements related to the composition of the audit committee).
Nasdaq listing rules composition requirements
Under the Nasdaq Stock Market listing rules, we are required to
maintain an audit committee consisting of at least three independent directors, each of whom is financially literate and one of whom has
accounting or related financial management expertise.
Our audit committee consists of Stephen T. Wills (chairperson), Vickie
R. Driver and Shmuel (Milky) Rubinstein, each of whom is an independent director in accordance with Rule 10A-3(b)(1) under the Exchange
Act and satisfies the independent director requirements under the Nasdaq Stock Market listing rules. All members of our audit committee
meet the requirements for financial literacy under the applicable listing rules of the Nasdaq Stock Market. Our board of directors has
determined that Stephen T. Wills is an “audit committee financial expert,” as defined in the SEC regulations, and possesses
accounting and financial expertise, as defined under the Israeli Companies Law.
Audit committee role
Our audit committee provides assistance to our board of directors
in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control
and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding
our accounting practices and systems of internal control over financial reporting. Our audit committee also oversees the audit efforts
of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent
of management.
Our board of directors has adopted an audit committee charter that
sets forth the responsibilities of the audit committee consistent with the rules and regulations of the SEC and the Nasdaq Stock Market
listing rules, as well as the requirements for such committee under the Israeli Companies Law, including, but not limited to, the following:
| • |
overseeing our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement
of our independent registered public accounting firm to the board of directors in accordance with Israeli law; |
| • |
recommending the engagement or termination of the person filling the office of our internal auditor; |
| • |
pre-approving all audit, audit-related and all permitted non-audit services, and related fees and terms, to be provided to MediWound
by the independent auditor under applicable law and regulations; |
| • |
Establishing policies for hiring employees or former employees of the independent auditor in accordance with applicable law and regulations;
|
| • |
reviewing periodically with management, the internal auditor and the independent auditor, the adequacy and effectiveness of the MediWound’s
system of internal control over financial reporting; |
| • |
evaluating whether management is effectively communicating to employees and other persons retained by MediWound the importance of
internal accounting and financial control effectiveness; |
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| • |
reviewing with management and the independent auditor the annual and quarterly financial statements of MediWound prior to filing
(or submission, as the case may be) with the SEC; |
| • |
discussing with management, and review prior to submission, any responses to SEC comments regarding MediWound’s financial statements
or financial reporting; |
| • |
discussing with management and MediWound’s independent auditors generally the types of financial information (including earnings
guidance) to be disclosed in earnings press releases and earnings calls, as well as to analysts and rating agencies; |
| • |
reviewing and discussing with management and MediWound independent auditors MediWound’s earnings press releases, including
the use of any pro forma, adjusted or other non-GAAP (or non-IFRS compliant) financial information, before their release to the public;
|
| • |
reviewing with MediWound’s general counsel and/or external counsel legal and regulatory matters that could have a material
impact on the financial statements; |
| • |
establishing procedures for (i) the receipt, retention, and treatment of complaints received by MediWound regarding accounting, internal
accounting controls or auditing matters; and (ii) the confidential, anonymous submission by employees of MediWound of concerns regarding
questionable accounting or auditing matters, and review any complaints or concerns received pursuant to such procedures; |
| • |
reviewing with management and the independent auditor risks of material misstatements due to fraud, and the process and controls
implemented by MediWound to manage the risks; |
| • |
recommending to the Board the retention and termination of the internal auditor, and the internal auditor’s engagement fees
and terms, in accordance with the Companies Law, approve the internal auditor’s work plan, and review and discuss the internal auditor’s
work on a quarterly basis; |
| • |
reviewing and monitoring, as appropriate, (i) litigation, regulatory, or other legal matters that could have a material impact on
MediWound’s financial results; and (ii) significant findings of any examination by regulatory authorities or agencies, in the areas
of securities, accounting or tax; |
| • |
receiving reports of suspected business irregularities and legal compliance issues through periodic and, when appropriate, immediate
reporting by members of MediWound’s management, legal counsel, the independent or internal auditor or pursuant to any “whistleblower
policy” adopted by the audit committee. |
| • |
establishing procedures for handling complaints by MediWound’s employees with respect to deficiencies in its business operations,
including the protection to be granted to such complaining employees; |
| • |
overseeing MediWound’s policies and procedures regarding compliance with applicable financial and accounting related standards,
rules and regulations; |
| • |
reviewing and considering the approval of related party transactions, including transactions between MediWound and a controlling
shareholder (as defined under the Israeli Companies Law) or a transaction with another person in which a controlling shareholder has a
personal interest, and transactions involving an office holder (as defined in the Israeli Companies Law) of MediWound that may present
a conflict of interest between the duties of such office holder to MediWound and his or her personal interests, in each case in accordance
with Nasdaq listing rules, the Israeli Companies Law or as referred by the Board; |
| • |
confirming that MediWound’s independent auditors are informed of the audit committee’s understanding of MediWound’s
related party transactions that are significant to MediWound; and reviewing and discussing with MediWound’s independent auditors
the auditors’ evaluation of MediWound’s identification of, accounting for, and disclosure of, its related party transactions,
including any significant matters arising from the audit regarding MediWound’s related party transactions; |
| • |
discussing MediWound’s policies with respect to risk assessment and risk management, and reviewing contingent liabilities and
risks that may be material to MediWound and relevant major legislative and regulatory developments that could materially impact MediWound’s
contingent liabilities and risks; |
| • |
reviewing periodically MediWound’s major financial risk exposures and MediWound’s policies for managing such risks;
|
| • |
conducting or authorizing investigations into any matters within the audit committee’s scope of responsibilities; and
|
| • |
reviewing and approving any material change or waiver in MediWound’s Code of Conduct regarding directors or executive officers,
and disclosures made in MediWound’s annual report. |
Our audit committee may not approve any actions requiring its approval
(see “-Approval of Related Party Transactions Under Israeli Law” below in this Item 6.C), unless at the time of the approval
a majority of the committee’s members are present, which majority consists of unaffiliated directors including at least one external
director, to the extent we then have external directors serving on the Board).
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Compensation Committee
Israeli Companies Law composition requirements
Under the Israeli Companies Law, the board of directors of a public
company must appoint a compensation committee. If a company is required to appoint external directors, the committee must consist of at
least three members, including all of the external directors, one of whom must serve as chairman of the committee. There are additional
requirements as to the composition of the compensation committee under the Companies Law. However, when we elected to exempt our company
from the external director requirement, we concurrently elected to exempt our company from all of such requirements (including the three-member
minimum). Our exemption under the Companies Law is conditioned on our fulfillment of all Nasdaq listing requirements related to the composition
of the compensation committee.
Israeli Companies Law committee duties
The duties of the compensation committee include the recommendation
to the company’s board of directors of a policy regarding the terms of engagement of office holders, which we refer to as a compensation
policy. That policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation
committee, and must be approved by the company’s shareholders, which approval requires what we refer to as a Special Majority Approval
for Compensation. A Special Majority Approval for Compensation requires shareholder approval by a majority vote of the shares present
and voting at a meeting of shareholders called for such purpose, provided that either (a) such majority includes at least a majority of
the shares held by all shareholders who are not controlling shareholders and do not have a conflict of interest (referred to under the
Israeli Companies Law as a “personal interest”) in such compensation arrangement or (b) the total number of shares of non-controlling
shareholders and shareholders who do not have a personal interest in the compensation arrangement and who vote against the arrangement
does not exceed 2% of the company’s aggregate voting rights.
Compensation policy requirements
We have adopted a compensation policy, most recently at the extraordinary
general meeting of shareholders held on November 28, 2022, which policy serves as the basis for decisions concerning the financial terms
of employment or engagement of office holders, including exculpation, insurance, indemnification or any monetary payment or obligation
of payment or other benefit in respect of employment or engagement. Under the Israeli Companies Law, the compensation policy must relate
to certain factors, including advancement of the company’s objectives, the company’s business plan and its long-term strategy,
and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management,
size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:
| • |
the knowledge, skills, expertise and accomplishments of the relevant office holder; |
| • |
the office holder’s roles and responsibilities and prior compensation agreements with him or her; |
| • |
the relationship between the terms offered and the average compensation of the other employees of the company, including those employed
through manpower companies; |
| • |
the impact of disparities in salary upon work relationships in the company; |
| • |
the possibility of reducing variable compensation at the discretion of the board of directors; |
| • |
the possibility of setting a limit on the exercise value of non-cash variable equity-based compensation; and |
| • |
as to severance compensation, the period of service of the office holder, the terms of his or her compensation during such service
period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement
of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
The compensation policy must also include the following principles:
| • |
the link between variable compensation and long-term performance, which variable compensation shall, other than office holders who
report to the CEO, be primarily based on measurable criteria; |
| • |
the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation; |
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| • |
the conditions under which an office holder would be required to repay compensation paid to him or her if it was later shown that
the data upon which such compensation was based was inaccurate and was required to be restated in the company’s financial statements;
|
| • |
the minimum holding or vesting period for variable, equity-based compensation; and |
| • |
maximum limits for severance compensation. |
The compensation committee is responsible for (a) recommending
the compensation policy to the company’s board of directors for its approval (and subsequent approval by its shareholders) and (b)
duties related to the compensation policy and to the compensation of a company’s office holders as well as functions related to
approval of the terms of engagement of office holders, including:
| • |
recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three
years (approval of the continuation of an existing compensation policy must in any case occur every three years); |
| • |
recommending to the board of directors periodic updates to the compensation policy; |
| • |
assessing implementation of the compensation policy; |
| • |
approving compensation terms of executive officers, directors and employees that require approval of the compensation committee;
|
| • |
determining whether the compensation terms of a chief executive officer nominee, which were determined pursuant to the compensation
policy, will be exempt from approval of the shareholders because such approval would harm the ability to engage with such nominee; and
|
| • |
determining whether to exempt from the requirement of shareholder approval the terms of employment and of a prospective chief executive
officer if the required conditions therefor are met under Section 272(c1)(3) of the Israeli Companies Law. |
A copy of our current compensation policy serves as an exhibit
to this annual report on Form 20-F.
Nasdaq listing rules composition
requirements
Under Nasdaq corporate governance rules, we are required to maintain
a wholly-independent compensation committee consisting of at least two independent directors or, if we choose to follow requirements under
Israeli law, we must disclose that fact in this annual report. Each of the members of the compensation committee is required to be independent
under the Nasdaq rules relating to compensation committee members and Rule 10C-1(b)(1) under the Exchange Act, which are different than
the general test for independence of board members.
Our compensation committee consists of Nachum Shamir (chairperson),
David Fox and Stephen T. Wills, each of whom is an independent director under the Nasdaq Stock Market listing rules and each of whom satisfies
the above-described additional requirements for compensation committee members under the Nasdaq rules and Exchange Act.
Compensation committee charter and role
Our board of directors has adopted a compensation committee charter
setting forth the responsibilities of the compensation committee, which include, but are not limited to:
| • |
the responsibilities set forth in the compensation policy; |
| • |
reviewing and approving the granting of options and other incentive awards to the extent such authority is delegated by our board
of directors; and |
| • |
reviewing, evaluating and making recommendations regarding the compensation and benefits for our non-employee directors. |
The compensation committee is subject to the same Companies Law
restrictions as the audit committee as to who may not be present during committee deliberations (as described under “Approval of
Related Party Transactions Under Israeli Law— Disclosure of Personal Interests of an Office Holder and approval of certain transactions”
below).
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Nominating and Governance Committee
Under Nasdaq corporate governance rules, director nominees must either be selected,
or recommended for the Board’s selection, either by independent directors constituting a majority of the Board’s independent
directors in a vote in which only independent directors participate, or a nominations committee comprised solely of independent directors.
If we choose to exempt ourselves from that requirement in accordance with our home country practices, we must disclose that fact in this
annual report. Each of the members of the nominating committee is required to be independent under the Nasdaq rules.
Our Board has established a nominating and governance committee, whose members consist
of David Fox (chairperson) and Nachum Shamir, each of whom has been determined by our Board to meet the Nasdaq independence requirement.
Our board of directors has adopted a nominating and governance committee charter setting forth the responsibilities of the committee,
which include, but are not limited to:
| • |
overseeing and assisting our board in reviewing and recommending nominees for election of directors; |
| • |
assessing the performance of the members of our board; and |
| • |
establishing and maintaining effective corporate governance policies and practices, including, but not limited to, developing and
recommending to our board a set of corporate governance guidelines applicable to our business. |
Research and Development Committee
Our Board has established a research and development committee,
which is composed of Vickie R. Driver (chairperson), Stephen T. Wills and Shmuel (Milky) Rubinstein. The primary functions of the research
and development committee include, but are not limited to:
| • |
overseeing the Company’s scientific, technical, research and development strategy, and the implementation thereof; and
|
| • |
advising our board of directors and management regarding program prioritization, clinical development strategy, regulatory strategy
and interactions, and related matters. |
Internal Auditor
Under the Israeli Companies Law, the board of directors of an Israeli
public company must appoint an internal auditor recommended by the audit committee. An internal auditor may not be:
| • |
a person (or a relative of a person) who holds 5% or more of the company’s outstanding shares or voting rights;
|
| • |
a person (or a relative of a person) who has the power to appoint a director or the general manager of the company (i.e., the chief
executive officer); |
| • |
an office holder (including a director) of the company (or a relative thereof); or |
| • |
a member of the company’s independent accounting firm, or anyone on its behalf. |
The role of the internal auditor is to examine, among other things,
our compliance with applicable law and orderly business procedures.
The audit committee is required to oversee the activities and to
assess the performance of the internal auditor as well as to review the internal auditor’s work plan. Our internal auditor is Mr.
Yisrael Gewirtz.
Fiduciary Duties of Directors and Executive Officers
The Israeli Companies Law codifies the fiduciary duties that office
holders owe to a company. Each person listed in the table under “Executive Officers and Directors” is an office holder under
the Israeli Companies Law.
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 level of care with which a reasonable office holder
in the same position would have acted under the same circumstances. The duty of loyalty requires that an office holder act in good faith
and in the best interests of the company.
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The duty of care includes a duty to use reasonable means to obtain:
| • |
information on the advisability of a given action brought for his or her approval or performed by virtue of his or her position;
and |
| • |
all other important information pertaining to any such action. |
The duty of loyalty includes a duty to:
| • |
refrain from any conflict of interest between the performance of his or her duties to the company and his or her other duties or
personal affairs; |
| • |
refrain from any activity that is competitive with the business of the company; |
| • |
refrain from exploiting any business opportunity of the company to receive a personal gain for himself or herself or others; and
|
| • |
disclose to the company any information or documents relating to the company’s affairs which the office holder received as
a result of his or her position as an office holder. |
Approval of Related Party Transactions Under Israeli Law
Disclosure of personal interests of an office holder and approval
of certain transactions
The Israeli Companies Law requires that an office holder promptly
disclose to the board of directors any personal interest that he or she may have and all related material information or documents concerning
any existing or proposed transaction with the company. An interested office holder’s disclosure must be made promptly and in any
event no later than the first meeting of the board of directors at which the transaction is considered. A personal interest includes an
interest of any person in an act or transaction of a company, including a personal interest of such person’s relative or of a corporate
body in which such person or a relative of such person is a 5% or greater shareholder, director or general manager or in which he or she
has the right to appoint at least one director or the general manager, but excluding a personal interest stemming from one’s ownership
of shares in the company.
A personal interest furthermore includes the personal interest
of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to his or her vote
on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter. An office holder
is not, however, obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction
that is not considered an extraordinary transaction. Under the Israeli Companies Law, an extraordinary transaction is defined as any of
the following:
| • |
a transaction other than in the ordinary course of business; |
| • |
a transaction that is not on market terms; or |
| • |
a transaction that may have a material impact on a company’s profitability, assets or liabilities. |
If it is determined that an office holder has a personal interest
in a transaction which is not an extraordinary transaction, approval by the board of directors is required for the transaction, unless
the company’s articles of association provide for a different method of approval. Further, so long as an office holder has disclosed
his or her personal interest in a transaction, the board of directors may approve an action by the office holder that would otherwise
be deemed a breach of his or her duty of loyalty. However, a company may not approve a transaction or action that is not in the best interest
of the company or that is not performed by the office holder in good faith. An extraordinary transaction in which an office holder has
a personal interest requires approval first by the company’s audit committee and subsequently by the board of directors. The compensation
of, or an undertaking to indemnify or insure, an office holder who is not a director requires approval first by the company’s compensation
committee, then by the company’s board of directors. If such compensation arrangement or an undertaking to indemnify or insure is
inconsistent with the company’s stated compensation policy, or if the office holder is the chief executive officer (apart from a
number of specific exceptions), then such arrangement is further subject to a Special Majority Approval for Compensation. Arrangements
regarding the compensation, indemnification or insurance of a director require the approval of the compensation committee, board of directors
and shareholders by ordinary majority, in that order, and under certain circumstances, a Special Majority Approval for Compensation. Generally,
a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may
not be present at such a meeting or vote on that matter unless the chairman of the relevant committee or board of directors (as applicable)
determines that he or she should be present in order to present the transaction that is subject to approval. If a majority of the members
of the audit committee or the board of directors (as applicable) has a personal interest in the approval of a transaction, then all directors
may participate in discussions of the audit committee or the board of directors (as applicable) on such transaction and the voting on
approval thereof, but shareholder approval is also required for such transaction.
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Disclosure of personal interests of controlling shareholders and
approval of certain transactions
Pursuant to Israeli law, the disclosure requirements regarding
personal interests that apply to directors and executive officers also apply to a controlling shareholder of a public company. In the
context of a transaction involving a shareholder of the company, a controlling shareholder also includes a shareholder who holds 25% or
more of the voting rights in the company if no other shareholder holds more than 50% of the voting rights in the company. For this purpose,
the holdings of all shareholders who have a personal interest in the same transaction will be aggregated. The approval of the audit committee
or the compensation committee, the board of directors and the shareholders of the company, in that order, is required for (a) extraordinary
transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, (b) the engagement with a controlling
shareholder or his or her relative, directly or indirectly, including through a company under the control of the controlling shareholder,
for the provision of services to the company, (c) the terms of engagement and compensation of a controlling shareholder or his or her
relative who is an office holder or (d) the employment of a controlling shareholder or his or her relative by the company, other than
as an office holder. In addition, the shareholder approval requires one of the following, which we refer to as a Special Majority:
| • |
at least a majority of the shares held by all shareholders who do not have a personal interest in the transaction and who are present
and voting at the meeting approves the transaction, excluding abstentions; or |
| • |
the shares voted against the transaction by shareholders who have no personal interest in the transaction and who are present and
voting at the meeting do not exceed 2% of the voting rights in the company. |
To the extent that any such transaction with a controlling shareholder
is for a period extending beyond three years, approval is required once every three years, unless, with respect to certain transactions,
the audit committee determines that the duration of the transaction is reasonable given the circumstances related thereto. Arrangements
regarding the compensation, indemnification or insurance of a controlling shareholder in his or her capacity as an office holder require
the approval of the compensation committee, board of directors and shareholders by a Special Majority, in that order, and the terms thereof
may not be inconsistent with the company’s stated compensation policy.
Pursuant to regulations promulgated under the Israeli 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 and board
of directors.
Shareholder Duties
Pursuant to the Israeli Companies Law, a shareholder has a duty
to act in good faith and in a customary manner toward the company and other shareholders and to refrain from abusing his or her power
in the company, including, among other things, in voting at a general meeting and at shareholder class meetings with respect to the following
matters:
| • |
an amendment to the company’s articles of association; |
| • |
an increase of the company’s authorized share capital; |
| • |
a merger; or |
| • |
the approval of related party transactions and acts of office holders that require shareholder approval. |
A shareholder also has a general duty to refrain from discriminating
against other shareholders. In addition, certain shareholders have a duty of fairness toward the company. These shareholders include any
controlling shareholder, any shareholder who knows that he or she has the power to determine the outcome of a shareholder vote and any
shareholder who has the power to appoint or to prevent the appointment of an office holder of the company or other power towards the company.
The Israeli Companies Law does not define the substance of the duty of fairness, except to state that the remedies generally available
upon a breach of contract will also apply in the event of a breach of the duty to act with fairness.
Exculpation, Insurance and Indemnification of Directors and Officers
Under the Israeli Companies Law, a company may not exculpate an
office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office holder in advance from liability
to the company, in whole or in part, for damages caused to the company as a result of a breach of duty of care but only if a provision
authorizing such exculpation is included in its articles of association. Our articles of association include such a provision. A company
may not exculpate in advance a director from liability arising out of a prohibited dividend or distribution to shareholders.
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Under the Israeli Companies Law, a company may indemnify an office
holder in respect of the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant
to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing
such indemnification:
| • |
financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s
award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance,
then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the company’s
activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors
as reasonable under the circumstances, and such undertaking shall detail the abovementioned foreseen events and amount or criteria;
|
| • |
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder (1) as a result of an investigation
or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i)
no indictment was filed against such office holder as a result of such investigation or proceeding, and (ii) no financial liability was
imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial
liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (2) in connection
with a monetary sanction; and |
| • |
reasonable litigation expenses, including attorneys’ fees, incurred by the office holder or imposed by a court in proceedings
instituted against him or her by the company, on its behalf, or by a third party, or in connection with criminal proceedings in which
the office holder was acquitted, or as a result of a conviction for an offense that does not require proof of criminal intent.
|
Under the Israeli Companies Law, a company may insure an office
holder against the following liabilities incurred for acts performed by him or her as an office holder, if and to the extent provided
in the company’s articles of association:
| • |
a breach of the duty of loyalty to the company, provided that the office holder acted in good faith and had a reasonable basis to
believe that the act would not harm the company; |
| • |
a breach of duty of care to the company or to a third party, to the extent such a breach arises out of the negligent conduct of the
office holder; and |
| • |
a financial liability imposed on the office holder in favor of a third party. |
Under the Israeli Companies Law, a company may not indemnify, exculpate
or insure an office holder against any of the following:
| • |
a breach of the duty of loyalty, except for indemnification and insurance for a breach of the duty of loyalty to the company to the
extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not harm the company;
|
| • |
a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office
holder; |
| • |
an act or omission committed with intent to derive illegal personal benefit; or |
| • |
a fine or forfeit levied against the office holder. |
Under the Israeli Companies Law, exculpation, indemnification and
insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect
to certain office holders or under certain circumstances, also by the shareholders. See “-Approval of Related Party Transactions
Under Israeli Law ” above in this Item 6.C.
Our articles of association permit us to exculpate, indemnify and
insure our office holders to the fullest extent permitted or to be permitted by the Israeli Companies Law. We have obtained directors’
and officers’ liability insurance for the benefit of our office holders and intend to continue to maintain such coverage and pay
all premiums thereunder to the fullest extent permitted by the Israeli Companies Law. In addition, we have entered into agreements with
each of our directors and executive officers exculpating them from liability to us for damages caused to us as a result of a breach of
duty of care and undertaking to indemnify them, in each case, to the fullest extent permitted by our articles of association and Israeli
Law.
95
The maximum indemnification amount set forth in those agreements
is limited to an amount equal to the greater of (i) 25% of our total shareholders’ equity based on our most recently financial statements
of the time of the actual payment of the indemnification; (ii) $50 million; (iii) 40% of our total market cap (which shall mean the average
closing price of the Company’s ordinary shares over the 30 trading days prior to the actual payment of indemnification multiplied
by the total number of issued and outstanding shares of the Company as of the date of actual payment); and (iv) in connection with or
arising out of a public offering of our securities, the aggregate amount of proceeds from the sale by us and/or any shareholder of ours
securities in such offering. The maximum amount set forth in those agreements is in addition to amounts actually paid, if any, under insurance
policies and/or by a third-party pursuant to an indemnification arrangement.
Directors’ Service Contracts
We are not presently party to any service contracts with any of
our directors that provide for benefits upon termination of employment or other service.
| D. |
Employees |
Our workforce has expanded in line with the growth of our operations and ongoing innovation
efforts. The table below presents the number of employees as of the dates indicated:
|
As of December 31, |
||||||||||||
|
2025 |
2024 |
2023 |
||||||||||
|
Total employees |
121 |
111 |
100 |
|||||||||
|
Located in Israel |
111 |
101 |
88 |
|||||||||
|
Located in Europe |
10 |
10 |
12 |
|||||||||
|
In Manufacturing department |
60 |
55 |
48 |
|||||||||
|
In research and development department |
35 |
31 |
26 |
|||||||||
|
In administrative department |
16 |
15 |
14 |
|||||||||
|
In sales and marketing department |
10 |
10 |
12 |
|||||||||
Israeli labor laws govern the length of the workday and workweek,
minimum wages for employees, procedures for hiring and dismissing employees, determination of severance pay, annual leave, sick days,
advance notice of termination, payments to the National Insurance Institute and other conditions of employment and include equal opportunity
and anti-discrimination laws. While none of our employees is party to any collective bargaining agreements, certain provisions of the
collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic
Organizations (including the Industrialists’ Associations) are applicable to our employees in Israel by order of the Israeli Ministry
of the Economy. These provisions primarily concern pension fund benefits for all employees, insurance for work-related accidents, recuperation
pay and travel expenses. We generally provide our employees with benefits and working conditions beyond the required minimums.
We have never experienced any employment-related work stoppages
and believe our relationships with our employees are good.
| E. |
Share Ownership |
For information regarding the share ownership of our directors
and executive officers, see “ITEM 6.B. Compensation-2014 Equity Incentive Plan and 2024 Equity Incentive Plan” and “ITEM
7.A. Major Shareholders.”
96
| F. |
Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
None.
Item 7. MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS
| A. |
Major Shareholders |
The following table sets forth information with respect to the
beneficial ownership of our shares as of March 1, 2026 by:
| • |
each person or entity known by us to own beneficially more than 5% of our outstanding shares; |
| • |
each of our directors and executive officers individually; and |
| • |
all of our executive officers and directors as a group. |
The beneficial ownership of ordinary shares is determined in accordance
with the rules of the SEC and generally includes any ordinary shares over which a person exercises sole or shared voting or investment
power. The percentage of shares beneficially owned is based on 12,845,664 ordinary shares issued and outstanding as of March 1, 2026.
Ordinary shares that are issuable under stock options or RSUs that are currently exercisable or exercisable within 60 days of March 1,
2026 are deemed to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of computing the
number of shares and percentage ownership of that person. Those shares are not deemed outstanding, however, for the purpose of computing
the percentage ownership of any other person. All of our shareholders, including the shareholders listed below, have the same voting rights
attached to their ordinary shares. See “ITEM 10.B. Articles of Association.” None of our principal shareholders nor our directors
or executive officers possesses different or special voting rights with respect to their ordinary shares. Unless otherwise noted below,
each shareholder’s address is c/o MediWound Ltd., 42 Hayarkon Street, Yavne 8122745, Israel.
97
A description of any material relationship that our principal shareholders
have had with us or any of our predecessors or affiliates within the past three years is included under “ITEM 7.B. Related Party
Transactions.”
|
Name of Beneficial Owner |
Number of Shares Beneficially Held |
Percentage of Class |
||||||
|
Directors and Executive Officers |
||||||||
|
Nachum (Homi) Shamir |
* |
* |
||||||
|
Ofer Gonen |
275,424 |
2.11 |
% | |||||
|
Vickie R. Driver |
* |
* |
||||||
|
David Fox |
* |
* |
||||||
|
Shmuel (Milky) Rubinstein |
* |
* |
||||||
|
Stephen T. Wills |
* |
* |
||||||
|
Shmulik Hess |
* |
* |
||||||
|
Ety Klinger |
* |
* |
||||||
|
Hani Luxenburg |
* |
* |
||||||
|
Yaron Meyer |
* |
* |
||||||
|
Robert Snyder |
* |
* |
||||||
|
All executive officers and directors as a group (10 persons)(1)
|
781,588 |
6.05 |
% | |||||
|
Principal Shareholders (who are not Directors or Executive Officers)
|
||||||||
|
Clal Biotechnology Industries Ltd. and affiliates (2)
|
1,455,706 |
11.3 |
% | |||||
|
HOLD Alapkezelo Zrt. (3) |
1,039,954 |
8.1 |
% | |||||
|
Rosalind Advisors, Inc. and affiliates (4)
|
912,319 |
7.0 |
% | |||||
|
Mölnlycke Health Care (5) |
872,093 |
6.8 |
% | |||||
|
Yelin Lapidot Holdings Management Ltd. And affiliates (6)
|
763,069 |
5.9 |
% | |||||
|
Deep Insight Limited Partnership and affiliates (7)
|
686,578 |
5.2 |
% | |||||
| * |
Less than 1%. |
| (1) |
Shares beneficially owned consist of 152,062 ordinary shares held directly or indirectly by such executive officers and directors,
598,488 ordinary shares issuable upon exercise of outstanding options and 31,038 ordinary shares issuable upon exercise of outstanding
Series A warrants that are held by certain directors and executive officers, that are currently exercisable or exercisable within 60 days
of March 1, 2026. |
| (2) |
Based solely on Schedule 13D/A filed on October 3, 2025, Clal Biotechnology Industries Ltd. (“CBI”) owns directly 308,811
ordinary shares, and may be deemed to share voting and investment power over the 1,172,710 ordinary shares owned directly by Clal Life
Sciences L.P. (“CLS”), the general partner of which, Clal Application Center Ltd., is wholly owned by CBI. Each of Access
Industries Holdings LLC (“AIH”), Access Industries, LLC (“Access LLC”), Access Industries Management, LLC (“AIM”),
Clal Industries Ltd. (“Clal Industries”) and Mr. Len Blavatnik may be deemed to share voting and investment power over the
ordinary shares owned directly by CBI and CLS because (i) Len Blavatnik controls AIM, AIH, Access LLC and AI International GP Limited
(the general partner of AI SMS, as defined below), (ii) AIM controls Access LLC and AIH, (iii) Access LLC controls a majority of the outstanding
voting interests in AIH, (iv) AIH owns a majority of the equity of AI SMS L.P. (“AI SMS”), (v) AI SMS controls AI Diversified
Holdings Ltd. (“Holdings Limited”), (vi) Holdings Limited owns AI Diversified Parent S.à r.l., which owns AI Diversified
Holdings S.à r.l., which owns Access AI Ltd (“Access AI”), (vii) Access AI wholly owns Clal Industries, (viii) Clal Industries
is the controlling shareholder of CBI, and (ix) CBI is the sole shareholder of Clal Application Center Ltd. The Reporting Persons, other
than CBI and CLS, and each of their affiliated entities and the officers, partners, members and managers thereof, disclaims beneficial
ownership of these securities. The address of Clal Industries Ltd. is the Triangular Tower, 3 Azrieli Center, Tel Aviv 67023, Israel and
the address of Access Industries Holdings LLC is c/o Access Industries Inc., 40 West 57th Street, New York, New York 10019, United States.
|
98
| (3) |
Based solely on Schedule 13G/A filed on February 13, 2026, HOLD Alapkezelo Zrt. beneficially owns an aggregate of 1,039,954 ordinary
shares, with sole voting power and sole dispositive power over these shares. The address of HOLD Alapkezelo Zrt. is H-1123 Budapest, Alkotas
u. 50., Hungary. |
| (4) |
Based solely on Schedule 13G/A filed on February 11, 2026, Rosalind Master Fund L.P. (“RMF”) is the record owner of 749,054
shares of ordinary shares and 163,265 shares of ordinary shares issuable upon exercise of warrants. The warrants contain a blocker provision
under which the holder thereof does not have the right to exercise any of the warrant to the extent that such exercise would result in
beneficial ownership by the holder in excess of 9.99% of the ordinary shares. Rosalind Advisors, Inc. is the investment advisor to RMF
and may be deemed to be the beneficial owner of shares held by RMF. Steven Salamon is the portfolio manager of Rosalind Advisors, Inc.
and may be deemed to be the beneficial owner of shares held by RMF. Gilad Aharon is the portfolio manager and member of Rosalind Advisors,
Inc. The reporting persons mentioned above have shared voting power and dispositive power with respect to the shares held by RMF. Notwithstanding
the foregoing, Rosalind Advisors, Inc. and Mr. Salamon disclaim beneficial ownership of the shares. The address of RMF is P.O. Box 309
Ugland House, Grand Cayman KY1-1104, Cayman Islands, and the address of the rest of the reporting persons is 15 Wellesley Street West,
Suite 326, Toronto, Ontario M4Y 0G7 Canada. |
| (5) |
Based solely on Schedule 13D filed on July 19, 2024, Mölnlycke Health Care AB (“Mölnlycke”), MHC Sweden AB,
Mölnlycke Holding AB, Mölnlycke AB, Rotca AB, Patricia Industries AB, and Investor AB beneficially own an aggregate of 872,093
ordinary shares, and each reporting person has sole voting power and sole dispositive power over these ordinary shares. The address of
each of Mölnlycke, MHC Sweden AB, Mölnlycke Holding AB and Mölnlycke AB is Gamlestadsvägen 3C, 415 11, Göteborg,
Sweden. The address of each of Rotca AB, Patricia Industries AB and Investor AB is Arsenalsgatan 8C, SE-103 32, Stockholm, Sweden
|
| (6) |
Based solely on Schedule 13G/A filed on February 5, 2026, 434,084 ordinary shares are beneficially owned by provident funds managed
by Yelin Lapidot Provident Funds Management Ltd. (“Provident Funds”), and 328,985 ordinary shares are beneficially owned by
mutual funds managed by Yelin Lapidot Mutual Funds Management Ltd. (“Mutual Funds”). Each Provident Funds and Mutual Funds
is a wholly-owned subsidiary of Yelin Lapidot Holdings Management Ltd. (“Yelin Lapidot Holdings”). Yelin Lapidot Holdings,
Mr. Dov Yelin and Mr. Yair Lapidot have shared voting power and shared dispositive power over the ordinary shares held by Provident Funds
and Mutual Funds. Notwithstanding the foregoing, each of Messrs. Yelin and Lapidot, Yelin Lapidot Holdings, Provident Funds and Mutual
Funds disclaims beneficial ownership of the ordinary shares. The address of each of the reporting persons is 50 Dizengoff St., Dizengoff
Center, Gate 3, Top Tower, 13th floor, Tel Aviv 64332,
Israel. |
| (7) |
Based on information provided by the shareholder, the 686,578 ordinary shares include 408,397 ordinary shares that are issuable upon
the exercise of warrants held directly by Deep Insight Limited Partnership (“Deep Insight”). Deep Insight Fund GP Limited
Partnership (“Deep Insight GP LP”) is the sole general partner of Deep Insight, Deep Insight GP Ltd. (“Deep Insight
GP Company”) is the sole general partner of Deep Insight GP LP, Deep Insight Management Ltd. (“Deep Insight Management”)
is the management company of Deep Insight GP LP and each of Barak Ben-Eliezer and Dr. Eyal Kishon hold 50% of the outstanding shares of
Deep Insight GP Company and Deep Insight Management. Deep Insight GP LP, Deep Insight GP Company, Deep Insight Management, Barak Ben-Eliezer
and Dr. Eyal Kishon may be deemed to share voting and dispositive power with respect to the Ordinary Shares that are beneficially owned
by Deep Insight. Barak Ben-Eliezer and Dr. Eyal Kishon disclaim beneficial ownership of the Ordinary Shares reported by Deep Insight herein.
The address of each of the reporting persons is 2 Rachel Imeinu St., Modiin, Israel 7177190. |
99
Changes in Ownership of Major Shareholders
To our knowledge, other than as disclosed in the table above, our
other filings with the SEC and this Annual Report, there has been no significant change in the percentage ownership held by any major
shareholder since January 1, 2023, except as follows: as reported in their filings with the SEC, during 2024, CBI and its affiliates have
decreased their holdings from approximately 16.1% to 11.3% as a result of a dilution from the 2024 Offering and the 2025 Securities Purchase
Agreement as described in ITEM 5. “Operating and Financial Review and Prospects-Liquidity and Capital Resources.
Voting Rights
The major shareholders listed above do not have voting rights with
respect to their ordinary shares that are different from the voting rights of other holders of our ordinary shares.
Change in Control Arrangements
We are not aware of any arrangement that may at a subsequent date,
result in a change of control of the Company.
Registered Holders
As of March 1, 2026, we had one holder of record of our ordinary
shares in the United States, which is Cede & Co., the nominee of The Depository Trust Company. This shareholder held in the aggregate
88% of the 11,309,495 ordinary shares issued and outstanding as of March 1, 2026. The number of record holders in the United States is
not representative of the number of beneficial holders nor is it representative of where such beneficial holders are resident since many
of these ordinary shares were held by brokers or other nominees.
| B. |
Related Party Transactions |
The following is a description of related party transactions we
have entered into since January 1, 2023 with any of the members of our executive officers or Board and the holders of more than 5% of
our ordinary shares.
Information Rights Agreement
We have entered into an information rights agreement with CBI,
which provides CBI with certain information rights relating to our financial information of the company and certain other information
necessary for CBI to meet Israeli Securities Law requirements. CBI is not required to reimburse us for expenses we incur in providing
such information. This agreement was expired on July 2024 due do CBI’s holdings in the Company after the 2024 Offering.
2021 Registration Rights Agreement
We are party to an amended and restated registration rights agreement,
dated April 6, 2021, with certain of our shareholders (the “2021 Registration Rights Agreement”). The 2021 Registration Rights
Agreement, which was approved by our shareholders at our 2021 annual general meeting of shareholders, replaced the registration rights
agreement, dated March 3, 2014 (the “Original Registration Rights Agreement”), that we had entered into in connection with
our initial public offering with certain of our pre-IPO shareholders, which expired by its own terms on its seven-year anniversary. The
ordinary shares held by most of our pre-IPO shareholders who were party to the Original Registration Rights Agreement were no longer entitled
to registration rights under that agreement as of the time that it expired, given their ability to freely sell their shares in the open
market under Rule 144 of the Securities Act. However, each of CBI and Professor Lior Rosenberg, and their affiliated entities that hold
ordinary shares (consisting of Clal Life Sciences LP and L.R. Research & Development Ltd., respectively) remained entitled to registration
rights as of the time of the expiration of the Original Registration Rights Agreement, and we therefore entered into the Registration
Rights Agreement with them as a means of extending those rights. The 2021 Registration Rights Agreement provides to the holders of our
ordinary shares that are party to the agreement the right to demand that we file a registration statement or request that their ordinary
shares be covered by a registration statement that we are otherwise filing. In March 19, 2025, we filed, and the SEC declared effective,
on March 27, 2025, a shelf registration statement on Form F-3 that registered the resale of the 1,266,141 CBI’s shares that were
then entitled to registration rights under the 2021 Registration Rights Agreement. That registration statement remains in effect as of
the date of this annual report however, Professor Lior Rosenberg and his affiliated entity, L.R. Research & Development Ltd. is no
longer a party to this agreement since he has ceased to be an affiliate of the Company. The registration rights under the 2021 Registration
Rights Agreement are described in more detail in Exhibit 2.1 to this Annual Report, which is incorporated by reference in ITEM 10.B. Articles
of Association.
100
Founders’ and Shareholders’ Agreement
In January 2001, we entered into a founders’ and shareholders’
agreement (the “Founders Agreement”), with CBI, Prof. Lior Rosenberg, and LR, a private company which is wholly-owned by Prof.
Rosenberg. The Founders Agreement was amended in 2006. Pursuant to the Founders Agreement, in exchange for the issuance of ordinary shares
and certain rights thereunder and the payment of certain fixed amounts, Prof. Rosenberg granted to us a perpetual, exclusive, non-revocable,
royalty-free, sub-licensable, worldwide license for intellectual property relating to debridement using products based on our proteolytic
enzyme technology. As of the date hereof, all of the payments under the Founders Agreement were paid by us to Prof. Rosenberg in accordance
with the Founders Agreement. The Founders Agreement also provided for anti-dilution, pre-emptive rights, a right of first refusal on the
sale of our ordinary shares and bring-along rights, all of which were subsequently terminated.
Agreements with Directors and Officers
Employment Agreements
We have entered into employment agreements with each of our executive
officers, which include standard provisions for a company in our industry regarding non-competition/solicitation, confidentiality of information
and assignment of inventions. However, the enforceability of the non-competition provisions may be limited under applicable law. Our executive
officers, other than our CEO, will not receive benefits upon the termination of their respective employment with us, other than payment
of salary and benefits (and limited accrual of vacation days) during the required notice period for termination of their employment, which
varies for each individual. Our CEO, is entitled upon termination of employment (other than a termination by the Company for Cause, as
defined below), to receive a single lump-sum payment equal 6 times his salary as of the last day of employment, less deductions and withholdings
under applicable law, subject him signing a separation agreement and release of known and unknown claims in a customary form provided
by the Company.
Options
Since our inception, we have granted options to purchase our ordinary
shares to our directors and executive officers. Such option agreements may contain acceleration provisions upon certain merger, acquisition
or change of control transactions. We describe our option plans under “ITEM 6.B. Compensation-Share Incentive Plans.” Upon
the consummation of a merger or acquisition transaction, an executive officer’s options will be assumed or substituted by the surviving
company, if applicable, or, in the compensation committee’s sole discretion, will vest immediately or be amended, modified or terminated.
Our compensation committee approved accelerated vesting in the case of a merger or an acquisition transaction for certain of our directors
and executive officers with respect to the option agreements dated December 23, 2015, June 22, 2017, January 16, 2018, December 31, 2018,
May 2, 2019, April 23, 2020, March 4, 2021 and February 15, 2023, April 3, 2023, August 15, 2023, December 1, 2023, February 26, 2024,
February 11, 2025 and March 4, 2026.
RSUs
Under the 2014 Plan and the 2024 Plan, we have granted RSUs to
our executive officers and our chairman of the board. The RSU agreements generally provide for vesting of RSUs over a four-year period
of continuous employment or service, with 25% of the RSUs vesting at the lapse of one year following the vesting commencement date, and
the remaining 75% of the RSUs vesting in three equal installments, at the lapse of each of the following three years. Absent a specific
acceleration provision, if a grantee’s service is terminated for any reason, all RSUs that have not vested will immediately terminate.
RSUs that have vested but have not been settled yet for underlying ordinary shares may generally be settled within the three months following
the termination of the service of the grantee, other than in the case of termination due to death or disability (in which case the grantee
or his/her estate will have one year to settle the vested RSUs for underlying ordinary shares) or termination for cause (in which case
all unsettled RSUs will immediately terminate). Upon the consummation of a merger or acquisition transaction, an executive officer’s
or the chairman’s RSUs will be assumed or substituted by the surviving company, if applicable, or, in the compensation committee’s
sole discretion, will vest immediately or be amended, modified or terminated. The RSUs that we grant may contain acceleration provisions
upon certain merger, acquisition or change of control transactions, if approved by our board of directors with respect to a specific grant.
The RSUs are generally subject to the further terms of the 2014 Plan, which we describe under “ITEM 6.B. Compensation-Equity Incentive
Plan.”
101
Exculpation, indemnification and insurance
Our articles of association permit us to exculpate, indemnify and
insure each of our directors and office holders to the fullest extent permitted by the Israeli Companies Law. Additionally, we have entered
into indemnification agreements with each of our directors and executive officers, undertaking to indemnify them to the fullest extent
permitted by Israeli law, including with respect to liabilities resulting from a public offering of our shares, to the extent that these
liabilities are not covered by insurance. We have also obtained Directors and Officers insurance for each of our executive officers and
directors. See “ITEM 6.C. Board Practices-Exculpation, Insurance and Indemnification of Directors and Officers.”
| C. |
Interests of Experts and Counsel |
None.
Item 8. FINANCIAL
INFORMATION
| A. |
Consolidated Statements and Other Financial Information |
Consolidated Financial Statements
See ITEM 18. “Financial Statements”.
Legal and Arbitration Proceedings
From time to time, we may be party to litigation or subject to
claims incident to the ordinary course of business. We are not currently a party to any material legal proceedings, including any such
proceedings that are pending or threatened, of which we are aware.
Dividend Policy
We have never declared or paid cash dividends to our shareholders
and we do not intend to pay cash dividends in the foreseeable future. We intend to reinvest any earnings in developing and expanding our
business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend
on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements,
business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors
may deem relevant.
| B. |
Significant Changes |
No significant changes have occurred since December 31, 2025, except
as otherwise disclosed in this annual report.
Item 9. THE
OFFER AND LISTING
| A. |
Listing Details |
Our ordinary shares trade on the Nasdaq Global Market under the
symbol “MDWD”.
| B. |
Plan of Distribution |
Not applicable.
| C. |
Markets |
See “-Listing Details” above.
| D. |
Selling Shareholders |
Not applicable.
| E. |
Dilution |
Not applicable.
102
| F. |
Expenses of the Issue |
Not applicable.
Item 10. ADDITIONAL
INFORMATION
| A. |
Share Capital |
Not applicable.
| B. |
Memorandum and Articles of Association |
A copy of our amended and restated articles of association is attached
as Exhibit 1.1 to this Annual Report. Other than as disclosed below, the information called for by this Item is set forth in Exhibit 2.1
to this Annual Report on Form 20-F, which information is incorporated by reference into this ITEM 10.B. of this annual report.
| C. |
Material Contracts |
Except as described below or otherwise described in this annual
report in ITEM 4.A “History and Development of the Company”, ITEM 4.B “Business Overview”, “ITEM 5.B ‘Operating
and Financial Review and Prospects—Liquidity and Capital Resources”, ITEM 6.C “Board Practices” and ITEM 7.B “Related
Party Transactions”, we are not currently, nor have we been for the two years immediately preceding the date of this annual report,
party to any material contract other than contracts entered into in the ordinary course of business.
For a description of the registration rights that are subject to
our 2021 Registration Rights Agreement, see “ITEM 7.B. Related Party Transactions – 2021 Registration Rights Agreement.”
For a description of our exclusive license and supply agreements
with Vericel, see “ITEM 4.B. Business Overview- Marketing, Sales and Distribution- Vericel
License and Supply Agreements.”
For a description of our license agreement with Mark Klein, see
“ITEM 4.B. Business Overview-Intellectual Property-Klein License Agreement.”
We have entered into an agreement with Challenge Bioproducts Corporation
Ltd. (“CBC”), a corporation organized and existing under the laws of Taiwan, dated January 11, 2001, as amended on February
28, 2010, pursuant to which CBC uses proprietary methods to manufacture bromelain SP and supplies us with this intermediate drug substance
in bulk quantities. According to the terms of the agreement, CBC shall not, and shall not permit related companies or a third party to,
manufacture, use, supply or sell the raw materials for the use or production of a product directly or indirectly competing with any of
our products. Our supply agreement with CBC has no fixed expiration date and can be voluntarily terminated by us, with at least six months’
advance written notice, or by CBC, with at least 24 months’ advance written notice.
For a description of the main lease agreement, see “ITEM
4. Properties.”
For a description of the turnkey scale-up agreement with Biopharmax
Group Ltd., see “ITEM 4. Properties.”
For a description of the 2025 Securities Purchase Agreement, 2024
Share Purchase Agreement, 2024 Registration Rights Agreement, and Collaboration Agreement with Mölnlycke, see “ITEM 4.A. Information
on the Company-Business Overview” and “ITEM 5.B. Operating and Financial Review and Prospects-Liquidity and Capital Resources.”
2022 Registration Rights Agreement
In connection with the PIPE Offering (as described in “ITEM
5. Operating and Financial Review and Prospects— B. Liquidity and Capital Resources”), in October 2022, we entered into a
registration rights agreement with the several investors named in the PIPE Securities Purchase Agreement (the “2022 Registration
Rights Agreement”). Pursuant to the 2022 Registration Rights Agreement, within 45 calendar days of the date of the closing of the
PIPE, we were required to file a registration statement to register for resale of (i) Pre-Funded Warrant Shares, (ii) the PIPE Ordinary
Warrant Shares and (iii) the RD Ordinary Share Warrant (together, the “Registrable Securities”). Pursuant to the 2022 Registration
Rights Agreement, we agreed to cause such registration statement to be declared effective under the Securities Act of 1933, as amended
(the “Securities Act”), as promptly as possible after the filing thereof, but in any event no later 75 days, or in the event
of a full review by the SEC, 110 days, after the closing date of the PIPE. We further agreed to use our best efforts to keep such registration
statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such registration
statement have been sold or otherwise may be sold pursuant to Rule 144 under the Securities Act. On November 10, 2022, we filed a registration
statement on Form F-1 pursuant to our obligations under the 2022 Registration Rights Agreement, which became effective on November 25,
2022.
103
| D. |
Exchange Controls |
In 1998, Israeli currency control regulations were liberalized
significantly, so that Israeli residents generally may freely deal in foreign currency and foreign assets, and non-residents may freely
deal in Israeli currency and Israeli assets. There are currently no Israeli currency control restrictions on remittances of dividends
on the ordinary shares or the proceeds from the sale of the shares provided that all taxes were paid or withheld; however, legislation
remains in effect pursuant to which currency controls can be imposed by administrative action at any time.
Non-residents of Israel may freely hold and trade our securities.
Neither our articles of association nor the laws of the State of Israel restrict in any way the ownership or voting of ordinary shares
by non-residents, except that such restrictions may exist with respect to citizens of countries which are in a state of war with Israel.
Israeli residents are allowed to purchase our ordinary shares.
| E. |
Taxation |
The following description is not intended to constitute a complete
analysis of all tax consequences relating to the acquisition, ownership and disposition of our ordinary shares. You should consult your
own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the
laws of any state, local, foreign or other taxing jurisdiction.
Israeli Tax Considerations for Our Shareholders
Capital gains taxes applicable to non-Israeli resident shareholders
A non-Israeli resident (whether an individual or a corporation)
who derives capital gains from the sale of shares in an Israeli resident company that were purchased after the company was listed for
trading on the Tel Aviv Stock Exchange or on a recognized stock exchange outside of Israel, will generally be exempt from Israeli capital
gain tax so long as the shares were not held through a permanent establishment that the non-resident maintains in Israel (and with respect
to shares listed on a recognized stock exchange outside of Israel, so long as the particular capital gain is otherwise subject to the
Israeli Income Tax Law (Inflationary Adjustments) 5745-1985. These provisions dealing with capital gain are not applicable to a person
whose gains from selling or otherwise disposing of the shares are deemed to be business income. However, non-Israeli corporations will
not be entitled to the foregoing exemption if Israeli residents (i) have a controlling interest of more than 25% 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 non-Israeli corporation, whether
directly or indirectly.
If not exempt, a non-Israeli resident shareholder would generally
be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2025), if generated by a company, or at the rate of 25%,
if generated by an individual, or 30%, if generated by an individual who is a “substantial shareholder” (as defined under
the Tax Ordinance), at the time of sale or at any time during the preceding 12-month period (or if the shareholder claims a deduction
for interest and linkage differences expenses in connection with the purchase and holding of such shares). A “substantial shareholder”
is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a
permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means
of control” generally include, among others, the right to vote, receive profits, nominate a director or an executive officer, receive
assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Individual
and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (a corporate tax rate
for a corporation (23% in 2025) and a marginal tax rate of up to 47% for an individual in 2025 (excluding excess tax as discussed below))
unless contrary provisions in a relevant tax treaty apply.
Additionally, a sale of shares by a non-Israeli resident may also
be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example, under the Convention Between the
Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended (the
“United States-Israel Tax Treaty”), the sale, exchange or other disposition of shares by a shareholder who is a United States
resident (for purposes of the United States-Israel Tax Treaty) holding the shares as a capital asset and is entitled to claim the benefits
afforded to such a resident by the United States-Israel Tax Treaty (a “Treaty U.S. Resident”) is generally exempt from Israeli
capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in
Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising
from the such sale, exchange or disposition can be attributable to a permanent establishment of the shareholder maintained in Israel,
under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital
of a company during any part of the 12-month period preceding such sale, exchange or disposition, subject to certain conditions; or (v)
such Treaty U.S. Resident is an individual and was present in Israel for a period or periods aggregating to 183 days or more during the
relevant taxable year. In each case, the sale, exchange or disposition of our ordinary shares would be subject to such Israeli tax, to
the extent applicable; However, under the United States-Israel Tax Treaty, such Treaty U.S. Resident would be permitted to claim a credit
for such taxes against the U.S. federal income tax imposed with respect to such sale, exchange or disposition, subject to the limitations
in U.S. laws applicable to foreign tax credits. The United States-Israel Tax Treaty does not provide such credit against any U.S. state
or local taxes. In some instances where our shareholders may be liable for Israeli tax on the sale of their ordinary shares, the payment
of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they
are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. Specifically, in transactions
involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may
require from shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority or obtain a specific
exemption from the Israel Tax Authority to confirm their status as non-Israeli resident, and, in the absence of such declarations or exemptions,
may require the purchaser of the shares to withhold taxes at source.
104
Taxation of non-Israeli shareholders on receipt of dividends
Non-Israeli residents (whether individuals or corporations) are
generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25% unless a relief is
provided in a treaty between Israel and a shareholder’s country of residence (provided that a valid certificate from the Israeli
Tax Authority allowing for a reduced withholding tax rate is obtained in advance). With respect to a person who is a “substantial
shareholder” at the time of receiving the dividend or on any time during the preceding 12 months, the applicable tax rate is 30%.
Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long as the shares are registered with a nominee company
(whether or not the recipient is a substantial shareholder), unless relief is provided in a treaty between Israel and the shareholder’s
country of residence and provided that a valid certificate from the Israel Tax Authority allowing for a reduced withholding tax rate is
obtained in advance. However, a distribution of dividends to non-Israeli residents is generally subject to withholding tax at source at
a rate of 15% if the dividend is distributed from income attributed to a Beneficiary Enterprise, or such a reduced tax rate as may be
provided under an applicable tax treaty (provided that a valid certificate from the Israel Tax Authority allowing for a reduced withholding
tax rate or such lower tax rate as may be provided in an applicable tax treaty is obtained in advance). For example, under the United
States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our ordinary shares who
is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by an Approved Enterprise
or Beneficiary Enterprise, that are paid to a U.S. corporation holding 10% or more of the outstanding voting capital throughout the tax
year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross
income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed
from income attributed to an Approved Enterprise or Beneficiary Enterprise are not entitled to such reduction under the tax treaty but
are subject to a withholding tax rate of 15% for such a U.S. corporation, provided that the condition related to our gross income for
the previous year (as set forth in the previous sentence) is met. The aforementioned rates under the United States-Israel Tax Treaty would
not apply if the dividend income is derived through a permanent establishment of the U.S. resident in Israel. If the dividend is attributable
partly to income derived from an Approved Enterprise, Beneficiary Enterprise or Preferred Enterprise, and partly to other sources of income,
the withholding rate will be a blended rate reflecting the relative portions of the two types of income. We cannot assure you that we
will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
A non-Israeli resident who receives dividends from which tax was
withheld, is generally exempt from the obligation 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 tax payer is not obligated to pay the excess tax (as further
explained below).
Excess Tax
Individuals who are subject to tax in Israel (whether any such
individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income exceeding
NIS 721,560 for 2025, which amount is generally linked to the annual change in the Israeli consumer price index (with the exception that
based on new Israeli legislation, that amount, and certain other statutory amounts, will not be linked to the Israeli consumer price index
for the years 2025-2027), including, but not limited to, dividends, interest and capital gain. According to new legislation, in effect
as of January 1, 2025, an additional 2% excess tax is imposed on Capital-Sourced Income (defined as income from any source other than
employment income, business income or income from “personal effort”), to the extent that an individual's Capital Sourced Income
exceeds the specified threshold of NIS 721,560 (and regardless of the employment/or business income amount of such individual). This new
excess tax applies, among other things, to income from capital gains, dividends, interest, rental income, or the sale of real property.
105
United States Federal Income Taxation
The following is a description of the material U.S. federal income
tax consequences of the ownership and disposition of our ordinary shares by a U.S. Holder that holds the ordinary shares as capital assets.
This description does not address tax considerations applicable to holders that may be subject to special tax rules, including, without
limitation:
| • |
banks, financial institutions or insurance companies; |
| • |
real estate investment trusts, regulated investment companies or grantor trusts; |
| • |
dealers or traders in securities, commodities or currencies; |
| • |
tax-exempt entities or organizations, including an “individual retirement account” or “Roth IRA” as defined
in Section 408 or 408A of the Code, respectively; |
| • |
certain former citizens or long-term residents of the United States; |
| • |
persons that received our shares as compensation for the performance of services; |
| • |
persons that holds our shares as part of a “hedging,” “integrated” or “conversion” transaction
or as a position in a “straddle” for U.S. federal income tax purposes; |
| • |
partnerships (including entities classified as partnerships for U.S. federal income tax purposes) or other pass-through entities,
or holders that will hold our shares through such an entity; |
| • |
S corporations; |
| • |
holders that acquired ordinary shares as a result of holding or owning our preferred shares; |
| • |
U.S. Holders (as defined below) whose “functional currency” is not the U.S. dollar; |
| • |
persons that are residents of ordinarily resident in or have a permanent establishment in a jurisdiction outside the United States;
or |
| • |
holders that own directly, indirectly or through attribution 10.0% or more of the voting power or value of our shares.
|
Moreover, this description does not address the U.S. federal estate,
gift or alternative minimum tax consequences, Medicare consequences, or any state, local or foreign tax consequences, of the ownership
and disposition of our ordinary shares.
This summary is based on the Internal Revenue Code of 1986, as
amended (the “Code”), administrative pronouncements, judicial decisions and final, temporary and proposed Treasury regulations,
all as currently in effect and available. These authorities are subject to change or differing interpretation, possibly with retroactive
effect. U.S. Holders should consult their tax advisors concerning the U.S. federal, state, local and foreign tax consequences of owning
and disposing of our ordinary shares in their particular circumstances. For purposes of this summary, a “U.S. Holder” is a
beneficial owner of our ordinary shares who is, for U.S. federal income tax purposes:
| • |
an individual who is a citizen or individual resident of the United States; |
| • |
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; |
| • |
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| • |
a trust that (1) is subject to the primary supervision of a U.S. Court and one or more U.S. persons that have the authority to control
all substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury regulations to be treated as a
U.S. person. |
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds our ordinary shares, the tax treatment of a partner in such partnership generally will depend
upon the status of the partner and upon the activities of the partnership. Investors who are partners in a partnership should consult
their tax advisors as to the particular U.S. federal income tax consequences of owning and disposing of our ordinary shares in their particular
circumstances.
106
A “Non-U.S. Holder” is a beneficial owner of our ordinary
shares that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.
Unless otherwise indicated, this discussion assumes that the company
is not, and will not become, a “passive foreign investment company,” or a PFIC, for U.S. federal income tax purposes. See
“ITEM 10.E. Taxation-United States Federal Income Taxation-Passive Foreign Investment Company Considerations” below. Further,
this summary does not address the U.S. federal estate and gift, state, local or non-U.S. tax consequences to U.S. Holders of owning and
disposing of our ordinary shares. Investors should consult their own tax advisors regarding the U.S. federal, state and local, as well
as non-U.S. income and other tax consequences of owning and disposing of our ordinary shares in their particular circumstances.
Distributions
If you are a U.S. Holder, the gross amount of any distribution
made to you with respect to our ordinary shares before reduction for any Israeli taxes withheld therefrom, other than certain distributions,
if any, of our ordinary shares distributed pro rata to all our shareholders, generally will be includible in your income as dividend income
to the extent such distribution is paid out of our current or accumulated earnings and profits as determined under U.S. federal income
tax principles. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles. Therefore,
if you are a U.S. Holder you should expect that the entire amount of any distribution generally will be taxable as dividend income to
you. Non-corporate U.S. Holders may qualify for the lower rates of taxation with respect to dividends on ordinary shares applicable to
long-term capital gains (i.e., gains from the sale of capital assets held for more than one year), provided that certain conditions are
met, including certain holding period requirements and the absence of certain risk reduction transactions. However, such dividends will
not be eligible for the dividends received deduction generally allowed to corporate U.S. Holders. If you are a U.S. Holder, dividends
paid to you with respect to our ordinary shares will generally be treated as foreign source income, which may be relevant in calculating
your foreign tax credit limitation. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be deducted from
your taxable income or credited against your U.S. federal income tax liability. The limitation on foreign taxes eligible for credit is
calculated separately with respect to specific classes of income. For this purpose, dividends that we distribute generally should constitute
“passive category income.” A foreign tax credit for foreign taxes imposed on distributions may be denied if you do not satisfy
certain minimum holding period requirements. Applicable U.S. Treasury Regulations have imposed additional requirements that must be met
for a foreign tax to be creditable, depending on the nature of such foreign tax, although temporary relief from the application of
certain aspects of these Regulations has been provided until new guidance or regulations are issued. The rules relating to the determination
of the foreign tax credit are complex, and you should consult your tax advisor to determine whether and to what extent you will be entitled
to this credit.
Subject to the discussion below under “-Backup Withholding
Tax and Information Reporting Requirements,” if you are a Non-U.S. Holder, you generally will not be subject to U.S. federal income
(or withholding) tax on dividends received by you on your ordinary shares, unless you conduct a trade or business in the United States
and such income is effectively connected with that trade or business (or, if required by an applicable income tax treaty, the dividends
are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
Sale, Exchange or Other Taxable Disposition
of Ordinary Shares
If you are a U.S. Holder, you generally will recognize gain or
loss on the sale, exchange or other taxable disposition of our ordinary shares equal to the difference between the amount realized on
such sale, exchange or other taxable disposition and your adjusted tax basis in our ordinary shares, and such gain or loss will be capital
gain or loss. The initial tax basis in an ordinary share generally will be equal to the cost of such ordinary share. Except with respect
to foreign currency gain or loss, if you are a non-corporate U.S. Holder, capital gain from the sale, exchange or other taxable disposition
of ordinary shares is generally eligible for a preferential rate of taxation applicable to capital gains, if your holding period for such
ordinary shares exceeds one year (i.e., such gain is long-term capital gain). The deductibility of capital losses for U.S. federal income
tax purposes is subject to limitations under the Code. Any such gain or loss that a U.S. Holder recognizes generally will be treated as
U.S. source income or loss for foreign tax credit limitation purposes. Because a U.S. Holder may use foreign tax credits against only
the portion of United States federal income tax liability that is attributed to foreign source income in the same category, a U.S. Holder’s
ability to utilize a foreign tax credit with respect to the foreign tax imposed on any such sale or other taxable disposition, if any,
may be significantly limited. Applicable U.S. Treasury Regulations further restrict the availability of any such credit. However,
a notice from the IRS indicates that the U.S. Department of the Treasury and the IRS are considering proposing amendments to such Regulations
and allows, subject to certain conditions, taxpayers to defer the application of many aspects of such Regulations for taxable years beginning
on or after December 28, 2021 and ending before the date that a notice or other guidance withdrawing or modifying the temporary relief
is issued (or any later date specified in such notice or other guidance).
107
Subject to the discussion below under “-Backup Withholding
Tax and Information Reporting Requirements,” if you are a Non-U.S. Holder, you generally will not be subject to U.S. federal income
or withholding tax on any gain realized on the sale or exchange of such ordinary shares unless:
| • |
such gain is effectively connected with your conduct of a trade or business in the United States (or, if required by an applicable
income tax treaty, the gain is attributable to a permanent establishment or fixed base that such holder maintains in the United States);
or |
| • |
you are an individual and have been present in the United States for 183 days or more in the taxable year of such sale or exchange
and certain other conditions are met. |
Passive Foreign Investment Company Considerations
If we were to be classified as a “passive foreign investment
company,” or “PFIC,” in any taxable year, a U.S. Holder would be subject to special rules generally intended to reduce
or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company
that does not distribute all of its earnings on a current basis.
A non-U.S. corporation will be classified as a PFIC for federal
income tax purposes in any taxable year in which, after applying certain look-through rules with respect to the income and assets of subsidiaries,
either:
| • |
at least 75% of its gross income is “passive income”; or |
| • |
at least 50% of the average quarterly value of its total gross assets (which may be determined in part by the market value of our
ordinary shares, which is subject to change) is attributable to assets that produce “passive income” or are held for the production
of passive income. |
Passive income for this purpose generally includes dividends, interest,
royalties, rents, gains from commodities and securities transactions, the excess of gains over losses from the disposition of assets which
produce passive income, and includes amounts derived by reason of the temporary investment of funds raised in offerings of our ordinary
shares. If a non-U.S. corporation owns at least 25% by value of the stock of another corporation, the non-U.S. corporation is treated
for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation and as receiving directly its
proportionate share of the other corporation’s income. If we are classified as a PFIC in any year with respect to which a U.S. Holder
owns our ordinary shares, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which
the U.S. Holder owns our ordinary shares unless we cease to be a PFIC and the U.S. holder has made a “deemed sale” election
under the PFIC rules.
Based on our current estimates of our gross income and the estimated
fair market value of our gross assets and the nature of our business, we do not believe we were classified as a PFIC for the taxable year
ending December 31, 2025. However, we must determine our PFIC status annually based on tests which are factual in nature, and our status
in future years will depend on our income, assets and activities in those years. Further, because the value of our gross assets is likely
to be determined in large part by reference to our market capitalization, a decline in the value of our ordinary shares or an increase
in the value of our passive assets (including cash and short term investments) may result in our becoming a PFIC. There can be no assurance
that we will not be considered a PFIC for any taxable year. If we were a PFIC and you are a U.S. Holder, then unless you make one of the
elections described below, a special tax regime will apply to both (a) any “excess distribution” by us to you (generally,
your ratable portion of distributions in any year which are greater than 125% of the average annual distribution received by you in the
shorter of the three preceding years or your holding period for our ordinary shares) and (b) any gain realized on the sale or other disposition
of the ordinary shares. Under this regime, any excess distribution and realized gain will be treated as ordinary income and will be subject
to tax as if (a) the excess distribution or gain had been realized ratably over your holding period, (b) the amount deemed realized in
each year had been subject to tax in each year of that holding period at the highest marginal rate for such year (other than income allocated
to the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. Holder’s regular
ordinary income rate for the current year and would not be subject to the interest charge discussed below) and (c) the interest charge
generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those years. In addition, dividend
distributions made to you will not qualify for the lower rates of taxation applicable to long-term capital gains discussed above under
“Distributions.” Certain elections may be available that would result in an alternative treatment (such as mark-to-market
treatment) of our ordinary shares.
108
If a U.S. Holder makes a valid mark-to-market election for the
first tax year in which such U.S. Holder holds (or is deemed to hold) ordinary shares in a corporation and for which such corporation
is determined to be a PFIC, the U.S. Holder generally will recognize as ordinary income any excess of the fair market value of the ordinary
shares at the end of each taxable year over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of
the adjusted tax basis of the ordinary shares over their fair market value at the end of the taxable year (but only to the extent of the
net amount of income previously included as a result of the mark-to-market election). If a U.S. Holder makes the election, the U.S. Holder’s
tax basis in the ordinary shares will be adjusted to reflect these income or loss amounts. Any gain recognized on the sale or other disposition
of ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary loss (but
only to the extent of the net amount of income previously included as a result of the mark-to-market election). The mark-to-market election
is available only if we are a PFIC and our ordinary shares are “regularly traded” on a “qualified exchange.” Our
ordinary shares will be treated as “regularly traded” in any calendar year in which more than a de minimis quantity of the
ordinary shares, are traded on a qualified exchange on at least 15 days during each calendar quarter. Nasdaq is a qualified exchange for
this purpose and, consequently, if the ordinary shares are regularly traded, the mark-to-market election will be available to a U.S. Holder.
If we are a PFIC, the general tax treatment for U.S. Holders described in this section would apply to indirect distributions and gains
deemed to be realized by U.S. Holders in respect of any entity in which we hold equity that is also a PFIC (a “lower tier PFIC”).
Because a mark-to-market election generally would not be available with respect to any lower-tier PFICs, a U.S. Holder may continue to
be subject to the PFIC rules with respect to such holder’s indirect interest in any investments held by us that are treated as an
equity interest in such lower-tiers PFICs.
We do not intend to provide the information necessary for U.S.
Holders to make qualified electing fund elections if we are classified as a PFIC. U.S. Holders should consult their tax advisors to determine
whether any of these elections would be available and if so, what the consequences of the alternative treatments would be in their particular
circumstances.
If a U.S. Holder owns ordinary shares during any year in which
we are a PFIC, the U.S. Holder generally will be required to file an IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign
Investment Company or Qualified Electing Fund) or successor form with respect to the company, generally with the U.S. Holder’s federal
income tax return for that year. If the company was a PFIC for a given taxable year, then you should consult your tax advisor concerning
your annual filing requirements.
U.S. Holders should consult their tax advisors regarding whether
we are a PFIC and the potential application of the PFIC rules.
Backup Withholding Tax and Information Reporting
Requirements
U.S. backup withholding tax and information reporting requirements
may apply to certain payments to certain holders of stock. Information reporting generally will apply to distributions on, and to proceeds
from the sale, exchange or redemption of, our ordinary shares made within the United States, or by a United States payor or United States
middleman, to a holder of our ordinary shares, other than an exempt recipient (including a payee that is not a United States person that
provides an appropriate certification and certain other persons). Payments made (and sales or other dispositions effected at an office)
outside the U.S. will be subject to information reporting in limited circumstances. A payor will be required to withhold backup withholding
tax from any payments of dividends on, or the proceeds from the sale or redemption of, ordinary shares within the United States, or by
a United States payor or United States middleman, to a holder, other than an exempt recipient, if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements,
or to report dividends required to be shown on the holder’s U.S. federal income tax returns. Back up withholding is not an additional
tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against the beneficial owner’s U.S. federal
income tax liability, if any, and any excess amounts withheld under the backup withholding rules may be refunded, provided that the required
information is timely furnished to the IRS.
Foreign Asset Reporting
Certain U.S. Holders who are individuals and certain entities may
be required to report information relating to an interest in our ordinary shares, subject to certain exceptions (including an exception
for shares held in accounts maintained by certain financial institutions) by filing IRS Form 8938 (Statement of Specified Foreign Financial
Assets) with their federal income tax return. U.S. Holders are urged to consult their tax advisors regarding their information reporting
obligations, if any, with respect to their ownership and disposition of our ordinary shares.
109
| F. | Dividends and Paying Agents |
Not applicable.
| G. | Statement by Experts |
Not applicable.
| H. | Documents on Display |
We are required to make certain filings with the SEC. The SEC maintains
an internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with
the SEC. The address of that site is www.sec.gov.
We also make available on our website, free of charge, our annual
reports on Form 20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC
filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.mediwound.com.
The information contained on our website is not incorporated by reference in this document.
| I. | Subsidiary Information |
Not applicable.
| J. | Annual Report to Security Holders |
Not Applicable.
Item 11. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to a variety of risks, including foreign currency
exchange fluctuations, changes in interest rates and inflation. We regularly assess currency, interest rate and inflation risks to minimize
any adverse effects on our business as a result of those factors.
Foreign Currency Risk
The U.S. dollar is our functional and reporting currency. A significant
portion of our operating expenses are denominated in Israeli shekels, accounting for approximately 61%, 52% and 45% of our operating expenses
in the years ended December 31, 2025, 2024 and 2023, respectively. We also have expenses in other non-dollar currencies, in particular
the Euro, and for the next few years, we expect that a substantial portion of our revenues will be denominated in U.S dollar. A devaluation
of the shekel in relation to the U.S. dollar has the effect of reducing the U.S. dollar amount of our expenses or payables that are payable
in shekels, unless those expenses or payables are linked to the U.S. dollar. Conversely, any increase in the value of the shekel in relation
to the U.S. dollar has the effect of increasing the U.S. dollar value of our unlinked shekel expenses, which would have a negative impact
on our profit margins.
Because exchange rates between the U.S. dollar and both the shekel
and the Euro (as well as between the U.S. dollar and other currencies) fluctuate continuously, such fluctuations have an impact on our
results and period-to-period comparisons of our results. The effects of foreign currency re-measurements are reported in our consolidated
financial statements of operations. The following table presents information about the changes in the exchange rates of the shekel against
the U.S. dollar and changes in the exchange rates of the Euro against the U.S. dollar:
|
Appreciation (Devaluation) of |
||||||||
|
Period |
Shekel against the U.S. dollar (%) |
Euro against the U.S. dollar (%) |
||||||
|
2023 |
(3.1 |
) |
(3.6 |
) | ||||
|
2024 |
(0.6 |
) |
(6.3 |
) | ||||
|
2025 |
12.5 |
11.3 |
||||||
110
A 10% increase (decrease) in the value of the NIS and Euro against
the U.S. dollar would have increased (decreased) our net profit by (loss) approximately $2.7 million for the year ended December 31, 2025.
As we are marketing and selling NexoBrid in Europe and conducting
clinical trials of outside the United States, we will continue to monitor exposure to currency fluctuations. We do not currently engage
in currency hedging activities in order to reduce this currency exposure, but we may begin to do so in the future. Instruments that may
be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be used to selectively manage
risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.
Other Market Risks
We do not believe that we have material exposure to interest rate
risk due to the fact that we have no long-term debt.
We do not believe that we have any material exposure to inflationary
risks. We do not believe that the rate of inflation in Israel has had a material impact on our business to date. However, our costs in
Israel will increase if inflation in Israel exceeds the devaluation of the shekel against the U.S. dollar (to the extent that it devalues
at all) or if the timing of such devaluation lags behind inflation in Israel.
Item 12. DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
111
PART II
Item 13. DEFAULTS, DIVIDEND
ARREARAGES AND DELINQUENCIES
None.
Item 14. MATERIAL MODIFICATIONS
TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None.
Item 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed
in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s
rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. Any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our management, including our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of December 31, 2025. Based on such evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of December 31, 2025, our disclosure controls and procedures were effective at a reasonable assurance
level.
(b) Management’s Annual Report on Internal Control over Financial
Reporting
Our management, under the supervision of our Chief Executive Officer
and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Our management, including our Chief Executive Officer and Chief
Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2025. In making this
assessment, our management used the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Our management has concluded, based on its assessment, that our internal control over
financial reporting was effective as of December 31, 2025.
(c) Attestation report of the registered public accounting firm
Somekh Chaikin, a member firm of KPMG International, an independent
registered public accounting firm, to which we refer as KPMG Israel, which audited the financial statements included in this annual report
containing the disclosure required by this Item 15 has issued an attestation report regarding the effectiveness of our internal control
over financial reporting. That report is included in “ITEM 18. Financial Statements” on page F-2 of this annual report, which
attestation report is incorporated by reference in this Item 15(c).
(d) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this annual
report that have materially affected, or that 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 Stephen T. Wills qualifies
as an “audit committee financial expert,” as defined under the U.S. federal securities laws and has the requisite financial
experience defined by the Nasdaq Marketplace Rules. In addition, Stephen Wills is independent as such term is defined in Rule 10A-3(b)(1)
under the Exchange Act and under the listing standards of the Nasdaq Global Market.
112
Item 16B. CODE OF ETHICS
We have adopted a code of business conduct and ethics applicable
to our executive officers, directors and all other employees. A copy of the code is delivered to every employee of MediWound Ltd. and
its subsidiaries and is available to our investors and others on our website http://ir.mediwound.com/ or by contacting our investor relations
department. Information contained on, or that can be accessed through, our website does not constitute a part of this annual report and
is not incorporated by reference herein. Any waivers of this code for executive officers or directors will be disclosed through the filing
of a Form 6-K or on our website. We granted no waivers under our code of ethics in 2025.
Item 16C. PRINCIPAL ACCOUNTANT
FEES AND SERVICES
Principal Accountant Fees and Services
The cost for the following professional services rendered by Somekh
Chaikin, a member firm of KPMG International, Tel-Aviv, Auditor firm ID: 1057, our independent registered public accounting firm for the
years ended December 31, 2025 and 2024, is as follows:
|
2025 |
2024 |
|||||||
|
Audit Fees |
$ |
370,000 |
$ |
394,110 |
||||
|
Tax Fees |
21,451 |
24,895 |
||||||
|
Total
|
$ |
391,451 |
$ |
419,005 |
||||
“Audit fees”
are the aggregate fees paid for the audit of our annual financial statements for the years 2025 and 2024. This category also includes
services that generally the independent accountant provides, such as consents and assistance with and review of documents filed with the
SEC.
“Tax fees” include
fees for professional services rendered by our independent registered public accounting firm for tax compliance, transfer pricing and
tax advice on actual or contemplated transactions.
Pre-Approval Policies and Procedures
The advance approval of the audit committee or members thereof,
to whom approval authority has been delegated, is required for all audit and non- audit services provided by our auditors.
All services provided by our auditors are approved in advance by
either the audit committee or members thereof, to whom authority has been delegated, in accordance with the audit committee’s pre-approval
policy.
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.
113
Item 16F. CHANGE IN REGISTRANT’S
CERTIFYING ACCOUNTANT
Not applicable.
Item 16G. CORPORATE
GOVERNANCE
As a foreign private issuer, we are permitted to comply with Israeli
corporate governance practices instead of the Nasdaq Stock Market requirements, provided that we disclose those Nasdaq Stock Market requirements
with which we do not comply and the equivalent Israeli requirement that we follow instead. We currently rely on this “foreign private
issuer exemption” with respect to the following requirements:
| • |
Quorum. As permitted under the Israeli Companies Law pursuant to our articles of association,
the quorum required for an ordinary meeting of shareholders will consist of at least two shareholders present in person, by proxy or by
other voting instrument in accordance with the Israeli Companies Law, who hold at least 25% of the voting power of our shares (and in
an adjourned meeting, with some exceptions, at least two shareholders), instead of 33 1/3% of the issued share capital required under
the Nasdaq Stock Market listing rules. |
| • |
Shareholder approval. We do not intend to follow Nasdaq Stock Market rules which require
shareholder approval in order to enter into any transaction, other than a public offering, involving the sale, issuance or potential issuance
by the Company of ordinary shares (or securities convertible into or exercisable for ordinary shares) equal to 20% or more of the outstanding
share capital of the Company or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market
value of the ordinary shares. We will follow Israeli law with respect to any requirement to obtain shareholder approval in connection
with any private placements of equity securities. |
Item 16H. MINE SAFETY DISCLOSURE
Not applicable.
Item 16I. DISCLOSURE REGARDING
FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.
Not applicable.
114
Item 16J. INSIDER TRADING POLICIES.
Item 16K. CYBERSECURITY
Cybersecurity Risk Management and Strategy
| • |
technical controls deployed to protect more critical systems and data, such as multi-factor authentication, firewalls, network segregation, and secure file transfer protocols;
|
| • |
disaster recovery and business continuity plan;
|
| • |
monitoring of our information technology systems for information security risks;
|
| • |
|
| • |
cybersecurity awareness training of our employees (including incident response personnel, and senior management), designed to help identify any new threats and to address security incidents;
|
| • |
risk assessments designed to help identify material risks from cybersecurity threats to our critical systems and information;
|
| • |
an internal team responsible for, inter alia, managing (1) our cybersecurity risk assessment processes, (2) our security controls, and (3) our response to cybersecurity incidents;
|
| • |
the use of external service providers, where appropriate, to assess, test, or otherwise assist with aspects of our security processes; and
|
| • |
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents.
|
Cybersecurity Governance
Our Board considers cybersecurity risk as part of its overall risk oversight function and oversees management’s implementation of our cybersecurity risk management program.
The Audit Committee receives periodic reports from management on our cybersecurity risks. In addition, management updates the Audit Committee, where it deems appropriate, regarding any cybersecurity incidents it considers to be significant, as well as any incidents with lesser impact potential.
Board members receive presentations on cybersecurity topics from our Chief Operations Officer, internal security staff or external experts as part of the Board’s continuing education on topics that impact public companies.
Our management team takes steps to stay informed about and monitor efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in our IT environment.
115
PART III
Item 17. FINANCIAL STATEMENTS
Not applicable.
Item 18. FINANCIAL STATEMENTS
See pages F-1 through F-51 of this annual report.
Item 19. EXHIBITS
|
Exhibit No.
|
Description
|
|
|
1.1
|
Amended and Restated Articles of Association of the Registrant, as amended(1)
|
|
|
1.2
|
Memorandum of Association of the Registrant(2)
|
|
|
2.1
|
Description of Securities(3)
|
|
|
2.2
|
Form of Indenture relating to debt securities (4)
|
|
|
4.1
|
Amended and Restated Registration Rights Agreement dated April 6, 2021 by and among the Registrant and certain shareholders of the Registrant(5)
|
|
|
4.2
|
Founders and Shareholders Agreement, dated January 2001, by and among Clal Biotechnology Industries Ltd., L.R. R&D Ltd., Professor Lior Rosenberg and the Registrant(6)
|
|
|
4.3†
|
Supply Agreement, dated January 11, 2001, as amended, by and between the Registrant and Challenge Bioproducts Corporation Ltd.(7)
|
|
|
4.4†
|
License Agreement, dated September 22, 2000, as amended, by and between the Registrant and Mark Klein(8)
|
|
|
4.5*
|
Form of Indemnification Agreement(9)
|
|
|
4.6*
|
2014 Equity Incentive Plan(10)
|
|
|
4.7*
|
2024 Equity Incentive Plan (11)
|
|
|
4.8*#
|
Amendment to 2024 Equity Incentive Plan(12)
|
|
|
4.9*
|
MediWound Ltd.’s Compensation Policy for Executive Officers and Directors(13)
|
|
|
4.10
|
Unprotected Lease Agreement, dated July 13, 2023 between the Registrant and Yezum-Tech(14)
|
|
|
4.11†#
|
License Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation(15)
|
|
|
4.12†#
|
Supply Agreement, dated as of May 6, 2019, by and between the Registrant and Vericel Corporation(16)
|
|
|
4.13
|
Form of Series A Ordinary Share Purchase Warrant issued in September 2022 pursuant to a registered direct offering of the Registrant (17)
|
|
|
4.14
|
Form of Series A Ordinary Share Purchase Warrant issued in October 2022 pursuant to a private placement (PIPE) of the Registrant (18)
|
|
116
|
4.16
|
Registration Rights Agreement, entered into in October 2022, by and between the Registrant and the purchasers of its securities in a registered direct offering (20)
|
|
|
4.17
|
Turnkey scale-up agreement with Biopharmax Group Ltd.(21)
|
|
|
4.18
|
Form of Share Purchase Agreement, dated July 15, 2024, by and between the Company and the purchasers listed on the signature pages thereto(22)
|
|
|
4.19
|
Form of Registration Rights Agreement, dated July 15, 2024, by and between the Company and the purchasers of the Company’s ordinary shares listed on the signature pages thereto(23)
|
|
|
4.20
|
Collaboration and Rights Agreement, dated July 15, 2024, by and between the Company and Mölnlycke Health Care AB(24)
|
|
|
4.21
|
Form of Securities Purchase Agreement, dated September 29, 2025, by and between the Company and the purchasers listed on the signature pages thereto(25)
|
|
|
8.1
|
List of subsidiaries of the Registrant(26)
|
|
|
11.1
|
Insider Trading Policy(27)
|
|
|
12.1#
|
Certificate of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
|
|
|
12.2#
|
Certificate of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002
|
|
|
13.1##
|
Certificate of Chief Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, furnished herewith
|
|
|
13.2##
|
Certificate of Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, furnished herewith
|
|
|
15.1#
|
Consent of Somekh Chaikin, a member firm of KPMG International, an independent registered public accounting firm
|
|
|
97.1
|
Policy for Recovery of Erroneously Awarded Compensation(28)
|
|
101.INS
|
Inline XBRL Instance Document
|
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
Inline XBRL Taxonomy Definition Linkbase Document
|
|
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
104
|
Cover Page Interactive Data File (the cover page iXBRL tags are embedded within the Inline XBRL document)
|
|
†
|
Portions of this exhibit have been omitted pursuant to Instruction 4(a) to Exhibits to Form 20-F because they are both (i) not material and (ii) the type that the Registrant treats as private or confidential.
|
|
*
|
Indicates management contract or compensatory plan or arrangement.
|
|
#
|
Filed herewith.
|
|
##
|
Furnished herewith.
|
117
|
(1)
|
Previously filed with the SEC on March 21, 2024 as Exhibit 1.1 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2023 (File No. 001-36349) and incorporated by reference herein.
|
|
(2)
|
Previously filed with the SEC on March 3, 2014 as Exhibit 3.3 to the Registrant’s registration statement on Form F-1 (File No. 333-193856) and incorporated by reference herein.
|
|
(3)
|
Previously filed with the SEC on March 21, 2024 as Exhibit 2.1 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2023 (File No. 001-36349) and incorporated by reference herein.
|
|
(4)
|
Previously filed with the SEC on March 19, 2025 as Exhibit 4.1 to the Registrant’s registration statement on Form F-3 (File No. 333-285908) and incorporated by reference herein.
|
|
(5)
|
Previously furnished to the SEC on May 5, 2021 as Appendix B to the Registrant’s proxy statement for its 2021 annual general meeting of shareholders held on June 15, 2021, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(6)
|
Previously filed with the SEC on February 10, 2014 as Exhibit 10.2 to the Registrant’s registration statement on Form F-1 (File No. 333-193856) and incorporated by reference herein.
|
|
(7)
|
Previously filed with the SEC on February 10, 2014 as Exhibit 10.6 to the Registrant’s registration statement on Form F-1 (File No. 333-193856) and incorporated by reference herein.
|
|
(8)
|
Previously filed with the SEC on February 10, 2014 as Exhibit 10.7 to the Registrant’s registration statement on Form F-1 (File No. 333-193856) and incorporated by reference herein.
|
|
(9)
|
Previously furnished to the SEC on June 9, 2022 as Appendix A to the Registrant’s proxy statement for its 2022 annual general meeting of shareholders held on July 19, 2022, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(10)
|
Previously filed with the SEC on February 25, 2020 as Exhibit 4.9 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2019 (File No. 001-36349) and incorporated by reference herein.
|
|
(11)
|
Previously furnished to the SEC on October 21, 2022 as Appendix A to the Registrant’s proxy statement for its extraordinary general meeting of shareholders held on November 28, 2022, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(12)
|
Previously furnished to the SEC on January 15, 2026 as Annex A to the Registrant’s proxy statement for its extraordinary general meeting of shareholders held on February 19, 2026, attached as Exhibit 99.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(13)
|
Previously filed with the SEC on March 19, 2025 as Exhibit 4.10 of the Registrant’s annual report on Form 20‑F for the year ended December 31, 2024 (File No. 001‑36349) and incorporated by reference herein.
|
|
(14)
|
Previously filed with the SEC on March 21, 2024 as Exhibit 4.14 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2023 (File No. 001-36349) and incorporated by reference herein.
|
|
(15)
|
Previously filed with the SEC by Vericel Corporation on August 6, 2019 as Exhibit 10.9 to its quarterly report on Form 10-Q for the quarter ended June 30, 2019 (File No. 001-35280) and incorporated by reference herein.
|
|
(16)
|
Previously filed with the SEC by Vericel Corporation on August 6, 2019 as Exhibit 10.10 to its quarterly report on Form 10-Q for the quarter ended June 30, 2019 (File No. 001-35280) and incorporated by reference herein.
|
|
(17)
|
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(18)
|
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.2 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(19)
|
Previously furnished to the SEC on September 26, 2022 as Exhibit 4.4 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(20)
|
Previously furnished to the SEC on September 26, 2022 as Exhibit 10.3 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(21)
|
Previously filed with the SEC on March 21, 2024 as Exhibit 4.23 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2023 (File No. 001-36349) and incorporated by reference herein.
|
|
(22)
|
Previously filed with the SEC on July 15, 2024 as Exhibit 4.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(23)
|
Previously filed with the SEC on July 15, 2024 as Exhibit 4.2 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(24)
|
Previously filed with the SEC on July 15, 2024 as Exhibit 4.3 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(25)
|
Previously filed with the SEC on September 30, 2025 as Exhibit 10.1 to the Registrant’s report of foreign private issuer on Form 6-K (File No. 001-36349) and incorporated by reference herein.
|
|
(26)
|
Previously filed with the SEC on February 25, 2021 as Exhibit 8.1 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2020 (File No. 001-36349) and incorporated by reference herein.
|
|
(27)
|
Previously filed with the SEC on March 19, 2025 as Exhibit 11.1 of the Registrant’s annual report on Form 20-F for the year ended December 31, 2024 (File No. 001-36349) and incorporated by reference herein.
|
|
(28)
|
Previously filed with the SEC on March 21, 2024 as Exhibit 97.1 to the Registrant’s annual report on Form 20-F for the year ended December 31, 2023 (File No. 001-36349) and incorporated by reference herein.
|
118
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.
|
MediWound Ltd.
|
|
|
Date: March 5, 2026
|
By: /s/ Hani Luxenburg
|
|
Hani Luxenburg
|
|
|
Chief Financial Officer
|
119
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2025
INDEX
|
Page
|
|
|
Report of Independent Registered Public Accounting Firm (PCAOB ID No.
|
F-2 – F3
|
|
Consolidated Statements of Financial Position
|
F-4
|
|
Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
|
F-5
|
|
Consolidated Statements of Changes in Shareholders' Equity
|
F-6
|
|
Consolidated Statements of Cash Flows
|
F-7 - F-8
|
|
Notes to Consolidated Financial Statements
|
F-9 - F-51
|
- - - - - - - - - - - - - - - - - - - - -
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
MediWound Ltd.:
MediWound Ltd.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated statements of financial position of MediWound Ltd. and its subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of profit or loss and other comprehensive income or loss, changes in shareholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with IFRS Accounting Standards as issued by the International Accounting Standards Board (IFRS Accounting Standards). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, 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 Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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.
F - 2
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated 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 consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a 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.
Israeli Innovation Authority grant liability
As discussed in notes 2c, 3d and 14 to the consolidated financial statements, in previous years the Company received grants from the Israeli Innovation Authority (“IIA”) to finance its research and development efforts. These grants were recognized as a liability to the extent the Company expected to refund them through royalties on its revenues derived from sales of products or services developed in whole or in part using the grants. The amount of the liability is reexamined each period using the Company’s updated future revenue forecasts discounted to their present value. Any changes in the IIA grant liability are recognized in profit or loss. The IIA grant liability was $8,538 thousand as of December 31, 2025.
We identified the evaluation of the subsequent period end measurement of the IIA grant liability as a critical audit matter. Specifically, a high degree of subjective auditor judgment was involved in evaluating certain significant assumptions used by the Company to develop its future revenue forecasts, including the likelihood and timing of achievement of regulatory approvals and potential market demand and market share for the Company’s products, which were based on market research. These significant assumptions were forward-looking and could be affected by future economic and market conditions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and effectiveness of certain internal controls related to the Company’s process for measuring the IIA grant liability, including controls related to the determination of the above referenced significant assumptions used to develop future revenue forecasts. We compared the Company’s assumption of the likelihood and timing for obtaining regulatory approvals for its products, based on the specific phases of their development, to relevant data in industry research reports. We evaluated the Company’s assumption of potential market demand and market share by evaluating the relevance and reliability of the market research upon which the Company based its future revenue forecasts. We performed sensitivity analyses over these significant assumptions to assess the impact of changes in the assumptions on the period end IIA grant liability.
Member Firm of KPMG International
We have served as the Company’s auditor since 2021.
March 5, 2026
F - 3
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Financial Position
U.S. dollars in thousands
|
As of December 31,
|
|||||||||||
|
Note
|
2025
|
2024
|
|||||||||
|
Cash and cash equivalents
|
4
|
|
|
||||||||
|
Short-term bank deposits
|
5
|
|
|
||||||||
|
Trade receivables, net
|
6
|
|
|
||||||||
|
Inventories
|
7
|
|
|
||||||||
|
Other receivables
|
8
|
|
|
||||||||
|
Total current assets
|
|
|
|||||||||
|
Other receivables
|
|
|
|||||||||
|
Long-term restricted bank deposits
|
|
|
|||||||||
|
Property, plant and equipment
|
9
|
|
|
||||||||
|
Right-of-use assets
|
10
|
|
|
||||||||
|
Intangible assets
|
11
|
|
|
||||||||
|
Total non-current assets
|
|
|
|||||||||
|
Total assets
|
|
|
|||||||||
|
Current maturities of long-term liabilities
|
|
|
|||||||||
|
Warrants
|
19c
|
|
|
||||||||
|
Trade payables and accrued expenses
|
12
|
|
|
||||||||
|
Other payables
|
13
|
|
|
||||||||
|
Total current liabilities
|
|
|
|||||||||
|
Grants received in advance
|
18d
|
|
|
||||||||
|
Liabilities in respect of IIA grants
|
14, 17b
|
|
|
||||||||
|
Lease liabilities
|
10
|
|
|
||||||||
|
Severance pay liability, net
|
16
|
|
|
||||||||
|
Total non-current liabilities
|
|
|
|||||||||
|
Total liabilities
|
|
|
|||||||||
|
Shareholders' equity:
|
19
|
||||||||||
|
Ordinary shares of NIS
|
|||||||||||
|
Authorized
|
|
|
|||||||||
|
Share premium
|
|
|
|||||||||
|
Foreign currency translation reserve
|
(
|
)
|
(
|
)
|
|||||||
|
Accumulated deficit
|
(
|
)
|
(
|
)
|
|||||||
|
Total equity
|
|
|
|||||||||
|
Total liabilities and equity
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
U.S. dollars in thousands (except of share and per share data)
|
Year Ended December 31
|
|||||||||||||||
|
Note
|
2025
|
2024
|
2023
|
||||||||||||
|
Revenues from sale of products
|
|
|
|
||||||||||||
|
Revenues from development services
|
|
|
|
||||||||||||
|
Revenues from license agreements and royalties
|
|
|
|
||||||||||||
|
Total revenues
|
22a
|
|
|
|
|||||||||||
|
Cost of revenues from sale of products
|
|
|
|
||||||||||||
|
Cost of revenues from development services
|
|
|
|
||||||||||||
|
Cost of revenues from license agreements and royalties
|
|
|
|
||||||||||||
|
Total cost of revenues
|
22b
|
|
|
|
|||||||||||
|
Gross profit
|
|
|
|
||||||||||||
|
Research and development
|
22c
|
|
|
|
|||||||||||
|
Selling and marketing
|
22d
|
|
|
|
|||||||||||
|
General and administrative
|
22e
|
|
|
|
|||||||||||
|
Other (income) expenses
|
22f
|
(
|
)
|
|
(
|
)
|
|||||||||
|
Total operating expenses
|
|
|
|
||||||||||||
|
Operating loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Finance income
|
|
|
|
||||||||||||
|
Finance expense
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Financing income (expenses), net
|
22g
|
|
|
(
|
)
|
|
|||||||||
|
Loss before taxes on income
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Taxes on income
|
21
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||
|
Net loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Other comprehensive income (loss):
|
|||||||||||||||
|
Foreign currency translation adjustments
|
(
|
)
|
|
(
|
)
|
||||||||||
|
Total comprehensive loss
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Loss per share data:
|
19,23
|
||||||||||||||
|
Basic and diluted net loss per share
|
(
|
)
|
(
|
)
|
(
|
)
|
|||||||||
|
Number of shares used in calculating basic and diluted loss per share
|
|
|
|
||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 5
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Changes in Shareholders’ Equity
U.S. dollars in thousands
|
Share capital
|
Share premium
|
Foreign currency translation reserve
|
Accumulated
deficit
|
Total
equity
|
||||||||||||||||
|
Balance as of January 1, 2025
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Net loss
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Other comprehensive loss
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Total comprehensive loss
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Exercise of options and warrants (see note 19 and 20)
|
|
|
|
|
|
|||||||||||||||
|
Issuance of ordinary shares, net of issuance expenses (see note 19c)
|
|
|
|
|
|
|||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2025
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Balance as of January 1, 2024
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Net loss
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Other comprehensive income
|
|
|
|
|
|
|||||||||||||||
|
Total comprehensive loss
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Exercise of options and warrants (see note 19 and 20)
|
|
|
|
|
|
|||||||||||||||
|
Issuance of ordinary shares, net of issuance expenses (see note 19c)
|
|
|
|
|
|
|||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2024
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Balance as of January 1, 2023
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
|
Net loss
|
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
|
Other comprehensive loss
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Total comprehensive loss
|
|
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||||||||
|
Exercise of options
|
|
|
|
|
|
|||||||||||||||
|
Issuance of ordinary shares, net of issuance expenses (see note 19c)
|
|
|
|
|
|
|||||||||||||||
|
Share-based compensation
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2023
|
|
|
(
|
)
|
(
|
)
|
|
|||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 6
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
U.S. dollars in thousands
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash flows from operating activities:
|
||||||||||||
|
Net loss
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
|
|
||||||||||||
|
Adjustments to profit and loss items:
|
||||||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Share-based compensation
|
|
|
|
|||||||||
|
Revaluation of warrants accounted at fair value
|
(
|
)
|
|
(
|
)
|
|||||||
|
Revaluation of liabilities in respect of IIA grants
|
|
|
|
|||||||||
|
Revaluation of liabilities in respect of TEVA
|
|
|
|
|||||||||
|
Financing income and exchange differences on lease liability
|
|
|
|
|||||||||
|
Increase (decrease) in severance pay liability, net
|
|
(
|
)
|
|
||||||||
|
Other (income) expenses
|
(
|
)
|
|
(
|
)
|
|||||||
|
Financial income, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Unrealized foreign currency loss (gain)
|
(
|
)
|
|
|
||||||||
|
|
|
|
(
|
)
|
||||||||
|
Changes in asset and liability items:
|
||||||||||||
|
Decrease (increase) in trade receivables
|
|
(
|
)
|
|
||||||||
|
Decrease (increase) in inventories
|
(
|
)
|
|
(
|
)
|
|||||||
|
Decrease (increase) in other receivables
|
|
|
(
|
)
|
||||||||
|
Increase (decrease) in trade payables and accrued expenses
|
|
|
(
|
)
|
||||||||
|
Increase in grants received in advance
|
|
|
|
|||||||||
|
Increase (decrease) in other payables
|
(
|
)
|
|
(
|
)
|
|||||||
|
|
|
|
||||||||||
|
Net cash used in operating activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 7
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows
U.S. dollars in thousands
|
Year ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cash flows from investing activities:
|
||||||||||||
|
Purchase of property and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Interest received
|
|
|
|
|||||||||
|
Investment in short-term bank deposits, net
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Net cash used in investing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Cash flows from financing activities:
|
||||||||||||
|
Repayment of lease liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Proceeds from exercise of warrants and share options
|
|
|
|
|||||||||
|
Proceeds from issuance of shares
|
|
|
|
|||||||||
|
Repayment of IIA grants
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Repayment of liabilities in respect of TEVA
|
|
(
|
)
|
(
|
)
|
|||||||
|
Net cash provided by financing activities
|
|
|
|
|||||||||
|
Exchange rate differences on cash and cash equivalent balances
|
|
(
|
)
|
(
|
)
|
|||||||
|
Decrease in cash and cash equivalents
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance of cash and cash equivalents at the beginning of the year
|
|
|
|
|||||||||
|
Balance of cash and cash equivalents at the end of the year
|
4,799
|
|
|
|||||||||
|
Supplement disclosure of non-cash transactions:
|
||||||||||||
|
Right of use asset, net, recognized with corresponding lease liability
|
|
|
|
|||||||||
|
Purchase of property and equipment with credit
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
The accompanying notes are an integral part of the consolidated financial statements.
F - 8
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 1: |
General
|
| a. |
Description of the Company and its operations:
|
MediWound Ltd. was incorporated in Israel in January 2000. The Company, which is located in Yavne, Israel (The "Company" or "MediWound"), is a biopharmaceutical company that develops, manufactures and commercializes novel, cost effective, bio-therapeutic, non-surgical solutions for tissue repair and regeneration. The Company’s strategy leverages its breakthrough enzymatic technology platform into diversified portfolio of biotherapeutics across multiple indications to pioneer solutions for unmet medical needs. The Company’s current portfolio is focused on next-generation protein-based therapies for burn care, wound care and tissue repair.
In December 2022, the Company's first innovative biopharmaceutical product, Nexobrid, has received an approval from the U.S. Food and Drug Administration (“FDA”) and marketing approval in each of India, Switzerland and Japan. In addition, it has a marketing authorization from the European Medicines Agency (“EMA”) and regulatory agencies in other international markets for removal of dead or damaged tissue, known as eschar, in adults with deep partial and/or full-thickness thermal burns.
The Company commercializes Nexobrid globally through multiple sales channels.
The Company sells Nexobrid to burn centers in the European Union, United Kingdom and Israel, primarily through its commercial organizations.
The Company has established local distribution channels in multiple international markets, including Asia Pacific, EMEA, CEE, Australia and LATAM, in which local distributors are also responsible for obtaining local marketing authorization within the relevant territories.
In the United States, the Company entered into an exclusive license and supply agreement with Vericel Corporation (“Vericel”) to commercialize Nexobrid in North America. On September 21, 2023, the Company announced the U.S. commercial availability of Nexobrid for the removal of eschar in adults with deep partial and/or full-thickness thermal burns.
In August 2024, the Company announced that the FDA has approved a pediatric indication for NexoBrid allowing for eschar removal in pediatric patients aged newborn through eighteen with deep partial and/or full-thickness thermal burns. With this FDA approval, NexoBrid is now authorized for use in the U.S. for all age groups, aligning with its approvals in the European Union and Japan.
The Company’s second investigational next-generation enzymatic therapy product, EscharEx, a topical biological drug being developed for debridement of chronic and other hard-to-heal wounds.
In February 2025, the Company announced the initiation of VALUE, a global, pivotal Phase III trial evaluating EscharEx for the treatment of venous leg ulcers (VLUs).
F - 9
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 1: |
General (Cont.)
|
| b. | The Company's securities are listed for trading on NASDAQ since March 2014. |
On February 7, 2023, the Company completed a registered direct offering. A total of 1,964,286 ordinary shares were issued at an offering price of $14 per share. The gross proceeds were $27,500 , before deducting commissions and other offering expenses. The net proceeds were approximately $25,469 .
On July 15, 2024, the Company entered into a definitive share purchase agreement. The agreement includes the sale and purchase of 1,453,488 shares of the Company’s ordinary shares, each with a par value of NIS 0.07 (the “Ordinary Shares”), in a private investment in public equity (the “PIPE Offering”). The purchase price was set at $17.20 per share. The gross proceeds from the PIPE Offering were $25,000 , and the issuance expenses were $862 .
On September 30, 2025, the Company completed a registered direct offering. A total of 1,734,105 ordinary shares were issued at an offering price of $17.3 per share. The gross proceeds were $30,000 , before deducting commissions and other offering expenses. The net proceeds were approximately $27,366 .
| c. |
The Company has three wholly owned subsidiaries: MediWound Germany GmbH, acting as Europe (“EU”) marketing authorization holder and EU sales and marketing arm, and MediWound UK Limited and MediWound US, Inc., which are currently inactive companies.
|
| d. |
The “Iron Swords” war began on October 7, 2023 and has significantly affected the security and economic situation of the State of Israel. Continuation of the fighting and attacks on Israel, together with the steps that were taken by the Government of Israel following declaration of a state of war and the mobilization of army reserves, have led to a decrease in business and economic activity throughout the country. These effects were reflected in disruption of the chains of supply and production, a shortage in manpower, volatility in the value of financial assets and in the exchange rates of foreign currencies in relation to the shekel. In addition, the Downgrading of Israel’s credit rating by the international rating agencies and the effects on the country’s budget have also affected the economy in general and the business activity of many companies and consequently also financial reporting.
|
In June 2025 the war significantly expanded to another front with the State of Israel opening a direct confrontation with Iran in the framework of operation “Rising Lion”. Upon the commencement of this operation, the State of Israel declared a special home-front situation and closed its airspace. This confrontation further intensified the impact of the war on the operations of many companies.
In October 2025, a ceasefire was reached between Israel and Hamas in the Gaza Strip.
The war did not have a significant impact on the Company’s operations.
F - 10
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 1: |
General (Cont.)
|
| e. |
The accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. From inception to December 31, 2025, the Company has incurred cash outflows from operations, losses from operations, and has an accumulated deficit of $
|
The Company believes that its existing cash and cash equivalents, short-term and restricted bank deposits of $53.6 million as of December 31, 2025, will be sufficient to fund its operations and capital expenditures for at least twelve months from the date of issuance of these consolidated financial statements.
| Note 2: |
Basis of Preparation of the Consolidated Financial Statements
|
| a. |
Statement of compliance with International Financial Reporting Standards
|
These financial statements have been prepared in accordance with IFRS® Accounting Standards (IFRSs) as issued by the International Accounting Standards Board ("IASB").
These consolidated financial statements were approved by the board of directors on March 5, 2026.
| b. |
Functional currency, reporting currency and foreign currency:
|
| 1. |
Functional currency and reporting currency:
|
The reporting currency of the financial statements is the U.S. dollar.
The Company determines the functional currency based on the currency in which it primarily generates and expends cash. The Company determined that its functional currency is the U.S. dollar since most of the Company's revenues are in U.S. dollars and the economic environment in which the Company operates and performs its transactions is mostly affected by the U.S dollar. A certain portion of the Company's costs are denominated in NIS mainly due to payroll and related benefit costs incurred in Israel. To further support the Company's determination, the Company has analyzed the currency in which funds from financing activities are generated or held and the currency in which receipts from operating activities are usually retained. In this respect, funds from financing activities were principally derived from significant funds raised in U.S. dollars and U.S governmental funds denominated also in U.S. dollars.
The Company operates and plans its activities in U.S. dollars and accordingly its periodic budgets and internal management reports are prepared and monitored using the U.S. dollar as the primary currency.
F - 11
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 2: |
Basis of Preparation of the Consolidated Financial Statements (Cont.)
|
The functional currency of the Company's subsidiary in Germany has been determined to be its local currency - the EURO. Assets and liabilities of this subsidiary are translated at year end exchange rates and its statement of operations items are translated using the average exchange rates at the quarter in which those items are recognized. Such translation adjustments are recorded as a separate component of accumulated other comprehensive income (loss) in shareholders' equity.
| 2. |
Transactions, assets and liabilities in foreign currency:
|
Transactions denominated in foreign currency are recorded upon initial recognition at the exchange rate on the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. Exchange differences are recognized in profit or loss.
| c. |
Use of estimates and judgments
|
Use of estimates
The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The preparation of accounting estimates used in the preparation of the Company’s financial statements requires that management of the Company makes assumptions regarding circumstances and events that involve considerable uncertainty. Company Management prepares the estimates on the basis of past experience, various facts, external circumstances, and reasonable assumptions according to the pertinent circumstances of each estimate. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
F - 12
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 2: |
Basis of Preparation of the Consolidated Financial Statements (Cont.)
|
Information about assumptions made by the Company with respect to the future and other reasons for uncertainty with respect to estimates that have a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next financial year are included in the following notes:
|
Estimate
|
Principal assumptions
|
Possible effects
|
Reference
|
|||
|
Assessment of probability of contingent liabilities
|
Government grants received from the IIA are recognized as a liability if future economic benefits are expected from the research and development activity that will result in royalty bearing sales. As the contingent liability is calculated based on future royalty-bearing sales, there is uncertainty regarding the estimated future cash flows used to measure the amortized cost of the liability.
|
An increase or decrease in Liabilities in respect of IIA grants and in financing expenses in subsequent periods.
|
See notes 14, 17b Regarding Liabilities in respect of IIA grants
|
|||
|
Determining the lease term
|
In order to determine the lease term, the Company takes into consideration the period over which the lease is non-cancellable, including renewal options that it is reasonably certain it will exercise and/or termination options that it is reasonably certain it will not exercise.
|
An increase or decrease in the initial measurement of a right-of-use asset and lease liability and in depreciation and financing expenses in subsequent periods.
|
See Note 10 regarding leases.
|
Determination of fair value
Preparation of the financial statements requires the Company to determine the fair value of certain assets and liabilities. Further information about the assumptions that were used to determine fair value is included in the following notes:
|
|
• | Note 19, on share-based payments; |
| • | Note 19c, Warrants |
When determining the fair value of an asset or liability, the Company uses observable market data as much as possible. There are three levels of fair value measurements in the fair value hierarchy that are based on the data used in the measurement, as follows:
| • | Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. |
| • | Level 2: inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly |
| • | Level 3: inputs that are not based on observable market data (unobservable inputs). |
The preparation of financial statements in conformity with IFRS® Accounting Standards (IFRSs( requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
F - 13
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 2: |
Basis of Preparation of the Consolidated Financial Statements (Cont.)
|
Information about key assumptions made in measuring fair value and estimates are described below:
| • |
Determining the fair value of share-based compensation to employees and directors:
|
The fair value of share-based compensation to employees and directors is determined using the binomial option pricing model or the Black-Scholes method. The assumptions used in the model include the expected volatility, early exercise factor, expected dividend and risk-free interest rate.
For grants awarded up to July 30, 2025, the fair value of share-based compensation was estimated using the binomial option pricing model.
For grants awarded from August 2025, the Company estimates the fair value of share-based compensation using the Black-Scholes option pricing model.
Management believes that the Black-Scholes model is appropriate given the characteristics of the Company’s option grants. This change represents a change in valuation technique and has been applied prospectively to new grants issued from the date of change.
| • | Fair value estimations of warrants: |
The Company completed financing transactions in which it issued shares and warrants to purchase additional shares. The fair value of the warrants, which are not traded on an active market, is determined by using valuation techniques. These valuation techniques maximizes the use of observable market data where it is available.
F - 14
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: | Material Accounting Policies |
The accounting policies set out below have been consistently applied for all periods presented in these consolidated financial statements:
| a. |
Basis of consolidation:
|
Consolidated financial statements include the financial statements of companies that the Company controls (subsidiaries). Control is achieved when the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee.
The financial statements of the Company and its subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform accounting policies by all entities in the Group.
| b. |
Inventories:
|
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs. The Company periodically evaluates the condition and age of inventories and makes provisions for slow moving inventories accordingly.
Cost of inventories is determined as follows:
|
Raw materials
|
-
|
At cost of purchase using the first-in, first-out method.
|
|
Finished goods
|
-
|
On the basis of average standard costs (which approximates actual cost on a weighted average basis) including materials, labor and other direct and indirect manufacturing costs based on normal capacity.
|
| c. |
Property, plant and equipment, net:
|
Property, plant and equipment are measured at cost, including directly attributable costs, less accumulated depreciation and accumulated impairment losses. Cost includes spare parts and auxiliary equipment that are used in connection with the plant and equipment.
Depreciation is calculated on a straight‑line basis over the useful life of the assets at annual rates as follows:
|
%
|
|||
|
Office furniture
|
|
||
|
Manufacturing machinery and lab equipment
|
|
||
|
Software
|
|
||
|
Computers
|
|
||
|
Leasehold improvements
|
|
F - 15
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
Leasehold improvements are depreciated on a straight‑line basis over the shorter of the lease term (including the renewal option held by the Company which is expected to be exercised) and the expected life of the improvement.
The useful life, depreciation method and residual value of an asset are reviewed at least each year-end, and any changes are accounted for prospectively as a change in accounting estimate.
| d. |
Government Grants:
|
| i. |
Liability in respect of Israeli Innovation Authority ("IIA"):
|
|
Grants from the IIA in respect of research and development projects are accounted for as forgivable loans according to IAS 20. Grants received from the IIA are recognized as a liability according to their fair value on the date of their receipt, unless on that date it is reasonably certain that the amount received will not be refunded. If future economic benefits are expected from the project that will result in royalty-bearing revenues from sale of products it will be treated as a contingent liability.
|
|
At the end of each reporting period, the Company evaluates whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid based on its best estimate of future sales and any changes in the present value of the cash flows discounted at the original interest rate of the grant are recognized in profit or loss. The difference between the amount received and the fair value on the date of receiving the grant is recognized as a deduction of research and development expenses.
|
| ii. |
Liability in respect of European Innovation Council ("EIC"):
|
|
Grants from the EIC in respect of research and development projects are accounted for as forgivable loans according to IAS 20 but have different characteristics than Grants from the IIA, therefore they follow a different presentational approach and presented in profit and loss as ‘other income’ when there is reasonable assurance that:
(a) the Company will comply with the conditions attaching to the grants; and
(b) the grants will be received.
|
| e. |
Leases:
|
The Company accounts for a contract as a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company has elected to recognize the lease payments as an expense in profit or loss on a straight-line basis over the lease term. In measuring the lease liability, the Company has elected to apply the practical expedient in IFRS 16 and does not separate the lease components from the non-lease components (such as management and maintenance services, etc.) included in a single contract.
F - 16
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
The following are the amortization periods of the ROU assets by class of underlying asset:
|
Years
|
|||
|
Motor vehicles
|
|
||
|
Buildings
|
|
The Company tests for impairment of the ROU asset whenever there are indications of impairment pursuant to the provisions of IAS 36.
| • |
Variable lease payments that depend on an index:
|
On the commencement date, the Company uses the index rate prevailing on the commencement date to calculate the future lease payments.
For leases in which the Company is the lessee, the aggregate changes in future lease payments resulting from a change in the index are discounted (without a change in the discount rate applicable to the lease liability) and recorded as an adjustment of the lease liability and the ROU assets, only when there is a change in the cash flows resulting from the change in the index (that is, when the adjustment to the lease payments takes effect).
| • |
Lease extension and termination options:
|
A non-cancelable lease term includes both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised and the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.
| f. |
Revenue recognition:
|
The Company recognizes revenue when the customer obtains control over the promised goods or services. The revenue is measured according to the amount of the consideration to which the Company expects to be entitled in exchange for the goods or services promised to the customer, other than amounts collected for third parties.
The Company determines the transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract.
F - 17
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied.
The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. Amounts received, or that are unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract are recognized as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as the current portion of deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.
The Company’s revenue-generating arrangements typically include licensing arrangements, which comprise upfront license fees, milestone payments and/or royalties, and product sale arrangements.
The promised goods or services in the Company’s licensing arrangements typically consist of a license to the Company’s intellectual property and/or research and development services.
If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
F - 18
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Vericel Agreement
In 2019, the Company entered into exclusive license and supply agreements with Vericel to commercialize Nexobrid in North America (see note 22). The Company identified three distinct performance obligations: (1) license rights (2) development services for Biologics License Application (“BLA”) approval and (3) manufacturing and supply of Nexobrid.
As of the closing date of the agreement the manufacturing and development services were at market value; therefore, the upfront payment was fully attributed to the license performance obligation and as such revenues are 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 it is 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 considerations are resolved. (see note 18b).
Revenues from royalties under this agreement will be payable based on future commercial sales, upon their occurrence.
Revenues from the sale of products to Vericel will be recognized when all the significant risks and rewards of ownership of the products have passed to Vericel and the Company no longer retains continuing managerial involvement. The delivery date of the products is usually the date on which ownership passes.
Revenues from distribution licensing arrangements:
The Company accounts for the bundled license provided to the distributors and related highly specialized services as a single performance obligation and consequently recognize revenue using the cost-to-cost method, where the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected to be incurred upon satisfying such single performance obligation. The revenues from such bundled performance obligation are included within “Revenues from license agreements”. Significant finance components related to such arrangements are recognized as finance expense.
F - 19
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
Revenues from development services:
Revenues from development services are recognized over time, during the period the customer receives and consumes the benefits provided by the Company's performance.
Revenues from the sale of products:
The Company generates revenues from sales of its innovative biopharmaceutical product, Nexobrid, to burn centers and hospital burn units in Europe, U.S., Japan, Israel and local international markets through its commercial organizations and local distributors.
Revenues from the sale of goods is recognized in profit or loss at the point in time when the control of the goods is transferred to the customer, generally upon delivery of the goods to the customer. The transaction price is the amount of the consideration that is expected to be received based on the contract terms.
| g. |
Research and development expenses:
|
Research and development expenses are recognized in profit or loss when incurred. An intangible asset arising from a development project or from the development phase of an internal project is recognized if the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale; the Company's intention to complete the intangible asset and use or sell it; the Company's ability to use or sell the intangible asset; how the intangible asset will generate future economic benefits; the availability of adequate technical, financial and other resources to complete the intangible asset; and the Company's ability to measure reliably the expenditure attributable to the intangible asset during its development. Since the Company's research and development projects are often subject to regulatory approval procedures and other uncertainties, the conditions for the capitalization of costs incurred before receipt of approvals are not normally satisfied and, therefore, research and development expenses are recognized in profit or loss when incurred.
| h. |
Financial instruments:
|
The accounting policy for financial instruments in accordance with IFRS 9, "Financial Instruments" is as follows:
| 1. |
Financial liabilities:
|
| a) |
Financial liabilities measured at amortized cost:
|
Financial liabilities are initially recognized at fair value less transaction costs that are directly attributable to the issue of the financial liability.
F - 20
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
After initial recognition, the Company measures all financial liabilities at amortized cost using the effective interest rate method, except for financial liabilities at fair value through profit or loss such as derivatives;
| b) |
Financial liabilities measured at fair value through profit or loss:
|
At initial recognition, the Company measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss.
After initial recognition, changes in fair value are recognized in profit or loss.
| 2. |
Fair value:
|
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's principal market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
F - 21
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
| i. |
Warrants:
|
Receipts in respect of warrants are classified as equity to the extent that they confer the right to purchase a fixed number of shares for a fixed exercise price. In the event that the exercise price or the numbers of shares to be issued are not deemed to be fixed (for example, in case of net share settlement provision), or warrants redemption in cash on the occurrence of fundamental transaction the warrants are classified as a non-current derivative financial liability. This liability is initially recognized at its fair value on the date the contract is entered into and subsequently accounted for at fair value at each reporting date. The fair value changes are charged to non-operating income and expense on the statement of comprehensive income or loss. Issuance costs allocable to warrants are also recorded as non-operating expense on the statement of comprehensive income or loss.
| j. |
Provisions:
|
A provision in accordance with IAS 37 is recognized when the Company has a present (legal or constructive) obligation as a result of a past event, it is expected to require the use of economic resources to clear the obligation and a reliable estimate has been made.
| k. |
Short-term employee benefits and severance pay liability, net:
|
The Company has several employee benefit plans:
| 1. |
Short-term employee benefits:
Short-term employee benefits, including salaries, paid annual leave, recreation and social security contributions, are recognized as expenses as the services are rendered.
|
| 2. |
Post-employment benefits:
The Company has liabilities for severance pay for its employees in several jurisdictions and in Israel.
The Company recognizes liability for severance pay mainly for its employees in EU in accordance with local laws.
|
F - 22
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 3: |
Material Accounting Policies (Cont.)
|
| l. |
Share-based compensation:
|
Certain Company employees and directors are entitled to remuneration in the form of equity-settled share-based compensation.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured at the fair value of their equity instruments granted at the grant date. The fair value is determined using the binomial option pricing model or Black-Scholes model.
The cost of equity-settled transactions is recognized in profit or loss, together with a corresponding increase in equity, during the period which the performance or service conditions are to be satisfied, ending on the date on which the relevant employees become fully entitled to the award.
| m. |
New standards, amendments to standards and interpretations not yet adopted:
|
IFRS 18, Presentation and Disclosure in Financial Statements replaces IAS 1, Presentation of Financial Statements. The standard provides guidance for improving the structure and content of the financial statements, particularly the income statement.
The standard includes new disclosure and presentation requirements as well as requirements that were taken from IAS 1, Presentation of Financial Statements.
As part of the new disclosure requirements, it is required to present two subtotals in the income statement: operating profit and profit before financing and taxes.
Furthermore, the results in the income statement will be classified into three new categories: an operating category, an investing category and a financing category.
In addition to the changes in the structure of the income statements, the standard also includes a requirement to provide separate disclosure in the financial statements regarding the use of management-defined performance measures (MPM).
Furthermore, the standard adds specific guidance for aggregation and disaggregation of items in the financial statements and in the notes.
The standard’s initial date of application is for annual reporting periods beginning on or after January 1, 2027 with earlier application being permitted.
The Company is examining the effects of the standard on its financial statements with no plans for early adoption.
| Note 4: |
Cash and Cash Equivalents
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Balance in USD
|
|
|
||||||
|
Balance in other currencies
|
|
|
||||||
|
|
|
|||||||
F - 23
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 5: |
Short-term bank deposits
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
USD Bank deposits (1)
|
|
|
||||||
|
|
|
|||||||
| (1) |
The USD deposits are for the period of
|
| Note 6: |
Trade Receivables, net
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Vericel (see note 18b)
|
|
|
||||||
|
BARDA (see note 18a)
|
|
|
||||||
|
MTEC (see note 18c)
|
|
|
||||||
|
Other trade receivables
|
|
|
||||||
|
Less provision for expected credit loss
|
(
|
)
|
(
|
)
|
||||
|
|
|
|||||||
| Note 7: | Inventories |
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Raw materials
|
|
|
||||||
|
Finished goods*
|
|
|
||||||
|
|
|
|||||||
*Finished goods are net of a write-off of $432 and $216 as of December 31,2025 and 2024, respectively.
| Note 8: |
Other Receivables- Short Term
|
|
December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Government authorities
|
|
|
||||||
|
Income receivable
|
|
|
||||||
|
Prepaid expenses and other
|
|
|
||||||
|
|
|
|||||||
F - 24
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 9: | Property, Plant and Equipment |
| |
Office
furniture
|
Manufacturing machinery and lab equipment
|
Computers
|
Leasehold
improvements
|
Total
|
|||||||||||||||
|
Cost |
||||||||||||||||||||
|
Balance as of January 1, 2025
|
|
|
|
|
|
|||||||||||||||
|
Additions
|
|
*
|
|
|
|
|||||||||||||||
|
Disposals
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Foreign currency translation
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2025
|
|
|
|
|
|
|||||||||||||||
|
Balance as of January 1, 2024
|
|
|
|
|
|
|||||||||||||||
|
Additions
|
|
*
|
|
|
|
|||||||||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||||
|
Foreign currency translation
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||
|
Balance as of December 31, 2024
|
|
|
|
|
|
|||||||||||||||
|
Accumulated Depreciation
|
||||||||||||||||||||
|
Balance as of January 1, 2025
|
|
|
|
|
|
|||||||||||||||
|
Additions
|
|
|
|
|
|
|||||||||||||||
|
Disposals
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||
|
Foreign currency translation
|
|
|
|
|
|
|||||||||||||||
|
Balance as of December 31, 2025
|
|
|
|
|
|
|||||||||||||||
|
Balance as of January 1, 2024
|
|
|
|
|
|
|||||||||||||||
|
Additions
|
|
|
|
|
|
|||||||||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
|
(
|
)
|
|||||||||||
|
Foreign currency translation
|
(
|
)
|
|
|
|
(
|
)
|
|||||||||||||
|
Balance as of December 31, 2024
|
|
|
|
|
|
|||||||||||||||
|
Carrying amounts of all fixed asset items
|
||||||||||||||||||||
|
December 31, 2025
|
|
|
|
|
|
|||||||||||||||
|
December 31, 2024
|
|
|
|
|
|
|||||||||||||||
*Including new facility costs in the amount of 4,147 for 2025 and 4,271 for 2024.
F - 25
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 10: |
Leases
|
| a. |
Lease Agreements:
|
The Company's offices and its production facility in Israel are located in a building that the Company previously leased from a related party (see note 24a), in accordance with a sub-lease agreement. The Company subleased approximately 3,000 square meters of laboratory, office and clean rooms space at a monthly fee of NIS 125 (approximately $35 ). This sub-lease agreement was amended in October 2021, to extend the period up to October 2025 which was included in the calculation of the lease liability and ROU asset.
In July 2023, the Company signed a termination agreement for the sub-lease agreement and signed a new lease agreement for the same area of approximately 3,000 square meters in the same building with the owner of the building at a annual rent fee of NIS 2,484 (approximately $720 ) linked to the index. The lease agreement is for 12 years with an option for an additional 3 years . The Company’s estimation is that it will exercise the 3-year option.
On January 1, 2024, the Company entered into a new lease agreement for 380 square meters of office, in Yavne, Israel, close to the main office, the agreement was for two years with options for an additional three years . The additional leased area was needed to support the Company in extending its activity. The annual fee for this agreement is NIS 437 (approximately $120 ) linked to the index. The Company didn’t exercise the additional 3 years option and entered into a new lease agreement
In May 2025, the Company entered into a new lease agreement for approximately 1,000 square meters of office and labs in Gan-Rave, Israel, close to the main office, the agreement is for five years with options for an additional two years. The additional leased area is needed to support the Company in extending its activity. The annual fee range for this agreement is NIS 672 – NIS 736 (approximately $210 - $231 ) linked to the index. The Company estimation is that it will exercise the 2-year option.
In September 2025, the Company entered into a new lease agreement for approximately 184 square meters of storage in Yavne, Israel, close to the main office. The agreement is for two years with options for an additional two years . The additional leased area is needed to support the Company in extending its activity. The annual fee for this agreement is NIS 95 (approximately $30 ) linked to the index. The Company estimation is that it will exercise the 2-year option.
In addition, the Company and its subsidiary have lease agreements for 13 vehicles for the remaining period of 1.5 years on average.
Amounts recognized in profit or loss and in the statement of cash flowsb.
|
Year ended December 31,
|
||||||||
|
2025
|
2024
|
|||||||
|
Interest expense on lease liabilities
|
|
|
||||||
|
Depreciation expenses
|
|
|
||||||
|
Cash outflow for leases
|
|
|
||||||
F - 26
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 10: |
Leases (Cont.)
|
The Company determined the appropriate interest rate for discounting leases, with the assistance of a third party. The valuation was based on: credit risk, the weighted average term of the leases and other economic variables. A weighted average interest rate in a range of 6.5 % to 8.5 % was used to discount future lease payments in the calculation of the lease liability.
| c. |
Disclosures in respect of Right- of- Use assets:
|
|
Buildings
|
Motor vehicles
|
Total
|
||||||||||
|
Cost
|
||||||||||||
|
Balance as of January 1, 2025
|
|
|
|
|||||||||
|
New leases
|
|
|
|
|||||||||
|
Adjustments for indexation
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance as of December 31, 2025
|
|
|
|
|||||||||
|
Accumulated depreciation
|
||||||||||||
|
Balance as of January 1, 2025
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Disposals
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance as of December 31, 2025
|
|
|
|
|||||||||
|
Depreciated cost
|
||||||||||||
|
Balance as of December 31, 2025
|
|
|
|
|||||||||
|
Buildings
|
Motor vehicles
|
Total
|
||||||||||
|
Cost
|
||||||||||||
|
Balance as of January 1, 2024
|
|
|
|
|||||||||
|
New leases
|
|
|
|
|||||||||
|
Adjustments for indexation
|
|
|
|
|||||||||
|
Disposals
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2024
|
|
|
|
|||||||||
|
Accumulated depreciation
|
||||||||||||
|
Balance as of January 1, 2024
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Disposals
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2024
|
|
|
|
|||||||||
|
Depreciated cost
|
||||||||||||
|
Balance as of December 31, 2024
|
|
|
|
|||||||||
F - 27
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 10: |
Leases (Cont.)
|
| d. | Disclosures of the Company's lease liabilities: |
|
Buildings
|
Motor vehicles
|
Total
|
||||||||||
|
Balance as of January 1, 2025
|
|
|
|
|||||||||
|
Repayment of leases liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Effect of changes in exchange rates
|
|
|
|
|||||||||
|
New finance lease obligation recognized
|
|
|
|
|||||||||
|
Adjustments for indexation
|
|
|
|
|||||||||
|
Financial expenses
|
|
|
|
|||||||||
|
Disposals-termination of leases
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Balance as of December 31, 2025
|
|
|
|
|||||||||
|
Current maturities of long-term leases
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Lease liability Balance as of December 31, 2025
|
|
|
|
|||||||||
|
Buildings
|
Motor vehicles
|
Total
|
||||||||||
|
Balance as of January 1, 2024
|
|
|
|
|||||||||
|
Repayment of leases liabilities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Effect of changes in exchange rates
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
New finance lease obligation recognized
|
|
|
|
|||||||||
|
Adjustments for indexation
|
|
|
|
|||||||||
|
Financial expenses
|
|
|
|
|||||||||
|
Disposals-termination of leases
|
|
(
|
)
|
(
|
)
|
|||||||
|
Balance as of December 31, 2024
|
|
|
|
|||||||||
|
Current maturities of long-term leases
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Lease liability Balance as of December 31, 2024
|
|
|
|
|||||||||
| Note 11: |
Intangible Assets, Net
|
|
License and
Know-how
|
||||||||
|
2025
|
2024
|
|||||||
|
Cost
|
||||||||
|
Balance as of January 1,
|
|
|
||||||
|
Additions
|
|
|
||||||
|
Balance as of December 31,
|
|
|
||||||
|
Accumulated Amortization
|
||||||||
|
Balance as of January 1,
|
|
|
||||||
|
Additions
|
|
|
||||||
|
Balance as of December 31,
|
|
|
||||||
|
Amortized cost
|
||||||||
|
Balance as of December 31,
|
|
|
||||||
F - 28
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 11: |
Intangible Assets, Net (Cont.)
|
Intangible assets include exclusive licenses to use patents, know-how and intellectual property for the development, manufacturing and marketing of products related to burn treatments and other products in the field of wound care. These licenses were purchased from third parties and from one of the Company's shareholders.
| Note 12: |
Trade payables and accrued expenses
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Trade payables
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
|
|
|||||||
| Note 13: |
Other Payables
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Employees and payroll accruals
|
|
|
||||||
|
Related parties
|
|
|
||||||
|
Deferred income
|
|
|
||||||
|
Grants received in advance*
|
|
|
||||||
|
Other
|
|
|
||||||
|
|
|
|||||||
*See also note 18d
| Note 14: |
Liabilities in Respect of IIA Grants
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Balance as of January 1,
|
|
|
||||||
|
Royalties
|
(
|
)
|
(
|
)
|
||||
|
Amounts carried to Profit or Loss
|
|
|
||||||
|
Balance as of December 31,
|
|
|
||||||
|
Current maturities
|
(
|
)
|
(
|
)
|
||||
|
Long term liabilities in respect of IIA grants
|
|
|
||||||
The Company is committed to pay royalties to the IIA up to the total grants received plus the applicable accrued interest. The total amount of grants received from IIA including accrued interest, net of royalties as of December 31, 2025, is approximately $14,142 , while the amortized cost of this liability as of that date is $8,538 , discounted to its present value.
The fair value of liabilities in respect of IIA grants with fixed interest is based on a calculation of the present value of the cash flows at the interest rate for a loan with similar terms. The Company used a discount rate of 12 % based in part on the Company’s estimation at the time of the Company’s recognition of the IIA grants which approximate the fair value at the respective balance sheet date.
F - 29
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 15: |
Financial Instruments
|
| a. |
Risk management:
|
The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.
The Company’s risk management practice was formulated to identify and analyze the risks that the Company faces, to set appropriate limits for the risks and controls, and to monitor the risks and their compliance within the limits. The risk policy and risk management methods are reviewed regularly to reflect changes in market conditions and in the Company’s operations.
The Company Audit Committee oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
The Company's activities expose it to various financial market risks, mainly foreign currency risk, interest rate risk and liquidity risk.
| 1. |
Foreign currency risk
The Company operates primarily in an international environment and is exposed to foreign exchange risk resulting from the fact that a certain portion of the Company's costs are denominated in NIS and EURO, mainly due to payroll and related benefit costs incurred in Israel and additionally due to marketing expenses incurred in Europe.
|
| 2. |
Sensitivity tests relating to changes in market factors:
The Company operates in an international environment and is exposed to foreign exchange risk resulting from the exposure to different currencies, mainly NIS and EURO. Foreign exchange risks arise from recognized assets and liabilities denominated in a foreign currency other than the functional currency.
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Gain (loss) from change:
|
||||||||
|
5% increase in NIS and EURO exchange rate
|
$
|
|
$
|
|
||||
|
5% decrease in NIS and EURO exchange rate
|
$
|
(
|
)
|
$
|
(
|
)
|
||
|
The Company has performed sensitivity tests of principal market risk factors that may affect its reported operating results or financial position.
The sensitivity tests present the profit or loss for the relevant risk variables chosen as of each reporting date.
|
F - 30
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 15: |
Financial Instruments (Cont.)
|
| 3. |
Liquidity risk
|
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to timely meet its liabilities, under both normal and stressed conditions, without incurring unwanted losses.
The Company manages the liquidity risk by holding cash balances, short-term deposits and secured bank credit facilities.
|
December 31, 2025
|
||||||||||||||||
|
Carrying
amount
|
12 months
or less
|
1-2 years
|
2-15 years
|
|||||||||||||
|
Non-derivative financial liabilities♠
|
||||||||||||||||
|
Current liabilities
|
||||||||||||||||
|
Current maturities of long-term liabilities
|
|
|
|
|
||||||||||||
|
Trade payables and accrued expenses
|
|
|
|
|
||||||||||||
|
Other payables
|
|
|
|
|
||||||||||||
|
Non-current liabilities
|
||||||||||||||||
|
Liabilities in respect of IIA grants
|
|
|
|
|
||||||||||||
|
Lease liabilities
|
|
|
|
|
||||||||||||
|
December 31, 2024
|
||||||||||||||||
|
Carrying
amount
|
12 months
or less
|
1-2 years
|
2-15 years
|
|||||||||||||
|
Non-derivative financial liabilities
|
||||||||||||||||
|
Current liabilities
|
||||||||||||||||
|
Current maturities of long-term liabilities
|
|
|
|
|
||||||||||||
|
Trade payables and accrued expenses
|
|
|
|
|
||||||||||||
|
Other payables
|
|
|
|
|
||||||||||||
|
Non-current liabilities
|
||||||||||||||||
|
Grants received in advance
|
|
|
|
|
||||||||||||
|
Liabilities in respect of IIA grants
|
|
|
|
|
||||||||||||
|
Lease liabilities
|
|
|
|
|
||||||||||||
|
4.
|
Credit risk
|
Credit risk is the risk of a financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s Cash and cash equivalents and deposits and from receivables from customers.
The Company holds cash and cash equivalents and deposits with banks and financial institutions rated A- to BBB+ based on the ratings of S&P Global.
Impairment on cash and cash equivalents has been measured on the basis of the expected loss. The Company considers that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties.
The balance of receivables from customers at the reporting date included one significant customer as described in note 6. The credit risk for the US Army is assessed at a low risk. Trade receivables are measured using the expected credit loss model in accordance with IFRS 9. Based on historical payment patterns, current conditions and forward-looking information, the resulting expected credit loss recorded for other trade receivables was USD 112.
F - 31
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 15: |
Financial Instruments (Cont.)
|
| b. |
Fair value:
|
| i |
Measurement of fair values |
|
| (1) |
Financial instruments measured at fair value for disclosure purposes only.
|
|
The carrying amounts of certain financial assets and liabilities, including cash, trade receivables, other receivables, deposits, trade and other payables are the same as or approximate to their fair value.
|
| (2) |
Fair value hierarchy of financial instruments measured at fair value.
|
|
The financial instruments measured at fair value use valuation methodology in accordance with the fair value hierarchy levels. When determining the fair value of an asset or liability, the Company uses observable market data as much as possible.
Details regarding fair value measurement at Level 2
The fair value of the warrants which are classified as current liabilities was measured by using Black-Scholes model. The following inputs were used to determine the fair value:
Contractual period of warrants–
Expected volatility –
Risk-free interest rate (3) –
Expected dividend yield –
|
F - 32
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 16: |
Severance Pay Liability, Net
|
The Company has liabilities for severance pay for its employees in Israel and in several EU jurisdictions. The Company’s liability for employee benefits is based on local laws, valid labor agreements, the employee’s salary and the applicable terms of employment, which together generate a right to severance compensation. Post‑employment employee benefits are partially financed by deposits with defined contribution plans, as detailed below.
The Israeli Severance Pay Law, 1963 (“Severance Pay Law”), specifies that Israeli employees are entitled to severance payment, following the termination of their employment.
Under the Severance Pay Law, the severance payment is calculated as one month salary for each year of employment, or a portion thereof. Under Section 14 of the Severance Pay Law (“Section 14”), employees are entitled to have monthly deposits, at a rate of 8.33 % of their monthly salary, made on their behalf to their insurance funds. Payments in accordance with Section 14 release the Company from the liability for any future severance payments in respect of those employees.
The majority of the Company’s liability for severance pay is covered by Section 14. Accordingly, the Company does not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Company’s balance sheet. These contributions for compensation represent defined contribution plans. The Company recognizes a liability for severance pay due to its employees in the EU in accordance with local laws and its Israeli employees who are not under Section 14.
| Note 17: |
Liabilities and Commitments
|
| a. |
In 2000, the Company signed an exclusive license agreement (as amended in 2007) with a third party with regard to its patents and intellectual property. Pursuant to the agreement, the Company received an exclusive license to use the third party’s patents and intellectual property, for the purpose of developing, manufacturing, marketing, and commercializing products for treatment of burns and other wounds.
|
|
The Company paid an aggregate amount of $
|
F - 33
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 17: |
Liabilities and Commitments (Cont.)
|
| b. |
Under the Israeli Research and Development Law, (the “R&D Law”) the Company undertook to pay royalties of
|
| c. |
In December 2020, Teva Pharmaceutical Industries Ltd (“TEVA”) has agreed to revise a settlement agreement from March 2019, which was comprised of past agreement for collaboration in the development, manufacturing and commercialization of solutions for the burn and chronic wound care markets, as well as the Company’s repurchase of shares from TEVA. Under the new settlement the Company paid $
|
|
Concurrently with the PIPE offering, on July 15, 2024, the Company and TEVA entered into Amendment No. 2 (the “Amendment”) to a settlement dated December 13, 2020, by and between the Company and TEVA (the “Agreement”). Under the terms of the Amendment, the Company paid TEVA $
|
|
Total liabilities recorded as of December 31, 2025 and 2024 were approximately $
|
| Note 18: | Material Agreements |
| a. |
BARDA Contracts
|
|
In September 2015, the Company was awarded a Biomedical Advanced Research and Developments Authority (“BARDA”) contract for treatment of thermal burn injuries. This contract was amended multiple times to extend its term until September 2025 and its total value, up to a total amount of $
|
|
In May 2023, BARDA has awarded an additional approximately $
|
F - 34
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 18: | Material Agreements (Cont.) |
As of December 31, 2025, the Company has recognized approximately $99,809 in the aggregate, from BARDA for support of its research and development activities and an additional $16,500 for procurement of Nexobrid for U.S. emergency preparedness, which were recorded at the net amount of approximately $10,500 following the split of gross profit agreement with Vericel for the initial BARDA procurement. The contract expired in September 2025.
In September 2018 the Company was awarded the second BARDA contract, to develop Nexobrid for the treatment of Sulfur Mustard injuries as part of BARDA’s preparedness for mass casualty events. The contract provides up to $12,000 of funding to support research and development activities and contains options to provide additional funding of up to $29,000 for additional development activities, animal pivotal studies, and the BLA submission for licensure of Nexobrid for the treatment of Sulfur Mustard injuries. The second BARDA contract expired in 2023. As of December 31, 2023, the Company has recognized and received approximately $4,368 of funding from the second BARDA contract.
| b. |
Vericel Agreement:
|
On May 6, 2019, the Company entered into exclusive license and supply agreements with Vericel to commercialize Nexobrid in North America (the “Collaboration Agreements”). Pursuant to the Collaboration Agreements, Vericel will obtain the authority over and control of the development, regulatory approval and commercialization of licensed products in the territory of North America. MediWound will be responsible for the development of the product through BLA approval, supported and funded by BARDA, as well as the manufacture and supply of Nexobrid. In addition, MediWound retains the commercial rights to Nexobrid in non-North American territory.
|
Under the terms of the license agreement, Vericel has made an upfront payment to MediWound of $
Total revenue from royalties as of December 31, 2025 and 2024 was approximately $
|
F - 35
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 18: | Material Agreements (Cont.) |
| c. |
DoW and MTEC contracts:
|
On February 17, 2022, the Company entered into a contract with the U.S. Department of War (DoW), through the Medical Technology Enterprise Consortium (MTEC), to develop Nexobrid as a non-surgical solution for field-care burn treatment for the U.S. Army. The contract provides funding up to $2,727 .
During 2023, the DoW through MTEC awarded the Company additional funding of $9,117 in addition, the company was awarded directly through MTEC funding of $1,190 , to advance the development of a new temperature stable formulation of Nexobrid.
In May 2024, the Company was awarded additional funding of $1,557 from the DoW through MTEC. In April 2025 the Company was awarded additional funding of $937 from the DoW through MTEC. In July 2025 the Company was awarded additional funding of $2,715 from the DoW through MTEC. As of December 31, 2025, the total funding from the DoW and MTEC is $18,243 .
| d. |
European Innovation Council (EIC):
|
In July 2024, the Company was awarded a Euro 2,500 (Approximately $2,725 ) grant from the European Innovation Council (EIC) Accelerator program to support the clinical and regulatory advancement of EscharEx for the treatment of diabetic foot ulcers (DFUs). Following a successful evaluation process, the Company entered into discussions with respect to a potential additional Euro 13,750 (Approximately $14,987 ) equity investment component under the program, however, these discussions did not result in an investment. In December 2024, the Company received the first payment of Euro 1,125 ($1,181 ) from the grant component. (See also note 13)
| e. |
During 2025 and 2024, the Company signed new agreements with suppliers to procure services totaling $
|
| f. |
Biopharmax Group Ltd. contract:
|
On July 17, 2023, the Company signed an agreement with Biopharmax Group Ltd. The objective of this agreement is to establish, commission, and validate a cutting-edge, sterile, and GMP-compliant manufacturing facility. The venture aims to increase the Company’s production capacity significantly, up to six times the current capacity.
The new facility, equipped with fully operational clean rooms, will be exclusively designed for Nexobrid production. It will comply with stringent regulations from the GMP, FDA, EMA, Israeli Ministry of Health, and relevant Israeli regulatory bodies. An estimated $13.1 million will be invested in the project. Construction was completed in 2024, in 2025, commissioning of the expanded NexoBrid manufacturing facility was successfully completed. Commercial availability will depend on securing the necessary regulatory approvals. (see also note 9).
F - 36
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 19: |
Equity
|
| a. |
Share capital:
|
|
December 31
|
||||||||
|
2025
|
2024
|
|||||||
|
Authorized number of shares
|
|
|
||||||
|
Issued and outstanding number of shares
|
|
|
||||||
An ordinary share confers upon its holder(s) a right to vote at the general meeting, a right to participate in distribution of dividends, and a right to participate in the distribution of surplus assets upon liquidation of the Company.
| b. |
Movement in share capital:
|
| 1. |
During 2025, 2024 and 2023 the Company issued additional
|
| 2. |
On May 31, 2023 the Shareholders of the Company approved an amendment to Article 6 of the Company’s Amended and Restated Articles of Association, which increased the Company’s authorized share capital from
|
| c. |
Financial transactions:
|
| 1. |
On September 26, 2022, the Company completed a registered direct (the “RD”) offering in an aggregate amount of $
|
The warrants issued have been classified as a current financial liability due to a net share settlement provision and as they can be settled in cash on the occurrence of Fundamental Transaction as determined in the agreement. This liability was initially recognized at its fair value on the date the contract was entered into and is subsequently accounted for fair value at each balance sheet date and recorded through profit and loss.
The fair value of the warrants has been evaluated with the assistance of external independent valuator and was computed based on then current price of the shares, a risk-free interest rate of 4.37 % and an average standard deviation of 68 %.
The net proceeds from this offering in the amount of $11,698 have been received on September 28, 2022. The issuance expenses related to the non-current financial liability were recorded through profit and loss and the issuance expenses related to the issuance of shares recorded as a deduction from the proceeds in equity.
F - 37
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 19: |
Equity (Cont.)
|
| 2. |
Concurrently, on October 6, 2022, the Company entered into a Private Issuance Purchase Equity agreement (the “PIPE”) with several purchasers, in connection with the offering of
|
The Pre-Funded warrants and warrants issued have been classified as a non-current financial liabilities due to a net share settlement provision and they can be redeemed in cash on the occurrence of Fundamental Transaction as determined in the agreement. The initial fair value of the financial liabilities issued in the transaction was approximately $20,788 , which comprised of: 1. The warrants which were valuated by Black-Scholes model based on the current price of the shares and a risk-free interest rate of 4.26 %, and 2. The pre-funded warrants which were valued in an amount which is approximate its share price upon their issuance.
The consideration received from this transaction was $17,233 . As the fair value on initial recognition of the warrants differs from the transaction price, the difference represents the first day loss at the amount of $3,555 , and has been allocated to the warrants with respect to this transaction and is amortized on a straight-line basis over the term of the warrants.
The net proceeds from this offering amounted to approximately $15,920 . The issuance expenses were recorded through profit and loss.
During December 2022, the 1,407,583 pre-funded warrants were exercised into ordinary shares.
| 3. |
Upon closing of the RD and PIPE Offerings, the Company also issued the placement agent up to
|
| 4. |
On February 7, 2023, the Company completed a RD offering of
|
F - 38
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 19: |
Equity (Cont.)
|
| 5. |
On July 15, 2024, the Company entered into a definitive share purchase agreement. The agreement includes the sale and purchase of
|
| 6. |
On September 30, 2025, the Company completed a RD offering of
|
During 2024 and 2025, 91,029 and 256,799 Series A warrants, respectively, were exercised into the Company’s ordinary shares at an exercise price of $13.475 per ordinary share, in accordance with the terms of the Series A warrants. The warrant exercises resulted in proceeds an aggregate amount of $4,687 . As of the date of this report, 2,266,459 Series A warrants remain outstanding and exercisable.
| Note 20: |
Share‑Based Compensation
|
| a. |
Expense recognized in the financial statements:
|
The expenses recognized for services received from employees and directors are as follows:
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Cost of revenues
|
|
|
|
|||||||||
|
Research and development
|
|
|
|
|||||||||
|
Selling and marketing
|
|
|
|
|||||||||
|
General and administrative
|
|
|
|
|||||||||
|
Total share-based compensation
|
|
|
|
|||||||||
| b. |
Share-based payment plan for employees and directors:
|
The Company has granted options and restricted stock units ("RSUs") for a total of 1,290,149 ordinary shares.
As of December 31, 2025, 134,670 ordinary shares of the Company were still available for a future grant.
Any options or RSUs, which are forfeited or not exercised before expiration, become available for future grants.
F - 39
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 20: |
Share‑Based Compensation (Cont.)
|
In March 2014, the Company adopted and obtained shareholder approval for its 2014 Equity Incentive Plan (the “2014 Plan”). Options and RSUs granted under the Company's 2014 Plan are exercisable in accordance with the terms of the Plan. Options are exercisable within 5-10 years from the date of grant, against payment of an exercise price or cashless exercise and share units are granted immediately upon vesting of the RSUs. The options and the RSUs generally vest over a period of 1-4 years .
In December 2024, the Company adopted and obtained shareholder approval for its 2024 Equity Incentive Plan (the “2024 Plan”). Options and RSUs granted under the Company's 2024 Plan are exercisable in accordance with the terms of the Plan. Options are exercisable within 10 years from the date of grant, against payment of an exercise price or cashless exercise and share units are granted immediately upon vesting of the RSUs. The options and the RSUs generally vest over a period of 1-4 years .
| c. |
Share options activity:
|
The following table lists the number of share options, the weighted average exercise prices of share options and changes that were made in the option plan for employees and directors:
|
2025
|
2024
|
2023
|
||||||||||||||||||||||
|
Number of
options
|
Weighted
Average
Exercise price
|
Number of
options
|
Weighted
Average
Exercise price
|
Number of
options
|
Weighted
Average
Exercise price
|
|||||||||||||||||||
|
Outstanding Options at beginning of year
|
|
|
|
|
|
|
||||||||||||||||||
|
Options Granted
|
|
|
|
|
|
|
||||||||||||||||||
|
Options Exercised
|
(
|
) |
|
(
|
)
|
|
|
|
||||||||||||||||
|
Options Forfeited and/or expired
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
|||||||||||||||
|
Outstanding options at end of year
|
|
|
|
|
|
|
||||||||||||||||||
|
Options Exercisable at end of year
|
|
|
|
|
|
|
||||||||||||||||||
F - 40
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 20: |
Share‑Based Compensation (Cont.)
|
The following table summarizes information about share options outstanding:
|
Options outstanding as of
December 31, 2025
|
|||||||||||||
|
Range of exercise prices ($ )
|
Number of
options
|
Weighted
Average
Remaining
contractual
life
|
Weighted
average exercise
price
|
||||||||||
|
8.13-9.64
|
|
|
|
||||||||||
|
11.89-14.42
|
|
|
|
||||||||||
|
18.39-19.59
|
|
|
|
||||||||||
|
34.44-37.52
|
|
|
|
||||||||||
|
Total
|
|
|
|
||||||||||
|
Options outstanding as of
December 31, 2024
|
|||||||||||||
|
Range of exercise prices ($ )
|
Number of
options
|
Weighted
Average
Remaining
contractual
life
|
Weighted
average exercise
price
|
||||||||||
|
8.13-9.64
|
|
|
|
||||||||||
|
11.89-14.42
|
|
|
|
||||||||||
|
34.44-37.52
|
|
|
|
||||||||||
|
47.11-67.06
|
|
|
|
||||||||||
|
Total
|
|
|
|
||||||||||
The following table summarizes information about RSUs outstanding:
|
RSUs
2025
|
RSUs
2024
|
RSUs
2023
|
||||||||||
|
Outstanding at beginning of year
|
|
|
|
|||||||||
|
Granted
|
|
|
|
|||||||||
|
Forfeited
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Vested
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
Outstanding at the end of the period
|
|
|
|
|||||||||
The fair value of the options and RSUs granted to employees and directors at the grant date for the years ended December 31, 2025, 2024 and 2023 was $2,964 , $3,953 and $2,320 , respectively.
The options and RSUs of the Company are managed by a trustee.
F - 41
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 20: |
Share‑Based Compensation (Cont.)
|
| 1. |
On February 15, 2023, the Company's Board of Directors approved the grant of
|
| 2. |
On April 3, 2023, the Company's Board of Directors approved the grant of
|
| 3. |
On May 31, 2023 the Shareholders of the Company approved the increase by
|
| 4. |
On May 31, 2023 the Shareholders of the Company approved the extension to the exercise period of options which were granted to certain of the Company’s directors on April 23, 2020 for an additional
|
| 5. |
On August 15, 2023, the Company's Board of Directors approved the grant of
|
| 6. |
On November 20, 2023, the Company's Board of Directors approved the grant of
|
| 7. |
On February 26, 2024, the Company granted
|
| 8. |
On February 11, 2025, the Board of Directors of the Company approved the granting of up to
|
| 9. |
On August 13, 2025, the Board of Directors of the Company approved the granting of up to
|
F - 42
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 20: |
Share‑Based Compensation (Cont.)
|
| 10. |
On November 19, 2025, the Board of Directors of the Company approved the granting of up to
|
The fair value of the Company's share options granted to employees and directors for the years ended December 31, 2025, 2024 and 2023 was estimated using the binomial option pricing and Black-Scholes models using the following assumptions:
|
December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Dividend yield (%)
|
|
|
|
|||||||||
|
Expected volatility of the share prices (%)
|
|
|
|
|||||||||
|
Risk‑free interest rate (%)
|
|
|
|
|||||||||
|
Early exercise factor (%)
|
|
|
|
|||||||||
|
Weighted average share prices (Dollar)
|
|
|
|
|||||||||
Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility (based on the weighted average volatility of the Company’s shares, over the expected term of the options), expected term of the options (based on general option holder behavior and expected share price), expected dividends, and the risk-free interest rate (based on government debentures).
| Note 21: |
Income Tax
|
| a. |
The Company operates in two main tax jurisdictions: Israel and Germany. As such, the Company is subject to the applicable tax rates in the jurisdictions in which it conducts its business.
|
| b. |
Corporate tax rate in Israel:
|
The standard tax rate in the years 2023-2025 is 23
| c. |
Benefits under the Law for the Encouragement of Capital Investments:
|
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the "Investment Law"):
Under the Investment Law, the Company has been granted "Beneficiary Enterprise" status which provides certain benefits, including tax exemptions and reduced tax rates. Income not eligible for Beneficiary Enterprise benefits is taxed at a regular rate.
F - 43
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 21: |
Income Tax (Cont.)
|
During the benefit period, the Company will be tax exempt in the first two years of the benefit period and subject to tax at the reduced rate of 10%- 25% for an additional period of five to eight years (depending on the percentage of foreign investments in the Company) of the benefit period. The benefit entitlement period starts from the first year that the Beneficiary Enterprise first earned taxable income and is limited to 12 years from the year in which the Company requested to have tax benefits apply. In the event of distribution of dividends from the said tax-exempt income, the amount distributed will be subject to corporate tax at the reduced rate ordinarily applicable to the Beneficiary Enterprise's income.
Tax exempt income generated under the Company's "Beneficiary Enterprise" program will be subject to taxes upon dividend distribution or complete liquidation. The entitlement to the above benefits is conditional upon the Company's fulfilling the conditions stipulated by the Investment Law and regulations published thereunder. Should the Company fail to meet such requirements in the future, income attributable to its Beneficiary Enterprise programs could be subject to the statutory Israeli corporate tax rate and the Company could be required to refund a portion of the tax benefits already received, with respect to such programs.
| d. |
The principal tax rates applicable to the subsidiary whose place of incorporation is outside of Israel are:
|
|
The statutory corporate tax rate in Germany was
|
| e. |
Final tax assessments:
|
The Company has finalized its tax assessments through the 2020 tax year.
The Company's subsidiary has received the final tax assessment for the year 2023.
| f. |
Net operating carryforward losses for tax purposes and other temporary differences:
|
As of December 31, 2025, the Company had carryforward losses and other temporary differences mainly from R&D expenses together amounting to approximately $212,973 .
| g. |
Deferred taxes:
|
The Company did not recognize deferred tax assets for temporary differences because their utilization in the foreseeable future is not probable.
F - 44
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 21: |
Income Tax (Cont.)
|
| h. |
Current taxes on income:
|
The Company did not record any current taxes for MediWound Ltd. in Israel for the years ended December 31, 2025, 2024 and 2023 as a result of its carryforward losses.
The current tax expenses are in respect of taxes charged outside of Israel.
| Note 22: |
Supplementary Information to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss
|
| a. | Additional information on Revenues: |
|
Major customers:
MTEC contributed
No other customer contributed 10% or more of the Company’s revenues in 2025, 2024 and 2023.
Geographic information:
The revenues reported in the financial statements are based on the location of the customers, as follows:
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
USA (see also note 18a, 18b, 18c)
|
|
|
|
|||||||||
|
Germany
|
|
|
|
|||||||||
|
Italy
|
|
|
|
|||||||||
|
Spain
|
|
|
|
|||||||||
|
Rest of the world
|
|
|
|
|||||||||
|
|
|
|
||||||||||
F - 45
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 22: |
Supplementary Information to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
|
| b. | Cost of Revenues: |
| 1. |
Cost of Revenues from sale of products
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits (including share-based compensation)
|
|
|
|
|||||||||
|
Subcontractors
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Cost of materials
|
|
|
|
|||||||||
|
Other manufacturing expenses
|
|
|
|
|||||||||
|
Decrease (increase) in inventory of finished products
|
(
|
)
|
|
(
|
)
|
|||||||
|
|
|
|
||||||||||
| 2. |
Cost of Revenues from development services
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits
|
|
|
|
|||||||||
|
Subcontractors
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| 3. |
Cost of Revenues from license agreements and royalties
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits
|
|
|
|
|||||||||
|
Royalties payments
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| c. | Research and development expenses: |
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits (including share-based compensation)
|
|
|
|
|||||||||
|
Subcontractors
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Cost of materials
|
|
|
|
|||||||||
|
Other research and development expenses
|
|
|
|
|||||||||
|
Total Research and development
|
|
|
|
|||||||||
F - 46
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 22: |
Supplementary Information to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
|
| d. | Selling and marketing expenses: |
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits (including share-based compensation)
|
|
|
|
|||||||||
|
Marketing and consulting
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Shipping and delivery
|
|
|
|
|||||||||
|
Registration and marketing license fees
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| e. | General and administrative expenses: |
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Salary and benefits (including share‑based compensation)
|
|
|
|
|||||||||
|
Professional fees
|
|
|
|
|||||||||
|
Depreciation and amortization
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
||||||||||
| f. |
Other (income) expenses:
|
The other one-time income amounted to $211 for the year ended December 31, 2023, was associated with the termination of sublease agreement (see note 10a).
F - 47
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 22: |
Supplementary Information to the Consolidated Statements of Profit or Loss and Other Comprehensive Income or Loss (Cont.)
|
| g. |
Financial income and expense:
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Financial income:
|
||||||||||||
|
Interest income
|
|
|
|
|||||||||
|
Revaluation of Warrants
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Financial expense:
|
||||||||||||
|
Revaluation of liabilities in respect of IIA grants
|
|
|
|
|||||||||
|
Financing income on net investment in lease
|
|
|
|
|||||||||
|
Finance expenses in respect of deferred income
|
|
|
|
|||||||||
|
Revaluation of liabilities in respect of TEVA
|
|
|
|
|||||||||
|
Exchange differences, net
|
|
|
|
|||||||||
|
Revaluation of Warrants
|
|
|
|
|||||||||
|
Other
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Financial income (expenses), net
|
|
(
|
)
|
|
||||||||
| Note 23: | Net Loss Per Share |
| a. |
Details of the number of shares and loss used in the computation of loss per share:
|
|
Year ended December 31
|
||||||||||||||||||||||
|
2025
|
2024
|
2023
|
||||||||||||||||||||
|
Weighted
average
number of shares
|
Loss
|
Weighted
average
number of shares
|
Loss
|
Weighted
average
number of shares
|
Loss
|
|||||||||||||||||
|
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
||||||||||||||
F - 48
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 23: | Net Loss Per Share (Cont.) |
| b. |
Net loss per share:
|
|
Year ended December 31
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Basic and diluted loss per share:
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
In 2025, 2,266,459 warrants, 1,247,308 options and 42,841 RSUs were excluded from the diluted weighted average number of Ordinary Shares calculation as their effect would have been anti-dilutive.
In 2024, 2,523,268 warrants, 1,136,249 options and 48,937 RSUs were excluded from the diluted weighted average number of Ordinary Shares calculation as their effect would have been anti-dilutive.
In 2023, 2,614,297 warrants, 957,487 options and 32,714 RSUs were excluded from the diluted weighted average number of Ordinary Shares calculation as their effect would have been anti-dilutive.
| Note 24: | Balances and Transactions with Related Parties and Key Officers |
| a. |
Related parties consist of:
|
| • |
Clal Biotechnology Industries Ltd.- Related party
|
| • |
Directors of the Company.
|
| 1. |
Balances with related parties:
|
|
Other Payables
|
||||
|
Directors:
|
||||
|
As of December 31, 2025
|
|
|||
|
As of December 31, 2024
|
|
|||
F - 49
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 24: | Balances and Transactions with Related Parties and Key Officers (Cont.) |
| 2. |
Transactions with related parties:
|
|
Rental fee:
|
Year ended December 31
|
|||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Related party
|
|
|
|
|||||||||
|
Professional fee *:
|
Year ended December 31
|
|||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Directors
|
|
|
|
|||||||||
|
Related party
|
|
|
|
|||||||||
|
|
|
|
||||||||||
|
Number of Directors
|
|
|
**
|
|
||||||||
| * |
Not including share-based compensation detailed in note 20.
|
| ** |
During 2023, three members of the board left and one member of the board was replaced. At the end of 2023, the board consisted of five members.
|
| b. |
Key Officers:
|
| 1. |
Balances with Key Officers of the Company
|
|
Other Payables
|
||||
|
Key Officers of the Company
|
||||
|
As of December 31, 2025
|
|
|||
|
As of December 31, 2024
|
|
|||
| • |
Represents the officer’s gross salary plus payments of mandatory social benefits, bonuses, and vacation provisions without share- based compensation.
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F - 50
MEDIWOUND LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements
U.S. dollars in thousands (except of share and per share data)
| Note 24: | Balances and Transactions with Related Parties and Key Officers (Cont.) |
| 2. |
Compensation of Key Officers of the Company:
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The following amounts disclosed in the table are recognized as an expense during the reporting period related to officers:
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Year ended December 31
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2025
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2024
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2023
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Short-term employee benefits
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Share-based compensation
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Number of officers (*)
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(*) During 2023, two key officers were replaced. At the end of 2023, the total key officers was six.
| Note 25: | Subsequent events: |
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1.
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On March 4, 2026, the Company’s Board of Directors approved the grant of
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2.
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On February 28, 2026, Israel and the United States initiated a coordinated military operation in Iran. In response, Iran launched missiles and unmanned aerial vehicles toward Israel and other countries in the region. On March 1, 2026, hostilities further expanded to Lebanon following rocket fire by Hezbollah toward Israel.
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Following the commencement of the operation, Israeli authorities declared a nationwide “essential activity” emergency status, which includes restrictions on educational activities, public gatherings and workplace attendance (other than essential services), as well as an additional mobilization of military reserve forces.
As of the date of approval of these financial statements, the Company is unable to reasonably estimate the potential impact, if any, of these developments on its financial condition, results of operations or cash flows. As of the reporting date and through the date of approval of these financial statements, the Company continues to conduct its commercial and operational activities without material disruption.
F - 51
FAQ
What does MediWound (MDWD) report about its 2025 financial performance?
MediWound reports a net loss of $23.9 million for 2025, reflecting continued investment in development and commercialization. The company also discloses an accumulated deficit of $228.9 million, underscoring its status as a growth-stage biopharmaceutical business focused on enzymatic burn and wound treatments.
How many MediWound (MDWD) shares were outstanding at year-end 2025?
As of December 31, 2025, MediWound had 12,835,148 ordinary shares outstanding. This share count provides investors with a baseline for evaluating per-share metrics, potential dilution from future financings, and the overall equity base supporting the company’s burn and wound-care franchise.
What are the key products and focus areas described in MediWound’s 2025 Form 20-F?
MediWound focuses on enzymatic therapies, led by NexoBrid for eschar removal in severe burns and EscharEx for chronic and hard-to-heal wounds. The filing emphasizes development, regulatory pathways, and commercialization plans across the United States, Europe and additional international markets for these product candidates.
What manufacturing developments does MediWound (MDWD) highlight for NexoBrid and EscharEx?
MediWound reports completion of a new GMP-compliant facility in Yavne, Israel, reaching full operational capacity by late 2025 and expanding NexoBrid output roughly sixfold. Commercial supply still depends on regulatory approvals, and future EscharEx demand will likely require additional manufacturing scale-up and regulatory clearance.
Which partnerships and government contracts are important to MediWound’s strategy?
The company relies on Vericel to commercialize NexoBrid in North America under an exclusive license with milestones and tiered royalties. It also highlights $18.2 million of cumulative funding from MTEC and the U.S. Department of War to develop a temperature-stable NexoBrid formulation for field-care use.
What major risks does MediWound (MDWD) emphasize in its 2025 annual report?
The filing stresses risks around lengthy clinical development, changing regulatory frameworks in the U.S., EU and UK, manufacturing concentration in Israel and reliance on a single Taiwanese supplier, dependence on NexoBrid and EscharEx success, pricing and reimbursement pressures, and extensive healthcare and anti-bribery compliance obligations.
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Mar 5, 2026
MediWound Files Annual Report on Form 20-F
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[6-K] MediWound Ltd. Current Report (Foreign Issuer)