NUVECTIS PHARMA, INC. Management report and analysis of operating results (Form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this report. The following discussion and analysis
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"), including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are signified by the
words "expect," "anticipate," "intend," "believe," "may," "plan," "seek" or
similar language. All forward-looking statements included in this document are
based on information available to us on the date hereof and we assume no
obligation to update any such forward-looking statements. For such
forward-looking statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Our business and financial performance are subject to substantial
risks and uncertainties. Actual results could differ materially from those
projected in the forward-looking statements. In evaluating our business, you
should carefully consider the information set forth under the heading "Risk
Factors" herein and in our Annual Report on Form 10-K for the year ended
December 31, 2021. As used below, the words "we," "us" and "our" may refer
to
Nuvectis Pharma, Inc.

Overview

We are a biopharmaceutical company focused on the development of novel targeted
therapies for the treatment of cancer. Our approach translates key scientific
insights relating to oncogenic drivers and cancer addiction pathways into a
clinical development strategy of potent and selective anticancer drug
candidates.

NXP800 (HSF1 pathway inhibitor)

We have licensed exclusive world-wide commercial rights to NXP800, a novel Heat
Shock Factor 1 ("HSF1") pathway inhibitor, which was discovered at the Institute
of Cancer Research ("ICR") in London, England. Cancer cells actively exploit
HSF1 to overcome diverse stresses and promote biological activities crucial for
their survival, progression, immune evasion, and metastasis.

In preclinical studies, treatment with NXP800 inhibited tumor growth in
xenografts models of human ovarian cancer. In addition, a genetic mutation in
the AT-rich interactive domain-containing protein 1A ("ARID1a") gene has been
identified as a potential biomarker for treatment sensitivity. Based on this
work, we plan to clinically investigate NXP800 in Ovarian Clear Cell Carcinoma
("OCCC") and endometrioid ovarian carcinoma, and to investigate the utility of
ARID1a deficiency as a patient selection marker. The genetic screening for the
ARID1a mutation is a standard part of the commercially available screening
panels being utilized in the clinic for cancer patients.

The Phase 1 study was initiated in December 2021 and is comprised of two parts:
dose-escalation (Phase 1a) to be followed by an expansion phase (Phase 1b). In
the Phase 1a, the safety and tolerability of NXP800 will be evaluated in
patients with advanced solid tumors to identify a dose and dosing schedule for
the Phase 1b. In the Phase 1b, the safety and preliminary anti-tumor activity of
NXP800 will be evaluated, initially in patients with OCCC and endometrioid
carcinoma and possibly in patients with other types of solid tumors. In June
2022, the U.S. Food and Drug Administration (the "FDA") cleared the Company's
Investigational New Drug Application ("IND") for NXP800, which includes the
Phase 1 clinical trial protocol. Additional preclinical studies are being
conducted to identify development opportunities for NXP800 in additional solid
tumor types.

NXP900 (SRC/YES1 kinase inhibitor)

NXP900 is a preclinical-stage drug candidate designed to preferentially inhibit
the Proto-oncogene c-Src ("SRC") and YES1 kinases. NXP900 was discovered at the
University of Edinburgh, Scotland. SRC is aberrantly activated in many cancer
types, including solid tumors such as breast, colon, prostate, pancreatic and
ovarian, while remaining predominantly inactive in non-cancerous cells.
Increased SRC activity is generally associated with late-stage cancers,
metastatic potential and resistance to therapy, and correlates with poor
clinical prognosis. YES1 gene amplification has been reported to be implicated
in several tumors including lung, head and neck, bladder and esophageal cancers.
Furthermore, it has been found that YES1 gene amplification is a key mechanism
of resistance to Epidermal Growth Factor Receptor ("EGFR") or (Human Epidermal
Growth Factor Receptor 2 ("HER2") and A1k inhibitors. A recent, peer reviewed
study published in Nature Communication (not sponsored by the Company)
demonstrated that NXP900 is able to re-sensitize resistant non-small cell lung
cancer ("NSCLC") cells to osimertinib (Tagrisso®), the leading EFGR inhibitor
used for the treatment of EGFR mutation-positive NSCLC.

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Preclinically, NXP900 demonstrated potent inhibition of SRC and YES1 kinases and
substantial growth inhibition of primary tumors and bone metastases in triple
negative breast cancer ("TNBC"), and group IV Medulloblastoma animal models. Of
note, in the animal models tested tumor growth inhibition was associated with
substantial improvement of median survival.

We plan to initially develop NXP900 in solid tumors where SRC and/or YES1 are
implicated. We anticipate submitting an IND or an equivalent submission with a
foreign agency in early 2023.

Since our inception in 2020, we have devoted all of our efforts and financial
resources to organizing and staffing our company, business planning, raising
capital, acquiring product candidates and securing related intellectual property
rights and conducting research and development activities. We do not have any
products approved for sale and have not generated any revenue from product
sales. We may never be able to develop or commercialize a marketable product. We
have not yet successfully completed any pivotal clinical trials, obtained any
regulatory approvals, manufactured a commercial-scale drug, or conducted sales
and marketing activities.

Results of Operations

From our inception on July 27, 2020, through June 30, 2022, we did not generate
any revenue. Our main activities through June 30, 2022 have been organizational
and capital raising activities and the completion of the in-license agreements
for our two drug candidates, NXP800 and NXP900, our Clinical Trial Application
by the Medicines and Healthcare Regulatory Agency, and preparation for the Phase
1a clinical trial for NXP800, which commenced in December 2021, and beginning
our IND-enabling studies for NXP900, which commenced in late 2021. Additionally,
we completed our initial public offering in February 2022.

Research and development costs

Research and development expenses include costs directly attributable to the
conduct of research and development programs, including licensing fees, cost of
salaries, share-based compensation expenses, payroll taxes, and other employee
benefits, subcontractors, and materials and service used for research and
development activities, including clinical trials, manufacturing costs, and
professional services. All costs associated with research and development are
expensed as incurred.

Product candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will increase substantially
in connection with our ongoing and planned preclinical and clinical development
activities in the near term and in the future. The successful development of our
product candidates is highly uncertain. At this time, we cannot accurately
estimate or know the nature, timing and costs of the efforts that will be
necessary to complete the preclinical and clinical development of any of our
product candidates and we may never succeed in obtaining regulatory approval for
any of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and
personnel-related costs, including stock-based compensation, for our personnel
in executive, finance and accounting, and other administrative functions.
General and administrative expenses also include legal fees relating to patent
and corporate matters; professional fees paid for accounting, auditing,
consulting, and tax services; insurance costs; travel expenses; and facility
costs not otherwise included in research and development expenses.

We anticipate that our general and administrative expenses will increase in the future as we increase our workforce to support our ongoing research and development activities.

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The following table summarizes our operating expense results for the three months ended June 30, 2022: (in thousands)

                                 Three Months Ended June 30
                                   2022               2021           Change
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT      $        2,505     $        4,245    $ (1,740)
GENERAL AND ADMINISTRATIVE             1,068              1,693        (625)

OPERATING LOSS                       (3,573)            (5,938)        2,365
FINANCE INCOME                             4                  -            4

NET LOSS                      $      (3,569)     $      (5,938)    $   2,369

Research and development costs

The following table summarizes our research and development expenses for the three months ended June 30, 2022: (in thousands)

                                               For the three months ended June 30          Increase/
                                                  2022                    2021             (Decrease)
Clinical Expense                            $           1,144       $              31    $      1,113
Employee Compensation and Benefits                        844              
      667             177
Manufacturing                                             453                      39             414
License Fee                                                 -                   3,500         (3,500)
Professional services and other                            64                       8              56
Total research and development expenses     $           2,505       $      

4,245 ($1,740)


Research and development expenses decreased by $1.7 million or 41% during the
three months ended June 30, 2022 compared to the same period in 2021. The
decrease in research and development expense during the three months ended June
30, 2022 was primarily driven by $3.5 million in one-time licensing fees expense
and  paid during the period in 2021 for compound NXP800 partially offset by $1.1
million in increased clinical expenses, $0.4 in manufacturing expenses mostly
related to the NXP800 program and $0.2 million of additional employee expenses
including $0.3 million in employee stock compensation.

General and administrative expenses

The following table summarizes our general and administrative expenses for the three months ended June 30, 2022: (in thousands)

                                                For the three months ended June 30           Increase/
                                                    2022                   2021             (Decrease)
Professional and consulting services         $              319     $            1,257    $       (938)
Employee Compensation and Benefits                          281                    222               59
Insurance and Other                                         468                    214              254
Total general and administrative expenses    $            1,068     $      

1,693 ($625)

General and administrative expenses decreased by $0.6 million or 37% during the
three months ended June 30, 2022 compared to the same period in 2021. The
decrease in general and administrative expense during the three months ended
June 30, 2022 was primarily driven by the $0.9 million decrease in professional
and consulting services related to the private funding round in 2021 which could
not be netted against the proceeds, partially offset by a $0.3 million increase
in insurance and other expenses associated with the IPO.

As a result of the above, our operating loss for the three months ended June 30, 2022decreases $2.4 million i.e. 40%, compared to the same period in 2021.

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The following table summarizes our operating expense results for the six months ended June 30, 2022: (in thousands)

                                Six Months Ended June 30
                                  2022             2021         Change
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT      $       4,310     $    4,245    $     65
GENERAL AND ADMINISTRATIVE            2,208          1,716         492

OPERATING LOSS                      (6,518)        (5,961)       (557)
FINANCE INCOME                            6              -           6

NET LOSS                      $     (6,512)     $  (5,961)    $  (551)

Research and development costs

The following table summarizes our research and development expenses for the six months ended June 30, 2022: (in thousands)

                                               For the six months ended June 30          Increase/
                                                  2022                   2021            (Decrease)
Clinical Expense                            $          1,588       $             31    $      1,557
Employee Compensation and Benefits                     1,311               
    667             644
Manufacturing                                            757                     39             718
License Fee                                              400                  3,500         (3,100)
Professional services and other                          254                      8             246

Total research and development expenses $4,310 $

$4,245,65

Research and development expenses increased by $0.1 million, or 2%, during the
six months ended June 30, 2022 compared to the same period in 2021.  The
increase in research and development expense during the six months ended June
30, 2022 was primarily driven by, $1.6 million increase in clinical expenses
paid out in connection with our product candidates NXP800 and NXP900, $0.6
million in employee compensation and benefits including $0.4 million in stock
based compensation and $0.7 million in manufacturing expenses mostly associated
with our product NXP800 and $0.2 million in professional services and other
expenses associated with the company's drug product programs, partially offset
by a $3.1 million decrease in license fees paid during 2021 to CRT for NXP800

net of UoE fees associated with the company’s 2022 IPO and UoE license agreement.

General and administrative expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2022: (in thousands)

                                                For the six months ended June 30           Increase/
                                                   2022                  2021             (Decrease)
Professional and consulting services         $           1,002     $           1,280    $       (278)
Employee Compensation and Benefits                         460                   222              238
Insurance and Other                                        746                   214              532
Total general and administrative expenses    $           2,208     $       

$1,716,492


General and administrative expenses increased by $0.5 million, or 29%, during
the six months ended June 30, 2022 compared to the same period in 2021. The
increase in general and administrative expenses for the six months ended June
30, 2022, was primarily driven by $0.5 million increase in insurance due to
insurance associated with the IPO, $0.2 million in employee compensation
including $0.3 million in stock compensation expense offset by a decrease of
$0.3 million in professional and consulting fees paid to third-party providers.

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As a result of the above, our operating loss for the six months ended
June 30, 2022increase $0.6 million i.e. 9%, compared to the same period in 2021.

Cash and capital resources

As of June 30, 2022, we had $13.6 million of cash and cash equivalents. For the
three months ended June 30, 2022, and 2021, we had net losses of $3.3 million
and $5.9 million, respectively. For the six months ended June 30, 2022, and
2021, we had net losses of $6.3 million and $6.0 million, respectively. As of
June 30, 2022, we had an accumulated deficit of $19.4 million.

On February 4, 2022, we entered into an underwriting agreement with H.C.
Wainwright & Co. (the "Underwriter"), as sole book-running manager, in
connection with our initial public offering of common stock (the "IPO"). On
February 4, 2022, we announced the pricing of our IPO of 3,200,000 shares of
common stock for a price of $5.00 per share, less certain underwriting discounts
and commissions. As part of the UoE license agreement, the Company owes UoE $0.4
million associated with this fundraising. We will pay UoE 2.5% of the gross
amount of each of the Company's future fund raisings up to a cumulative total of
$3.0 million, including this $0.4 million.

The IPO was closed on February 8, 2022with a gross product of $16.0 millionbefore deduction of discounts and subscription fees (for the net proceeds of $12.6 million).

In addition, on July 29, 2022, we completed a private placement in which we
received gross proceeds of $15.9 million before deducting fees and expenses (for
net proceeds of $14.2 million). We believe that the proceeds from our IPO and
private placement will enable us to fund our operating expenses and capital
expenditures through at least the next 12 months from the issuance of our
financial statements. We have based this estimate on assumptions that may prove
to be wrong, and we could exhaust our available capital resources sooner than we
expect. Our future viability in the long term is dependent on our ability to
raise additional capital to finance our operations.

We expect our expenses to increase substantially in connection with our ongoing
activities, particularly as we advance the preclinical activities and clinical
trials of our current or future product candidates, including payments of
milestones and sponsored research commitments associated with our license
agreements for NXP800 and NXP900. In addition, now that we have closed our IPO,
we expect to incur additional costs associated with operating as a public
company, including significant legal, accounting, investor relations, and other
expenses that we did not incur as a private company. The timing and amount of
our operating expenditures will depend largely on our ability to:

?advance the development of our clinical and preclinical programs;

?acquiring additional product candidates;

? manufacture or obtain manufacture of our preclinical and clinical drug

materials and process development for commercial and late-stage manufacturing;

?seek regulatory approvals for any current or future product candidates that successfully complete clinical trials;

?achieve milestones in accordance with our license agreements;

establish a sales, marketing, medical affairs and distribution infrastructure? commercialize any current or future product candidates for which we may

obtain marketing authorization;

?hire additional clinical, quality control and scientific staff;

develop our operational, financial and management systems and increase? personnel, including personnel to support our clinical development,

manufacturing and marketing efforts and our operations as a public

company; and

?obtain, maintain, develop and protect our intellectual property portfolio.

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We anticipate that we will require additional capital as we seek regulatory
approval of our product candidates and if we choose to pursue in-licenses or
acquisitions of other product candidates. If we receive regulatory approval for
our other future product candidates, we expect to incur significant
commercialization expenses related to product manufacturing, sales, marketing
and distribution, depending on where we choose to commercialize.

Because of the numerous risks and uncertainties associated with research,
development and commercialization of our product candidates, we are unable to
estimate the exact amount of our working capital requirements. Our future
funding requirements will depend on and could increase significantly as a result
of many factors, including:

the scope, progress, results and costs of research and development of our ? current or future product candidates, and conduct preclinical and clinical studies

trials;

?the costs, timing and results of regulatory review of our current or future product candidates;

the costs, schedule and manufacturing capacity of our current or future product? candidates to fuel our clinical and preclinical development efforts and our

clinical tests;

costs of future activities, including product sales, medical affairs, ? marketing, manufacturing and distribution, for any of our current or future products

product candidates for which we receive marketing approval;

?the costs of manufacturing commercial-grade products and inventory required to support commercial launch;

?the ability to receive additional non-dilutive funding, including grants from organizations and foundations;

? revenue, if any, from the commercial sale of our products, if

of our current or future product candidates receive marketing authorization;

the costs of preparing, filing and pursuing patent applications, obtaining, ? maintain, extend and enforce our intellectual property rights and

defend intellectual property claims;

our ability to establish and maintain collaborations on favorable terms, if at all; and

?the extent to which we acquire or license other product candidates and technologies.

Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our operations through a combination of public or private
equity offerings, debt financings, governmental funding, collaborations,
strategic partnerships and alliances or marketing, distribution or licensing
arrangements with third parties. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, your ownership
interest may be materially diluted, and the terms of such securities could
include liquidation or other preferences that adversely affect your rights as a
common stockholder. Debt financing and preferred equity financing, if available,
may involve agreements that include restrictive covenants limiting or
restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. In addition, debt
financing would result in fixed payment obligations.

If we raise additional funds through governmental funding, collaborations,
strategic partnerships and alliances or marketing, distribution or licensing
arrangements with third parties, we may have to relinquish valuable rights to
our technologies, future revenue streams, research programs or product
candidates or grant licenses on terms that may not be favorable to us. If we are
unable to raise additional funds through equity or debt financings or other
arrangements when needed, we may be required to delay, limit, reduce or
terminate our research, product development or future commercialization efforts
or grant rights to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.

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Cash Flows

The following table provides information about our cash flows for the periods presented: (in thousands)

                                                For the six months ended 

June 30th

                                                   2022                  

2021

Net cash used in operating activities ($5,619) $(4,011)
Net cash used in investing activities

                       -               

Net cash provided by financing activities              13,449              
 11,225


Operating Activities
During the six months ended June 30, 2022, $5.6 million of cash was used in
operating activities. This was primarily attributable to our net loss of $6.5
million, partially offset by non-cash charges of $0.7 million. The change in our
operating assets and liabilities was primarily due to an increase of $0.6
million in prepaid and other assets, which was primarily due to $1.1 million
payment for our director and officer insurance, partially offset by $0.8 million
increase in accounts payable and accrued expense, due to growth in our business,
the advancement of our research programs, and the timing of vendor invoicing and
payments.

During the six months ended June 30, 2021, $4.0 million of cash was used in
operating activities. This was primarily attributable to our net loss of $6.0
million, partially offset by non-cash charges of $1.6 million. The change in our
operating assets and liabilities was primarily due to an increase of $0.4
million in accounts payable and accrued expense, due to growth in our business,
the advancement of our research programs, and the timing of vendor invoicing and
payments.

Financing activities

During the six months ended June 30, 2022, net cash provided by financing
activities was $13.4 million, consisting primarily of proceeds from the sale of
our common stock, offset by $2.6 million of commission and deferred offering
costs paid.

In the six months ended June 30, 2021net cash provided by financing activities was $11.2 millionconsisting of proceeds from the sale of our convertible redeemable preferred shares.

Contractual obligations and other commitments

We enter into contracts in the normal course of business with clinical research
organizations, contract manufacturing organizations, and other third parties for
clinical trials, preclinical research studies, and testing and manufacturing
services. These contracts are cancelable by us upon prior written notice.
Payments due upon cancellation consist only of payments for services provided or
expenses incurred, including noncancelable obligations of our service providers,
up to the date of cancellation. The amount and timing of such payments are not
known.

We have also entered into license and collaboration agreements with third
parties, which are in the normal course of business. We have not included future
payments under these agreements since obligations under these agreements are
contingent upon future events such as our achievement of specified development,
regulatory, and commercial milestones, or royalties on net product sales.

Pursuant to the NXP800 License Agreement, we are required to make payments to
the ICR for certain development and regulatory milestones. As of June 30, 2022,
we were obligated to pay up to $23.0 million in milestone payments to the ICR
related to pre-approval milestones, up to $178 million (in addition to the $23.0
million) in regulatory and commercial sales milestones, and mid-single digit to
10% royalties on a tiered basis on net sales. Additionally, the Company
originally agreed to provide the ICR with up to an additional $0.5 million in
research and development. On March 31, 2022, the Company and ICR agreed to
research and development support of an additional $0.4 million ($0.9 million
total).

Pursuant to the NXP900 License Agreement, we are required to make payments to
the UoE for certain development and regulatory milestones. As of June 30, 2022,
we were obligated to make up to $46.0 million in milestone payments to the UoE
related to pre-approval milestones, including $0.5 million on the first
anniversary of the agreement, up to $279.50 million in regulatory and commercial
sales milestones, mid-single digit to 8% royalties on a tiered basis on net
sales and 2.5% of the gross amount of each of the Company's future

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fund raising up to a cumulative total of $3.0 million. Additionally, the Company
will provide UoE with up to an additional $754,000 in research and development
support.

We currently have no long term leases. We rent our offices to Fort Lee, New Jerseybased on a one-year agreement signed on May 1, 2022.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
Securities and Exchange Commission.

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed financial statements and the related notes thereto included
elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with
U.S. generally accepted accounting principles (U.S. GAAP). The preparation of
condensed financial statements also requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, costs,
expenses, and related disclosures. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances. Actual results could differ significantly from the
estimates made by management. To the extent that there are differences between
our estimates and actual results, our future financial statement presentation,
financial condition, results of operations, and cash flows will be affected.

There have been no significant changes to our critical accounting policies and
estimates as compared to those described in "Note 2 - Summary of Significant
Accounting Policies" to our audited financial statements set forth in our Annual
Report on Form 10-K filed with the SEC on March 23, 2022.

Recently published accounting pronouncements

See Note 2 to our summary financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.

Emerging Growth Company and Small Company Reporting Status

The Jumpstart Our Business Startups Act of 2012 permits an "emerging growth
company" such as us to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies until
those standards would otherwise apply to private companies. We have elected to
not "opt out" of this provision and, as a result, we will adopt new or revised
accounting standards at the time private companies adopt the new or revised
accounting standard and will do so until such time that we either
(i) irrevocably elect to "opt out" of such extended transition period or (ii) no
longer qualify as an emerging growth company.

We are also a "smaller reporting company" meaning that the market value of our
stock held by non-affiliates plus the proposed aggregate amount of gross
proceeds to us as a result of our initial public offering is less than $700
million and our annual revenue was less than $100 million during the most
recently completed fiscal year. We will continue to be a smaller reporting
company for as long as either (i) the market value of our stock held by
non-affiliates is less than $250 million or (ii) our annual revenue was less
than $100 million during the most recently completed fiscal year and the market
value of our stock held by non-affiliates is less than $700 million. If we are a
smaller reporting company at the time we cease to be an emerging growth company,
we may continue to rely on exemptions from certain disclosure requirements that
are available to smaller reporting companies. Specifically, as a smaller
reporting company we may choose to present only the two most recent fiscal years
of audited financial statements in our Annual Report on Form 10-K and, similar
to emerging growth companies, smaller reporting companies have reduced
disclosure obligations regarding executive compensation.

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