SecProbe.io

CORRESP
1
filename1.htm

    New York

Northern California

Washington DC

São Paulo

London
    Paris

Madrid

Tokyo

Beijing

Hong Kong

        Sophia Hudson

    Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

        212 450 4762 tel

        212 701 5800 fax

        sophia.hudson@davispolk.com

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

    November 17, 2017

    Re:

        Entera Bio Ltd.

        Registration Statement on Form F-1

File No. 333-221472

        CIK No. 0001638097

        CONFIDENTIAL

Ms. Ada D. Sarmento

Ms. Mary B. Breslin

Division of Corporation Finance

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, DC 20549-3628

Dear Ms. Ada D. Sarmento and Ms. Mary B. Breslin,

On behalf of our client, Entera Bio Ltd.,
a company incorporated in Israel with limited liability (the “Company”), we are providing the information that
follows to the Staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”)
in response to comment number 8 contained in the Staff’s letter dated August 10, 2017 (the “Comment Letter”)
relating to the Company’s Draft Registration Statement on Form F-1, originally confidentially submitted on July 14, 2017
(the “Registration Statement”), in connection with the initial public offering of the Company’s ordinary
shares (the “Offering”).

The response and information below are based
on information provided to us by the Company. For convenience, the Staff’s comments are repeated below in italics, followed
by the Company’s response to the comment. Capitalized terms used but not defined herein are used herein as defined in the
Registration Statement.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Share-Based Compensation, page 67

 8. We may have additional comments on your accounting for equity issuances including stock compensation and beneficial conversion
features. Once you have an estimated offering

    Ms. Ada D. Sarmento

    Ms. Mary B. Breslin

    Division of Corporation Finance

    U.S. Securities and Exchange Commission
    November 17, 2017

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

price, please provide us an analysis explaining
the reasons for the differences between recent valuations of your ordinary shares leading up to the IPO and the estimated offering
price.

Historical Fair Value Determination Methodology

For an explanation of how the Company determined
the fair value of the ordinary shares underlying its issuances of equity, the Company respectfully refers the Staff to the discussion
of its general approach set forth in the Registration Statement in “Management's Discussion and Analysis of Financial Condition
and Results of Operations—Share-Based Compensation” and “Note 10. Share Capital” to the Company’s
audited consolidated financial statements as of and for the periods ended December 31, 2016 and 2015, as well as “Note 4.
Financial Risk Management and Financial Instruments” to the Company’s unaudited condensed consolidated financial statements
as of and for the period ended June 30, 2017.

As there has been no public market for the Company’s ordinary
shares to date, the estimated fair value of the Company’s ordinary shares has been determined by the Company using a variety
of methods. The estimated fair value of the Company’s ordinary shares was determined using the Probability Weighted Expected
Return Method (“PWERM”) model, based on possible scenarios that the Company foresees. This model considered the value
of the Company as a whole and allocated such value to the ordinary shares and preferred shares under an option pricing model within
each applicable exit scenario of the Company (the “Hybrid Method”).

For the purpose of determining the value of the Company, the
Company used the discounted cash flow, or DCF, method. Under the DCF method, the Company’s projected after-tax cash flows
were discounted back to present value using a particular discount rate. The discount rate, known as the weighted average cost of
capital, or WACC, accounts for the time value of money and the appropriate degree of risk inherent in the Company’s business.
The DCF method requires significant assumptions, in particular, regarding the Company’s projected cash flows and the discount
rate applicable to the Company’s business.

As of September 30, 2017, the fair value of the Company’s
ordinary shares was based on the market approach and used a price per share of $908.78 per Series B preferred share from the Company’s
preferred share issuance in October 2017 as a basis for fair market value.

Various objective and subjective factors
that the Company believed were relevant in determining estimated fair value per ordinary share during each reporting period included:

 · the results of a third-party valuation
obtained as of October 4, 2017, which resulted in an estimated fair value per ordinary share of $819. This valuation was prepared
using the Probability-Weighted Expected Return Method model based on possible scenarios for the Company and Backsolve option pricing
method model.

 · the price at which the Company sold preferred
shares and the superior rights and preferences of the Company’s preferred shares relative to the ordinary shares at the

Ms. Ada D. Sarmento

    Ms. Mary B. Breslin

    Division of Corporation Finance

    U.S. Securities and Exchange Commission
    November 17, 2017

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

time of each grant. As detailed
above, as of October 4, 2017, the fair value of ordinary shares was valued based on the market approach and used the price per
share of $908.78 per Series B preferred share from the Company’s preferred share issuance in October 2017 as a basis for
fair market value.

 · the progress of the Company’s research
and development programs, including the status of preclinical studies and clinical trials for its lead product candidates, EB612
and EB613;

 · the Company’s stage of development
and its business strategy, external market conditions affecting the biotechnology industry, and trends within the biotechnology
industry, the Company’s financial position, including cash on hand, and its historical and forecasted performance and operating
results;

 · the lack of an active public market for
the ordinary shares and preferred shares;

 · the likelihood of achieving a liquidity
event, such as an initial public offering, in light of prevailing market conditions; and

 · the analysis of initial public offerings
and the market performance of similar companies in the biopharmaceutical industry.

Estimated Offering Price

The Company hereby advises the Staff
that the underwriters in the Offering have indicated to the Company that the anticipated offering price to the public of the
Company’s ordinary shares in the Offering is expected to be between approximately $[***Redacted***] and
$[***Redacted***] per share. Please note that this price range does not reflect the effect of an anticipated share
split before the initial public offering. The Company has calculated an approximate pre-money valuation  of
$[***Redacted***] million  using the treasury stock method.

The actual price range to be included on
the cover of the Company’s preliminary prospectus (which will comply with the Staff’s interpretation regarding the
parameters of a bona fide price range) has not yet been finally determined and remains subject to adjustment based on factors outside
of the Company’s control. However, the Company believes that the foregoing indicative price range will not be subject to
significant change and that the actual price range will be within the range stated above (adjusting for the exchange ratio that
will be determined in conjunction with the finalizing of the actual price range).

The Company notes that, as is typical in
initial public offerings, the estimated price range for the Offering was not derived using a formal determination of fair value,
but was determined by negotiation between the Company and its underwriters for the Offering. Among the factors that were considered
in setting this range were the Company’s prospects and the history of and prospects for its industry, the general condition
of the securities markets, the recent market prices

Ms. Ada D. Sarmento

    Ms. Mary B. Breslin

    Division of Corporation Finance

    U.S. Securities and Exchange Commission
    November 17, 2017

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

of, and the demand for, publicly traded
shares of generally comparable companies and preliminary discussions with the underwriters for the Offering regarding potential
valuations of the Company.

Since January 1, 2016, the Company has issued
the following equity awards in the form of options with the following fair value per ordinary share.

    Period
    Number of

options granted
    Exercise

price per

share
    Fair value

per ordinary share

        March 2016

    1,133
    $479.38
    $1,030

    May-June 2016
    8
    NIS 0.01*
    $1,020

    July-September 2016
    12
    NIS 0.01*
    $1,010

    August 2016
    494
    $479.00
    $1,010

    November 2016
    4
    NIS 0.01*
    $990

    February 2017
    12
    NIS 0.01*
    $980

    April 2017
    1,133
    $980
    $970

    October 2017**
    8,578
    $820
    $819

    November 2017
    4,650
    $820
    $819

* As of November 2017, NIS 0.01 was equal
to less than USD 0.01

**
In April 2017, the Company’s shareholders approved granting these options pending certain triggering conditions. However,
the options did not become exerciseable until October 2017 when a relevant triggering condition was met. For accounting purposes,
the Company treated the awards as performance-based awards. Given that the performance condition was probable as of September
30, 2017, the Company recognized expenses with respect to this grant.

In October 2017, the company raised $12.4 million through the sale of its Series B preferred shares (the “Series B Financing”).
As a result, as of October 4, 2017, the Company used the market approach to determine the fair value of its ordinary shares. The
Company derived the fair value of its ordinary shares by using the price of $908.78 per Series B preferred share, the price at
which the Company sold preferred shares to investors in the Series B Financing.

In order to derive the fair value of its ordinary
shares, the Company used the Hybrid Method and Backsolve option pricing method model. Based on the market approach described above,
the Company determined that the fair value per ordinary share in October 2017 was $819, based on a fair value per ordinary share
of $[***Redacted***] for the initial public offering scenario (weighted at [***Redacted***]%). If the Company had
applied a weighting of [***Redacted***]% to the initial public offering scenario, the fair value of the Company’s
common stock in the October 2017 valuation would have been $[***Redacted***] per share.

The Company additionally performed a sensitivity analysis to
examine what the total amount of option compensation would have been if the Company had calculated the fair value of the options
granted in prior periods using $819 as the fair value of the Company’s ordinary shares for the relevant period, and the effect
was immaterial.

As discussed above, the fair value per ordinary share derived
from the market approach in October 2017 was $819, an overall decrease of 20.5% from March 2016. This decrease in fair value was
mainly due to difficulties experienced by the Company in raising capital over this period as well as

Ms. Ada D. Sarmento

    Ms. Mary B. Breslin

    Division of Corporation Finance

    U.S. Securities and Exchange Commission
    November 17, 2017

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

consideration of a short-term liability of approximately $9 million
in convertible loans that was required to be repaid in December 2017 unless converted to shares before that date (such loans were
converted to Series B-1 preferred shares in connection with the Series B Financing). In October 2017, the Company raised capital
in the form of the issuance of Series B preferred shares, which shares have superior preference liquidation rights versus ordinary
shares. As a result, the fair value of the Company’s ordinary shares decreased.

With respect to the Staff’s request for the reasons explaining
the difference between the estimated offering price and recent valuations of the Company’s ordinary shares, the Company believes
that the differences in value reflected between the estimated price range for the Offering and the fair value per share for each
of the periods set forth in the table above were primarily the result of the following factors and circumstances:

 · The Company entered into the Series B Financing
in October 2017. The option awards granted in October 2017 have exercise prices of $819 for grants issued under the Company’s
Share Incentive Plan to certain directors, reflecting the fair value of the ordinary shares based on a market approach that uses
the price per share of $908.78 per Series B preferred share from the Company’s preferred share issuance in October 2017 as
a basis for fair market value.

 · The Company engaged underwriters in September
2017 in connection with the Offering and submitted a confidential draft registration statement to the Commission in July 2017.
Thereafter, the Company commenced testing-the-waters meetings with potential investors in which the Company received favorable
feedback and as a result of which the Company elected to continue to pursue the Offering. In November 2017, the Company publicly
filed the Registration Statement with the Commission to position itself for the anticipated launch of the Offering.

 · The Offering is expected to create liquidity,
and the estimated price range assumes that an initial public offering has occurred, a public market for the Company’s ordinary
shares has been created and the Company’s preferred shares have converted into ordinary shares in connection with the offering.
The estimated price range excludes any marketability or illiquidity discount for the Company’s ordinary shares.

 · The Company expects to accrue significant
benefits as a result of becoming publicly traded through the Offering, including (i) a substantial increase in the Company’s
cash position after receiving the net proceeds from the IPO, (ii) an improved ability to raise equity and debt capital going forward,
including from the public equity and debt markets, and at a lower expected cost of capital and with reduced borrowing costs, and
(iii) the expected increased attractiveness of the Company’s equity as a currency to raise capital, compensate employees
and complete strategic transactions.

 · The Company’s currently outstanding
preferred shares have economic rights and preferences superior to the Company’s ordinary shares, in particular, a liquidation
preference with interest of 5% per annum, depending on the series of preferred shares.

Ms. Ada D. Sarmento

    Ms. Mary B. Breslin

    Division of Corporation Finance

    U.S. Securities and Exchange Commission
    November 17, 2017

FOIA Confidential Treatment Request

Pursuant to Rule 83 by Entera Bio Ltd.

The estimated price range reflects
the contemplated conversion of the Company’s preferred shares into ordinary shares in the initial public offering and the
corresponding elimination of such superior economic rights and preferences.

 · The estimated price range for the Offering
is based only upon a scenario in which the Company completes the Offering and is not probability weighted, in contrast to the Company’s
prior valuations of the Company’s ordinary shares in connection with its option gra