RAPH Raphael Pharmaceutical Inc (QB)

As filed with the Securities and Exchange Commission on September 13, 2024

Registration No. 333-               

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

Raphael Pharmaceutical Inc.

(Exact name of registrant as specified in its charter)

4 Lui Paster
Tel Aviv-Jaffa, Israel 6803605
Telephone: (972) 52-775-5072
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Shlomo Pilo

Chief Executive Officer
4 Lui Paster
Tel Aviv-Jaffa, Israel 6803605
Telephone: +(972) 52-775-5072
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check market if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities, in any jurisdiction where the offer or sale is not permitted.

Raphael Pharmaceutical Inc.

Resale of up to 5,787,027 Shares of Common Stock

This prospectus relates to the resale by the selling security holders named in this prospectus or their permitted transferees (the “Selling Securityholders”) of up to 5,787,027 shares of our common stock, par value $0.01 per share (the “Common Stock”) issued in one or more private placements. Of the up to 5,787,027 shares of Common Stock offered by this prospectus, 1,854,196 shares of Common Stock were previously registered but not sold under our Registration Statement on Form S-1 (File No. 333-260766) and 682,615 shares of Common Stock were previously registered and not sold under our Registration Statement on Form S-1 (File No. 333-265878).

The shares of Common Stock that may be sold by the Selling Securityholders are collectively referred to in this prospectus as the “Offered Securities.” We will not receive any of the proceeds from the sale by the Selling Securityholders of the Offered Securities. See “Use of Proceeds” beginning on page 35 of this prospectus. We will bear all costs, expenses and fees in connection with the registration of the Offered Securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of the Offered Securities, except as otherwise expressly set forth under “Plan of Distribution” beginning on page 75 of this prospectus.

This prospectus describes the general manner in which the Offered Securities may be offered and sold. If necessary, the specific manner in which the Offered Securities may be offered and sold will be described in one or more supplements to this prospectus. Any prospectus supplement may add, update or change information contained in this prospectus. You should carefully read this prospectus, and any applicable prospectus supplement before you invest in any of our securities.

The Selling Securityholders may offer, sell or distribute Offered Securities publicly or through private transactions. If the Selling Securityholders use underwriters, dealers or agents to sell Offered Securities, we will name them and describe their compensation in a prospectus supplement. The price to the public of those securities and the net proceeds the Selling Securityholders expect to receive from that sale will also be set forth in a prospectus supplement.

Our Common Stock is quoted on the OTCQB Marketplace operated by OTC Markets Group Inc. (the “OTCQB”) under the symbol “RAPH.” On September 12, 2024, the last reported sale price of our Common Stock on the OTCQB was $1.65 per share.

See “Risk Factors” beginning on page 8 of this prospectus for a discussion of information that should be considered in connection with the ownership of our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of the prospectus is                , 2024.

TABLE OF CONTENTS  

PART I

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus or a supplement to this prospectus. We have not authorized anyone to provide you with different information. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus or any supplement to this prospectus is accurate as of any date other than the date on the front cover of those documents.

RISK FACTORS

An investment in our securities carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our historical financial statements and related notes included elsewhere in this prospectus, before you decide to purchase our securities. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our Common Stock. Refer to “Cautionary Statement Regarding Forward-Looking Statements.”

We may not be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.

Risks Related to Our Financial Condition and Capital Requirements

We have a limited operating history and we have incurred significant operating losses since our inception, and anticipate that we will incur continued losses for the foreseeable future.

We are an emerging pharmaceutical research and clinical development company with a limited operating history in our industry. Before the Share Exchange, we did not have any operations dating back to 2011. To date, we have focused almost exclusively on developing our RA product candidate. Raphael Israel has funded its operations to date primarily through proceeds from investors and from its own resources. Other than the funding that Easy Energy received, and which was lent to Raphael Israel after the closing of the Share Exchange, Easy Energy has had no sources of funding since ceasing its operations in 2011. We have only a limited operating history in our current industry upon which you can evaluate our business and prospects. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry. To date, we have not generated revenue from the sale of our product candidates (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information). We incurred losses in each year since our inception and, while operational, we have never been profitable and have incurred losses since inception. We expect to continue to incur losses until, and if, a product candidate that we are developing, such as our RA product candidate, receives approval from regulators for commercialization. Our net loss attributable to holders of our ordinary shares for the years ended December 31, 2023 and 2022 was approximately $1.28 million and $3.36 million, respectively. As of December 31, 2023, we had an accumulated deficit of approximately $7.31 million. Substantially all of our operating losses resulted from costs incurred in connection with our development program and from general and administrative costs associated with our operations.

We expect our research and development expenses to increase in connection with our planned preclinical and clinical trials. In addition, even if we obtain marketing approval for any current or future product candidate, we will likely incur significant business development expenses as we seek to commercialize such products, as well as continued research and development expenses. Furthermore, we expect to incur additional costs associated with operating as a reporting company, which we estimate will be at least tens of thousands of dollars annually. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

We expect to continue to incur significant losses until we are able to commercialize our product candidates, which we may not be successful in achieving. We anticipate that our expenses will increase substantially if and as we:

We have not generated revenue from any product candidate yet and may never be profitable.

Our ability to become profitable depends upon our ability to generate revenue. We do not expect to generate significant revenue unless or until we obtain marketing approval of, and commercialize, our RA product candidate or any other product candidate that we may seek to develop. Our ability to generate future revenue from product candidate sales depends heavily on our success in many areas, including but not limited to:

We do not believe that our current cash on hand will be sufficient to fund our projected operating requirements. This raises substantial doubt about our ability to continue as a going concern. In addition, the report of our independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.

We do not believe that our current cash on hand will be sufficient to fund our projected operating requirements. This raises substantial doubt about our ability to continue as a going concern. In addition, the report of our independent registered public accounting firm on our audited financial statements for each of the two years ended December 31, 2023 and 2022 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our audited financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance of equity or debt securities or otherwise. Further reports on our financial statements may include an explanatory paragraph with respect to our ability to continue as a going concern. If we cannot continue as a going concern, our investors may lose their entire investment in our Common Stock. Until we can generate significant revenues, if ever, we expect to satisfy our future cash needs through debt or equity financing. 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 our products. 

We expect that we will need to raise substantial additional funding before we can expect to complete the development of our RA product candidate or any other product candidate. This additional financing may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product candidate development efforts or other operations.

As of June 30, 2024, our cash and cash equivalents were $120,000 and we had an accumulated deficit of $8.11 million. We believe that our existing cash and cash equivalents will not be sufficient to fund our projected cash requirements through the end of 2024. Therefore, we will require significant additional financing in the near future to fund our operations. We currently anticipate that we will require approximately $700,000 for research and development activities over the course of the next 12 months. We also anticipate that we will require approximately $500,000 for capital expenditures over such 12-month period, which consists primarily of expenditures for clinical trials and general operating costs. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future funding requirements will depend on many factors, including but not limited to:

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all, during or after the COVID-19 pandemic. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the trading price of our shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and we may be required to agree to certain 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. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the development or commercialization, if any, of any product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations. 

The lack of an active trading market could adversely impact our ability to raise working capital and adversely impact our ability to continue operations.

Our Common Stock is not currently traded on any national securities exchange and is traded on the over-the-counter market with quotations published on the OTC Markets Group, Inc.’s OTCQB tier Venture Market (the “OTCQB”) under the symbol “RAPH.” Because our Common Stock is considered illiquid, we may find it more difficult to raise capital. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations. For additional information, see “Risk Factors – Risks Related to Ownership of Our Securities – Investors may have difficulty in reselling their shares due to the substantial lack of liquidity of our common stock.”

Risks Related to Product Development, Regulatory Approval and Commercialization

We are heavily dependent on the success of our product candidates, which are in various stages of pre-clinical development. We cannot give any assurance that any of our product candidates will proceed to clinical development or that they will receive regulatory approval, which is necessary before they can be commercialized.

Since its inception, Raphael Israel has invested substantially all of its efforts and financial resources to design and develop its product candidates, including conducting preclinical studies in anticipation for clinical trials and providing general and administrative support for these operations. Our future success is dependent on our ability to continue these operations, and more specifically, to successfully complete pre-clinical and clinical development of our product candidates, which will require coordination from applicable regulatory agencies, obtain regulatory approval for, and then successfully commercialize one or more product candidates for which we receive regulatory approval. We currently generate no revenue from, and we may never be able to generate revenue.

Our RA product candidate and the product candidate that we are seeking to develop for the treatment of inflammation associated with COVID-19 are both in pre-clinical development and will require clinical development (and in some cases additional pre-clinical development), management of non-clinical, clinical and manufacturing activities, regulatory approval, obtaining adequate manufacturing supply, building of a commercial organization and significant marketing efforts before we generate any revenue from product candidate sales. It may be months or years before a pivotal study is initiated, if at all. Any clinical trials in the United States will require the approval of an Investigational New Drug, or IND, application by the FDA, and we cannot assure that we will obtain such approval in a timely manner, or at all. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive such regulatory approval for any of our product candidates.

We as a company have never submitted marketing applications to the FDA or comparable foreign regulatory authorities. We cannot be certain that any of our product candidates will be successful in clinical studies or receive regulatory approval or what regulatory pathway the regulatory authorities shall designate for our product candidates. Further, our product candidates may not receive regulatory approval even if they are successful in clinical studies. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations.

We generally plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union, Israel and other foreign countries. To obtain regulatory approvals we must comply with the numerous and varying regulatory requirements of such countries regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing and distribution of our product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions. If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations would be negatively affected.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical studies and depends upon numerous factors. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, which may cause delays in the approval or the decision not to approve an application. We have not obtained regulatory approval for any product candidate, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Applications for our product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:

This lengthy approval process, as well as the unpredictability of the results of clinical studies, may result in our failing to obtain regulatory approval to market any of our product candidates, which would significantly harm our business, results of operations and prospects.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study process. The results of pre-clinical studies and early clinical studies, if any are commenced, of our product candidates may not be predictive of the results of later-stage clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks in subsequent advanced clinical studies. There is a high failure rate for drugs proceeding through clinical studies, and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having progressed satisfactorily through preclinical studies and initial clinical studies. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. We do not know whether any Phase 1, Phase 2, Phase 3 (if any) or other clinical studies we may conduct will demonstrate consistent or adequate efficacy and safety sufficient to obtain regulatory approval to market our product candidates.

We may find it difficult to enroll patients in our clinical studies. Difficulty in enrolling patients could delay or prevent clinical studies of our product candidates.

Identifying and qualifying patients to participate in clinical studies of our product candidates is critical to our success. The timing of our clinical studies depends in part on the speed at which we can recruit patients to participate in testing our product candidates, and we may experience delays in our clinical studies if we encounter difficulties in enrollment.

Additionally, the process of finding patients may prove costly. We also may not be able to identify, recruit and enroll a sufficient number of patients to complete our clinical studies because of the perceived risks and benefits of the product candidate under study, the availability and efficacy of competing therapies and clinical studies, the proximity and availability of clinical study sites for prospective patients and the patient referral practices of physicians. If patients are unwilling to participate in our studies for any reason, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential product candidates will be delayed.

If we experience delays in the completion or termination of any clinical study of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product candidate revenue from any of these product candidates could be delayed or prevented. In addition, any delays in completing our clinical studies will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product candidate sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to the denial of regulatory approval of our product candidates.

We may encounter substantial delays in our clinical studies, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.

Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies to demonstrate the safety and efficacy of the product candidates in humans. Clinical testing is expensive, time consuming and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful. Events that may prevent successful or timely completion of clinical development include but are not limited to:

Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. We may also be required to conduct additional safety, efficacy and comparability studies before we will be allowed to start clinical studies with our repurposed drugs. Clinical study delays could also shorten any periods during which our product candidates have patent protection and may allow our competitors to bring product candidates to market before we do, which could impair our ability to obtain orphan exclusivity and successfully commercialize our product candidates and may harm our business and results of operations.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any.

The use of dronabinol has been associated with seizures, paranoia, rapid heart rate and unusual thoughts and behaviors. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive marketing label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Potential side effects of our cannabinoid-based treatments may include: asthenia, palpitations, tachycardia, vasodilation/facial flush, abdominal pain, nausea, vomiting, amnesia, anxiety/nervousness, ataxia, confusion, depersonalization, dizziness, euphoria, hallucinations, paranoid reaction, somnolence and abnormal thinking. Results of our studies may identify unacceptable severity and prevalence of these or other side effects. In such an event, our studies could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications.

Drug-related side effects could affect patient recruitment, the ability of enrolled patients to complete the study or result in potential product candidate liability claims.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product candidates, a number of potentially significant negative consequences could result, including but not limited to:

Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.

Even if we obtain regulatory approval for a product candidate, our product candidates will remain subject to regulatory scrutiny.

If our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including both federal and state requirements in the United States. In addition, manufacturers and manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good Manufacturing Practices, or cGMP, regulations and Quality System Regulation, or QSR. As such, we and our contract manufacturers will be subject to continual review and inspections to assess compliance with cGMP, QSR and adherence to commitments made in any NDA. Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control. 

Any regulatory approvals that we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product candidate may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. We will also be required to report certain adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion for our product candidates. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product candidate’s approved label. As such, we may not promote our product candidates for indications or uses for which they do not have FDA approval. The holder of an approved NDA must also submit new or supplemental applications and obtain FDA approval for certain changes to the approved product candidate, product candidate labeling or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our product candidates in general or in specific patient subsets. If original marketing approval were obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical study to confirm clinical benefit for our product candidates. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval. Furthermore, any new legislation addressing drug safety issues could result in delays in product candidate development or commercialization or increased costs to assure compliance. Foreign regulatory authorities impose similar requirements.

If a regulatory agency discovers previously unknown problems with a product candidate, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product candidate is manufactured, or disagrees with the promotion, marketing or labeling of a product candidate, such regulatory agency may impose restrictions on that product candidate or us, including requiring withdrawal of the product candidate from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

We are subject to numerous complex regulations and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.

The research, testing, development, manufacturing, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, marketing, distribution, possession and use of our product candidates, among other things, are subject to regulation by numerous governmental authorities in the United States and elsewhere. The FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act of 1938, or the FDC Act, and implementing regulations. Noncompliance with any applicable regulatory requirements can result in refusal to approve product candidates for marketing, warning letters, product candidate recalls or seizure of product candidates, total or partial suspension of production, prohibitions or limitations on the commercial sale of product candidates or refusal to allow the entering into of federal and state supply contracts, fines, civil penalties and/or criminal prosecution. Additionally, the FDA and comparable governmental authorities have the authority to withdraw product candidate approvals that have been previously granted. Moreover, the regulatory requirements relating to our product candidates may change from time to time and it is impossible to predict what the impact of any such changes may be. 

We are developing product candidates that are controlled substances as defined in the Controlled Substances Act of 1970, or CSA, which establishes, among other things, certain registration, production quotas, security, recordkeeping, reporting, import, export and other requirements administered by the Drug Enforcement Administration, or the DEA. The active ingredient in our product candidates is CBD, which, when derived from cannabis, is a Schedule V controlled substance, meaning that any drug containing it cannot be marketed before it receives regulatory approval from the FDA.

The manufacture, shipment, storage, sale and use, among other things, of controlled substances that are pharmaceutical product candidates are subject to a high degree of regulation. The DEA also conducts periodic inspections of registered establishments that handle controlled substances. Facilities that conduct research, manufacture, distribute, import or export controlled substances must be registered to perform these activities and have the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance, particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results of operations, financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

Individual states also have controlled substances laws. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule our product candidates as well. While some states automatically schedule a drug when the DEA does so, other states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product candidate for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product candidate. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal law.

If the market opportunities for our product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.

Our projections of both the number of people who have our target diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, including the scientific literature, surveys of clinics, patient foundations or market research and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for each of our product candidates may be limited or may not be amenable to treatment with our product candidates, and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations and our business.

We face intense competition and rapid technological change and the possibility that our competitors may discover, develop or commercialize therapies that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

The biotechnology and pharmaceutical industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to our product candidates.

More established companies may have a competitive advantage over us due to their greater size, cash flows and institutional experience. Compared to us, many of our competitors may have significantly greater financial, technical and human resources. As a result of these factors, our competitors may have an advantage in marketing their approved products and may obtain regulatory approval of their product candidates before we are able to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are safer, more effective, more widely used and less expensive than ours, and may also be more successful than us in manufacturing and marketing their products. These advantages could materially impact our ability to develop and commercialize our product candidates successfully. 

Our product candidates may also compete with medical and recreational marijuana, in markets where the recreational and/or medical use of marijuana is legal. There is support in the United States for further legalization of marijuana. In markets where recreational and/or medical marijuana is not legal, our product candidates may compete with marijuana purchased in the illegal drug market. We cannot assess the extent to which patients may utilize marijuana obtained illegally for the treatment of the indications for which we are developing our product candidates.

Even if we successfully develop our product candidates, and obtain marketing approval for them, other treatments or therapeutics may be preferred and we may not be successful in commercializing our product candidates or in bringing them to market.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

Even with the requisite approvals from the FDA and comparable foreign regulatory authorities, the commercial success of our product candidates will depend in part on the medical community, patients and third-party payors accepting our product candidates as medically useful, cost-effective and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of any of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

Even if a potential product displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product will not be fully known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates may require significant resources and may never be successful. If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable. 

The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

The pricing, coverage and reimbursement of our product candidates, if approved, must be adequate to support our commercial infrastructure. Our per-patient prices must be sufficient to recover our development and manufacturing costs and potentially achieve profitability. Accordingly, the availability and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford expensive treatments such as ours, assuming approval. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our product candidates will be paid for by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government authorities, private health insurers and other third-party payors. If coverage and reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about coverage and reimbursement for new drugs are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new drug will be covered and reimbursed under Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for products such as ours.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenue and profits.

Moreover, increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. 

Healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, was passed. The Affordable Care Act is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and the health insurance industry, impose new taxes and fees on the healthcare industry and impose additional health policy reforms. This law revises the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states once the provision is effective. Further, the law imposes a significant annual fee on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may require us to modify our business practices with healthcare practitioners. While the U.S. Supreme Court upheld the constitutionality of most elements of the Affordable Care Act in 2012, other legal challenges are still pending final adjudication in several jurisdictions. In addition, Congress has also proposed a number of legislative initiatives, including possible repeal of the Affordable Care Act. At this time, it remains unclear whether there will be any changes made to the Affordable Care Act, whether to certain provisions or its entirety. We can provide no assurance that the Affordable Care Act, as currently enacted or as amended in the future, will not adversely affect our business and financial results, and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business. 

We continue to evaluate the effect that the Affordable Care Act has on our business. Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken. However, the CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2031. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, on January 28, 2021, President Biden issued an executive order to initiate a special enrolment period from February 26, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the Affordable Care Act marketplace. 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 Affordable Care Act. In addition, on August 16, 2022, President Biden signed the IRA into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. Affordable Care Act Additional legislative and regulatory changes and judicial challenges to the Affordable Care Act, its implementing regulations and guidance and its policies, remain possible.

It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future. It is unclear how any such challenges and the healthcare reform measures of the Biden administration will impact the Affordable Care Act. In the coming years, additional legislative and regulatory changes could be made to governmental health programs that could significantly impact pharmaceutical companies and the success of our product candidates. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. The Affordable Care Act, as well as other federal, state and foreign healthcare reform measures that have been and may be adopted in the future, could harm our future revenues.

Risks Related to our Business and Operations

We hold no patents on our products, and our business employs proprietary technology (know-how) and information may be difficult to protect and/or infringe on the intellectual property rights of third parties.

Raphael has no patents and therefore, as a result of the Share Exchange, we did not acquire any patents. As such, we currently rely on trade secrets, proprietary know-how, and technology methods that we seek to protect, in part, by confidentiality agreements. We cannot assure you that these agreements will not be breached, that we will have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others. We currently do not hold patents from the United States Patent and Trademark Office, or USPTO.

We cannot assure you that the patents of others will not have an adverse effect on our ability to conduct our business, that any of our trade secrets and applications will be protected, that we will develop additional proprietary technology (know-how) or methods that is defensible against theft or will provide us with competitive advantages or will not be challenged by third parties.

We manage our business through our three executive officers and key consultants and are highly dependent upon our Chief Technology Officer.

Key service providers are serving as our Chief Executive Officer, Chief Financial Officer and Chief Technology Officer and other scientific services consultants. Due to the lean nature of our operations and our current operations which mainly consist of outsourcing services, we are highly dependent upon our Chief Technology Officer. If our Chief Technology Officer, and to a lesser extent, any key consultants, resigns, this could adversely affect our ability to execute our business plan and harm our operating results. We do not currently carry “key person” insurance on the lives of members of management.

We will need to expand our organization and we may experience difficulties in recruiting needed additional employees and consultants, which could disrupt our operations.

As our development and commercialization plans and strategies develop and because we are so leanly staffed, we will need additional managerial, operational, sales, marketing, financial, legal and other resources. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense competition, we may be unable to attract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth. 

We may not be successful in our efforts to identify, license or discover additional product candidates.

Although a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of our existing product candidates, the success of our business also depends in part upon our ability to identify, license or discover additional product candidates. Our research programs or licensing efforts may fail to yield additional product candidates for clinical development for a number of reasons, including but not limited to the following:

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, license or discover additional product candidates, which would have a material adverse effect on our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act and physician sunshine laws and regulations. These laws may impact, among other things, our proposed sales, and marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these laws. For example, the Affordable Care Act, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, 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 Act.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States or Israel.

Other than our headquarters and other operations which are located in Israel (as further described below), we currently have limited international operations, but our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product candidates. We plan to maintain sales representatives and conduct physician and patient association outreach activities, as well as clinical trials, outside of the United States and Israel. Doing business internationally involves a number of risks, including but not limited to:

Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts, business operations and environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage.

The use of any of our product candidates could result in product liability or similar claims that could be expensive, damage our reputation and harm our business.

Our business exposes us to an inherent risk of potential product liability or similar claims. The pharmaceutical industry has historically been litigious, and we face financial exposure to product liability or similar claims if the use of any of our products were to cause or contribute to injury or death. There is also the possibility that defects in the design or manufacture of any of our products might necessitate a product recall. Although we plan to maintain product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. In the future, we may be unable to maintain product liability insurance on acceptable terms or at reasonable costs and such insurance may not provide us with adequate coverage against potential liabilities. A product liability claim, regardless of merit or ultimate outcome, or any product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction and frustration and a substantial diversion of management attention. A successful claim brought against us in excess of, or outside of, our insurance coverage could have a material adverse effect on our business, financial condition and results of operations. 

Risks Related to Our Reliance on Third Parties

We rely on third parties to conduct our preclinical and, in the future, clinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs. We rely on these parties for execution of our preclinical and, in the future, clinical studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs and other vendors will be required to comply with current cGMP, GCP, QSR and Good Laboratory Practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area, and comparable foreign regulatory authorities for any product candidates that move into clinical development. Regulatory authorities enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors. If we or any of our CROs or vendors fail to comply with applicable regulations, the clinical data generated in our clinical studies may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical studies before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical studies comply with GCP regulations. In addition, our clinical studies must be conducted with product candidates which are produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical studies, which would delay the regulatory approval process.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical studies may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur, which could materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

We will rely on third parties to grow and provide us with our active pharmaceutical ingredient, or API, and formulations. Our business could be harmed if those third parties fail to provide us with sufficient quantities of our needed supplies, or fail to do so at acceptable quality levels or prices.

We do not have the infrastructure or capability internally to manufacture the API formulations, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. We plan to rely on third parties for such supplies. In addition, we are reliant on one third party for the CBD that we intend to use in our preclinical studies, which, has caused us to rely on their cooperation to meet their contractual obligations, but there can be no guarantee that we are able to meet such obligations. In addition, there may be a need to identify alternate manufacturers to prevent a possible disruption of our clinical studies. Any significant delay or discontinuity in the supply of these components could considerably delay completion of our preclinical studies, product candidate testing and potential regulatory approval of our product candidates, which could harm our business and results of operations.

We and our collaborators and contract manufacturers are subject to significant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.

All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or a product candidate used in late-stage clinical studies must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational product candidates and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We, our collaborators or our contract manufacturers must supply all necessary documentation in support of an NDA, or Marketing Authorization Application, or MAA, on a timely basis and must adhere to GLP and cGMP QSR regulations enforced by the FDA and other regulatory agencies through their facilities inspection program. Some of our contract manufacturers have never produced a commercially approved pharmaceutical product and therefore have not obtained the requisite regulatory authority approvals to do so. The facilities and quality systems of some or all of our collaborators and third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential product candidates. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements. If these facilities do not pass a pre-approval plant inspection, regulatory approval of the product candidates may not be granted or may be substantially delayed until any violations are corrected to the satisfaction of the regulatory authority, if ever.

The regulatory authorities also may, at any time following approval of a product candidate for sale, if ever, audit the manufacturing facilities of our collaborators and third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product candidate specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third party to implement, and that may include the temporary or permanent suspension of a clinical study or commercial sales, or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.

If we, our collaborators, or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product, withdrawal of an approval or suspension of production. As a result, our business, financial condition and results of operations may be materially harmed.

Additionally, if supply from one approved manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA or MAA amendment, or equivalent foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause us to incur higher costs and, if we commence clinical development, could cause the delay or termination of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed or we could lose potential revenue.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we rely on third parties to develop and manufacture our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business. 

Risks Related to Ownership of Our Securities

Our executive officer, directors and certain stockholders who are beneficial owners of 5% or more of our outstanding Common Stock possess the majority of our voting power, and through this ownership, have the ability to control our Company and our corporate actions.

As of the date of this prospectus, our current executive officer, directors and certain stockholders who are beneficial owners of 5% or more of our outstanding Common Stock hold approximately 49.5% of the issued and outstanding voting power of the Company’s outstanding shares. These persons have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions. As such, our directors and executive officer may have the power, acting alone or together, to prevent or cause a change in control; therefore, without their consent we could be prevented from entering into transactions that could be beneficial to us. The interests of our executive officer may give rise to a conflict of interest with the Company and the Company’s shareholders.

In addition, we have a number of stockholders who are beneficial owners of more than 5% of our outstanding Common Stock, as of September 13, 2024, including our Chief Executive Officer who beneficially owns approximately 24.3% of our issued and outstanding shares, and as such, also may have the ability to prevent us from entering into transactions that could be beneficial to us and/or other shareholders. In addition, we have one additional non-affiliated stockholder who is a beneficial owner of more than 5% of our outstanding Common Stock. Although this non-affiliated stockholder currently does not have a controlling influence in determining the outcome of any corporate transaction or other matters submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets, election of directors, and other significant corporate actions, obtaining its vote on certain matters may be necessary to effect certain actions that our management and directors otherwise deem to be in the best interests of the Company.

For additional details concerning beneficial ownership of our securities, please refer to the section below entitled “Beneficial Ownership of the Company’s Common Stock” and with respect to voting power, please refer to the section below entitled “Description of Securities.”

Investors may have difficulty in reselling their shares due to the substantial lack of liquidity of our Common Stock.

Our Common Stock is traded on the over-the-counter market with quotations published on the OTC Markets Group, Inc.’s OTCQB tier Venture Market, under the symbol “RAPH.” The trading volume of our Common Stock historically has been limited and sporadic. As a result of the limited and sporadic trading activity, the quoted price for our Common Stock on the over-the-counter market is not necessarily a reliable indicator of its fair market value. The price at which our Common Stock will trade in the future may be highly volatile and may fluctuate as a result of a number of factors, including, without limitation, any potential business combination that we announce, as well as the number of shares available for sale in the market.

The trading volume of our Common Stock may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our Common Stock will develop or be sustained, or that current trading levels will be sustained. As a result of such trading activity, the quoted price for our Common Stock on the OTCQB may not necessarily be a reliable indicator of our fair market value. In addition, if our shares of Common Stock cease to be quoted, holders would find it more difficult to dispose of or to obtain accurate quotation as to the market value of, our Common Stock and as a result, the market value of our Common Stock likely would decline.

Other factors that could have a similar impact include, but are not limited to:

Many of these factors are beyond our control and may decrease the market price of our Common Stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our Common Stock will be at any time, including as to whether our Common Stock will sustain current market prices, or as to what effect that the sale of shares or the availability of Common Stock for sale at any time will have on the prevailing market price.

Our Common Stock may never be listed on a major stock exchange.

While we may seek the listing of our Common Stock on a national or other securities exchange at some time in the future, we currently do not satisfy the initial listing standards and cannot ensure that we will be able to satisfy such listing standards or that our Common Stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our Common Stock is otherwise rejected for listing, the trading price of our Common Stock could suffer, the trading market for our Common Stock may be less liquid, and our Common Stock price may be subject to increased volatility.

The price of our common stock may be subject to wide fluctuations.

Even though our Common Stock is quoted with OTCQB, the market price of our Common Stock may be highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control. In addition to the risks noted elsewhere in this registration statement, some of the other factors affecting our stock price may include:

For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on past results as an indication of future performance. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against the public company. Regardless of its outcome, this type of litigation could result in substantial costs to us and a likely diversion of our management’s attention.

As a former shell company, resales of shares of our restricted Common Stock in reliance on Rule 144 of the Securities Act are subject to the requirements of Rule 144(i).

We previously were a “shell company” and, as such, sales of our securities pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), cannot be made unless, among other things, at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 as amended, as applicable, during the preceding 12 months, other than Form 8-K reports. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, restrictive legends on certificates for shares of our Common Stock cannot be removed except in connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities Act. Because our unregistered securities cannot be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue to comply with such requirements.

The securities issued in connection with the Share Exchange are restricted securities and may not be transferred in the absence of registration or the availability of a resale exemption.

The shares of Common Stock issued in connection with the Share Exchange were issued in reliance on an exemption from the registration requirements under Section 4(a)(2) of the Securities Act. Consequently, these securities are subject to restrictions on transfer under the Securities Act and may not be transferred in the absence of registration or the availability of a resale exemption. In particular, in the absence of registration, such securities cannot be resold to the public until certain requirements under Rule 144 promulgated under the Securities Act have been satisfied, including certain holding period requirements. As a result, a purchaser who receives any such securities issued in connection with the Share Exchange may be unable to sell such securities at the time or at the price or upon such other terms and conditions as the purchaser desires, and the terms of such sale may be less favorable to the purchaser than might be obtainable in the absence of such limitations and restrictions.

We do not plan to declare or pay any dividends to our stockholders in the near future.

We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

The requirements of being a reporting company may strain our resources and distract management.

As a reporting company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are extensive. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting.

We may incur significant costs associated with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

If in the future there is a trading market for our Common Stock, “penny stock” rules may make buying or selling our Common Stock difficult.

The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer that recommends our Common Stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our Common Stock, which could severely limit the market price and liquidity of our Common Stock.

The sales practice requirements of the Financial Industry Regulatory Authority, or FINRA, may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy the Company’s Common Stock, which may limit your ability to buy and sell the Company’s stock and have an adverse effect on the market for our shares.

Because we are a “smaller reporting company,” we will not be required to comply with certain disclosure requirements that are applicable to other public companies, and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our Common Stock less attractive to investors.

We are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K under the Securities Act. As a smaller reporting company, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to:

We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million plus we have any public common equity float or public float of more than $700 million. We also would not be eligible for status as smaller reporting company if we become an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

Risks Related to our Operations in Israel

Our headquarters and other significant operations are located in Israel, and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

Our executive offices are located in Tel Aviv-Jaffa, Israel. In addition, the majority of our officers and directors are residents of Israel. If these or any future facilities in Israel were to be damaged, destroyed or otherwise unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, hurricanes, storms, tornadoes, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development is disrupted for any other reason, such an event could delay our clinical trials or, if our product candidates are approved and we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives, or if we are unable to manufacture an approved product within a timeframe that meets our prospective customers’ expectations, our business, prospects, financial results and reputation could be harmed.

Conditions in Israel, including the armed conflict between Israel and Hamas, Hezbollah and other terrorist organizations from the Gaza Strip and Lebanon.

On October 7, 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas and the Israeli military began to call-up reservists for active duty. At the same time, and because of the war declaration against Hamas, the clash between Israel and Hezbollah in Lebanon has escalated to an armed conflict and there is a possibility that it will turn into a greater regional conflict in the future. Recently, Iran has directly joined the hostilities against Israel by firing hundreds of drones, ballistic missiles and guided missiles to Israel causing further uncertainty in the region. While currently no damages were registered in Israel from such attack, the situation is developing and could lead to additional wars and hostilities in the Middle East. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank will join the hostilities. Such hostilities may include terror and missile attacks.

As of the date of this prospectus, there has been no material impact on the Company’s operations. According to the recent guidelines of the Israeli government, the Company’s offices are open and functioning as usual. However, if the war will escalate and expand further to the Northern border with Lebanon, and the Israeli government will impose additional restrictions on movement and travel, our management and employees’ ability to effectively perform their daily tasks might be temporarily disrupted, which may result in delays in some of our operations.

Any hostilities involving Israel, terrorist activities, political instability or violence in the region, or the interruption or curtailment of trade or transport between Israel and its trading partners could make it more difficult for us to raise capital, if needed in the future, and adversely affect our operations and results of operations and the market price of our common shares.

 Our insurance does not cover damage or losses that may occur as a result of the war or terrorists events. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or, if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business, financial condition, and results of operations.

Further, many Israeli citizens are obligated to perform several days, and in some cases, more, of annual military reserve duty each year until they reach the age of 40 (or older for certain reservists) and, in the event of an escalated military conflict, may be called to active duty. In response to the series of attacks on civilian and military targets in October 2023, there have been significant call-ups of military reservists. As of September 13, 2024, we have no employees and none of our consultants in military reserve service have been called up to active military service.

It is currently not possible to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial condition. The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, and adversely affect our ability to raise additional funds or sell our securities, among other impacts.

Our operations are subject to currency and interest rate fluctuations.

Although our functional currency is the U.S. dollar, and our financial records are maintained in U.S. dollars, we also incur expenses in Euros and New Israeli Shekels. In the future, we expect that a substantial portion of our revenues will be generated in U.S. dollars, Euros and other foreign currencies, although we currently incur a significant portion of our expenses in currencies other than U.S. dollars, mainly New Israeli Shekels. As a result, we are affected by foreign currency exchange fluctuations through both translation risk and transaction risk, and our financial results may be affected by fluctuations in the exchange rates of currencies in the countries in which our prospective product candidates may be sold. We currently partially hedge our foreign currency exchange rate risk to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies.

It may be difficult to enforce a judgment of a U.S. court against us and our executive officers and directors and the Israeli experts named in this prospectus in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our executive officers and directors and these experts.

We were incorporated in Israel. Substantially all of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court.

General Risk Factors

Future changes in financial accounting standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.

A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct business.

Raising additional capital would cause dilution to our existing shareholders, and may affect the rights of existing shareholders.

We may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the issuance of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder.

Failure in our information technology systems, including by cybersecurity attacks or other data security incidents, could significantly disrupt our operations.

Our operations depend, in part, on the continued performance of our information technology systems. Our information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Failure of our information technology systems could adversely affect our business, profitability and financial condition. Although we have information technology security systems, a successful cybersecurity attack or other data security incident could result in the misappropriation and/or loss of confidential or personal information, create system interruptions, or deploy malicious software that attacks our systems. It is possible that a cybersecurity attack might not be noticed for some period of time. The occurrence of a cybersecurity attack or incident could result in business interruptions from the disruption of our information technology systems, or negative publicity resulting in reputational damage with our shareholders and other stakeholders and/or increased costs to prevent, respond to or mitigate cybersecurity events. In addition, the unauthorized dissemination of sensitive personal information or proprietary or confidential information could expose us or other third parties to regulatory fines or penalties, litigation and potential liability, or otherwise harm our business.

We may be subject to securities litigation, which is expensive and could divert management attention.

In the past, companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.

The requirements associated with being a reporting company will require significant company resources and management attention.

We are subject to the reporting requirements of the Exchange Act. The Exchange Act requires that we file periodic reports with respect to our business and financial condition and maintain effective disclosure controls and procedures and internal control over financial reporting. In addition, subsequent rules implemented by the SEC may also impose various additional requirements on reporting companies. We estimate that these expenses will be at least several tens of thousand dollars annually. Further, the need to maintain the corporate infrastructure demanded of a reporting company may divert management’s attention from implementing our development plans. We have made changes to our corporate governance standards, disclosure controls and financial reporting and accounting systems to meet our reporting obligations. The measures we take, however, may not be sufficient to satisfy our obligations as a public company, which could subject us to fines, sanctions and other regulatory action and potentially civil litigation.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The Company makes forward-looking statements in this prospectus, including in the statements incorporated herein by reference. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this prospectus include, but are not limited to, statements regarding our disclosure concerning our operations, cash flows and financial position.

Forward-looking statements appear in a number of places in this prospectus including, without limitation, in the sections entitled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” and “Business.” The risks and uncertainties include, but are not limited to:

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the section entitled “Risk Factors” and elsewhere in this prospectus. You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.

INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made based on such data and other similar sources and on our knowledge of the markets for our products. These data sources involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.

We have not independently verified any third-party information. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information may be imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus and in any documents that we incorporate by reference into this prospectus and the registration statement of which this prospectus forms a part. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

USE OF PROCEEDS

All of the shares of Common Stock offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales. All proceeds from the sale of the Common Stock will be paid directly to the Selling Securityholders.

DILUTION

The shares of Common Stock to be sold by the Selling Stockholders pursuant to this prospectus are currently issued and outstanding. Accordingly, there will be no dilution to our existing stockholders as a result of this offering.

DIVIDEND POLICY

We have not declared any dividends in the past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the amount of any such dividend.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes included elsewhere herein and in our consolidated financial statements.

In addition to our consolidated financial statements, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements.

Overview

We are a pharmaceutical drug research and development company focused on the discovery and clinical development of life-improving drug therapies based on cannabinoids, including cannabidiol, or CBD, oil. Unless indicated otherwise, we plan on using oil derived from CBD strains with low levels of Tetrahydrocannabinol, or THC. All references to the use of CBD in our product candidates refer to CBD strains with less than 0.3% of THC.

We are currently in the pre-clinical development stage for our lead product candidate, our RA product candidate for the treatment of RA. In addition, we are aiming to develop a pharmaceutical drug product for the treatment of hyperinflammatory syndrome inflammation related to COVID-19. At Rambam Health Care Campus, or Rambam Hospital, we have successfully completed preclinical studies on human-derived immune cells and mouse models for both the COVID-19 and rheumatoid arthritis products, or RA products.

In November 2022, we submitted a proposal to the Ministry of Health of Israel, or MOH for a clinical trial of a cannabis-based drug intended to alleviate the deterioration of COVID-19 patients.

On February 9, 2022, we filed an application for a clinical trial with the Medical Cannabis Unit of the Ministry of Health of Israel, or MOH. On February 16, 2022 we submitted an application with the Helsinki Committee at Rambam Hospital for a clinical trial in COVID-19 patients.

On March 27, 2023, the MOH accepted our proposal for a clinical trial of a cannabis-based drug intended to alleviate the deterioration of COVID-19 patients.

In April 2024 we began a proof-of-concept clinical trial in the United States, leveraging insights from the pre-clinical experiments we have conducted at the Rambam Hospital. This proof-of-concept clinical trial aims to evaluate the efficacy of Cannabigerol in patients with active RA. The estimated timeline to finalize such proof-of-concept clinical trial is six months from the recruitment of the first participant.

We have engaged with MindMate, Inc./ dba Citruslabs (“Citruslabs”) to oversee such proof-of-concept clinical trial. Our collaboration with Citruslab underscores our dedication to conducting such proof-of-concept clinical trial in accordance with applicable industry standards and regulations, including the International Conference on Harmonisation Good Clinical Practice guidelines, and dedication to bringing treatments to fruition and improving the lives of individuals affected by RA. This milestone represents a significant stride forward in our mission to pioneer innovative solutions for managing RA and underscores its commitment to driving advancements in medical research, addressing the unmet needs of patients.

As we move forward, our focus will be on further investigating and refining the formula through continued pre-clinical research. Our goal is to ensure that the formula meets all the necessary standards and regulations set forth by the FDA, allowing us to progress towards clinical treatments.

Our vision is to emerge as a pioneering company at the forefront of formulating pharmaceutical drugs that harness the potential of purified cannabinoids and full-spectrum CBD oil. Our primary mission is to cater to the unmet medical requirements of patients grappling with various disorders, with a particular focus on conditions linked to inflammation, such as chronic lung inflammation, RA and COVID-19.

By leveraging our expertise in this field, we are committed to providing innovative solutions to improve the lives of those afflicted with these challenging medical conditions. Through our dedication to research, development, and compassionate care, we aim to contribute significantly to the well-being of patients worldwide, offering them much-needed relief and hope for a better future.

In order to achieve our goal, we have and will continue to build an experienced team of senior executives and scientists, with experience in all facets of pharmaceutical research and development, drug formulation, clinical trial execution and regulatory submissions. We intend to leverage the knowledge of our team in order to complete the clinical trials needed to receive approvals of our product candidates from applicable regulatory authorities.

Initially, we intend to obtain approvals for our product candidates from the FDA, and the Medical Cannabis Unit of the MOH. Upon obtaining FDA approvals, or in the event that we are not successful in obtaining such approvals, we intend to apply for European Medicines Agency, or EMA, and other countries’ governmental regulatory agencies approvals for our product candidates. If we are successful in obtaining FDA approvals for our product candidates, we intend to enter into royalty agreements with good manufacturing practice, or GMP, approved medical manufactures and distributors, having them using our medical formulas for the purpose of growing, cultivating, manufacturing, and distributing Raphael Pharmaceutical medical indications in their designated territories.

For this purpose, in October 2022, we entered into an agreement with the Medical Cannabis Research Center at Rambam Health Care Campus, and Rambam MedTech for the development of a new, patentable formulation that combines purified cannabinoids to treat rheumatoid diseases.

The overall objective of this study is to identify a novel cannabinoid based patentable formulation to treat Rheumatoid diseases. Specifically, to investigate combination of purified cannabinoids to downregulate inflammation related to Rheumatoid diseases. We propose to base our study on data derived from Dr. Igal Louria-Hayon’s studies (Helsinki # 0442-20-RMB) on the evaluation of the immune regulation properties of cannabinoids on the immune system and the data derived from the cannabinoids receptors study (Helsinki # 0331-20-RMB). We will analyze the activation of cannabinoid receptors on mouse models and will study the role of purified cannabinoid as a potential to develop a novel patentable formulation to treat RA.

Components of Operating Results

Operating Expenses

Our current operating expenses consist of two components – research and development expenses, and general and administrative expenses. To date, we have not generated any revenues. We do not expect to receive any revenue from our product candidate unless and until we obtain regulatory approval and commercialize our product candidate or enter into agreements with third parties to commercialize them. There can be no assurance that we will receive such regulatory approvals, and if our product candidate is approved, that we will be successful in commercializing them.

Research and Development Expenses

Research and development activities are our primary focus. Products in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase as we prepare for, and commence, registrational clinical trials of our RA and COVID-19 product candidates. A key activity in progressing our product candidates toward registrational trials is the development of large-scale manufacturing processes that are tailored specifically to our product candidate. In order to confirm the suitability of a new manufacturing facility and/or process, numerous experiments are needed. Moreover, the regulatory requirements in preparation for manufacturing a drug to be used in a registrational trial or for commercial use involve validation activities and extensive updates to our regulatory files, all of which are lengthy and costly activities. For these reasons, the development of manufacturing processes currently represents the largest portion of our research and development expenses. Research and development expenses include, but are not limited to, the following: 

General and Administrative Expenses

General and administrative expenses consist primarily of employee related expenses, including salaries, benefits, and equity-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, and fees for accounting and consulting services.

We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities, potential commercialization of our product candidates and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. We also anticipate increased expenses related to the reimbursements of third-party patent related expenses in connection with the ongoing interference proceeding with respect to certain of our in-licensed intellectual property. Additionally, we anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with SEC requirements and insurance costs. 

Comparison of the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023, And Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Results of Operations

Three months ended June 30, 2024, compared to the three months ended June 30, 2023

Revenues

We had no revenues during the three months ended June 30, 2024, and June 30, 2023.

Research and Development Expenses

Our research and development expenses totaled $24,000 for the three months ended June 30, 2024, representing a decrease of $269,000, or 91.8%, compared to $293,000 for the three months ended June 30, 2023. The decrease was primarily attributable to value of shares issued to Wolc in June 2023 which did not recur in 2024.

General and Administrative Expenses

Our general and administrative expenses totaled $225,000 for the three months ended June 30, 2024, representing an increase of $99,000, or 78.5%, compared to $126,000 for the three months ended June 30, 2023. The increase was primarily due to increase in professional services in the second quarter of 2024.

Operating Loss

Our operating loss totaled $249,000 for the three months ended June 30, 2024, representing a decrease of $170,000, or 40.5%, compared to $419,000 for the three months ended June 30, 2023. The decrease was primarily due to the decrease in our research and development expenses offset by an increase in our general and administrative expenses.

Financial income, net

We recognized financial income, net, of $1,000 for the three months ended June 30, 2024, representing a decrease of $1,000, or 50%, compared to financial income, net of $2,000 for the three months ended June 30, 2023. The decrease was immaterial.

Net Loss

As a result of the foregoing, our net loss totaled $248,000 for the three months ended June 30, 2024, representing a decrease of $169,000, or 40.5%, compared to $417,000 for the three months ended June 30, 2023. The decrease was primarily due to decrease in our research and development expenses offset by an increase in our general and administrative expenses.

Six months ended June 30, 2024 compared to the six months ended June 30, 2023

Revenues

We had no revenues during the six months ended June 30, 2024 and June 30, 2023.

Research and Development Expenses

Our research and development expenses totaled $403,000 for the six months ended June 30, 2024, representing a decrease of $4,000, or 1%, compared to $407,000 for the six months ended June 30, 2023. The decrease was immaterial.

General and Administrative Expenses

Our general and administrative expenses totaled $393,000 for the six months ended June 30, 2024, representing an increase of $123,000, or 45.5%, compared to $270,000 for the six months ended June 30, 2023. The increase was primarily due to increase in professional services in the second quarter of 2024.

Operating Loss

Our operating loss totaled $796,000 for the six months ended June 30, 2024, representing an increase of $119,000, or 17.5%, compared to $677,000 for the six months ended June 30, 2023. The increase was primarily due to the increase in our general and administrative expenses.

Financial Expense, net

We recognized financial expense, net of $2,000 for the six months ended June 30, 2024, representing a decrease of $2,000, or 50%, compared to $4,000 for the six months ended June 30, 2023. The decrease was immaterial.

Net Loss

As a result of the foregoing, our net loss totaled $798,000 for the six months ended June 30, 2024, representing an increase of $117,000, or 17.2%, compared to $681,000 for the six months ended June 30, 2023. The increase was primarily due to the increase in our general and administrative expenses.

Comparison of the Year Ended December 31, 2023 to the Year Ended December 31, 2022

Results of Operations

Research and Development Expenses

Our research and development expenses totaled $569 thousand for the year ended December 31, 2023, representing a decrease of $609 thousand, or 51.7%, compared to $1,178 thousand for the year ended December 31, 2022. The decrease was primarily attributable to the decrease in share-based compensation to our consultants and service providers of $600.

General and Administrative Expenses

Our general and administrative expenses totaled $703 thousand for the year ended December 31, 2023, representing a decrease of $1,436 thousand, or 67.1%, compared to $2,139 thousand for the year ended December 31, 2023. The decrease was primarily attributable to decrease in our share-based payment compensation for our officers, directors and consultants.

Operating Loss

As a result of the foregoing, our operating loss totaled $1,272 thousand for the year ended December 31, 2023, representing a decrease of $2,045 thousand, or 61.6%, compared to $3,317 thousand for the year ended December 31, 2022.

Financial income (expense), net

We recognized financing expense, net of $12 thousand for the year ended December 31, 2023, representing a decrease of $29 thousand, or 70.7%, compared to finance expense, net of $41 thousand for the year ended December 31, 2022. The decrease was primarily attributable to exchange rate differences between the U.S. dollar and the New Israeli Shekel.

Net and Comprehensive Loss

As a result of the foregoing, our loss totaled $1,284 thousand for the year ended December 31, 2023, representing a decrease of $2,074 thousand, or 61.7%, compared to $3,358 thousand for the year ended December 31, 2022.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with US GAAP. There are no critical accounting estimates for the years ended December 31, 2023 and 2022.

Liquidity and Capital Resources

The Company has funded its operations to date primarily through equity financing and the issuance of a loan. Additional funding will be required to complete the Company’s research and development and clinical trials, to attain regulatory approvals, to begin the commercialization efforts of the Company’s product and to achieve a level of sales adequate to support the Company’s cost structure. As of June 30, 2024, we had $120 thousand in cash and cash equivalents, and have invested most of our available cash funds in ongoing cash accounts.

Overview

The table below presents our cash flows for the periods indicated:

Net cash used in operating activities was $390 thousand for the six months ended June 30, 2024, compared with net cash used in operating activities of $614 thousand for the corresponding period in 2023. The $224 thousand decrease in net cash used in operating activities during the six months ended June 30, 2024, compared to the same period in 2023, was primarily due to an increase in the Company’s net loss for the period in the amount of $117 thousand, which was offset by a change in accounts payable, related party, and other current assets of $341 thousand.

Net cash used in operating activities was $1,203 thousand for the year ended December 31, 2023, compared with net cash used in operating activities of $759 thousand for the year ended December 31, 2022. The $444 thousand increase in the net cash used in operating activities during 2023, compared to 2022, was mainly from higher general and administrative activity during 2023 compared with 2022.

We did not record any net cash provided by investing activities in the six months ended June 30, 2024 or in the six month ended on June 30, 2023.

Net cash used in investing activities for the year ended December 31, 2023 was $0 compared to $2 thousand for the year ended December 31, 2022. The decrease in net cash provided by investing activities during 2023 compared to 2022 was immaterial.

Net cash provided by financing activities for the six months period ended June 30, 2024, was $280 thousand compared to $437 thousand for the same period in 2023. The decrease in net cash provided by financing activities during the six months period ended June 30, 2024, compared to the corresponding period in 2023, was mainly due to a decrease in funds received from the issuance of shares and warrants and proceeds received from the exercise of warrants. 

Net cash provided by financing activities for the year ended December 31, 2023 was $1,145 thousand compared to $896 thousand for the year ended December 31, 2022. The increase of $249 thousand in net cash provided by financing activities during 2023 compared to 2022 was mainly due to higher proceeds in 2023 from issuance of common stock and warrants compared with 2022.

Current Outlook

We have financed our operations to date primarily through proceeds from founder’s capital and issuance of shares and warrants. We have incurred losses and generated negative cash flows from operations since inception. To date we have not generated revenue, and we do not expect to generate significant revenues from the sale of our products in the near future.

We do not believe that our current cash on hand will be sufficient to fund our projected operating requirements. This raises substantial doubt about our ability to continue as a going concern. At this time, there is no guarantee that we will be able to obtain an adequate level of financial resources required for the short and long-term support of our operations or that we will be able to obtain additional financing as needed, or meet the conditions of such financing, or that the costs of such financing may not be prohibitive. These conditions raise substantial doubt about our ability to continue as a going concern for a period within one year from the date of the financial statements included elsewhere in this prospectus.

As of June 30, 2024, our cash and cash equivalents were $120,000. We believe that our existing cash and cash equivalents will not be sufficient to fund our projected cash requirements through the end of the year. Therefore, we will require significant additional financing in the near future to fund our operations. We currently anticipate that we will require approximately $700,000 for research and development activities over the course of the next 12 months. We also anticipate that we will require approximately $500,000 for capital expenditures over such 12-month period, which consists primarily of expenditures for clinical trials and general Company operating costs.

In addition, our operating plans may change as ae result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including: 

Until we can generate significant revenues, if ever, we expect to satisfy our future cash needs through our existing cash, cash equivalents and short-term deposits, loans, or debt or equity financings. 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 applications of our products. This may raise substantial doubts about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

Rambam Research Agreement

On July 17, 2019, we entered into a sponsored research agreement, or the Research Agreement, with Rambam MT, pursuant to which the Company agreed to fund a research project, to be performed by Rambam MD, with a research plan aimed at identifying the effects of different cannabis strains on the function of immune cells. On October 28, 2020, the Company and Rambam MT agreed to expand the research plan to study the anti-inflammatory activities of cannabis extracts in an RA mouse model. On February 15, 2021, the Company and Rambam MT agreed to further expand the research plan to study the effect of cannabis extracts on the immunopathology of the COVID-19 disease. The Sponsored Researched Agreement is for an initial term of 48 months. On October 23, 2022, we and Rambam MT entered into a supplement to the Research Agreement, or the Supplement Agreement, pursuant to which we exercised an option to extend the Research Agreement by additional two years until December 31, 2024.

Pursuant to the Research Agreement, we agreed to pay Rambam $1.4 million in four equal payments, due on the first day of August on each successive year from 2019 through 2022. Pursuant to the Supplement Agreement, we agreed to pay Rambam MT $960,000 plus VAT in four biannual payments from May 2023 through December 2024. Furthermore, in accordance with the terms of the Research Agreement, we and Rambam MT will have joint ownership of any IP created as a result of research programs covered by such agreement. In connection with the Research Agreement, Rambam MT agreed not to work, study or develop any technologies with other entities that compete with our work with Rambam MT for our COVID-19 product candidate or RA product candidate for a term of three and seven years, respectively, from the end of the parties’ collaboration with respect to the COVID-19 product candidate and seven years from the end of the term of the Research Agreement with respect to the RA product candidate. 

Subject to commercial sales of any product candidate using the intellectual property created as a part of the research covered by such agreement, Raphael Israel is required to pay Rambam MT a royalty in an amount equal to 6% of all net sales, subject to certain deductions, such as taxes paid by any purchaser, transportation and shipping costs, and other customary deductions.

On December 25, 2023, we received an extension to pay the remaining $350,000 pursuant to the Research Agreement until the end of June 2024. As of December 31, 2023, we have made all four of the four equal payments due pursuant to the Research Agreement, for a total amount of $1.4 million and $120,000 for the Supplement Agreement.

Way of Life Cannabis Agreement

In October 2020, Raphael Israel entered into an engagement agreement with Wolc, pursuant to which, subject to its completing the Share Exchange with Easy Energy, Raphael Israel will be provided with up to 15 liters of CBD oil, from a strain of cannabis during a term of 18 months, to be provided in two to three deliveries of between one to seven liters of CBD oil. In accordance with Raphael Israel’s agreement with Wolc, Raphael Israel has agreed to issue to certain persons affiliated with Wolc 3% of Raphael’s issued and outstanding share capital as of the date of the Share Exchange, to be provided in three equal issuances; provided, however, that such persons may elect to receive a cash payment of $100,000 instead of any one issuance of Raphael’s shares. In addition to the issuance of shares, Raphael Israel has also agreed to pay Wolc a royalty fee equal to 15% of the net royalties generated from sales of Raphael Israel’s pharmaceutical drug products that are developed at Rambam hospital in Israel.

On July 27, 2022, we issued 100,500 shares of common stock to Wolc in connection with the engagement agreement. The value of such issued shares was based on the value of the service provided, which amounted to $100,000. In June 2023, we issued 201,000 shares of common stock to Wolc, in connection with the services agreement dated October 2020. The value of the shares issued was based on the value of the service provided, which amounted to $200,000.

Except for the above, we have not engaged in any off-balance sheet arrangements, such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.

We do not believe that our off-balance sheet arrangements and commitments have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

BUSINESS

Overview

We are a pharmaceutical drug research and development company focused on the discovery and clinical development of life-improving drug therapies based on cannabinoids, including cannabidiol, or CBD, oil. Unless indicated otherwise, we plan on using oil derived from CBD strains with low levels of Tetrahydrocannabinol, or THC. All references to the use of CBD in our product candidates refer to CBD strains with less than 0.3% of THC.

We are currently in the pre-clinical development stage for our lead product candidate, our RA product candidate for the treatment of RA. In addition, we are aiming to develop a pharmaceutical drug product for the treatment of hyperinflammatory syndrome inflammation related to COVID-19. At Rambam Health Care Campus in Israel, or Rambam Hospital, we have successfully completed preclinical studies on human-derived immune cells and mouse models for both the COVID-19 and rheumatoid arthritis products, or RA products.

On February 9, 2022, we filed an application for a clinical trial with the Medical Cannabis Unit of the Ministry of Health of Israel, or MOH. On February 16, 2022 we submitted an application with the Helsinki Committee at Rambam Hospital for a clinical trial in COVID-19 patients.

In November 2022, we submitted a proposal to the MOH for a clinical trial of a cannabis-based drug intended to alleviate the deterioration of COVID-19 patients.

On March 27, 2023, the MOH accepted our proposal for a clinical trial of a cannabis-based drug intended to alleviate the deterioration of COVID-19 patients.

In April 2024 we began a proof-of-concept clinical trial in the United States, leveraging insights from the pre-clinical experiments we have conducted at the Rambam Hospital. This proof-of-concept clinical trial aims to evaluate the efficacy of Cannabigerol in patients with active RA. The estimated timeline to finalize such proof-of-concept clinical trial is six months from the recruitment of the first participant.

We have engaged with MindMate, Inc./ dba Citruslabs (“Citruslabs”) to oversee such proof-of-concept clinical trial. Our collaboration with Citruslab underscores our dedication to conducting such proof-of-concept clinical trial in accordance with applicable industry standards and regulations, including the International Conference on Harmonisation Good Clinical Practice guidelines, and dedication to bringing treatments to fruition and improving the lives of individuals affected by RA. This milestone represents a significant stride forward in our mission to pioneer innovative solutions for managing RA and underscores its commitment to driving advancements in medical research, addressing the unmet needs of patients.

As we move forward, our focus will be on further investigating and refining the formula through continued pre-clinical research. Our goal is to ensure that the formula meets all the necessary standards and regulations set forth by the FDA, allowing us to progress towards clinical treatments.

Our vision is to emerge as a pioneering company at the forefront of formulating pharmaceutical drugs that harness the potential of purified cannabinoids and full-spectrum CBD oil. Our primary mission is to cater to the unmet medical requirements of patients grappling with various disorders, with a particular focus on conditions linked to inflammation, such as chronic lung inflammation, RA and COVID-19.

By leveraging our expertise in this field, we are committed to providing innovative solutions to improve the lives of those afflicted with these challenging medical conditions. Through our dedication to research, development, and compassionate care, we aim to contribute significantly to the well-being of patients worldwide, offering them much-needed relief and hope for a better future.

 In order to achieve our goal, we have and will continue to build an experienced team of senior executives and scientists, with experience in all facets of pharmaceutical research and development, drug formulation, clinical trial execution and regulatory submissions. We intend to leverage the knowledge of our team in order to complete the clinical trials needed to receive approvals of our product candidates from applicable regulatory authorities.

Initially, we intend to obtain approvals for our product candidates from the FDA, and the Medical Cannabis Unit of the MOH. Upon obtaining FDA approvals, or in the event that we are not successful in obtaining such approvals, we intend to apply for European Medicines Agency, or EMA, and other countries’ governmental regulatory agencies approvals for our product candidates. If we are successful in obtaining FDA approvals for our product candidates, we intend to enter into royalty agreements with good manufacturing practice, or GMP, approved medical manufactures and distributors, having them using our medical formulas for the purpose of growing, cultivating, manufacturing, and distributing Raphael Pharmaceutical medical indications in their designated territories.

For this purpose, in October 2022, we entered into an agreement with the Medical Cannabis Research Center at Rambam Health Care Campus, and Rambam MedTech for the development of a new, patentable formulation that combines purified cannabinoids to treat rheumatoid diseases.

The overall objective of this study is to identify a novel cannabinoid based patentable formulation to treat Rheumatoid diseases. Specifically, to investigate combination of purified cannabinoids to downregulate inflammation related to Rheumatoid diseases. We propose to base our study on data derived from Dr. Igal Louria-Hayon’s studies (Helsinki # 0442-20-RMB) on the evaluation of the immune regulation properties of cannabinoids on the immune system and the data derived from the cannabinoids receptors study (Helsinki # 0331-20-RMB). We will analyze the activation of cannabinoid receptors on mouse models and will study the role of purified cannabinoid as a potential to develop a novel patentable formulation to treat RA.

Our discovery platform currently focuses the use of CBD oil, one of the cannabinoids in cannabis plants, as the active pharmaceutical ingredient, or API, for our RA product candidate and COVID-19 product candidate. Research results published in 2018 (“Translational Investigation of the Therapeutic Potential of Cannabidiol (CBD): Toward a New Age”) has shown that there may be benefits to treading medical conditions, or their effects, with cannabinoids, and more specifically, with CBD, which may help reduce chronic pain by impacting endocannabinoid receptor activity, reducing inflammation and interacting with neurotransmitters. This research has also shown that CBD may have neuroprotective properties, and could have the ability to (i) reduce anxiety and depression, (ii) alleviate cancer-related symptoms, (iii) reduce acne and (iv) benefit heart health.

Over the last few years, pharmaceutical drug products that include parts of the cannabis plant have begun to receive regulatory approvals for use in patients suffering from certain disorders, as highlighted below.

In light of the past regulatory approvals for other pharmaceutical drug products and, more specifically, the potential beneficial effects of CBD and other parts of the cannabis plant, we believe that a drug discovery platform based on CBD may offer new and differentiated treatment options for patients. Prior regulatory approvals of other companies’ pharmaceutical drug products do not serve as an indication as to the ability or likelihood that we receive regulatory approval to commercialize any of our product candidates.

After two successful years of pre-clinical research and studies at the laboratories of Rambam Hospital, in January 2021, we commenced a pre-clinical trial in mice for our RA product candidate that we expect will take four to five months. Following the completion of this pre-clinical trial, we intend on submitting an Investigational New Drug, or IND, application to the FDA and MOH. See “Business – Research and Clinical Development Strategy – Clinical Development Plan” for additional information on the ongoing pre-clinical trial and our planned clinical trial for our RA product candidate. In addition, with respect to our COVID-19 product candidate, our clinical research partners have been focused on the effect of cannabinoids and cannabis extracts on immune cells which induce acute inflammation. This study will begin in the pre-clinical level in immune cell models and, subject to positive results that exhibit downregulation of pro-inflammatory cytokines by cannabis extract, the study was completed successfully. Following the completion of the pre-clinical study, a mice model was conducted to analyze for acute inflammation, which resembles the immunopathology of COVID-19. The mice model was successfully completed and we have registered for a clinical trial in patients with the MOH.

As a pharmaceutical research and clinical development company we do not own or operate, and currently do not intend on creating an in-house team to manufacture and commercialize our pharmaceutical drug products, if any, that receive regulatory approval allowing for commercialization. We currently rely, and expect to continue to rely, on third parties for the manufacturing of our product candidates for preclinical and clinical testing, as well as for commercial manufacturing of any pharmaceutical drug products for which we may receive regulatory approval. Subject to the receipt of such regulatory approvals, we intend on cooperating with manufacturers and other third parties to manufacture and commercialize approved pharmaceutical drug products.

Product Pipeline

Currently, we have begun development for our RA and COVID-19 product candidates, which are in the pre-clinical stage.

Assuming that we successfully complete the clinical development of our RA and COVID-19 product candidates, we intend to then turn our attention to the clinical development of cannabinoid-based drug products for the treatment of certain oncology indications. Unlike our RA and COVID-19 product candidate, the use of our cannabinoid-based drug products for the treatment of certain oncology indications will require specific dosing and potentially, a different regulatory pathway than our existing product candidates.

We intend to apply for MOH approval, as well as the FDA and EMA approvals right afterwards, subject to the completion of the applicable clinical trials, for our RA product candidate as well as our COVID-19 product candidate using the FDA’s regulatory pathway for drug products.

Indications and Market

Rheumatoid Arthritis

RA is an autoimmune disease of unknown cause characterized by inflammation in multiple joints, including synovial inflammation with hyperplasia. Inflammation is also associated with reduced hemoglobin (anemia) and reduced albumin and changes in levels of cholesterol and triglycerides. In addition to the inflammation associated with RA, studies, including a 2018 publication entitled, “Cartilage and bone damage in rheumatoid arthritis,” patients suffering from RA generally also suffer from chronic pain, fatigue, progressive joint damage, disability, hyperplasia, production of autoantibodies such as rheumatoid factor and anti–citrullinated protein antibody, cartilage damage and bone erosions. 

Research has shown that in about 30% of RA patients, current conventional synthetic and biologic disease modifying anti-rheumatic drugs and targeting molecules may fail or induce only partial responses, both of which we believe are insufficient for patients suffering from RA. Using disease modified anti-rheumatic drugs, or DMARD, based treatments, as shown in a 2017 study from Sohita Dhillon, patients tend to report at follow-up meetings that pain relief is unsatisfactory and although there is an initial improvements in the average pain score, a plateau may be reached beyond which DMARDs are not able to resolve RA pain. As a result, we believe that RA patients need ongoing therapy as RA relapses are frequent. During RA flareups, patients experience acute and chronic pain, fatigue, sleep disturbances, and morning stiffness which significantly reduces their quality of life. Furthermore, damage is accumulated by long-term disease which also interferes with pain, fatigue and quality of life. 

All types of pain (acute or chronic, widespread or local and nociceptive) have been reported in RA. Patients with RA may develop fibromyalgia, or FM, especially with long-term disease. Concomitant FM is a key factor for discordance between PRO and clinical outcomes in assessment of RA patients including in RCTs. Peripheral sensitization, induced by local inflammation or damage, and pain augmentation by the central nervous system, or CNS, both drives the pain problems in RA patients. Anxiety or depression, impaired sleep and fatigue all contribute to pain sensitization in RA patients. As noted in the study, “Tackling Pain Associated with Rheumatoid Arthritis: Proton-Sensing Receptors,” some RA patients have allodynia and peripheral neuropathies that contribute to refractory chronic pain.

We believe that clinical studies on the use of cannabinoids in rheumatic conditions, and particularly RA, are logically advocated as possible positive effectors of the inflammatory pathway of RA, as well as symptomatic pain relievers that may have the potential to also improve fatigue, sleep disorder and tolerability of DMARDs. Through our Sponsored Research Agreement (as further detailed below), we believe that we have arrived at an understanding as to how cannabinoids influence inflammation. Applying immune cells models in our pre-clinical research, we identified specific strains of cannabis which reduce the capacity of the immune cells to communicate during inflammation, thus decreasing their capacity to participate in chronic inflammation. For a deeper understanding of the mechanism in which cannabinoids effect inflammation, we developed a unique, real time-Polymerase chain reaction, or RT-PCR, method to identify 10 different receptors to cannabinoids, both in human and mice models. We believe that this technology will allow us to identify which cannabinoids receptors are participating in the downregulation of inflammation, which we believe will help us develop our RA product candidate.

In 2015 alone, research conducted by the NIH National Library of Medicine showed that RA affected about 24.5 million people as of 2015, which reflected between 0.5% and 1% of adults in the developed world, with an additional 5 to 50 per 100,000 people developing the condition each year. It is believed that onset is most frequent during middle age and women are affected 2.5 times as frequently as men. Further research indicates that RA resulted in 38,000 deaths in 2013, up from 28,000 deaths in 1990.

Hyperinflammatory Syndrome Related to COVID-19

Since the first emergence of COVID-19 in December 2019 in Wuhan, China, COVID-19 has spread across more than 200 countries across the world and over 112 million cases of the virus have been reported. Most patients develop only mild symptoms of COVID-19; however, some develop severe symptoms including dyspnea, hypoxia and lung involvement which requires hospitalization. Based on research, we believe that most of the severe COVID-19 symptoms are related to hyperinflammation caused by failure of resolution of the immunological response to the infection similar as observed in cytokine release syndrome. Despite the advancements in COVID-19 vaccines and the use of anti-inflammatory or anti-viral medications worldwide according to The World Health Organization, or WHO, there was a 4% global increase in reported new cases during the 28-day period from December 11, 2023, to January 7, 2024, compared to the previous 28-day period, totaling over 1.1 million new cases. However, there was a 26% decrease in new deaths, with 8,700 reported fatalities during the same period. Globally, as of January 7, 2024, there have been over 774 million confirmed cases and over seven million deaths since the emergence of COVID-19, according to the WHO. Consequently, there is an urgent need to explore new anti-inflammatory therapies that could potentially prevent symptom deterioration. 

Research and Clinical Development Strategy

Research and clinical development of our pharmaceutical drug product candidates is our core business. We are currently focused on developing innovative cannabinoid-based medical indications that we aim to push through Phase 2A and Phase 2B approval from both the FDA and EMA.

The research efforts that have been conducted to date by the team at Rambam Med-Tech Ltd., or Rambam MT, are aimed at revealing the mechanism which structures the activity of cannabinoids in human cells and organs, while applying a variety of disease models. By employing our PCR method, we are able to discern various cannabinoid receptors and determine their involvement in inflammation downregulation. This approach empowers us to identify which cannabinoid receptors play a role in mitigating inflammation. Consequently, we can accurately identify the cannabinoid components within a chosen strain, enabling precise administration tailored to patient treatment. This pivotal discovery forms the scientific cornerstone for our pioneering anti-inflammatory formulas.

Research Agreement with Rambam MT

On July 17, 2019, we entered into a sponsored research agreement, or the Research Agreement, with Rambam MT, pursuant to which the Company agreed to fund a research project, to be performed by Rambam MD, with a research plan aimed at identifying the effects of different cannabis strains on the function of immune cells. On October 28, 2020, the Company and Rambam MT agreed to expand the research plan to study the anti-inflammatory activities of cannabis extracts in an RA mouse model. On February 15, 2021, the Company and Rambam MT agreed to further expand the research plan to study the effect of cannabis extracts on the immunopathology of the COVID-19 disease. The Sponsored Researched Agreement is for an initial term of 48 months. On October 23, 2022, we and Rambam MT entered into a supplement to the Research Agreement, or the Supplement Agreement, pursuant to which we exercised an option to extend the Research Agreement by additional two years until December 31, 2024.

Pursuant to the Research Agreement, we agreed to pay Rambam $1.4 million in four equal payments, due on the first day of August on each successive year from 2019 through 2022. Pursuant to the Supplement Agreement, we agreed to pay Rambam MT $960,000 plus VAT in four biannual payments from May 2023 through December 2024. Furthermore, in accordance with the terms of the Research Agreement, we and Rambam MT will have joint ownership of any IP created as a result of research programs covered by such agreement. In connection with the Research Agreement, Rambam MT agreed not to work, study or develop any technologies with other entities that compete with our work with Rambam MT for our COVID-19 product candidate or RA product candidate for a term of three and seven years, respectively, from the end of the parties’ collaboration with respect to the COVID-19 product candidate and seven years from the end of the term of the Research Agreement with respect to the RA product candidate.

Subject to commercial sales of any product candidate using the IP created as a part of the research covered by such agreement, we are required to pay Rambam MT a royalty in an amount equal to 6% of all net sales, subject to certain deductions, such as taxes paid by any purchaser, transportation and shipping costs, and other customary deductions.

On December 25, 2023, we have received an extension to pay the remaining $350,000 pursuant to the Research Agreement until the end of June 2024. As of December 31, 2023, the Company has made all four of the four equal payments due pursuant to the Research Agreement, for a total amount of $1.4 million and $120,000 for the Supplement Agreement.

We and Rambam MT are currently focused on characterizing the activity of cannabinoids in RA and in hyperinflammatory syndrome related to COVID-19. RA is a long-term autoimmune disorder, and as such, the research conducted by Rambam MT has focused on identifying the effect of cannabinoids on inflammatory processes related to RA, while, with respect to our COVID-19 product candidate, their research has been focused on the effect of cannabinoids and cannabis extracts on immune cells which induce acute inflammation. Moreover, building on the promising findings of a mouse model study demonstrating the potential of the Company’s cannabis treatment for lung inflammation, as published in Frontiers in Immunology in May 2022, Rambam’s team is currently investigating the impact of cannabinoids on models of chronic lung inflammation such as asthma.

Pre-Clinical Studies for RA Product Candidate

In Vitro Study

Pursuant to the Research Agreement, the team at Rambam MT established a study in order to determine which cannabis strains extracts may affect inflammation. The lab applied an in vitro system, allowing them to screen a variety of cannabis derived oil extracts and their influence on cytokine secretion, which is a type of response to injury and infection in the body.

The researchers employed human THP1 cells, which can be induced to differentiate macrophages (specialized cells involved in the detection, phagocytosis and destruction of bacteria and other harmful organisms) and to secrete cytokines (which is aimed as serving as a bridge for cross-communication with other innate immune cells). Using this system, our partners from Rambam MT have established a variety of cannabinoids and studied their influence on pro-inflammatory and anti-inflammatory cytokines. Most interestingly the study has identified a non-psychoactive cannabis strain, which we refer to as “CAN1.” Our study showed that CAN1 reduced TNFα and IL-6 secretion but increased the secretion of the anti-inflammatory cytokine IL-10, while also reducing the secretion of the pro-inflammatory chemokine IL-8, as highlighted in Figure 1 below. Based on the results from this pre-clinical study, we believe that CAN1 strain, may be a potential anti-inflammatory agent with the ability to influence both activation and migration of cells during inflammation. 

Figure 1. CAN1 downregulates pro-inflammatory cytokines (TNFα, IL-8, IL-6) and upregulates the anti-inflammatory counterpart IL-10.

The results in Figure 1 above reflect the results from our in vitro study of THP1 cells (0.25*10^6/ml) incubated with phorbol 12-myristate 13-acetate (PMA) (50 ng/ml) to induce THP1 cells to differentiate to macrophages. for 48 hours. Then, cells were washed twice with phosphate buffer saline (PBS) and treated with Can1 (1 µg/ml) in medium free serum for 24 hours. Then, cells were washed twice with PBS and incubated with LPS (Lipopolysaccharides) to induce cytokines secretion (1 µg/ml) overnight. Supernatants were collected and frozen. Levels of TNFα, IL-8, IL-6 and IL-10 were determined by the enzyme-linked immunosorbent assay (ELISA).

Pre-Clinical Study in Mice

In January 2021, we commenced a pre-clinical study in mice. Mice in our pre-clinical study are being treated with cannabis strains that we previously identified in our in vitro study and other prior research as potential candidates in the cell models. Following the treatment, we expect to examine the ability of the treatment to modulate the immune function, specifically in the case of chronic inflammation, in order to optimize treatment for RA.

This pre-clinical study is expected to be focused on the following results.

In addition, this pre-clinical study is expected to enable us to examine how we manufacture the API, the dosage design, analytical and bioanalytical method development and validation, metabolism and pharmacokinetics, toxicology, both safety and genetic toxicology and possibly safety pharmacology; and good manufacturing practice, or GMP, manufacture and documentation of drug product for use in clinical trials.

Aim 1. Evaluating the immune modulation properties of different cannabis strains

RA is an autoimmune disease that causes chronic inflammation and damage to the joints, leading to pain, stiffness, and loss of mobility. It occurs when the body’s immune system mistakenly attacks the synovium, which is the lining of the joints. This can cause swelling and thickening of the synovium, which can eventually lead to erosion of the cartilage and bone within the joint. RA can also affect other parts of the body, such as the skin, eyes, lungs, and blood vessels. RA is a chronic condition that requires ongoing management to control symptoms and prevent joint damage.

Current treatments for RA have potential difficulties and side effects that need to be carefully weighed against their benefits. Some medications may lose effectiveness over time, requiring patients to switch treatments. Additionally, some medications have side effects such as gastrointestinal problems, liver damage, and increased risk of infections and cancer. There are also individual differences in patient response to treatments, highlighting the need for more personalized approaches.

It is our belief, based on the research conducted by our partners, and that or our industry peers, that cannabinoids have immunomodulatory properties, although the exact effects are not fully comprehended.

Together with the team at the Medical Cannabis Research and Innovation Center at Rambam Health Care Campus, our experiments in cells derived from human healthy donors (Helsinki Num. 044220-RNB) have revealed a specific high-CBD strain that effectively reduces the capacity of immune cells: T cells and neuthrophils to be activated in response to inflammatory stimulation. The strain was found to reduce the expression levels of IL6, TNF alpha. This suggests that the strain has the potential to slow the progression of RA.

Thus, we have successfully completed the proof-of-concept phase in human derived immune cells.

Aim 2. Demonstrating the immune modulatory properties of specific cannabis extract on mouse models for RA.

Cannabis is not an isolated substance; it contains a plethora of biologically active substances. The most common substances are THC and CBD. Today more than 140 cannabinoids are known to be expressed in the plant. In addition to cannabinoids, the plants contain flavonoids and terpenes. This greatly complicates our ability to understand the effects of cannabis on the physiology because the different substances may have different (and even contradictory) effects. Therefore, the use of different cannabis varieties with diverse ingredients may produce distinct and unexpected results.

Our preclinical experiments have revealed a specific high-CBD strain that effectively reduces inflammation in a mouse model of RA. The strain was found to reduce the expression levels of IL6, TNF alpha, and IL1b in the joints and peripheral blood of the mice. This suggests that the strain has the potential to slow the progression of RA.

We have successfully completed the proof-of-concept phase in mice and are now preparing to move towards clinical trials.

Aim 3. Elucidating the MOA of cannabinoids that are involved in the regulation of inflammation in RA.

Upon activation, it is the cannabinoid receptors, or CBrs, in the endocannabinoid system, or ECS, which initiate numerous regulatory functions in a mammal. CBrs have been found in a variety of species including human, monkey, pig, dog, rat and mouse. The discovery of membrane receptors found in the brain, central nervous system as well as peripheral tissues and organs that bind cannabimimetic compounds was a critical turning point that paved the way towards the pharmacological understanding of cannabis-derived compounds. 

The most studied CBrs are CB1 and CB2; both belong to the G protein-coupled receptors (these cell surface receptors act like an inbox for messages in the form of light energy, peptides, lipids, sugars, and proteins), or GPCR, family. GPCRs constitute a large protein family of receptors that detect molecules outside the cell and activate internal signal transduction pathways and cellular responses. GPCRs, are called seven-transmembrane receptors because they pass through the cell membrane seven times. Heterotrimeric G proteins are activated by GPCRs and are made up of three subunits, α, β and γ. G proteins are divided into four main classes: Gαs, Gαi, Gαq and Gα12. These proteins are activated depending on the ability of the G protein α-subunit, or Gα, to cycle between an inactive guanosine diphosphate, or GDP, bound conformation and an active guanosine triphosphate, or GTP, bound conformation that can modulate the activity of downstream effector-proteins. Additional receptors have been shown to bind cannabinoids: G protein-coupled receptor 55, or GPR55, several transient receptor potential, or TRP, channels (TRPV1, TRPV2, TRPA1, TRPM8), and glycine receptors.

Figure 2. CB1 downstream signaling network. Adapted from Chakravarti et al., 2014. 

Since most of the biological properties related to phytocannabinoids, a type of natural cannabinoid, rely on their interactions with receptors of the endocannabinoid system, it is crucial to define which receptors are expressed and activated in the target cells. As a result, we have developed a system with the capacity to identify ten cannabinoid receptors simultaneously and measure their expression levels using quantitative real-time PCR. We have applied this method in examining cells of the immune system, and more specifically, in monocytes, before and after differentiation to macrophages, or after stimulation to secrete cytokines. Using this methodology, we were able to identify a differential expression pattern of the receptors under different conditions.

To obtain a deep understanding on the mechanism of action of the cannabis strains, we applied our research system and established a unique study to research the response of 10 different receptors to Cannabis in RA patients, which aims to identify the specific cannabinoids receptors on the immune cells. The data from this study is expected to subsequently be used to set up a system for analyzing and matching the specific cannabis treatment to the specific cannabinoids receptors that are expressed in the patient’s cells. We believe that if cannabinoid treatments correspond to the receptors in the patient’s cells, the treatment may be more accurate for treating that specific patient’s RA symptoms. We have identified cannabinoid receptors that are expressed on activated T cells from human donors (Helsinki # 033120-RNB). Our next objective is to determine the cannabinoid receptors expressed on neutrophils. 

Aim 4. Establish a Phase 1 & 2B clinical trial according to FDA rules and regulations to study the effect of cannabis-based medical indications on RA.

Our goal for the treatment of RA is to achieve disease remission or low disease activity, or LDA. LDA is measured with several assessment metrics that are intended to measure the effect of the treatment on a number of physical phenomena that are connected to RA. These metrics include, but are not limited to: (i) Disease Activity Score based on assessment of 28 joints, or DAS28, patient’s assessment, (ii) erythrocyte sedimentation rate (a common hematology test, and is a non-specific measure of inflammation) or C-reactive protein, or CRP, test, which is a blood test that measures the CRP in a person’s blood, (iii) SDAI and CDAI (Simple and Complex Disease Activity Indices) as compared to DAS28, (iv) patient’s and physician’s assessment, including global assessment scores, or PtGA and PhGA, respectively (v) pain visual analogue scale and (vi) health assessment questionnaire disability index, or HAQ-DI.

Clinical Development Plan for RA Product Candidate

We intend to utilize the knowledge and results that we obtain from our pre-clinical study to establish, initially a Phase 1 clinical trial, which we expect will take approximately 3 months, followed by a Phase 2 clinical trial to study the effect of cannabis-based medical intervention on RA, which we expect will take approximately 24 months, following which, we hope to receive FDA approval to allow for the commercialization of our RA product candidate. Specifically, we intend to study the changes in RA patients’ status after cannabis compounds were added to their stable conventional treatment. We currently plan that our partners at Rambam MT will carry out these trials at the Rambam Health Care Campus in Haifa, Israel.

Our hypothesis is that in patients with RA, the regular addition of cannabinoids in a defined dosage to basic treatment of RA might add to the patients’ quality of life. We intend to measure quality of life by scores for fatigue using the fatigue severity scale, pain using the visual analogue scale, the Pittsburgh Sleep Quality Index, PtGA, PhGA, HAQ-DI and the 6-Item Short Form Health Survey. We also propose that cannabinoids may influence the disease status. This may be measured by DAS28, SDAI, CDAI, CRP, ESR, albumin and Hb levels and also by levels of key cytokines and chemokines. As part of these clinical studies, we currently plan to assess changes in RA patients’ status after cannabis compounds were added to their stable conventional treatment.

Pre-Clinical Studies for Treatment of Hyperinflammatory Syndrome Related to COVID-19

We are studying the potential of cannabis extracts to downregulate the hyperinflammation and the immunopathology in COVID-19 patients. Our partners at Rambam MT have been conducting research on the use of cannabis to treat disorders with widespread inflammatory responses, such as RA and COVID-19. We hope that by decoding the cannabinoid mechanism of action during inflammatory storms, we can treat inflammation associated with COVID-19 where conventional drugs and other therapies have failed.

At the outbreak of the COVID-19 pandemic, members of the Rambam MT team directed their efforts and experience to join the world-wide battle against the COVID-19 pandemic. Their research found that cannabinoids contribute to the sophisticated fabric network of intercellular communications. Based on this research, we believe, that if we understand how cannabinoid components are used in intercellular communication, we can help influence this communication in the event of a disease, to disrupt it or empower the communication to convey desired messages. 

In order to properly understand cannabis’ effects on COVID-19, the Rambam MT team compiled its Biobank database. In generating the Biobank database, the Rambam MT team found what they believed to be a safe way to separate the white blood cells, including the immune cells, from verified patients. We believe that this is crucial as blood samples are the most accessible resource for continuous sampling (allowing for the understanding of biological processes during the disease) and to develop vaccines and drugs for treatment of the condition.

In February 2021, we entered into an agreement with Rambam MT for investigation of CBD oil extracts as a potential treatment for COVID-19 related inflammation. In accordance therewith, the Rambam MT team is investigating the effect of cannabis extracts oil on the inflammation response of immune cells derived from COVID-19 patients as well as a deep study on the capacity of cannabis extract oil to reduce acute inflammation and lung inflammation in mouse models which resembles the immunopathology of COVID-19.

This study will begin in the pre-clinical level in immune cell models and, subject to positive results that exhibit downregulation of pro-inflammatory cytokines by cannabis extract, the study is expected to continue to a mouse model to analyze for acute inflammation, which resembles the immunopathology of COVID-19. We believe that our strategy to investigate the response of ex-vivo immune cells to cannabis extract together with the analysis of the in-vivo model for acute and lung inflammations, will allow us to identify the medical cannabis extracts, if any, that have the potential to treat patients with COVID-19 related hyperinflammatory syndrome.

Our experiments have revealed a specific high-CBD strain that presents enhanced anti-inflammatory effects. Using cells derived from human donors (Helsinki Num. 044220-RNB) and a mouse model for systemic inflammation and severe lung inflammation, we have found that this strain is effective in preventing cytokine storms. It reduces the secretion of IL6 and TNF alpha, as well as the inflammation in the mice’s lungs, while also inhibiting the migration of immune cells to the lungs.

These findings were published by Rambam’s research team in the prestigious scientific journal “Frontiers in Immunology”: “High-CBD Extract (CBD-X) Downregulates Cytokine Storm Systemically and Locally in Inflamed Lungs” (Frontiers in Immunology, May 16, 2022).

In November 2022, we submitted a proposal to the MOH for a clinical trial of a cannabis-based drug intended to alleviate the deterioration of COVID-19 patients. On March 27, 2023 the MOH accepted our proposal. We are currently in the process of finalizing the strategy for the trial site and ensuring it will have the requisite number of COVID-19 patients needed for our trial.

Aim 5. Development of a new, patentable formulation that combines purified cannabinoids to treat rheumatoid diseases.

In October 2022, we entered into an agreement with Rambam MedTech for the development of a new, patentable formulation that combines purified cannabinoids to treat rheumatoid diseases.

The overall objective of this study is to identify a novel cannabinoid based patentable formulation to treat Rheumatoid diseases. Specifically, to investigate combination of purified cannabinoids to downregulate inflammation related to Rheumatoid diseases. We propose to base our study on data derived from Dr. Igal Louria-Hayon’s studies (Helsinki # 0442-20-RMB) on the evaluation of the immune regulation properties of cannabinoids on the immune system and the data derived from the cannabinoids receptors study (Helsinki # 0331-20-RMB). We will analyze the activation of cannabinoid receptors on mouse models and will study the role of purified cannabinoid as a potential to develop a novel patentable formulation to treat RA.

Competition and Competitive Position

The pharmaceutical industry is characterized by rapidly advancing technologies and intense competition. While we believe that our knowledge, experience and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates for which we complete clinical development successfully and for which we receive marketing approval may compete with existing therapies and new therapies that may become available in the future. 

Many of our competitors have far greater marketing and research capabilities than us. We also face potential competition from academic institutions, government agencies and private and public research institutions, among others, which may in the future develop products to treat those diseases that we currently or, in the future, seek to treat. All of these companies and institutions may have product candidates in development that are or may become superior to our RA product candidate or any other product candidate that we may seek to develop. Our commercial opportunity would be reduced significantly if our competitors develop and commercialize products that are safer, more effective, more convenient, have fewer side effects or are less expensive than our product candidates.

In addition, although our product candidates may, if approved, be considered advantageous to existing therapies, such as the use of corticosteroids and DMARDs for the treatment of RA, our target market may continue to use existing therapies.

However, we do believe, specifically with respect to our competitors not using cannabis in their pharmaceutical drug products that our use of, and experience with, cannabinoids provides us with a potential competitive advance. Our research has shown that the use of cannabinoids for the treatment of RA is justified based on its positive effect on pain, fatigue, sleep problems and its potential safety profile. Growing evidence on the anti-inflammatory effect of cannabinoids provide more strong ground for their use in the treatment of RA.

Although the use of any part of the cannabis plant in pharmaceutical drug products was once non-existent or minimal, in addition to approved pharmaceutical drug products that use parts of the cannabis plant (see “Business – Overview” for additional information), we are aware that there is at least one plan for a multicenter randomized control trial on the use of medical cannabidiol in Danish patients with RA and Ankylosing Spondylitis (inflammatory joint and spine disease), as previously published in an issue of BMJ Open in 2019. As the medical benefits of cannabis become more well-known, we believe that we may face more competition from both new startup pharmaceutical and biotechnology companies and from well-funded and experienced organizations and it is therefore imperative that we face as few delays as possible in our pre and clinical development plan or we may otherwise face more competition.

The following table highlights the estimated cost that RA patients incur on an annual basis based on a 2017 report from the Canadian Agency for Drugs and Technologies in Health.