Another FDA approval and a US IPO

Elbit Medical Technologies 6 December 2018 Update
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Elbit Medical Technologies

Another FDA approval and a US IPO

Clinical update

Pharma & biotech

 

6 December 2018

Price

NIS1.10

Market cap

NIS254m

Priced as at 6 December 2018

NIS3.69/US$

Net debt ($m) at 30 June 2018

38.7

Shares in issue

231.5m

Free float

25.3%

Code

EMTC

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.4

3.5

(2.2)

Rel (local)

6.5

2.6

(12.2)

52-week high/low

NIS1.5

NIS0.9

Business description

Elbit Medical Technologies (Elbit Medical), a fully controlled subsidiary of Elbit Imaging (EMITF), is an Israeli biomedical and healthcare technology group. Its portfolio of two companies is focused on medical devices and therapeutics: InSightec, which develops and markets the ExAblate platform for non-invasive thermal tissue ablation, and Gamida Cell, which is developing a universal bone marrow transplant.

Next events

Gamida Cell NiCord Phase III top-line data

H120

InSightec Parkinson’s disease Phase II/III top-line data

2020

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Briana Warschun

+1 646 653 7031

Elbit Medical Technologies’ two portfolio investments continue to advance. Notably, Gamida Cell announced a $53m IPO on Nasdaq in late October and presented NiCord data at the American Society of Hematology (ASH) annual meeting in December. InSightec reported record revenues for Q318 and received FDA approval for ExAblate Neuro compatibility with Siemens’ magnetic resonance (MR) scanners.

Year end

Revenue ($m)

PBT* ($m)

EPS* ($)

DPS ($)

P/E (x)

Yield (%)

12/15

1.8

(1.1)

(0.0)

0.0

N/A

N/A

12/16

0.0

(3.7)

(0.0)

0.0

N/A

N/A

12/17

0.0

(5.2)

(0.0)

0.0

N/A

N/A

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

InSightec’s ExAblate Neuro compatible with Siemens

InSightec (~22% owned by Elbit Medical, ~18.5% fully diluted) recently announced its Q318 results. Revenues, which are based on the sale of ExAblate systems and corresponding annual service contract costs and consumables, were $8.1m, up 105% from Q217 ($4.0m). Notably, InSightec announced that it had received FDA approval for ExAblate Neuro compatibility with Siemens’ MR scanners. We expect this will provide InSightec with the opportunity to expand its presence in the global MR market.

Gamida Cell IPOs on NASDAQ

Gamida Cell recently announced a $53m IPO on Nasdaq under the symbol GMDA, for 6.25m ordinary shares at $8.00 per share. Following this offering, Elbit Medical now owns ~11% of the company (previously ~18%). Gamida Cell also presented an update regarding its Phase I/II of NiCord as a graft evaluating immune reconstitution (IR) after myeloablative chemotherapy versus non-manipulated cord blood and traditional unrelated bone marrow transplant at ASH.

Elbit Imaging sells shares in Elbit Medical

On 6 September, Elbit Imaging sold approximately 5% of Elbit Medical’s outstanding share capital to Exigent Capital Group for NIS11.1m. Two months later, Elbit Imaging sold an additional 10% of Elbit Medical’s outstanding share capital to the group for NIS21.3m. According to reports from 21 November and 28 November, Elbit Imaging sold an additional 8% and 3% of Elbit Medical’s outstanding share capital for NIS18.6m and NIS6.7m, respectively. Following these transactions, Elbit Imaging now owns ~63% of Elbit Medical (previously ~89%). The proceeds from these transactions will be used to repay their debts.

Valuation: NIS424m or NIS1.83 per share

We are decreasing our valuation to NIS424m NIS1.83 per share from NIS444.4m or NIS1.92 per share, which was mainly driven by the decrease in value of Elbit Medical’s stake in Gamida Cell following the IPO and offset by the increase in strength of the US dollar (NIS3.69/US$). We expect to update our valuation with the announcement of new deals and as the portfolio companies advance through the clinical pipeline.

Elbit Medical Technologies is a research client of Edison Investment Research Limited

Record revenues, new reimbursement and an approval

On 1 October 2018, InSightec announced that it received FDA approval for ExAblate Neuro compatibility with Siemens Healthineers’ Magnetom Skyra, Prisma, and Prismafit clinical MR scanners for the treatment of essential tremor (ET). We expect this will provide InSightec with the opportunity to expand its presence in the global MR market. In November, the company announced that Medicare had updated the reimbursement code for MRgFUS ET to $12,500.50 (previously $17,500.50). Pain palliation will be reimbursed at $10,936.00. These will take effect as of 1 January 2019, although it is unclear what impact this will have on sales.

As a reminder, the ExAblate system compromises magnetic resonance imaging and high-intensity focused ultrasound (MRgFUS) to perform non-invasive thermal tissue ablation for a wide range of neurology, oncology and gynaecology clinical applications. By way of full clinical validation under the pre-market approval route, the company has achieved FDA approval and CE markings for the ExAblate 2100 system for the treatment of symptomatic uterine fibroids and pain palliation caused by bone metastases, and for its ExAblate 4000 system for the treatment of medication-refractory ET. Moreover, the company has received CE markings for the treatment of prostate cancer, tremor-dominant Parkinson’s disease and neuropathic pain, and is investigating these further in clinical trials in an effort to achieve FDA approval.

With regard to the underlying business, InSightec recently reported its Q318 financials. Revenues, which are based on the sale of ExAblate systems and corresponding annual service contract costs and consumables, were $8.1m, which more than doubled from Q217 ($3.9m). R&D expenses totalled $7.4m for the period, which reflects ongoing clinical development. The company is targeting FDA approval for the use of its ExAblate technology for the treatment of prostate cancer and tremor-dominant Parkinson’s disease in 2020 and 2021, respectively. Furthermore, Elbit Medical recently announced that the FDA has given InSightec the green light to initiate a clinical trial investigating the use of MRgFUS for targeted drug delivery for Alzheimer’s disease.

Gamida Cell’s IPO on Nasdaq and NiCord data at ASH

On 26 October 2018, Gamida Cell announced the listing of its IPO on NASDAQ under the symbol GMDA, having offered 6,250,000 ordinary shares at $8.00 per share, totalling $53m (including the underwriters’ option to purchase up to an additional 937,500 ordinary shares at the IPO price). BMO Capital Markets and RBC Capital Markets acted as joint book-running managers for the offering, while Needham & Company and Oppenheimer acted as co-lead managers. Following the offering, Elbit Medical’s ownership of Gamida Cell has decreased to ~11% (from ~18%).

Moreover, Gamida Cell presented translational data from its Phase I/II study of NiCord as a graft after myeloablative chemotherapy at the ASH Annual meeting on 1 December 2018. Overall, 27 (median age 41.5 years) out of 36 patients had evaluable blood samples for early monitoring of immune reconstitution (IR). Delayed IR following cord blood transplantation is associated with significant morbidity (ie increased risks of infections, relapse, development of secondary malignancies) and mortality.1, 2 IR is affected by human leukocyte antigen (HLA) discrepancy between donor and host, graft versus host disease (GvHD), preparative radiation/chemotherapy regimens and age-related thymic involution.3 Data from this cohort were compared to subgroups of patients with hematologic malignancies receiving non-manipulated cord blood transplantation (n=27, median age 15.4 years) and T-cell-replete, unrelated bone marrow transplantation (n=20, median age 14.3 years). Ninety-one percent of the patients achieved the primary end point, which was defined as successful CD4+ IR (>50×106/L) within the first 100 days following NiCord transplantation. No difference in probability of early CD4+ IR was noted between the groups (p=0.76). The secondary end points were IR of CD4+ and CD8+ T-Cells, natural killer (NK) cells, B-cells and monocytes during the first year after transplantation. The study found that IR of T-cells were similar among the groups, while IR of NK cells (p<0.001) and B-cells (p=0.02) after NiCord transplantation was faster in comparison to the other groups.

  M. R. M. Van Den Brink, Velardi, E., & Perales, M. (2015). Immune reconstitution following stem cell transplantation. Hematology,2015(1), 215-219.

  Komanduri, K. V., et al. (2007). Delayed immune reconstitution after cord blood transplantation is characterized by impaired thymopoiesis and late memory T-cell skewing. Blood,110(13), 4543-4551.

  Lucchini, G., Perales, M., & Veys, P. (2015). Immune reconstitution after cord blood transplantation: Peculiarities, clinical implications and management strategies. Cytotherapy,17(6), 711-722.

Furthermore, on 4 December 2018, Gamida Cell published the complete data set from its Phase I/II NiCord study in all 36 patients with high-risk haematological malignancies in the Journal of Clinical Oncology. The primary end points of the trial were the cumulative incidence of neutrophil engraftment at 42 days (with ≤10% host cells) and the incidence of secondary graft failure. NiCord and the Center for International Blood and Marrow Transplant Research (CIBMTR) historical comparator cohort demonstrated a cumulative incidence of neutrophil engraftment at 42 days post-transplantation of 94% and 85%, respectively, and neutrophil engraftment was faster in NiCord recipients (p<0.001). Of the patients who engrafted, median time to neutrophil recovery was 11.5 days and 21 days for the NiCord and CIBMTR comparator cohort, respectively. Platelet engraftment was also faster in NiCord recipients (p<0.001), and for those who achieved platelet recovery, median time to platelet recovery 34 days for NiCord recipients and 46 days for the CIBMTR matched cohort. One NiCord patient experienced primary graft failure, while two NiCord recipients experienced secondary graft failure (at day 19 and day 262). The cumulative incidence of grade II through grade IV acute graft-versus-host disease at day 100 was 44% and 56% for NiCord recipient and the matched cohort, respectively. These data indicate that NiCord has the potential to be the graft of choice for patients without a matched donor; however, it is important to note that the study included a retrospective cohort of patients and the NiCord cohort had a relatively small sample size. We expect the Phase III trial, which is expected to be fully enrolled in H219, to elucidate the findings presented in this study.

Exhibit 1: Investment portfolio

Investment

Technology

% held

Founded

Status

Advantages

Targets

InSightec

MRgFUS to treat various indications with thermal tissue ablation

~22% (~18.5% fully diluted)

1999

ExAblate (Body): FDA and CE approved for uterine fibroids and pain palliation due to bone metastases.

Provides non-invasive alternatives to common standard procedures and improves patient outcomes by minimizing recovery time. InSightec’s ExAblate system is the only MRgFUS therapy with CE and FDA approval.

Evaluating potential for bilateral thalamotomy in the treatment of essential tremor with ExAblate Neuro device. Enrolment is underway for Phase III study of ExAblate Neuro to treat Parkinson’s disease.

ExAblate (Neuro): FDA and CE approved for unilateral thalamotomy in the treatment of essential tremor.

Gamida Cell

Cord stem cell transplant for hematologic diseases

~11%

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 for a Phase III study of NiCord expected to be complete in H219.

Source: Elbit Medical Technologies

Valuation

We are decreasing our valuation to NIS424m NIS1.83 per share from NIS444.4m or NIS1.92 per share. This change was driven by the decrease in value of Elbit Medical’s stake in Gamida Cell following the IPO and offset by the increase in strength of the US dollar (NIS3.69/US$). We expect to update our valuation with the announcement of new deals and as the portfolio companies advance through the clinical pipeline.

Exhibit 2: Valuation of Elbit Medical

Product

Setting

Status

Launch

Peak sales ($m)

Probability of success

Royalty rate

rNPV ($m)

% owned by Elbit Medical (fully diluted)

Elbit Medical rNPV ($m)

InSightec

MRgFUS (for gynaecology, oncology, neurology indications)

Market

Market

583

100%

100%

579

18.5%

107.2

Gamida Cell

Leukaemia (AML, ALL, CML, CLL)

Phase III

2020

437

50%

100%

423

11%

46.5

Portfolio total ($m)

153.7

Net debt (as at 30 June 2018) ($m)

38.7

Overall valuation

115.0

Shekel/dollar conversion rate

3.7

Overall valuation in shekels (NISm)

424.3

Shares outstanding (m)

231.5

Per share (NIS)

1.83

Source: Edison Investment Research

Financials

Elbit Medical reports financials in six-month increments. Its H118 post-tax gain was $2.1m (H117 post-tax loss: $7.1m), mainly from financing income. General and admin costs for the period were $0.59m (NIS2.1m), which include management fees, professional services, as well as other related expenses. The company had cash on the balance sheet of $1.7m (NIS6.2m) at 30 June 2018. Elbit Medical completed an NIS180m offering of convertible notes (NIS1.47 par value in notes convertible to one Elbit Medical ordinary share) on the TASE in February 2018, as well as an NIS2m offering of Series C convertible notes (NIS2.1 par value of notes convertible to Elbit Imaging) in March 2018, which lengthens the maturity profile to March 2022. The company used the majority of the proceeds to repay its NIS154m debt to Elbit Imaging earlier this year, while NIS4m was set aside for ongoing operational expenses, in addition to approximately NIS18m set aside for interest payments due on the notes for the first two years. The notes are secured by a lien on the company’s holdings in InSightec and Gamida Cell, which therefore introduces significant dilution risk to Elbit Medical shareholders.

We outline historical financials in Exhibit 3. However, we are not providing forecasts at this time.

Exhibit 3: Financial summary

US$000s

2015

2016

2017

Year-end 31 December

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

1,752

0

0

Cost of Sales

0

0

0

Gross Profit

1,752

0

0

R&D expenses

0

0

0

SG&A expenses

0

(553)

(677)

EBITDA

 

1,174

(553)

(677)

Operating Profit (before amort. and except.)

1,174

(553)

(677)

Intangible Amortisation

0

0

0

Exceptionals

(14,428)

(15,000)

(5,518)

Operating Profit

(13,254)

(15,553)

(6,195)

Other

(2,270)

(3,101)

(4,557)

Net Interest

0

0

0

Profit Before Tax (norm)

 

(1,096)

(3,654)

(5,234)

Profit Before Tax (FRS 3)

 

(15,524)

(18,654)

(10,752)

Tax

0

0

0

Profit After Tax (norm)

(1,096)

(3,654)

(5,234)

Profit After Tax (FRS 3)

(15,524)

(18,654)

(10,752)

Average Number of Shares Outstanding (m)

1,851.9

1,851.9

1,851.9

EPS - normalised (c)

 

(0.00)

(0.00)

(0.00)

EPS - FRS 3 (US$)

 

(0.01)

(0.01)

(0.01)

Dividend per share (c)

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

20,520

5,518

50

Intangible Assets

0

0

0

Tangible Assets

0

0

0

Other

20,520

5,518

50

Current Assets

 

103

30

40

Stocks

0

0

0

Debtors

6

15

8

Cash

97

15

32

Other

0

0

0

Current Liabilities

 

(131)

(57)

(60)

Creditors

(131)

(57)

(60)

Short term borrowings

0

0

0

Short term leases

0

0

0

Other

0

0

0

Long Term Liabilities

 

(33,873)

(37,126)

(42,415)

Long term borrowings

(33,873)

(37,126)

(42,415)

Long term leases

0

0

0

Other long term liabilities

0

0

0

Net Assets

 

(13,381)

(31,635)

(42,385)

CASH FLOW

Operating Cash Flow

 

(2,531)

(3,394)

(4,858)

Tax

0

0

0

Capex

0

0

0

Acquisitions/disposals

0

0

0

Financing

0

0

0

Dividends

0

0

0

Other

3

0

0

Net Cash Flow

(2,528)

(3,394)

(4,858)

Opening net debt/(cash)

 

31,248

33,776

37,111

HP finance leases initiated

0

0

0

Other

0

59

(414)

Closing net debt/(cash)

 

33,776

37,111

42,383

Source: Company reports, Edison Investment Research

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Schumannstrasse 34b

60325 Frankfurt

Germany

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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 4, 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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Herzilya Pituach, 46766

Israel

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Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Israel

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.

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 4, 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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

Herzilya Pituach, 46766

Israel

General disclaimer and copyright

This report has been commissioned by TASE and prepared and issued by Edison, in consideration of a fee payable by TASE. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Israel

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.

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 4, 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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

Herzilya Pituach, 46766

Israel

General disclaimer and copyright

This report has been commissioned by TASE and prepared and issued by Edison, in consideration of a fee payable by TASE. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Israel

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.

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 4, 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 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

Herzilya Pituach, 46766

Israel

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