Company profile page - 4SC feature image - 28062019 - JPG

A strategic approach to MediWound

Clal Biotechnology Industries 10 April 2018 Update
Download PDF

Clal Biotechnology Industries

A strategic approach to MediWound

Financial update

Pharma & biotech

10 April 2018

Price*

NIS2.75

Market cap

NIS430m

*Priced at 6 April 2018

NIS3.48/US$

Net cash ($m, unconsolidated) at 31 December 2017

8.1

Shares in issue

156.5m

Free float

35.3%

Code

CBI

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.3)

(24.2)

(17.0)

Rel (local)

(6.5)

(18.0)

(18.8)

52-week high/low

NIS4.3

NIS2.7

Business description

Clal Biotechnology Industries is a healthcare investment company focused on investing in a variety of therapeutic, diagnostic and medical device companies covering a full range of development phases from preclinical to post-market. The company holds 10 direct investments with interests ranging between 5% and 70%. It also has five indirect investments through its 50% stake in the Anatomy Fund, which it manages.

Next events

Gamida Cell IPO

H218

MediWound NexoBrid Phase III results

YE18

MediWound EscharEx Phase III trial initiation

YE18

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Clal Biotechnology Industries’ (CBI’s) portfolio of investments continues to progress on multiple fronts. Most importantly, MediWound (CBI owns a 35% stake) announced in March that it had been approached by a third party to consummate a strategic transaction. The exact nature of the proposed transaction is unclear and could range from a product out-licensing to the acquisition of all of MediWound. The companies are in advanced discussions and conducting mutual due diligence.

Year end

Revenue (NISm)

PBT* (NISm)

EPS* (NIS)

DPS (NIS)

P/E (x)

Yield (%)

12/15

55.8

(209.4)

(1.44)

0.0

N/A

N/A

12/16

30.5

(454.1)

(2.89)

0.0

N/A

N/A

12/17

73.6

(54.2)

(0.15)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Continued growth at MediWound

MediWound recently announced its full year 2017 results. Revenues, which are based on NexoBrid sales in the EU, were up 60% in 2017 compared to the previous year. The company also updated timelines with top-line results from the US NexoBrid Phase III expected by the end of the year and protocol submission for the EscharEx Phase III to the FDA now expected in H218 (previously both were expected in H118).

Clinical progress at Gamida Cell

Gamida Cell (18%-owned by CBI) recently presented Phase I/II data on CordIn in patients with severe sickle-cell disease. All 13 patients had rapid engraftment at a median of seven days and in the nine patients with long-term follow up, transfusion independence with a normal haemoglobin profile was achieved. However, two patient deaths were reported, one due to secondary graft failure and the other due to severe graft versus host disease (a common complication from BMT).

BioCanCell getting closer to additional funding

In January, BioCanCell (44% owned by CBI) announced it had executed a non-term sheet for a $25m private equity investment in the company. The funding has not closed yet but if it does, BioCanCell will have the funding to initiate two registrational studies for its lead program, BC-819 in non-muscle invasive bladder cancer (NMIBC). The company also recently updated data for BC-819 in combination with BCG, where 54% were recurrence free after 24 months.

Valuation: NIS1,011m or NIS6.46 per share

We are increasing our valuation from NIS918m or NIS5.87 per share to NIS1,011m or NIS6.46 per share. This was mainly due to rolling forward our NPV and increasing the value of two of its portfolio companies (Neon and Cadet) due to funding and business development milestones. This was mitigated partly by a more conservative view of the trajectory NexoBrid launch in the EU and delaying the US launch to 2020 due to delayed clinical timelines.

Portfolio progress

In March, MediWound announced it had been approached by a third party interested in a strategic transaction. The exact nature of the proposed transaction was not disclosed but could include anything from a product out-licensing to the acquisition of all of MediWound. If it does involve licensing the rights to a MediWound product, we believe it would likely be for EscharEx, which has a larger addressable market than NexoBrid. It is important to note that we currently do not include any upfront or milestone payments in our EscharEx model so a licensing agreement could provide upside to our valuation for the product. Also, a takeout price above our current NPV/share for MediWound ($7.65 with current MediWound shares outstanding) would also provide upside to our valuation. The parties are in advanced discussions and conducting mutual due diligence so we should receive further updates in the coming weeks and months. We will update our model once an agreement, if any, is finalised.

In terms of the underlying business, MediWound recently announced its full-year 2017 results. Revenues, which are based on NexoBrid sales in the EU, were up 60% (to $2.5m) in 2017 compared to the previous year.

The company also updated timelines for its clinical programs for NexoBrid and EscharEx. In terms of the 175-patient US NexoBrid Phase III, top-line results are now expected around the end of the year (compared to our previous expectation of H118). The reason for the delay is that there is a lot of fluctuation in the monthly enrolment numbers as they are highly dependent upon how many patients burn themselves in any given month and meet the enrolment criteria. Also, MediWound’s regulatory consultants recommended that it not lock the database until three months follow up was completed on all patients.

With regards to EscharEx, the company now expects to submit the Phase III protocol to the FDA in H218 (versus previous expectations of H118) with the actual initiation of the study likely sometime around the end of 2018 or the beginning of 2019. Also, the company announced that after speaking with regulatory experts, it believes the Phase III programme might only need 500 patients across two studies (250 each study), 200 fewer than the previous expectations of 700 (350 each study). If agreed to by the FDA, this could lead to significant R&D cost savings for the EscharEx programme.

Gamida Cell clinical progress

Gamida Cell recently presented the results from its 13-patient trial of CordIn in 13 patients with sickle-cell disease (SCD) who were in need of allogeneic bone marrow transplant (BMT) at the 2018 BMT Tandem Meetings (21-25 February, Salt Lake City). Engraftment was observed after a median of seven days post-treatment in all 13 patients. And in the nine patients with long-term follow up, transfusion independence with a normal haemoglobin profile was achieved. However, two patient deaths were reported, one due to secondary graft failure and the other due to severe graft versus host disease (a common complication from BMT). The company plans to continue development although we do not yet include this programme in our valuation as it is still relatively early and timelines are unclear.

As a reminder, enrolment is underway for Gamida Cell’s 120-patient Phase III study of NiCord in patients with haematological malignancies, which will take place worldwide in 12 sites. This trial is investigating the ability of NiCord to provide an umbilical cord blood (UCB) graft with an ample amount of cells that have fast and vigorous in vivo neutrophil and platelet producing potential to improve transplantation outcomes (as low cell dose is associated with delayed engraftment and poor outcomes). The primary endpoint for the trial is time to neutrophil engraftment following transplantation (on or before the 42nd day post-transplant) compared to a non-manipulated cord blood unit. The company intends to use the funds from its recent $40m fund-raising to progress its Phase III trial, which is expected to read out in H219.

BioCanCell potential funding and clinical data

In January, BioCanCell (44% owned by CBI) announced it had executed a non-term sheet for a $25m private equity investment. The lead investor expects to contribute $7m to the offering and has the right to allocate $8m from other equity investors. Existing investors would provide another $5m and additional new investors would provide an additional $5m. As this is a non-binding term sheet, the exact amount of investment is unknown and it is possible that the financing does not close at all. If and when it does close, BioCanCell will have the funding to initiate two registrational studies for its lead program, BC-819 in non-muscle invasive bladder cancer (NMIBC). However, it is likely that CBI’s percentage ownership of BioCanCell will fall from current 44% due to dilution from the placement.

BioCanCell is preparing to initiate two pivotal clinical trials in 2018. BC-204 will be an open label Phase II single-arm trial in 140 patients who are unresponsive to BCG therapy and the primary end point is durable response rate (either partial or complete) at 12 months. It is expected to begin in H118. BC-301 will be an open-label Phase III trial in approximately 495 patients of BC-819 in combination with BCG in versus BCG alone and is expected to begin in H218. The BC-301 trial has been granted a special protocol assessment (SPA) by the FDA and the primary end point is median time to recurrence. The BC-301 trial will be the first comparative study and we expect the results to elucidate the clinical value of BC-819 for NMIBC.

BioCanCell also recently presented updated data for BC-819 at the ASCO Genitourinary Cancers Symposium (8-10 February, San Francisco). In a Phase II trial of 38 patients with NMIBC, a combination of BC-819 and BCG (the current standard of care) achieved a 24-month recurrence-free rate of 54% an improvement over prior data at the 24-month mark for BC-819 alone. In an open label 18-patient Phase I/II single-arm trial, intravesical infusion of BC-819 into the bladder showed a 24-month recurrence-free rate of 29%. In another open-label 39-patient Phase II single-arm trial, the intravesical infusion of BC-819 into the bladder demonstrated a 24-month recurrence-free rate of 33%.

Agreement to sell CureTech

In late March, CBI announced an agreement to sell CureTech (53% owned by CBI) to InSight Innovations. This is not a surprise following the termination of the CureTech agreement with Pfizer for CureTech’s pidilizumab in October 2017 and the announcement by CBI that CureTech would no longer be considered a material portfolio company.

As part of the agreement with InSight Innovations, CureTech’s shareholders will receive up to $550m in milestone payments, additional royalties and CBI will receive $3m upfront. Also, if CureTech’s pidilizumab is approved and InSight Innovations receives a priority review voucher (PRV), CureTech’s shareholders would receive 20% of any monies received if that voucher is then sold. There were several sales of PRVs in 2017, with prices ranging from $125m to $150m (hence CureTech’s shareholders could receive $25m to $30m). As a reminder, PRVs can currently be granted to companies that receive approvals for drugs treating a variety of indications, including rare pediatric diseases such as diffuse intrinsic pontine glioma (DIPG), currently the lead indication for CureTech’s pidilizumab. We continue to not include CureTech in our valuation for CBI as timelines for future development and hence the payment schedule of the milestones are unclear. We will revisit this if we gain additional clarity.

Update on rest of portfolio

Biokine’s (27% owned by CBI) partner BioLineRx announced partial results from the monotherapy portion of its 30-patient single-arm Phase II trial to evaluate BKT-140/BL-8040 in combination with KEYTRUDA (pembrolizumab), the anti-PD-1 therapy, in patients with metastatic pancreatic adenocarcinoma. The results showed that BL-8040 induced an increase in the number of total immune cells in the peripheral blood while reducing the frequency of peripheral blood regulatory cells that may impede the anti-tumour immune response. Top-line clinical results from this trial are on track for H218. We do not currently include pancreatic cancer in our model so any positive data from the trial could provide upside to our valuation for Biokine.

Also, Cadent announced that it has initiated a Phase I for its lead program CD-1883, a positive allosteric modulator. CD-1883 is being developed to treat spinocerebellar ataxia, an orphan genetic disorder characterised by cerebellum dysfunction or degeneration that causes difficulty co-ordinating movements, and essential tremor (ET), a neurological disorder characterised by involuntary and rhythmic shaking, most commonly of the hands and forearms. CD-1883 increases the sensitivity of calcium-sensitive potassium (SK) channels that play an essential role in regular neuronal firing with the intent to restore regularity and improve motor function.

Exhibit 1: CBI’s key investments

Investment

Technology

% held

Founded

Status

Advantages

Targets

MediWound*

Enzyme technology for severe burns and chronic wound

35%

2001

NexoBrid: Launched in Europe; In Phase III development in the US. EscharEx: Phase II complete.

Reduces time to successful eschar removal, reduces need for surgery and need for grafting.

NexoBrid Phase III study readout YE18; EscharEx Phase III trial initiation in end of 2018 or beginning of 2019.

Gamida Cell*

Cord stem cell transplant for hematologic diseases

18%

1998

NiCord: Enrolling Phase III; CordIn: Two ongoing Phase I/II trials; Natural killer cells: Initiated Phase I.

UCB for transplantation only requires partial matching and nicotinamide technology increases the limited population and quality of stem and progenitor cells. NiCord received FDA breakthrough therapy designation.

Enrolment is underway for a Phase III study of NiCord; NASDAQ listing targeted for H218.

BioCanCell

BC-819 is a DNA plasmid for non-muscle invasive bladder cancer

44%

2004

Ongoing Phase II BC-819 and BCG combination trial

BC-819 is a 4.5 kb recombinant DNA plasmid containing H19 regulatory sequences that drives expression of the potent diphtheria toxin A and inhibits protein translation in malignant bladder cells. Monotherapy clinical studies demonstrated promising efficacy rates.

Initiate two (monotherapy and combination therapy) pivotal clinical trials in 2018. NASDAQ listing targeted for H218.

Biokine

Cyclic peptide inhibitor of CXCR4 for AML and other malignancies

27%

2000

Phase III in stem cell mobilisation. Phase II in relapsed/ refractory AML with BioLineRx; Phase Ib/II: collaboration with Genentech, combination BKT-140/BL-8040 and Tecentriq (atezolizumab) for multiple oncology indications.

Phase I/II trials showed vigorous mobilisation of CD34+ stem and progenitor cells from the bone marrow, inducing cell death and sensitising the malignant cells to anti-cancer therapies.

Phase II mobilisation results for BL-8040 in H118. Phase II pancreatic results in H218.

Source: Clal Biotechnology Industries. Notes: *Material assets according to CBI. All key investments included in our rNPV.

Exhibit 2: CBI direct holdings

Investment

Technology

% held

Founded

Status

Advantages

Targets

eXIthera

Factor XIa inhibition to prevent thrombosis and stroke

54%

2012

Phase I: Safety, tolerability, PK, PD of parenteral EP-7041

Positive Phase I dose escalation readout showed EP-7041 was safe and well tolerated in healthy volunteers and also demonstrated positive PK and PD data.

Potential licensing deal for EP-7041 in H118. Phase II initiation in H218. Selection of oral candidate expected in coming months.

Vedantra

Cancer and infectious disease immunotherapy

66%

2011

Preclinical

Engineering a molecular vaccine that possesses both hydrophilic and hydrophobic properties (amph-vaccine) to exploit albumin to transport small payloads to the lymph node to initiate effective T- and B-cell responses.

Amphiphile technology-based HPV vaccine for the treatment of HPV-related head and neck malignancies expected in the clinic in H118.

Neon

Personalised neoantigen therapeutics for cancer

5%

2015

Phase I: NEO-PV-01 and OPDIVO combination therapy

Initial results published in Nature. Several collaborations in the pipeline with large pharma, academic institutions, and other clinical stage biopharmaceutical companies. Recently completed a $106m crossover Series B financing.

Initial NEO-PV-01 and OPDIVO combination results expected in H118; Potential NASDAQ listing in H218.

Cadent

Treatment of CNS disorders by targeting calcium-sensitive potassium (SK) channels

24%

2010

Phase I

CD-1883 increases the sensitivity of SK channels that play an essential role in regular neuronal firing with the intent to restore regularity and improve motor function.

Potential NASDAQ listing in H218.

Source: Clal Biotechnology Industries. Notes: DIPG = diffuse intrinsic pontine glioma, CXCR4 = CXC- chemokine receptor-4 pathway, AML = acute myeloid leukaemia, NMDAR = N-methyl-D-aspartate receptor.

Exhibit 3: CBI indirect holdings through 50% stake in Anatomy

Investment

Technology

Anatomy investments at fair value to CBI ($m)

Founded

Status

Advantages

Targets

FDNA

Genetic disease diagnostics with facial recognition

1.1

2011

Market

Combines computer vision, machine learning and artificial intelligence to analyse facial features, genomic data, and patient symptoms

Innovation needs to be linked to clinical outcomes

Sight Diagnostics

Computer vision point-of-care blood diagnostics system

1.0

2011

Parasight: Market; OLO: Pivotal trial

Point-of-care full complete blood count system

OLO: Clinical validation and commercial test development. FDA approval

Colospan

Developing bypass device (CG-100) for colorectal surgery

1.6

2010

CE approved in Europe.

Prevents life threatening leakage and makes it possible to cut down the use of stomas. Positive initial clinical results

CG-100: Soft launch in Europe in 2018 for market feasibility. Recruiting approximately 137 patients to participate in the safety and efficacy trial through H219 and expects to file for FDA marketing approval following trial results.

MinInvasive

Device for arthroscopic rotator cuff repair

1.6

2011

Market

Needle-based shoulder tendon repair device that eliminates the need for suture anchors

MicroPort granted exclusive rights to distribute device in China. FDA cleared and anticipating US launch.

Pi-Cardia*

Non-implant based technology for aortic valve stenosis

1.6

2009

Clinical

Developed a low profile catheter to treat aortic stenosis without replacing the valve

Clinical validation.

Total, including $1.5m in additional investments

8.5**

Source: Clal Biotechnology Industries. Note: *as of year-end 2017 **Pi-Cardia is also held directly (21% stake includes direct costs of CBI and 50% stake in Anatomy).

Valuation

We are increasing our valuation from NIS918m or NIS5.87 per share to NIS1,011m or NIS6.46 per share. This was mainly due to rolling forward our NPV and increasing the value of two of its portfolio companies. We have increased the value of the Neon investment (5% owned by CBI) to $12.4m from $5m based on the valuation of the most recent funding round completed in December 2017. We have also increased the value of its Cadent stake (it owns 24%) from $7.1m to $18m, due to company disclosures that the implied value of Cadent following the Novartis milestone is $75m. This was partly mitigated by a more conservative view of the trajectory NexoBrid launch in the EU and delaying the US launch to 2020 due to delayed clinical timelines (although we have kept peak sales the same). We expect to update our valuation of MediWound further once we get more information about the advanced discussions with the potential strategic partner. We also note that our valuation may change as a result of BioCanCell’s ongoing funding round.

Exhibit 4: Clal Biotechnology Industries valuation table

Product

Setting

Status

Launch

Peak sales ($m)

Probability of success

Royalty rate

rNPV ($m)

% owned by Clal B

Clal B rNPV ($m)

MediWound

Burns

Market and Phase III ready

Nexobrid: Market, EscharEx: Phase III

375

Nexobrid US 80%, Europe 100%, EscharEx 50%

Nexobrid: 100% EscharEx: 20%

207

35%

72.4

Gamida Cell

Leukemia (AML, ALL, CML, CLL)

Phase III

2020

437

50%

100%

423

18%

76.1

Biokine

AML

Phase II

2023

1,286

30%

40% of what BioLineRx receives from a sublicense (assume 20%)

43

27%

11.6

BioCanCell

Bladder cancer

Phase II and Phase III ready

2022

530

30%

100%

142

44%

62.4

Neon

5%

12.4

Vedantra

66%

9.1

ExlThera

54%

10.3

Cadent

24%

18.0

Anatomy portfolio

8.5

Portfolio total ($m)

281

Cash, unconsolidated (As of 31 December 2017) ($m)

8

Overall valuation

289

Shekel/Dollar Conversion rate

3.5

Overall valuation in Shekels (NISm)

1,011

Shares outstanding (m)

156.5

Per share (NIS)

6.46

Source: Edison Investment Research, Clal Biotechnology Industries reports

Financials

As a reminder, due to significant ownership stakes, CBI consolidates the financials of several of its investments (MediWound, Vedantra, CureTech and the Anatomy fund) and on this basis, it had NIS165.1m ($47.4m) in cash, cash equivalents and bank deposits as of Q417. CBI’s cash position at the corporate level (excluding consolidation) was NIS28.4m ($8.1m) at the end of 2017.

Total consolidated revenues of NIS43.5m ($12.5m) were generated through the sales of MediWound’s NexoBrid in Europe, Israel and Argentina, licensing agreements and rent in addition to a gain of NIS11.0m ($3.2m) from the decrease of equity interest in associates and a NIS19.1m ($5.5m) gain from the disposal of subsidiaries or loss of control in 2017.

Significant investment was made into the development of underlying technologies and products of CBI’s material assets as indicated by R&D spend of NIS32.6m ($9.4m) in 2017 although this is down from NIS42.0m ($12.1m) in FY16. For the year, general and admin costs, which include payroll and related expenses, management fees, and marketing and advertising expenses on a consolidated basis, were NIS61.7m ($17.7m), down from NIS81.1m ($23.3m) in the prior year.

We outline historical financials in Exhibit 5; however, we are not providing forecasts at this time.

Exhibit 5: Financial summary

NIS'000s

2015

2016

2017

Year end 31 December

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

55,759

30,484

73,635

Cost of Sales

(42,549)

(46,967)

(32,433)

Gross Profit

13,210

(16,483)

41,202

R&D expenses

(54,094)

(42,011)

(32,644)

SG&A expenses

(82,747)

(81,107)

(61,679)

EBITDA

 

 

(175,382)

(434,812)

(103,330)

Operating Profit (before amort. and except.)

 

(179,999)

(451,764)

(103,633)

Intangible Amortisation

0

0

0

Exceptionals

0

0

0

Operating Profit

(179,999)

(451,764)

(103,633)

Other

(35,553)

(11,850)

(31,078)

Net Interest

6,197

9,510

80,478

Profit Before Tax (norm)

 

 

(209,355)

(454,104)

(54,233)

Profit Before Tax (FRS 3)

 

 

(209,355)

(454,104)

(54,233)

Tax

14,023

60,104

31,795

Profit After Tax (norm)

(195,332)

(394,000)

(22,438)

Profit After Tax (FRS 3)

(195,332)

(394,000)

(22,438)

Average Number of Shares Outstanding (m)

135.8

136.2

149.4

EPS - normalised (NIS)

 

 

(1.44)

(2.89)

(0.15)

EPS - FRS 3 (NIS)

 

 

(1.44)

(2.89)

(0.15)

Dividend per share (NIS)

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

1,225,127

927,359

849,112

Intangible Assets

1,035,753

741,543

626,342

Tangible Assets

17,077

16,536

14,854

Other

172,297

169,280

207,916

Current Assets

 

 

307,645

191,351

185,228

Stocks

6,691

3,248

6,539

Debtors

18,784

16,415

13,612

Cash

256,105

171,022

165,077

Other

26,065

666

0

Current Liabilities

 

 

(66,785)

(68,277)

(31,182)

Creditors

(14,782)

(8,507)

(7,975)

Short term borrowings

0

0

0

Short term leases

0

0

0

Other

(52,003)

(59,770)

(23,207)

Long Term Liabilities

 

 

(373,520)

(297,938)

(194,962)

Long term borrowings

0

0

0

Long term leases

0

0

0

Other long term liabilities

(373,520)

(297,938)

(194,962)

Net Assets

 

 

1,092,467

752,495

808,196

CASH FLOW

Operating Cash Flow

 

 

(156,274)

(52,529)

(59,400)

Net Interest

23,298

0

0

Tax

(14,023)

(60,104)

(32,005)

Capex

0

0

0

Acquisitions/disposals

27,971

(395)

(3,876)

Financing

22,499

23,123

80,611

Dividends

0

0

0

Other

146,116

5,447

72,644

Net Cash Flow

49,587

(84,458)

57,974

Opening net debt/(cash)

 

 

(207,517)

(256,105)

(171,022)

HP finance leases initiated

0

0

0

Other

(999)

(625)

0

Closing net debt/(cash)

 

 

(256,105)

(171,022)

(228,996)

Source: Edison Investment Research, Clal Biotechnology Industries reports

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007 Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007 Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Limited (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007 Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007 Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Share this with friends and colleagues