VBI Vaccines (VBIVQ) Risk Factors

During the 12-month period ended April 12, 2024, our common shares traded as high as $4.45 per share and as low as $0.45 per share. The market prices of our common shares may continue to be volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following: - future announcements about us, our collaborators, or competitors, including the results of testing, technological innovations, or new products and services;         - clinical trial results;         - depletion of cash reserves;         - additions or departures of key personnel;         - operating results that fall below expectations;         - announcements by us relating to any strategic relationship;         - sales of equity securities or issuance of additional debt;         - industry developments;         - changes in state, provincial, or federal regulations affecting us and our industry;         - the continued large fluctuations in major stock market indexes which causes investors to sell our common shares;         - economic, political, and other external factors; and         - period-to-period fluctuations in our financial results. Furthermore, the stock market in general and the market for biotechnology companies, in particular, have from time-to-time experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common shares.

On November 1, 2023, we received a letter from the Listing Qualifications Department of Nasdaq indicating that, based upon the closing bid price of our common shares for the 30 consecutive business day period between September 19, 2023 through October 31, 2023, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that we will be provided with the Compliance Period, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). In order to regain compliance with Nasdaq's minimum bid price requirement, our common shares must maintain a minimum closing bid price of $1.00 for a minimum of ten consecutive business days during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for Nasdaq, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common shares will be subject to delisting. We have not regained compliance as of the date of this Form 10-K. If we fail to regain compliance during the Compliance Period or any subsequent grace period granted by Nasdaq, our common shares will be subject to delisting by Nasdaq. We would then be permitted to appeal any delisting determination to a Nasdaq Hearings Panel. Our common shares would remain listed on Nasdaq pending the panel's decision after the hearing. If we do not appeal the delisting determination, or do not succeed in such an appeal, we may list our common shares on an over-the-counter exchange. Any delisting could seriously decrease or eliminate the value of an investment in our common shares and result in significantly increased uncertainty as to the Company's ability to raise additional capital. To resolve the noncompliance, we may consider available options including a reverse share split, which may not result in a permanent increase in the market price of our shares, which is dependent on many factors, including general economic, market and industry conditions and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission (the "SEC"). It is not uncommon for the market price of a company's shares to decline in the period following a reverse share split. For example, we did not meet the minimum bid price for the period between May 18, 2022 to June 30, 2022, and we effected the Reverse Stock Split in April 2023 with the primary intent of increasing the price of our common shares immediately following the Reverse Stock Split to regain compliance with the minimum bid price requirement, and regained compliance in April 2023. It cannot be assured that any future reverse stock split will result in any sustained proportionate increase in the market price of our common shares, which is dependent upon many factors, including the business and financial performance of the company, general market conditions, and prospects for future success, which are unrelated to the number of shares of our common shares outstanding. It is not uncommon for the market price of a company's common shares to decline in the period following a reverse stock split. Although we expect to take actions intended to restore our compliance with the listing requirements, we can provide no assurance that any action taken by us would be successful, that we would successfully maintain compliance with the minimum bid price requirement or any of Nasdaq's other listing requirements or that any such action would stabilize the market price or improve the liquidity of our shares. Should a delisting occur, an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our shares, and our ability to raise future capital through the sale of our shares could be severely limited.

From time to time, certain of our shareholders may be eligible to sell all or some of their restricted common shares by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended, subject to certain limitations. In general, pursuant to Rule 144, non-affiliate shareholders may sell freely after six months, subject only to the current public information requirement (which disappears after one year). Of the 23,918,983 common shares outstanding as of December 31, 2023, approximately 95.41% common shares are held by "non-affiliates," all of which are currently freely tradable either because those were issued in a registered offering or pursuant to Rule 144. Any substantial sale of our common shares pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our common shares. In addition, as of December 31, 2023, we had outstanding options, awards, convertible debt, and warrants for the purchase of 16,323,250 common shares. Of this amount, options, awards, convertible debt, and warrants for the purchase of 14,642,758 common shares are held by non-affiliates, who may sell these shares in the public markets from time to time, without limitations on the timing, amount, or method of sale. If our share price rises, the holders may exercise their options and sell a large number of shares. This could cause the market price of our common shares to decline.

We are currently a "smaller reporting company" as defined by Rule 12b-2 of the Exchange Act. For as long as we continue to be a "smaller reporting company", we may take advantage of exemptions from various reporting requirements that are applicable to other public reporting companies that are not smaller reporting companies, including providing simplified executive compensation disclosures in our filings and having certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in our annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects. We will remain a smaller reporting company so long as (1) the value of our common shares held by non-affiliates is less than $250,000 as measured on the last business day of our second fiscal quarter, or (2) our annual revenues are less than $100,000 during the most recently completed fiscal year and the value of our common shares held by non-affiliates is less than $700,000 as measured on the last business day of our second fiscal quarter. Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management's assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor provide an attestation of our management's assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period. We cannot predict if investors will find our securities less attractive because we may rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the price of our securities may be more volatile.

We are governed by the BCBCA and other relevant laws, which may affect the rights of shareholders differently than those of a company governed by the laws of a U.S. jurisdiction, and may, together with our charter documents, including the advance notice provisions in our articles for the nomination of directors, have the effect of delaying, deferring, or discouraging another party from acquiring control of our company by means of a tender offer, a proxy contest, or otherwise, or may affect the price an acquiring party would be willing to offer in such an instance. The material differences between the BCBCA and Delaware General Corporation Law ("DGCL"), that may have the greatest such effect include, but are not limited to, the following: (i) for material corporate transactions (such as mergers and amalgamations, other extraordinary corporate transactions or amendments to our articles) the BCBCA generally requires a two-thirds majority vote by shareholders, whereas DGCL generally only requires a majority vote; and (ii) under the BCBCA a holder of 5% or more of our common shares can requisition a special meeting of shareholders, whereas such right does not exist under the DGCL.

We are required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to a publicly traded U.S. domestic issuer. The obligations of being a public reporting company require significant expenditures, including costs resulting from public company reporting obligations under the Exchange Act and the rules and regulations regarding corporate governance practices, including those under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the listing requirements of Nasdaq. These rules require the establishment and maintenance of effective disclosure and financial controls and procedures, internal control over financial reporting and corporate governance practices, among many other complex rules that are often difficult and time consuming to implement, monitor, and maintain compliance with. Moreover, despite recent reforms made possible by the JOBS Act, the reporting requirements, rules, and regulations will make some activities more time-consuming and costly, particularly after we are no longer an "emerging growth company." In addition, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance. Compliance with such requirements also places significant demands on our management, administrative, operational, internal audit, and accounting resources. As a result, we incur, and we expect to continue to incur, legal and financial compliance costs and some activities are highly time consuming and costly.

Our consolidated balance sheet contains approximately $36,499 of intangible assets. For IPR&D assets, which consist of the CMV and GBM programs, the risk of failure is significant, and there can be no certainty that these assets ultimately will yield successful products. The nature of our business is high-risk and requires that we invest in a large number of projects in an effort to achieve a successful portfolio of approved products. Our ability to realize value on these significant investments is often contingent upon, among other things, regulatory approvals, availability of resources, and market acceptance. These IPR&D and goodwill assets may become impaired and be written off at some time in the future, which can have a material adverse effect on the financial statements. While all intangible assets can face events and circumstances that can lead to impairment, in general, intangible assets that are most at risk of impairment include IPR&D assets. IPR&D assets are high-risk, as research and development is an inherently risky activity. For the year ended December 31, 2023, we recognized a non-cash, pre-tax IPR&D impairment charge of $22,600, specifically attributable to the congenital CMV asset. In the event we continue to experience challenging market conditions, insufficient internal resources due to competing programs, and changes in the competitive and technological landscape for our IPR&D assets, this may give rise to additional triggering events that may require the Company to record further impairment charges on our IPR&D assets and/or goodwill in the future.

We have incurred significant net losses and negative operating cash flows since inception. We incurred net losses of approximately $92,836 and $113,303 for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of?$582,445 and cash of $23,685. Cash outflows from operating activities were $60,883 for the year ended December 31, 2023. Our income generating activities have been from sales of PreHevbrio in the U.S., PreHevbri in Europe, and Sci-B-Vac in Israel, which have generated a limited number of sales to-date, fees from research and development services, and revenue from partnership collaborations. We expect to incur significant operating losses for the next several years as we support the continued commercialization activities of our 3-antigen HBV vaccine, advance other pipeline candidates into and through clinical development, including our GBM vaccine immunotherapeutic candidate, prophylactic coronavirus vaccine program candidates, and CMV candidate, complete clinical trials, and seek regulatory approval. Because of the numerous risks and uncertainties associated with developing and commercializing pharmaceutical products, as well as those related to our expectations for the Brii Collaboration Agreements, we are unable to predict the extent of any future losses or guarantee when, or if, our company will become profitable or cash flow positive. If we never achieve profitability or positive cash flows, or achieve either later than we anticipate, you may lose some or all of your investment in us.

In its report dated April 16, 2024, EisnerAmper LLP, our independent registered public accounting firm, expressed substantial doubt about our ability to continue as a going concern as we have suffered recurring losses from operations and have insufficient liquidity to fund our future operations. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment. As of December 31, 2023, we had $23,685 of cash. Based on our available cash at December 31, 2023, together with the net proceeds from the April 2024 Offering, in order to continue to fund our operations, we must raise additional equity or debt capital in the near term and cannot provide any assurance that we will be successful in doing so. If we are unable to obtain additional financing in the near future, we may be required to pursue a reorganization proceeding, including under applicable bankruptcy or insolvency laws. Holders of our common shares will likely not receive any value or payments in a restructuring or similar scenario. In the event we pursue bankruptcy protection, we will be subject to the risks and uncertainties associated with such proceedings. There can be no guarantees that if we seek bankruptcy protection, we will emerge from bankruptcy protection as a going concern or that holders of our common shares will receive any recovery from any bankruptcy proceedings.

Pursuant to the Brii Purchase Agreement, subject to achievement of certain activities, in consideration for the sale, transfer, conveyance and assignment to Brii Bio of substantially all of the intellectual property related to VBI-2601 owned by us and VBI Cda, we received the Note with an initial principal amount of $2,500, which shall be increased by $7,500, up to total principal amount of $10,000, upon our obtaining the applicable consents under the Amended and Restated Ferring License Agreement. Additionally, pursuant to the Side Letter, upon completion of the Essential Activities, the principal amount of the Note may be further increased to up to $18,000 in principal amount. The entry by VBI Cda and Brii Bio into the Brii License Agreement, pursuant to which VBI Cda will grant Brii Bio an exclusive license to the GBM program (VBI-1901) for development and commercialization in the APAC region (excluding Japan), for a secured promissory note in the principal amount of $5,000, and the closing of the transactions pursuant to the Rehovot Purchase Agreement, for consideration of $10,000, are subject to the terms and conditions therein and our completion of the Essential Activities. There can be no assurances that we will be able to obtain the applicable consents under the Brii License Agreement or that we complete any or all of the Essential Activities pursuant to the Side Letter. If we are unable to obtain the applicable consents under the Brii License Agreement or complete the Essential Activities, the amount of consideration we may receive from the completion of the transactions contemplated by various agreements with Brii Biosciences may be reduced, and as such our obligations due under the Loan Agreement would only be reduced by the corresponding amount, which in turn will affect our liquidity position, financial condition, business and results of operation After the Forbearance Expiration Date, we will additionally be obligated to maintain a minimum cash amount in collateral accounts for the benefit of the Secured Parties equal to our obligations due under the Loan Amendment at all times. If the Loan Agreement is not reduced by the full potential aggregate consideration we may receive from completion of the transactions contemplated by various agreements entered into with Brii Bio in February 2024, we will be required to maintain a greater amount of cash in such collateral accounts, which may in turn reduce our capital available to fund our business, operations, and research and development of our products, among others, and have an adverse effect on our liquidity position. There can be no assurance that additional financing we will need to maintain the minimum cash amount will be available to us in the future, or if it is, that it will be available at terms acceptable to us, or that the issuance of any equity securities or securities convertible into equity securities in such financing would not cause the percentage ownership of our shareholders to be diluted, among others.

In order to raise additional funds to support our operations, we may sell additional equity or debt securities, which may impose restrictive covenants that adversely impact our business. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to expand our operations or otherwise capitalize on our business opportunities due to such restrictions, our business, financial condition and results of operations could be materially adversely affected.

Our revenue generating activities include product sales and research and development services pursuant to fee for service agreements, collaboration agreements, and certain governmental research and development grants. However, our revenues have not been significant to date. Our long-term success and ability to continue as a going concern is dependent upon obtaining sufficient capital to fund the research and development of our products, to bring about their successful commercial release, if approved, to generate revenue, and, ultimately, to attain profitable operations or alternatively advance the products and technology to such a point that an acquirer would find attractive. We face substantial demand on our cash resources to fund operations and our growth plans in the future. To date, we have been able to obtain financing; however, there is no assurance that financing will be available in the future, or if it is, that it will be available at terms acceptable to us. Moreover, the purchase agreement for the April 2024 Offering prohibits us from issuing common shares or common share equivalents for 30 days, subject to certain exceptions. Additional financings may be effected through debt financing and/or the issuance of equity securities, there being no assurance that any type of financing on terms acceptable to us will be available or otherwise occur. Debt financing must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all of our assets. Any equity financing or debt financing that requires the issuance of equity securities or securities convertible into equity securities would cause the percentage ownership of our shareholders to be diluted, which dilution may be substantial. Also, any additional equity securities issued may have rights, preferences, or privileges senior to those of existing shareholders. Furthermore, if we issue additional securities, whether equity or debt, or if investors believe we may issue additional securities, the market price of our common shares could decline. If such financing is not available when required or is not available on acceptable terms, we may be required to reduce or eliminate certain pipeline candidates and development activities, and it may ultimately require us to suspend or cease operations, which could cause investors to lose the entire amount of their investment.

Regulatory approval to market a given medical product in a given country does not guarantee that the product will be accepted by the medical community or successful in generating revenue in the applicable market. Accordingly, the commercial success of our current and future products, as applicable, depends and will depend on, among other things, their acceptance by physicians, patients, third-party payers such as health insurance companies and other members of the medical community as a prophylaxis or therapeutic and a cost-effective alternative to competing products. If our products fail to gain market acceptance, we may be unable to earn sufficient revenue to continue our business. Market acceptance of, and demand for, any product that we currently market or may commercialize in the future depends on many factors, including: - our ability to provide acceptable evidence of safety and efficacy;- the prevalence and severity of adverse side effects;         - whether our vaccines are differentiated from other vaccines based on immunogenicity or convenience;         - availability, relative cost, and relative efficacy of alternative and competing vaccines or treatments;         - the effectiveness of our marketing and distribution strategy;         - publicity concerning our products or competing products and treatments; and         - our ability to obtain sufficient third-party insurance coverage or reimbursement. If our products do not become widely accepted by physicians, patients, third-party payers and other members of the medical community, our business, financial condition, and results of operations would be materially and adversely affected.

The marketing, promotional, and business practices of pharmaceutical and biologics companies are subject to extensive regulation, the enforcement of which may result in the imposition of civil and/or criminal penalties, injunctions, and/or limitations on marketing practices for some of our products. There is no official FDA definition of "promotion," but FDA regulations, guidance documents, and enforcement actions make clear that the FDA takes a broad view of the term. Promotional materials include any written, oral, graphic, or broadcast material made and distributed to consumers by a company or its agents with the intent to proactively communicate certain attributes (e.g., use/indication, safety, effectiveness, etc.) of a given drug or biologic product. Examples include presentations, posters, brochures, notes, e-mail messages (external), blog postings, corporate websites, social media posts, videos, oral representations made by company representatives, product samples, reprints of scientific, and medical articles, among others. To be lawful, promotions, at a minimum, must: - be consistent with, and not contrary to, labeling;         - present "fair balance" between risks and benefits;         - be truthful and not false or misleading;         - be adequately substantiated (when required); and         - include adequate directions for use. Aside from off-label promotion, a lack of fair balance between risk information and benefit information has been among the highest enforcement priorities for the FDA in this context. We may also be subject to enforcement action in connection with any promotion of an investigational product. Under the Food, Drug, and Cosmetic Act, a sponsor or investigator, or any person acting on behalf of a sponsor or investigator, shall not represent in a promotional context that an investigational new drug is safe or effective for the purposes for which it is under investigation or otherwise promote the product candidate. The most common factors that trigger FDA enforcement actions for unauthorized promotion of an investigational drug include: - absence of clear and prominent statement on investigational status;         - use of trade name pre-approval (without adequate clarification as to status);         - lack of separation between information on investigational and approved products;         - characterizations and descriptions of a promotional nature that are phrased as established facts (e.g., "long actions," "tamper-resistant," "next generation"); and         - presentation of information in a manner that visually suggests it is an approved product (e.g., under a heading titled "Products"). Any enforcement action or lawsuit brought against us in connection with alleged violations of applicable promotion requirements, or prohibitions, could harm our business and our reputation, as well as the reputation of any then approved products we may promote or commercialize.

Since we have obtained FDA approval to commercialize PreHevbrio, our operations are directly and indirectly, through our relationships with third parties, such as, healthcare providers, customers, and third-party payors, subject to various federal and state fraud and abuse laws, including, without limitation the following: - the federal anti-kickback statute (and state equivalents), which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or the purchase, order or recommendation of, any item or service that is reimbursable, in whole or in part, by a federal healthcare program such as the Medicare and Medicaid programs;         - the federal physician self-referral law, commonly known as the "Stark Law" (and state equivalents), which prohibits a physician from making a referral for certain designated health services covered by the Medicare program if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls within an applicable exception to the prohibition;         - the federal False Claims Act and related laws (and state equivalents) that prohibit and impose liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;         - the so-called qui tam provisions of the federal and state False Claims Act, which permit whistleblowers to sue in the name of the federal or state governments' healthcare providers and others for alleged violations of those laws and which permit whistleblowers to obtain a reward for bringing the case. These qui tam cases have been on the rise in recent years;         - federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;         - the federal transparency requirements under the Affordable Care Act, including the provisions commonly referred to as the Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or Children's Health Insurance Program to report annually to the Centers for Medicare & Medicaid Services information related to payments and other transfers of value to physicians and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members;         - the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;- the Prescription Drug Marketing Act, as amended, which governs the distribution of prescription drug samples to healthcare practitioners;         - the fraud and abuse provisions of the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH"), and its implementing regulations (collectively "HIPAA"), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made in 2013 to HIPAA under the Health Information Technology for Economic and Clinical Health Act, which strengthens and expands HIPAA privacy and security compliance requirements, increases penalties for violators, extends enforcement authority to state attorneys general, and imposes requirements for breach notification;         - analogous state laws and regulations, including (among others) state anti-kickback, self-referral, and false claims laws, which may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S. federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information and that require tracking gifts and other remuneration and items of value provided to healthcare professionals and entities; state and local laws that require the registration of pharmaceutical sales representatives; and         - state and local law equivalents of HIPAA related to the privacy and security of patient information in certain circumstances, which are typically not preempted by HIPAA and may apply more broadly, and/or contain different, potentially more stringent, restrictions and obligations, than HIPAA thus complicating compliance efforts. Further, the Affordable Care Act, among other things, amended the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity can be found guilty of fraud or false claims under the Affordable Care Act without actual knowledge of the statute or specific intent to violate it. In addition, the Affordable Care Act provides that 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 statutes. Ensuring that our activities and business arrangements with third parties comply with applicable healthcare laws and regulations generally comes with substantial costs, as does, possibly to an even greater degree, any actual or alleged failure to comply with such laws. Possible sanctions for violation of the applicable fraud-and-abuse laws may include monetary fines, civil, and criminal penalties, exclusion from Medicare, Medicaid, and other government programs, forfeiture of amounts collected in violation of such prohibitions, individual imprisonment, additional reporting obligations, and oversight (if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws), and the curtailment or restructuring of our operations. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against such claims, could result in a material adverse effect on our reputation, business, results of operations, and financial condition. In addition, there has been an increase in federal and state regulation of payments made to physicians and teaching hospitals for marketing, medical directorships, and other purposes. These laws and any other similar initiatives, including, among many others, legislation requiring publication of drug costs, could materially and adversely impact our business, financial condition and results of operations. The scope and enforcement of these laws is uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. We are not able to predict the impact on our business of any changes in these laws. Federal or state regulatory authorities may challenge our future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, results of operations and financial condition. Any state or federal regulatory review of the Company, regardless of the outcome, would be costly and time-consuming. Our business, and our current and future activities and products are also subject to equivalent healthcare-related laws and regulations of applicable foreign countries, provinces, and/or any other applicable jurisdictions in which we currently operate or may operate in the future. There can be no assurance that the potential compliance obligations of any such foreign laws, and any corresponding consequences of noncompliance, will be similar to those of U.S. fraud and abuse laws. In addition to the spectrum of potentially serious consequences that could result from our noncompliance with any such applicable laws or regulations, our global compliance efforts currently, and will continue to, require a significant commitment of our time, efforts, and money.

In the U.S., there have been a number of legislative and regulatory initiatives focused on containing the cost of healthcare. The federal Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the "ACA"), for example, substantially changed the way healthcare is financed by both governmental and private insurers. The ACA contains a number of provisions that could impact our business and operations, in both foreseeable and unforeseeable ways. ACA provisions that may affect our business include those governing enrollment in federal healthcare programs, reimbursement changes, rules regarding prescription drug benefits under health insurance exchanges, expansion of the 340B program, expansion of state Medicaid programs, and fraud and abuse enforcement. Such changes may impact existing government healthcare programs, industry competition, formulary composition, and may result in the development of new programs, including Medicare payment for performance initiatives, health technology assessments, and improvements to the physician quality reporting system and feedback program. Since its enactment, there have been numerous executive, judicial, and legislative challenges to the ACA, including several efforts to repeal or replace certain elements thereof, such as, for example, the lawsuit brought by the State of Texas (and others) challenging the constitutionality of the ACA after the so-called "Individual Mandate" was repealed by Congress, which was ultimately unsuccessful, as the Supreme Court ordered its dismissal in June 2021. While it appears that the ACA will remain intact, in its current form, for now, we cannot predict whether, or to what extent, it will undergo additional challenges and/or amendments in the future or the impact any such efforts will have on our business and financial results. Various additional federal reform measures have been introduced in recent years, focusing on healthcare and drug pricing, in particular. For example, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021, and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. On the legislative front, the American Rescue Plan Act of 2021 was signed into law on March 11, 2021, which, in relevant part, eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug's average manufacturer price, for single source drugs and innovator multiple source drugs, beginning January 1, 2024. And, in July 2021, the Biden administration released an executive order entitled, "Promoting Competition in the American Economy," with multiple provisions aimed at prescription drugs. In response, on September 9, 2021, HHS released a "Comprehensive Plan for Addressing High Drug Prices" that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. Additionally, in August 2022, the Inflation Reduction Act ("IRA") was signed into law, which will, among other things, allow U.S. Department of Health and Human Services ("HHS") to negotiate the selling price of certain drugs and biologics that the Centers for Medicare & Medicaid Services ("CMS") reimburses under Medicare Part B and Part D, although only high-expenditure single-source drugs that have been approved for at least 7 years, or 11 years for biologics, can be selected by CMS for negotiation, with the negotiated price taking effect two years after the selection year. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Beginning in October 2023, the IRA will also penalize drug manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. In foreign healthcare markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. We cannot predict how our business will ultimately be affected by existing healthcare reform measures or what new statutory, regulatory, and/or administrative initiatives may be adopted in the future. However, we expect there to be continued, or increased, downward pressure on drug pricing in most, if not all, jurisdictions in which we currently, or may in the future, market one or more biological products. Any and all current and future reform measures at any level and in any country could result in, among other things, reduced demand for or market acceptance of our current and future (if any) products. If we or any third parties we may engage are slow or unable to adapt to changes in the applicable regulatory landscape or the adoption of new requirements and/or policies, or if we or such third parties are not able to maintain regulatory compliance, the success of our products and development pipeline will likely suffer, and we may have greater difficulty achieving or sustaining profitability.

Even if our clinical trials are completed as planned, we cannot be certain that the FDA or other foreign regulatory authorities will agree with our conclusions regarding them, which may prevent us from receiving regulatory approvals, may restrict what data is included in the prescribing information and indication if approved, and may prevent us from developing differentiated and meaningful promotional claims as part of the marketing and commercialization of approved products. Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies. The clinical trial process may fail to demonstrate that our pipeline candidates are safe and effective for the proposed indicated uses. If the FDA or foreign regulatory authorities conclude that the clinical trials for any of our pipeline candidates for which we might seek approval have failed to demonstrate safety and effectiveness, we would not receive regulatory approval to market that product in the U.S. or in other jurisdictions for the indications sought. In addition, such an outcome could cause us to abandon the pipeline candidates and might delay development of others. Any delay or termination of our clinical trials will delay the filing of any product submissions with the FDA or foreign regulatory authorities and, ultimately, our ability to commercialize our pipeline candidates and generate revenues. It is also possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product candidate's profile. Adverse clinical trial results, such as death or injury due to side effects, could jeopardize regulatory approval, and if approval is granted, such results may also lead to marketing restrictions or prohibitions. In addition, the clinical trials performed for programs other than for our 3-antigen HBV vaccine involve a relatively small patient population. Because of the small sample size, their results may not be indicative of future results.

The FDA has established regulations, guidelines, and policies to govern the pharmaceutical and biologic development and approval processes, as have foreign regulatory authorities. We expect there will continue to be federal and state laws and/or regulations, proposed and implemented, that could impact our operations and business. Any change in regulatory requirements resulting from the adoption of new legislation, regulations or policies may require us to amend existing clinical trial protocols or add new clinical trials to comply with these changes. Such amendments to existing protocols or clinical trial applications or the need for new ones, may significantly and adversely affect the cost, timing, and completion of the clinical trials for our candidates. In addition, the FDA's policies and those of other regulatory authorities may change and additional government regulations may be issued that could prevent, limit, or delay regulatory approval of our pipeline candidates, or impose more stringent product labeling and post-marketing testing and other requirements.

With regard to our 3-antigen HBV vaccine and any other product candidates for which we obtain approval in the U.S. or other regions (if any), the FDA and other regulatory bodies may still impose significant restrictions on a product's indicated uses or marketing, or impose conditions for approval, or impose ongoing requirements for potentially costly post-approval studies, including Phase IV clinical trials or post-marketing surveillance. As a condition to granting marketing approval of a product, the FDA or other regulatory bodies may require us to conduct additional clinical trials. The results generated in these post-approval clinical trials could result in loss of marketing approval, changes in product labeling, or new or increased concerns about side effects or efficacy of a product. The Food and Drug Administration Amendments Act of 2007 gives the FDA enhanced post-market authority, including the explicit authority to require post-market studies and clinical trials, labeling changes based on new safety information and compliance with FDA-approved REMS. We are also subject to ongoing FDA post-market requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, record keeping, and reporting of safety and other post-market information. The FDA's exercise of its authority could result in delays or increased costs during product development, clinical trials, and regulatory review, increased costs to comply with additional post-approval regulatory requirements, and potential restrictions on sales of approved products. Foreign regulatory agencies often have similar authority and may impose comparable costs. Post-marketing studies, whether conducted by us or by others and whether mandated by regulatory agencies or voluntary, and other emerging data about marketed products, such as adverse event reports, may also adversely affect sales of our pipeline candidates once approved, and potentially our other marketed products. Further, the discovery of significant problems with a product similar to one of our products that implicate (or are perceived to implicate) an entire class of products could have an adverse effect on sales of our approved products. Accordingly, new data about our products could negatively affect demand because of real or perceived side effects or uncertainty regarding efficacy and, in some cases, could result in product withdrawal or recall. Furthermore, new data and information, including information about product misuse, may lead government agencies, professional societies, and practice management groups or organizations involved with various diseases to publish guidelines or recommendations related to the use of our products or the use of related therapies or place restrictions on sales. Such guidelines or recommendations may lead to lower sales of our products. The holder of a BLA that has been approved also is subject to obligations to monitor and report adverse events and instances of the failure of a product to meet the specifications in the BLA. License holders must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling, or manufacturing process. Application holders must also submit advertising and other promotional material to the FDA. Advertising and promotional materials must comply with FDA rules in addition to other potentially applicable federal and state laws, including, by way of example, the Federal Trade Commission Act. Any sales and promotional activities are also potentially subject to federal and state consumer protection and unfair competition laws. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA, or such other regulatory agencies as reflected in the product's approved labeling. Such regulatory agencies may impose further requirements or restrictions on the distribution or use of our pipeline candidates as part of a mandatory plan, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. If we receive marketing approval for one or more of our pipeline candidates, physicians may nevertheless prescribe such products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. In particular, the U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. Depending on the circumstances, failure to meet post-approval requirements by us or our third-party collaborators can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, FDA issuance of Form 483, untitled letters, and/or warning letters, suspension or termination of any ongoing clinical trials, or refusal to allow us to enter into supply contracts, including government contracts. Any government investigation of alleged violations of law could require us to expend significant amounts of time and resources in response and could generate negative publicity and significantly inhibit our ability to bring to market or continue to market our products and generate revenue.

In both the U.S. and other countries, our product sales depend, or will depend, as applicable and in part, upon the availability of reimbursement from third-party payers, which include governmental authorities, managed care organizations and other private health insurers. Third-party payers are increasingly challenging the price and examining the cost effectiveness of medical products and services. Increasing expenditures for healthcare have been the subject of considerable public attention in the U.S. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products. Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. Any reduction in reimbursement that results from federal legislation or regulation may also result in a similar reduction in payments from payers. New laws may also result in additional reductions in healthcare funding, which could have a material adverse effect on our customers, which may affect our financial operations. Legislative and regulatory proposals may expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be certain whether additional legislative changes will be enacted, or whether relevant regulations, guidance, or interpretations will be changed, or what the impact of such changes on our products may be. Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise capital, obtain additional collaborators and market our products. In addition, we believe the increasing emphasis on managed care in the U.S. has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact product sales.

In some countries, particularly countries in Europe, the pricing and/or reimbursement of vaccines and therapeutics is subject to governmental control. In Canada, the prices of patented medicines are subject to price controls. In these countries, pricing negotiations with governmental, reimbursement, and coverage authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a study that compares the cost-effectiveness of our products to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

COVID-19 has been classified as an endemic by public health authorities, and it is possible that one or more government entities may take actions that directly or indirectly have the effect of abrogating some of our rights or opportunities. In particular, the Government of Canada has announced that foreign investments into Canada will be subject to enhanced review under the Investment Canada Act, particularly foreign direct investments in Canadian businesses that are related to public health or involved in the supply of critical goods and services to Canadians or to the government. If we were to develop a coronavirus vaccine, the economic value of such a vaccine to us could be affected by these measures. Various government entities, including the U.S., Israeli, and Canadian governments, are offering incentives, grants, and contracts to encourage additional investment by commercial organizations into preventative and therapeutic agents against coronavirus, which may have the effect of increasing the number of competitors and/or providing advantages to known competitors. Accordingly, there can be no assurance that we will be able to successfully establish a competitive market share, if any, for our coronavirus vaccine even if we succeed in developing one. Furthermore, government grants and subsidies may limit our ability to develop and manufacture our coronavirus vaccine candidates in the most efficient way. For example, under the terms of the Contribution Agreement, we are required to conduct Phase II studies of our coronavirus vaccine program in Canada, unless permitted otherwise. As a result of such limitations, we may be unable to pursue the most efficient or profitable path in developing our coronavirus vaccine program.

We are governed by the Business Corporations Act (British Columbia) ("BCBCA") and a substantial portion of our assets, including our manufacturing facility in Rehovot, Israel, and our research facility in Ottawa, Canada, are located outside the U.S. As a result, it may be difficult for investors to effect service of process within the U.S. upon us or to enforce judgments obtained against us in U.S. courts, in any action, including actions predicated upon the civil liability provisions of U.S. federal securities laws or any other laws of the U.S. Additionally, rights predicated solely upon civil liability provisions of U.S. federal securities laws or any other laws of the U.S. may not be enforceable in original actions, or actions to enforce judgments obtained in U.S. courts, brought in Canadian or Israeli courts. In addition, two of our officers reside outside of the U.S., and all or a substantial portion of their assets may be located outside the U.S., which may make effecting service of process within the U.S. or enforcing judgments obtained against such persons in U.S. courts difficult.

On April 4, 2023, we announced organizational changes including our plan to reduce our internal workforce and other expenses by 30-35%, activity which began in April 2023 and was completed by the end of September 2023. The headcount reduction and other actions to reduce our operating costs may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees seeking alternative employment, decreased morale among our remaining employees, and the risk that we may not achieve the anticipated benefits of the reduction in force. Our workforce reductions could also harm our ability to attract and retain qualified management and personnel who are critical to our business. In addition, our former employees may initiate lawsuits related to their termination. The reduction in internal workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives. Any of the foregoing may be disruptive to our operations. If we are unable to realize the anticipated benefits from the reduction in internal workforce, or if we experience significant unintended adverse consequences from the reduction in internal workforce, our business, financial condition, and results of operations may be materially adversely affected.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to: - comply with FDA regulations or similar regulations of comparable foreign regulatory authorities;         - provide accurate information to the FDA or comparable foreign regulatory authorities;         - comply with manufacturing standards that we have established;         - comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities;         - properly protect patient information which is subject to federal and state privacy and security laws or similar laws in foreign countries;         - report financial information or data accurately; or         - disclose unauthorized activities to us. In particular, sales, marketing, and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commissions, customer incentive programs, and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions that we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us and we are not successful in defending or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

The near and long-term commercial viability of our current and future (as applicable) products may depend, in part, on our ability to successfully execute current strategic collaborations and establish new strategic collaborations with contract commercial organizations, pharmaceutical and biotechnology companies, non-profit organizations, and government agencies. Establishing and maintaining strategic collaborations and obtaining government funding is difficult and time-consuming. Potential collaborators may reject collaborations based upon their assessment of our financial, regulatory or intellectual property position or based on their internal pipeline or available resources; government agencies may reject contract or grant applications based on their assessment of public need, the public interest, the ability of our products to address these areas, or other reasons beyond our expectations or control. If we fail to establish or maintain collaborations or government relationships necessary for successful commercialization on acceptable terms, our current commercialization efforts may be unsuccessful, and we may not be able to commercialize our pipeline candidates that are approved for marketing in the future, if any, or generate sufficient revenue to fund further research and development efforts. There can be no assurances that any new or existing collaborations, including our collaborations with Syneos, Valneva, and Brii Bio, and/or government funding will ever result in the successful development or commercialization of any products for several reasons, including that: - we may not have the ability to control the activities of our partners and cannot provide assurance that they will fulfill their obligations to us, including with respect to the license, development, and commercialization of products and pipeline candidates, in a timely manner or at all;         - such partners may not devote sufficient resources to the commercialization or clinical development of our products or pipeline programs or properly maintain or defend our intellectual property rights (if required);         - relationships with our collaborators could also be subject to certain fraud and abuse laws if not structured properly to comply with such laws;         - any failure on the part of our partners to perform or satisfy their obligations to us could lead to delays in the development or commercialization of our pipeline candidates and affect our ability to realize product revenue; and         - disagreements, including disputes over the ownership of technology developed with such collaborators, could result in litigation, which would be time-consuming and expensive, and may delay or terminate research and development efforts, regulatory approvals, and commercialization activities. If we or our collaborators fail to maintain our existing agreements or if we fail to establish agreements as necessary, we could be required to undertake research, development, manufacturing, and commercialization activities solely at our own expense. These activities would significantly increase our capital requirements and, given our lack of sales, marketing and distribution capabilities, significantly delay or hinder our commercial success.

If and when we deem it to be our strategic priority, we may seek to in-license pipeline candidates or technologies to expand our product pipeline and may not succeed. The number of such candidates and technologies is limited. Competition among large pharmaceutical companies and biopharmaceutical companies for promising pipeline candidates and technologies is intense because such companies generally desire to expand their product pipelines through in-licensing. If we fail to carry out such in-licensing and expand our product pipeline, our potential future revenues may suffer especially if our current products or pipeline candidates fail to generate material revenue.

Our wholly owned manufacturing facility and any of our current and future manufacturers, whether the facilities are ours or third-party manufacturer facilities, are subject to pre-approval and periodic, often unannounced, post-market regulatory inspections by the FDA and applicable foreign equivalents to evaluate regulatory compliance and product quality and safety. This continual regulatory monitoring and periodic inspections of the manufacturing facilities where our current and future products, as applicable, are produced can result in substantial costs, time, and efforts in connection with any perceived deficiencies, as well as the inherently costly and often burdensome quality-assurance and compliance efforts that are required year-round and in anticipation of a regulatory inspection or audit. Similar rules apply in the EU, the UK and Israel. Other than for our 3-antigen HBV vaccine and VBI-2601 (BRII-179), which are currently manufactured by us at our manufacturing site in Rehovot, Israel, and which such facility and certain related assets are being sold to Brii Israel, subject to satisfaction of customary closing conditions and certain other conditions, we are completely dependent on third-party manufacturers for compliance with the requirements of U.S. and ex-U.S. regulators for the manufacture of our finished products and pipeline candidates, which comes with additional risks, as we are ultimately responsible for any violations observed at any such third-party facilities but do not have the same level of day-to-day control or oversight as one would have at its own facility. Furthermore, following the completion of the sale of the Rehovot facility, if the sale is completed subject to the terms and conditions in the Rehovot Purchase Agreement, we will also be dependent on Brii Israel to manufacture our supply of our 3-antigen HBV vaccine. If we or our third-party manufacturers or contract testing organizations cannot successfully produce material that conforms to our specifications and cGMP requirements of any applicable regulatory agency, we may not be able to secure or maintain approval for our manufacturing or testing facilities. If the FDA or another regulatory agency does not approve these facilities for commercial production, or if they do not maintain a satisfactory regulatory standing, we will need to find alternative suppliers, which would result in significant delays in obtaining required regulatory approvals. In addition, if we or a regulatory agency discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency or problems with the facility where the product is manufactured or tested, a regulatory agency may impose restrictions on that product, the manufacturing or testing facility, or us, including requiring recall or withdrawal of the product from the market or suspension of manufacturing, requiring new warnings or other labeling changes to limit use of the drug, requiring that we conduct additional clinical trials, imposing new monitoring requirements or requiring that we establish a REMS program. These challenges may have a material adverse impact on our business, results of operations, financial condition and prospects.

We rely on a single source for our supply of some of our raw materials and certain reagents required for the manufacture our 3-antigen HBV vaccine and VBI-2601. Our current manufacturing facility in Rehovot, Israel, which pursuant to the Rehovot Purchase Agreement will be sold by SciVac to Brii Israel, subject to the completion of certain activities and to the terms and conditions therein, contains highly specialized equipment and materials and utilizes complicated production processes developed over a number of years, which would be difficult, time-consuming, and costly to duplicate or, though a remote risk, may be impossible to duplicate. Furthermore, following the completion of the sale of the Rehovot facility, subject to the terms and conditions in the Rehovot Purchase Agreement, we will be dependent on Brii Israel to manufacture our supply of our 3-antigen HBV vaccine. If the facility were damaged or destroyed, or otherwise subject to disruption, including contamination, it would require substantial lead-time to replace our manufacturing capabilities and could cause costly delays. In such event, we would be forced to identify and rely entirely on third-party contract manufacturers for an indefinite period of time, which we may not be able to do in a timely manner and would further increase our production costs. Any disruptions or delays at the facility or its failure to meet regulatory compliance would significantly impair our ability to manufacture our 3-antigen HBV vaccine for sale in the jurisdictions where it is approved for sale, for future potential clinical studies of our 3-antigen HBV vaccine, and for the ongoing and future clinical studies of VBI-2601, which would result in increased costs and losses and adversely affect our business and results of operations.

We rely on a single source for our supply of some of our raw materials and certain reagents required for the manufacture our 3-antigen HBV vaccine and VBI-2601. We do not have a written or oral agreement with these single sources of supply, as all orders are handled through individual purchase orders or on an order-by-order basis. Alternative sources from which we can obtain our supply of most of these materials exist. However, we may not be able to find alternative suppliers in a timely manner that would provide supplies of these raw materials or reagents at acceptable quantities and prices, if at all. Any interruption in the supply of these materials would disrupt our ability to manufacture our 3-antigen HBV vaccine or VBI-2601 for further development, current and future clinical trials, and commercial manufacturing, and could have a material adverse effect on our business, commercialization of our 3-antigen HBV vaccine and VBI-2601 and future profit margins, if any. Following the completion of the sale of the Rehovot facility, if the sale is completed subject to the terms and conditions in the Rehovot Purchase Agreement, we will be dependent on Brii Israel to manufacture our supply of our 3-antigen HBV vaccine. We do not manufacture any of our raw materials nor do we plan to develop any capacity to do so. Instead, we rely on multiple sources to supply our raw materials so that we can manufacture sufficient quantities of our 3-antigen HBV vaccine and VBI-2601 at our manufacturing facility in Israel and sufficient quantities of our eVLP vaccine candidates at CDMOs. The COVID-19 pandemic impacted lead times and availability of many raw materials, which may adversely impact our ability to manufacture products in a timely manner. Some of the countries of origin of our raw materials are not the same as our drug manufacturing location. Any disruption in supply of raw materials from a qualified supplier could result in significant delays with our manufacturing, clinical trials, BLA filing, BLA approval or commercial sale of the finished product due to contract delays, the need to manufacture new raw materials, out of specification raw materials, the need for import and export permits, and the failure of the newly sourced raw materials to perform to the standards of the previously sourced raw materials. These delays could have a material adverse effect on our business and future profit margins, if any. Following the completion of the sale of the Rehovot facility, if the sale is completed subject to the terms and conditions in the Rehovot Purchase Agreement, we will be dependent on Brii Israel to manufacture our supply of our 3-antigen HBV vaccine.

Our third-party manufacturers and suppliers have experienced in the past due to the COVID-19 pandemic, and may experience in the future due to a resurgence of coronavirus, armed conflict, including in the Middle East and its impact on the Red Sea shipping routes, and other global events, supply chain disruption and shipping disruptions, including disruptions or delays in loading container cargo in ports of origin or off-loading cargo at ports of destination, congestion in port terminal facilities, labor supply and shipping container shortages, inadequate equipment and  persons to load, dock and offload container vessels and for other reasons. These disruptions, to the extent that they continue, may impact our ability to receive our raw materials and certain components required for the manufacture of our 3-antigen HBV vaccine and VBI-2601 and our other pipeline candidates, to distribute our products in a cost-effective and timely manner and to meet demand, all of which could have an adverse effect on our financial condition and results of operations. Additionally, following the completion of the sale of the Rehovot facility, if the sale is completed subject to the terms and conditions in the Rehovot Purchase Agreement, we will be dependent on Brii Israel to manufacture our supply of our 3-antigen HBV vaccine, which such production and manufacture may be impacted by the ongoing conflict in the Middle East and the Red Sea shipping disruptions and could impact our financial condition and results of operations. There can be no assurance that further unforeseen events impacting the supply chain will not have a material adverse effect on us in the future. Additionally, the impacts that supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. Prolonged supply chain disruption that may impact us or our manufacturers and suppliers could interrupt product manufacturing, increase raw material and product lead times, increase raw material and product costs, impact our ability to meet customer demand and result in lost sales and reputational damage, all of which could have a material adverse effect on our business, financial condition and results of operations.

Concerns over inflation, geopolitical issues, the U.S. financial markets, foreign exchange rates, capital and exchange controls, unstable global credit markets and financial conditions and the COVID-19 endemic and the ongoing effects from such conditions have led to periods of significant economic instability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, and increased unemployment rates. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. In addition, there is a risk that one or more of our current or future service providers, manufacturers, suppliers, our third-party payors, and other partners could be negatively affected by difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives. In addition, we face several risks associated with international business and are subject to global events beyond our control, including war, public health crises, such as endemics and epidemics, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations. There may be changes to our business if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease. As a result of the ongoing war between Russia and Ukraine and between Israel and Hamas, related sanctions could be announced by the U.S. and other countries, and may include restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations. The U.S. and other countries could impose wider sanctions and take other actions should conflict further escalate. It is not possible to predict the broader consequences of conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition and results of operations.