Annual Report for Fiscal Year Ending December 31, 2024 (Form 20-F)

Item 5 . Operating and Financial Review and Prospects

You should read the following discussion together with the consolidated financial statements and related notes included elsewhere in this Annual Report. The statements contained in this discussion regarding industry outlook, our expectations regarding our future performance, planned investments in our expansion into additional geographies, research and development, sales and marketing and general and administrative functions as well as other non-historical statements contained in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in Item 3.D. entitled "Risk factors" and "Special note regarding forward-looking statements" included elsewhere in this Annual Report. Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Overview

We are a clinical-stage biotechnology company focused on the discovery and development of innovative therapeutics for fibrotic and inflammatory diseases with high unmet needs. Based on the unique and pivotal role of the soluble protein CCL24 in promoting fibrosis and inflammation, we have developed nebokitug, a monoclonal antibody designed to bind and block CCL24 activity. nebokitug has demonstrated the potential to treat multiple severe and life-threatening fibrotic and inflammatory diseases.

We have pioneered the therapeutic targeting of CCL24, a chemokine also known as eotaxin-2, which promotes various types of cellular processes that regulate inflammatory and fibrotic activities through the CCR3 receptor. CCL24 is expressed in various types of cells, including immune cells, endothelial cells and epithelial cells. We have developed a novel CCL24 inhibiting product candidate with dual anti-fibrotic and anti-inflammatory activity that modulates the complex interplay of these inflammatory and fibrotic mechanisms, which drive abnormal states of fibrosis and fibrotic diseases. This innovative approach is currently being developed for difficult-to-treat rare diseases, also known as orphan indications or diseases, such as primary sclerosing cholangitis (PSC) and systemic sclerosis (SSc) for which patients have no established disease-modifying or standard-of-care treatment options. We estimate that there are approximately 77 thousand patients suffering from PSC in the United States., European Union and Japan, representing a more than $1 billion market opportunity, and approximately 170,000 patients suffering from SSc in those same markets, representing a more than $1.5 billion market opportunity.

Nebokitug, our lead clinical product candidate, is a first-in-class humanized monoclonal antibody that attenuates the basic function of CCL24 as a regulator of major inflammatory and fibrotic pathways. We have demonstrated that nebokitug interferes with the underlying biology of inflammation and fibrosis through a novel and differentiated mechanism of action. We are currently concluding a Phase 2 clinical study of nebokitug in PSC, a rare obstructive and cholestatic liver disease, with sites in the United States, Europe and Israel. Positive topline results from the double-blinded and open label portions of this trial were reported in July, 2024 and March 2025, respectively.

The randomized, placebo-controlled study design included two doses of nebokitug (10 or 20mg/kg) vs placebo, administered once every three weeks for 15 weeks, as well as an open label extension in which all eligible patients could receive nebokitug for an additional 33 weeks. In the Phase 2 study, nebokitug achieved its primary endpoint of safety and tolerability and demonstrated anti-fibrotic, anti-inflammatory and anti-cholestatic effects across a broad range of disease-related secondary efficacy endpoints, including statistically significant improvements in liver stiffness, a key PSC disease marker, after just 15-weeks of treatment. Moreover, nebokitug is among the first investigational drugs to show a reduction in total bilirubin, an important marker of cholestasis and liver health, as well as reductions in pruritus, a cholestatic indicator of great relevance to patients. Nebokitug is the first investigational drug being developed for PSC to exhibit broad, clinically relevant effects on all three components of the disease, establishing clinical proof-of-concept and providing further evidence of its multifactorial mechanism of action and disease-modifying potential. Data from the open label extension portion of the trial was recently reported showing continued safety and anti-fibrotic, anti-inflammatory and anti-cholestatic activity of nebokitug over 48 weeks of treatment . The company had an End of Phase 2 meeting with the FDA in December, 2024 to discuss the Phase 2 SPRING trial results and the path forward to Phase 3 and potential regulatory approval for PSC. Chemomab and the FDA aligned on the design of a single, clinical-events-driven Phase 3 trial. If successful in finalizing a strategic partnership or a major financing, Chemomab could initiate this pivotal trial in PSC before the end of 2025.

The nebokitug SSc clinical program is Phase 2-ready and we have an open IND in the United States for a Phase 2 clinical trial. However, Chemomab has suspended initiation of this study while we focus our resources on the nebokitug PSC program. We believe that nebokitug could have disease-modifying potential in this poorly treated condition. While our primary focus is on these two rare indications, we previously reported results from a completed Phase 2a clinical study in patients with liver fibrosis due to metabolic dysfunction-associated steatohepatitis (MASH). This trial provided safety and pharmacokinetic ("PK") data and information useful for assessing our current subcutaneous formulation of nebokitug. Additionally, the trial measured a number of biomarkers that may be relevant to the activity of nebokitug in other fibro-inflammatory conditions. The results showed that the trial met its primary endpoint of safety and tolerability, and that nebokitug demonstrated consistent data trends and positive activity across secondary endpoints that included a range of liver fibrosis biomarkers and physiologic assessments. A secondary analysis, that further confirmed and extended these initial results was reported at the 2023 EASL Congress in June 2023.

Fibrosis is the abnormal and excessive accumulation of collagen and extracellular matrix, the non-cellular component in all tissues and organs, which provides structural and biochemical support to surrounding cells. When present in excessive amounts, collagen and extracellular matrix lead to scarring and thickening of connective tissues, affecting tissue properties and potentially leading to organ dysfunction and failure. Fibrosis can occur in many different tissues, including lung, liver, kidney, muscle, skin, and the gastrointestinal tract, resulting in a wide array of progressive fibrotic conditions. Fibrosis and inflammation are intrinsically linked. While a healthy inflammatory response is necessary for efficient tissue repair; after disease or injury, an excessive, uncontrolled inflammatory response can lead to tissue fibrosis that in turn can further stimulate inflammatory processes in a fibro-inflammatory vicious cycle.

A. Components of Operating Results

Revenues

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the near future. If development efforts for our product candidates are successful and result in our receipt of necessary regulatory approvals, or if our development efforts otherwise lead to any commercialized products or additional license agreements with third parties, then we may generate revenue in the future from product sales.

We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.

We do not allocate employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these resources are deployed across multiple programs and, as such, the related costs are not separately classified. We use internal resources primarily to oversee our research, as well as for managing our preclinical development, process development, manufacturing and clinical development activities. Our employees work across multiple programs; therefore, we do not track the related expenses by program.

Research and development activities are fundamental to our business. 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. As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue to advance the development of our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, share-based compensation expenses for personnel in executive and administrative functions, insurance and professional fees for legal, consulting, accounting and audit services.

We anticipate that our general and administrative expenses will increase in the future due to increased headcount and professional fees to support our continued research activities and development of our product candidates. We also anticipate that we will continue to incur accounting, audit, legal, regulatory, compliance, director and officer insurance costs, as well as investor and public relations expenses associated with being a public company. Additionally, once we believe that regulatory approval of a product candidate appears likely, we will begin to incur a material increase in payroll and related expenses as a result of preparation for commercial operations, particularly in respect of sales and marketing.

Financing Expenses, Net

Financing expenses, net consist primarily of income or expenses related to revaluation of foreign currencies and interest income on our bank deposits.

Results of Operations

The following table summarizes our results of operations for the years ended December 31, 2024, 2023 and 2022:

Our results of operations have varied in the past and can be expected to vary in the future due to numerous factors. We believe that period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied upon as indications of future performance.

Year ended December 31, 2024, Compared to the Year Ended December 31, 2023

Research and development expenses

Research and development expenses decreased by approximately $7.1 million, or 38%, to approximately $11.3 million for the year ended December 31, 2024, compared to approximately $18.4 million for the year ended December 31, 2023. The decrease resulted due to production for clinical trial done in 2023 and decrease in clinical related expenses due to completion of phase 2 clinical study in Q3 2024.

General and administrative expenses

General and administrative expenses decreased by approximately $3.7 million, or 52%, to approximately $3.4 million for the year ended December 31, 2024, compared to approximately $7.1 million for the year ended December 31, 2023. The decrease was primarily due to a decrease in headcount, professional fees, insurance expenses and share-based compensation.

Financing income, net

Financing income, net, decreased by approximately $444 thousand, or 36%, to net income of $794 thousand for the year ended December 31, 2024, compared to a net income of $1,238 thousand for the year ended December 31, 2023. The decrease was primarily due to a reduction in the amount of deposits and cash and cash equivalents between the periods. Financing income, net for the year ended December 31, 2024, was primarily related to interest income on deposits offset by foreign currency exchange rate differences.

Year ended December 31, 2023, Compared to the Year Ended December 31, 2022

Research and development expenses

Research and development expenses increased by approximately $1.4 million, or 8.3%, to approximately $18.4 million for the year ended December 31, 2023, compared to approximately $17.0 million for the year ended December 31, 2022. The increase resulted primarily from an increase in from a continued investment in the clinical programs of the Company.

General and administrative expenses

General and administrative expenses decreased by approximately $4.5 million, or 38.8%, to approximately $7.1 million for the year ended December 31, 2023, compared to approximately $11.6 million for the year ended December 31, 2022. This decrease was primarily due to decrease in headcount and professional fees and insurance expenses and share-based compensation.

Financing income, net

Financing income, net, increased by approximately $885 thousand, or 251%, to net income of $1,238 thousand for the year ended December 31, 2023, compared to a net income of $353 thousand for the year ended December 31, 2022. Financing income , net for the year ended December 31, 2023, was primarily related interest income on deposits offset by foreign currency exchange rate differences.

Taxes on Income

The tax benefit in 2022 is related to a tax return of Chemomab Therapeutics Inc., a wholly owned subsidiary of ours, derived by carryback of net operating losses

Cash Flows

The following table summarizes our cash flows for the years ended December 31, 2024, 2023 and 2022:

Year ended December 31, 2024, Compared to the Year Ended December 31, 2023

Operating activities

Net cash used in operating activities for the year ended December 31, 2024, was approximately $15 million and included net loss of $13.9 million, and by net cash used by changes in operating assets and liabilities of approximately $2.1 million offset by non-cash charges of $0.7 million, which mainly included share-based compensation expenses.

Net cash used in operating activities for the year ended December 31, 2023, was approximately $23.6 million and included net loss of $24.2 million, partially offset by net cash used by changes in operating assets and liabilities of approximately $0.9 million and non-cash charges of $1.6 million, which mainly included share-based compensation expenses.

Investing activities

Net cash provided by investing activities for the year ended December 31, 2024, was approximately $2.3 million, due to decrease in short term deposits.

Net cash provided in investing activities for the year ended December 31, 2023, was $15.9 million, due to decrease in short term deposits.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2024, was approximately $9.9 million due to proceeds from issuance of shares net of issuance costs.

Net cash provided by financing activities for the year ended December 31, 2023, was $3.5 million, consisting of $2.9 million of proceeds from issuance of shares net of issuance costs , $0.6 of proceeds from the sale of treasury shares.

Year ended December 31, 2023, Compared to the Year Ended December 31, 2022

Operating activities

Net cash used in operating activities for the year ended December 31, 2023, was approximately $23.6 million and included net loss of $24.2 million, partially offset by net cash used by changes in operating assets and liabilities of approximately $0.9 million and non-cash charges of $1.6 million, which mainly included share-based compensation expenses.

Investing activities

Net cash provided by investing activities for the year ended December 31, 2023, was $15.9 million, which was primarily related to funds received from bank deposits.

Net cash provided by investing activities for the year ended December 31, 2022, was approximately $19.5 million, which was primarily related to investment in short-term deposits offset by purchasing of fixed assets.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2023, was approximately $3.5 million, consisting of $2.9 million of proceeds from the sale of ADSs, $0.6 of proceeds from the sale of treasury shares.

Net cash used in financing activities for the year ended December 31, 2022, was approximately $0.8 million, consisting of $0.3 million of proceeds from the sale of ADSs, $0.14 million of proceeds from the exercise of stock options offset by the repurchase of shares in the amount of $1.2 million.

Funding Requirements

We expect our expenses to increase substantially as we advance the clinical trials of our product candidate. In addition, we expect to continue to incur additional costs associated with operating as a public company.

We believe that our existing cash, cash equivalents and bank deposits will enable us to fund our operating expenses and capital expenditure requirements through March 31, 2026. This means that there is a substantial doubt about our ability to continue as a going concern, and that we will be required to raise additional funds to support our operations and continue as a going concern. While we believe that we can raise additional funds, there can be no assurance that these efforts will be successful or sufficient. We have based these estimates on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we expect. If we receive regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution.

Until such time, if ever, that we generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through the sales of our securities and through other outside funding sources. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government and other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, then we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, then we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market.

B. Liquidity and Capital Resources

In connection with the Merger, on March 15, 2021, we entered into Securities Purchase Agreements with certain investors, pursuant to which we agreed to sell approximately $45.5 million of the ADSs in a private placement transaction (the Private Placement). The Private Placement closed on March 22, 2021, at which time we sold 2,619,270 ADSs together with warrants to purchase up to 261,929 ADSs at an exercise price of $17.35 per ADS. The warrants expire five years from the date of issuance, and, if exercised in full, will provide proceeds of approximately $4.5 million.

On April 30, 2021, we entered into the Sales Agreement with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, we may offer and sell, from time to time, ADSs having an aggregate offering price of up to $75 million through Cantor (the "Cantor ATM Facility"). Sales of ADSs, if any, under the Sales Agreement will be issued and sold pursuant to our Registration Statement on Form S-3 which was declared effective on May 17, 2021, and will be made in sales deemed to be an "at the market offering" as defined in Rule 415(a)(4) promulgated under the Securities Act. Pursuant to the Sales Agreement, Cantor has agreed to act as sales agent on a best efforts basis and use commercially reasonable efforts to sell on our behalf all of the ADSs we requested to be sold in accordance with the Sales Agreement, consistent with Cantor's normal trading and sales practices, on mutually agreed terms.

On April 25, 2022, we filed a prospectus supplement with the SEC for the issuance and sale of up to $18,125,000 of ADSs in connection with the reactivation of the Cantor ATM Facility and pursuant to General Instruction I.B.6 of Form S-3, which, subject to certain exceptions, limits the amount of securities we are able to offer and sell under such registration statement during any twelve month period to one-third of our unaffiliated public float.

In October 2023, we entered into an At the Market Offering Agreement (the "Roth ATM Agreement") with Roth Capital Partners, LLC, ("Roth"). Pursuant to the Roth ATM Agreement, we may offer and sell, from time to time, our ADSs having an aggregate offering price of up to $2,863,664 through Roth or the Roth ATM Agreement (the "Roth ATM Facility"). Accordingly, in October 2023, we filed a prospectus supplement with the SEC for the issuance and sale of up to $2,863,664 of our ADSs in connection with the reactivation of the Roth ATM Facility.

On November 15, 2024, we filed a prospectus supplement with the SEC for the issuance and sale of up to $8,626,564 of ADSs in connection with the Roth ATM .Facility and pursuant to General Instruction I.B.6 of Form S-3, which, subject to certain exceptions, limits the amount of securities we are able to offer and sell under such registration statement during any twelve month period to one-third of our unaffiliated public float.

On July 25, 2024, we entered into a Securities Purchase Agreement with the Purchasers as identified therein, pursuant to which we sold to the Purchasers: (i) 4,148,867 ADSs, at a purchase price of $1.235 per ADS; and (ii), in lieu of ADSs, Pre-Funded Warrants to purchase up to 3,948,300 ADSs at a purchase price of $ 1.2349 per warrant (the July 2024 Private Placement). The Pre-Funded Warrants will have an exercise price of $0.0001 per ADS, be immediately exercisable and remain exercisable until exercised in full. The July 2024 Private Placement closed on July 30, 2024, and we received gross proceeds from the July 2024 Private Placement of approximately $10.0 million before deducting any offering expenses. On August 23, 2024, we filed a Registration Statement on Form F-3 with the SEC for the issuance and sale of the 8,097,167 of ADSs sold to the Purchasers in the July 2024 Private Placement.

During the year ended December 31, 2022, we sold 130,505 ADSs at an average price of USD 2.11 per ADS, through the Cantor ATM Facility, resulting in gross proceeds of $275,000.

During the year ended December 31, 2023, we sold 1,800,000ADSs at an average price of USD 0.96 per ADS, through the Roth ATM Facility, resulting in gross proceeds of USD1.73 million and 772,900 ADSs at an average price of USD 1.83 per ADS, through the Cantor ATM Facility, resulting in gross proceeds of approximately USD1.4 million

During the year ended December 31, 2023, we sold 582,023 ADSs which were held in treasury for consideration of approximately $580 thousand.

During the year ended December 31, 2024, we sold 503,009 ADSs at an average price of USD 1.65 per ADS, through the Roth ATM Facility, resulting in gross proceeds of approximately $0.8 million shown in the accompanying consolidated financial statements, we have incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit as of December 31, 2024, of $102.6 million. We have financed operations to date primarily through public and private placements of equity securities. We anticipate that we will continue to incur net losses for the foreseeable future. We believe that our existing cash, cash equivalents and bank deposits will be sufficient to fund our projected cash needs through March 31, 2026. To meet future capital needs we would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be available to us on favorable terms or at all. Our failure to obtain sufficient funds on commercially acceptable terms when needed would have a material adverse effect on our business, results of operations and financial condition.

Current Outlook

We estimate that our current liquidity resources will allow us to execute our business plans through March 31, 2026.

Developing drugs, conducting preclinical and clinical trials, obtaining commercial manufacturing capabilities and commercializing products is expensive, and we will need to raise substantial additional funds to achieve our strategic objectives. We will require significant additional financing in the future to fund our operations, including if and when we progress into clinical trials of our product candidates, obtain regulatory approval for one or more of our product candidates, obtain commercial manufacturing capabilities and commercialize one or more of our product candidates. Our future capital requirements will depend on many factors, including, but not limited to:

•	our ability, or that of our collaborators, to achieve development milestones, marketing approval and other events or developments under potential future licensing agreements;

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through capital raising or by out-licensing and/or co-developing applications of one or more of our product candidates. We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of or eliminate research or development plans for, or commercialization efforts with respect to, one or more of our product candidates and make the necessary change to our operations to reduce the level of our expenditures in line with available resources.

We are a development-stage company and it is not possible for us to predict with any degree of accuracy the outcome of our research and development efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources, or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However, to the extent possible, certain trends, uncertainties, demands, commitments and events are described in this item.

C.	Research and Development, Patents and Licenses

For information concerning our research and development policies and a description of the amount spent during each of the last three fiscal years on company-sponsored research and development activities, see "Item 5. Operating and Financial Review and Prospects-Results of Operations."

D.	Trend Information

Other than 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, 2024 to December 31, 2024 that are reasonably likely to have a material adverse effect on our revenue, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial condition.

E.	Critical Accounting Estimates

Our financial statements are prepared in accordance with generally accepted accounting principles in the United States (GAAP). The preparation of our financial statements and related disclosures in accordance with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are 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. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in more detail in Note 2 to our consolidated financial statements