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February 5, 2020
Roni Mamluk
Chief Executive Officer
Ayala Pharmaceuticals, Inc.
Oppenheimer 4
Rehovot 7670104, Israel
Re: Ayala Pharmaceuticals, Inc.
Draft Registration Statement on Form S-1
Submitted January 8, 2020
CIK No. 0001797336
Dear Dr. Mamluk:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. We note your statements indicating that your small molecule therapeutics
are potentially
"best-in-class". This term suggests that your product candidates are
effective, likely to be
approved and favorable as compared to competitive products and product
candidates.
Given the status of development, it is premature and inappropriate for
you to make such
statements or implications at this time. Accordingly, please delete all
references in your
registration statement to your product candidates being potentially
"best-in-class".
2. We note the inclusion of your collaboration program with Novartis in
your pipeline table.
Given the status of development and the limited disclosure on pages
115-116 concerning
the program, it is premature to highlight this program prominently in
your Summary
Roni Mamluk
FirstName LastNameRoni Mamluk
Ayala Pharmaceuticals, Inc.
Comapany NameAyala Pharmaceuticals, Inc.
February 5, 2020
February 5, 2020 Page 2
Page 2
FirstName LastName
pipeline table. Accordingly, please revise to remove this program from
the Summary
table.
3. Please revise your disclosures on pages 2-3 concerning clinical trial
results to indicate
whether the reported results are statistically significant.
4. For each study where you report results concerning efficacy, please
revise to indicate
whether the trials were powered to assess statistical significance for
any endpoints.
5. Revise to explain briefly key measures you cite in this section,
including terms such as
"disease control rate" and "overall response rate." Also, please
ensure that you provide a
balanced presentation of results. In this regard, we note that your
discussion of the interim
Phase 2 ACCURACY trial results highlights the percentage of patients
displaying "partial
responses" and "stable disease" but it does not indicate whether any
patients displayed a
"complete response."
6. We note that your disclosures on page 4 highlight your strategy to
rapidly advance your
clinical development of three programs. With reference to your
disclosures on pages 22
and 102, please revise to highlight in the Summary the risk that you
may not be able to
identify a sufficient number of patients to initiate and complete your
clinical trials in a
timely manner, including with respect to your on-going Phase 2
ACCURACY Trial.
Risk Factors, page 11
7. You may not disclaim responsibility for your disclosures, particularly
as it relates to
interpretations of trial data that you present throughout the
prospectus. Accordingly,
please revise to remove this risk factor. Alternatively, please
explain to us why this risk
factor disclosure is appropriate and discuss your consideration of
Rule 436(a).
8. Please revise the disclosure on page 22 to clarify which "trial" you
may not be able to
initiate by the target date and identify such date.
Use of Proceeds, page 74
9. Please revise to disclose the approximate amount of proceeds that you
intend to allocate
toward the development of each AL101 and AL102 program that you
identify in the
Summary pipeline table. For each program, disclose the trial phase or
phases that you
intend to fund with the proceeds and indicate whether your plans call
for additional
funding to complete that phase or phases. Also tell us whether a
material portion of the
offering proceeds is intended to be allocated to the development of
companion
diagnostics.
Management's Discussion and Analysis
Research and Development Expenses, page 84
10. You disclosed multiple drug candidates with multiple indications and
that research and
development is a significant aspect of your business. Please expand to
provide more
Roni Mamluk
Ayala Pharmaceuticals, Inc.
February 5, 2020
Page 3
detail for your research and development expenses during each period
presented,
including but not limited to, by drug candidates and/or by
indications, as well as by the
nature of the expenses.
Critical Accounting Policies and Use of Estimates, page 87
11. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances, including stock
compensation.
Contractual Obligations, page 91
12. Please tell us what consideration was given to including the future
payments you may
be obligated to pay under the BMS License Agreement in your
contractual obligations
table. Refer to Item 303(a)(5) of Regulation S-K.
Business, page 93
13. For each clinical trial you discuss, please disclose whether there
were treatment-related
serious adverse events and, if so, identify them.
14. Given the status of your clinical development programs, please tell us
the basis for your
claim on page 98 that your GSIs are "highly potent and selective."
15. Please reconcile your disclosure in the final sentence on page 99 with
the two footnotes on
page 100 which indicate that two of the three third-party drug
candidates are not under
active development.
16. Please revise the discussion that accompanies the first table on page
100 to clarify how
these results demonstrate the relative inhibitory potency of your
product candidates and
also discuss why the levels achieved support continued clinical
development. Also,
briefly discuss the term "PDX model" and clarify whether this relates
to a mouse model.
Expanding Our Addressable Patient Population, page 99
17. We note you have entered into a collaboration agreement with ArcherDX,
Inc. Please
revise to discuss the terms of the collaboration and file the
agreement as an exhibit or
explain why it is not a material contract.
License Agreements, page Mamluk
FirstName LastNameRoni 116
Comapany each of your Pharmaceuticals, Inc.
18. For NameAyala license agreements, please revise to clarify the term of
the agreement and
February 5, 2020 Pagethe royalty obligations.
the duration of 3
FirstName LastName
Roni Mamluk
FirstName LastNameRoni Mamluk
Ayala Pharmaceuticals, Inc.
Comapany NameAyala Pharmaceuticals, Inc.
February 5, 2020
Page 4
February 5, 2020 Page 4
FirstName LastName
Choice of Forum, page 157
19. We note that your forum selection provision identifies the Court of
Chancery of the State
of Delaware as the sole and exclusive forum for certain litigation,
including any
"derivative action." Please disclose whether this provision applies to
actions arising under
the Securities Act or Exchange Act. In that regard, we note that
Section 27 of the
Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any
duty or liability created by the Exchange Act or the rules and
regulations thereunder, and
Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts
over all suits brought to enforce any duty or liability created by the
Securities Act or the
rules and regulations thereunder. If the provision applies to
Securities Act claims, please
also revise your prospectus to state that there is uncertainty as to
whether a court would
enforce such provision and that investors cannot waive compliance with
the federal
securities laws and the rules and regulations thereunder.
Financial Statements
Note 2. Significant Accounting Policies
Consolidated Financial Statements in U.S. Dollars, page F-8
20. You disclose that the functional and reporting currency of the company
is the U.S dollar,
while also disclose that a substantial portion of your subsidiary's
expenses are paid in new
Israeli shekels. Please tell us and revise if necessary what you
consider to be the
functional currency for your subsidiary. Refer to ASC 830-10-45-2,
which requires that
the assets, liabilities, and operations of a foreign entity shall be
measured using the
functional currency of that entity.
Note 5. Commitments and Contingent Liabilites, page F-16
21. Please expand your disclosures related to your BMS License Agreement
to clarify the
following:
You disclose that in November 2017 you entered into the BMS License
Agreement
under which BMS granted you a license related to BMS Licensed
Products. In light
of the fact that you issued the shares of Series A Preferred
stock in 2018, disclose
when the license was transferred and, if applicable, why the
license was transferred
before the shares were issued. Supplementally support your basis
for the timing of
your recognition of the related research and development expense;
and
Separately quantify the amount of the fixed upfront payment and the
value of the
Series A convertible preferred shares issued to BMS.
Note 11. Net Loss per Share, page F-26
22. Please revise to disclose the securities that could potentially dilute
basic EPS in the future
that were not included in the computation of diluted EPS because to do
so would have
been antidilutive for the periods presented as required by ASC
260-10-50-1.
Roni Mamluk
Ayala Pharmaceuticals, Inc.
February 5, 2020
Page 5
General
23. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Li Xiao at 202-551-4391 or Jeanne Baker at 202-551-3691
if you have
questions regarding comments on the financial statements and related matters.
Please contact
William Mastrianna at 202-551-3778 or Joseph McCann at 202-551-6262 with any
other
questions.
FirstName LastNameRoni Mamluk Sincerely,
Comapany NameAyala Pharmaceuticals, Inc.
Division of
Corporation Finance
February 5, 2020 Page 5 Office of Life
Sciences
FirstName LastName