Full-year financial results

Elbit Medical Technologies 30 April 2019 Update
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Elbit Medical Technologies

Full-year financial results

Financial update

Pharma & biotech

30 April 2019

Price

NIS0.93

Market cap

NIS215m

Priced at 26 April 2019

NIS3.62/US$

Net debt ($m) at 31 December 2018

34.0

Shares in issue

231.5m

Free float

10.7%

Code

EMTC

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.3

(4.3)

(2.4)

Rel (local)

(1.7)

(10.5)

(12.5)

52-week high/low

NIS1.1

NIS0.9

Business description

Elbit Medical Technologies, a fully controlled subsidiary of Elbit Imaging, 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

Briana Warschun

+1 646 653 7031

Elbit Medical Technologies’ two portfolio investments continue to advance on multiple fronts. InSightec recently completed its compatibility project with Siemens MR scanners and its ExAblate Neuro units, which lends the opportunity to expand its presence in the global MR market. According to Gamida Cell, its cash balance should fund its operations through the top-line readout of its Phase III study of NiCord, which is expected in H120.

Year end

Revenue ($m)

PBT*
($m)

EPS*
($)

DPS
($)

P/E
(x)

Yield
(%)

12/16

0.0

(3.7)

(0.00)

0.0

N/A

N/A

12/17

0.0

(5.2)

(0.00)

0.0

N/A

N/A

12/18

23.0

3.8

0.12

0.0

N/A

N/A

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

InSightec completes Siemens compatibility project

In December, InSightec (~22% owned by Elbit Medical, ~18% fully diluted) announced the receipt of FDA-expanded approval of ExAblate Neuro for the treatment of tremor-dominant Parkinson’s disease (PD). Notably, InSightec received the both FDA approval and CE mark for ExAblate Neuro compatibility with Siemens magnetic resonance (MR) scanners and we expect this to provide InSightec with the opportunity to expand its presence in the global MR market.

Gamida Cell looks to 2019 and 2020

Gamida Cell (~11% owned by Elbit Medical, ~8% fully diluted) has set clear milestones for the next few years. According to the company, its current cash position of $60.7m will provide a runway through March 2020, which is roughly in line with company expectations for delivering top-line NiCord data. Provided that these Phase III data are positive, Gamida Cell plans to submit a BLA filing for NiCord for the treatment of haematological malignancies in H220.

Elbit Imaging sells shares in Elbit Medical

Elbit Imaging recently entered into another share purchase agreement with Exigent Capital Group for the sale of between 1.6% and 25% of the ordinary shares of Elbit Medical for a price per share of NIS0.96 on or before 27 March 2019. Additionally, Exigent Capital may purchase up to 25% of shares through 13 May 2019 for a price per share of NIS1.02. As of 28 March 2019, 1.6% of Elbit Medical’s outstanding share capital was sold for NIS3.6m. Since August 2018, Elbit Imaging has sold roughly 27.6% of Elbit Medical’s outstanding share capital to Exigent Capital. Therefore, Elbit Imaging owns ~61.6% of Elbit Medical.

Valuation: NIS507.4m or NIS2.19 per share

We have increased our valuation to NIS507.4m or NIS2.19 per share, from NIS424m or NIS1.83 per share, primarily attributed to increasing the potential market share of ExAblate Neuro systems to include the opportunity of installing units on Siemens MR scanners. These changes were partially offset by the decrease of Elbit Medical’s stake (fully diluted) in Gamida Cell following its IPO.

Expanded MR compatibility with Siemens

The ExAblate system comprises 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 (PMA) route, the company has achieved FDA approval and CE markings for the ExAblate 2100 (Body) system for the treatment of symptomatic uterine fibroids and pain palliation caused by bone metastases, and for its ExAblate 4000 (Neuro) system for the treatment of medication-refractory ET (essential tremor). Moreover, the company has received CE markings for the treatment of prostate cancer, neuropathic pain and tremor-dominant PD. InSightec is investigating these devices further in clinical trials to achieve FDA approval and, on 18 December 2018, announced the FDA approved an expansion of ExAblate Neuro to include the treatment of patients with medication-refractory tremor-dominant PD. In February 2019, InSightec announced that Noridian posted positive local coverage determination for MRgFUS effective 1 April 2019 and that Medicare beneficiaries in 38 US states will have coverage for the treatment of ET using MRgFUS.

The clinical presence of the ExAblate platform is limited by the number of compatible MRI systems installed in hospital settings. We therefore believe the recent completion of the compatibility project for ExAblate Neuro with Siemens Magnetom Aera 1.5T and Skyra 3T clinical MR scanners in the US and in Europe could potentially double the accessible global MRI market for ExAblate Neuro. According to the Organisation for Economic Co-operation and Development, as of 2016 there were more than 5,400 MRI units active in US hospitals (roughly 16.67 per one million of the US population).1 This numeric excludes MRI units installed in outpatient imaging centres as we assume MRgFUS procedures will require the presence of a specialized surgeon. According to EvaluateMedTech, the diagnostic medical imaging market is led by Siemens Healthineers, GE Healthcare and Philips with 26%, 21% and 19% of the market share in 2016, respectively. Currently, the ExAblate Body systems are exclusively compatible with GE Healthcare’s 1.5 and 3.0 Tesla MR scanners.

  OECD (2018), Magnetic resonance imaging (MRI) units (indicator).

Disrupting the BBB using MRgFUS

On 30 January 2019, InSightec announced that the first patient completed temozolomide (TMZ) chemotherapy cycles in a clinical trial investigating the safety and efficacy MRgFUS for disrupting the blood brain barrier (BBB) in patients with glioblastoma. Gliomas are a collection of malignant tumours arising from glia or glial precursor cells within the central nervous system that form in the brain and spinal cord.2 Glioblastoma, also known as glioblastoma multiforme (GBM), is the most aggressive of the gliomas and affects less than 10 per 100,000 people in the US.2 Despite treatment (ie surgery to remove the tumour and adjuvant chemo- or radiation therapy) the disease is largely incurable and most patients with GBM have a median survival of about 14 to 15 months.3 Also, cytotoxic therapies such as chemotherapy do not effectively cross the BBB. The trial, which is being conducted at the University of Maryland Medical System in the US, is expected to enrol 15 patients with GBM and will analyse the number and severity of device and procedure related adverse events and investigate the feasibility of BBB disruption at the time of the procedure and 24 hours post-procedure.

  Holland, E. C. (2000). Glioblastoma multiforme: The terminator. Proceedings of the National Academy of Sciences, 97(12), 6242-6244.

  Hanif, F., et al. (2017). Glioblastoma Multiforme: A Review of its Epidemiology and Pathogenesis through Clinical Presentation and Treatment. Asian Pacific Journal of Cancer Prevention : APJCP, 18(1), 3–9.

Regarding the underlying business, InSightec recently reported its FY18 financials. Revenues, which are based on the sale of ExAblate systems and corresponding annual service contract costs and consumables, were $38.0m, up from $32.1m in FY17. R&D expenses totalled $28.4m for the year, which reflects ongoing clinical development.

Gamida Cell sets clear milestones for 2019–20

Gamida Cell’s 120-patient Phase III study of NiCord in patients with haematological malignancies is ongoing. NiCord, which is the company’s lead asset, expands umbilical cord blood (UCB) cell graft ex vivo and enriches the specific subpopulation of stem and progenitor cells to treat haematological malignancies such as leukaemia and lymphoma. Essentially, CD133+ cells selected from a single unit of UCB are cultured for 21 days in nicotinamide resulting in a c 100-fold expansion of dose stem and progenitor cells, which are then cryopreserved until they are transplanted into patients. This expansion is expected to provide a substantial advantage over a single UCB graft. The registrational trial is investigating the ability of NiCord to provide a graft with an ample number 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 use of UCB for bone marrow transplantation (BMT) is limited by the minimal number of stem and progenitor cells. The NiCord process seeks to provide a more viable alternative to BMT in cancer patients, and only partial genetic matching is needed (ie a minimum requirement of four out of six HLA biomarkers). Enrolment is on track for completion in H219 with top-line data expected in H120. Provided that these Phase III data are positive, Gamida Cell plans to submit a BLA filing for NiCord for the treatment of haematological malignancies in H220.

The company is also investigating NiCord for the treatment of severe aplastic anaemia (SAA) in an ongoing Phase I/II study. Gamida Cell recently presented data on three patients included in the first cohort (Exhibit 1) with SAA and severe neutropenia who previously failed immunosuppressive therapy at the annual Transplantation & Cellular Therapy (TCT) Meetings of American Society for Blood and Marrow Transplantation and Center for International Blood and Marrow Transplant Research in Houston in February 2019.

Exhibit 1: NiCord Phase I/II study design in SAA

Cohort

No. patients

Notes

1

Three to six

Single NiCord-expanded unit combined with 3 x 106 CD34+ cells/kg from a haploidentical donor as a stem cell backup

2

Up to 20

Once adequate cord engraftment is established* transplant with NiCord-expanded unit alone

Source: Gamida Cell. Notes: Patients conditioned with cyclophosphamide (60mg/kg x 2), horse ATG (40mg/kg x 4), fludarabine (25 mg/m2 x 5), and 200cGy of TBI and graft-versus-host-disease prophylaxis with tacrolimus and MMF. *Defined as three of the first three to four patients, four of six patients with ANC>500 cells/µl by day 29 and cord ANC >500 cells/µl by day 42 sustained at day 100. ANC: absolute neutrophil count.

From 2017 to 2018, three SAA patients (age/gender: 22 male, 45 female, 22 female), who all previously failed immunosuppressive therapy, with a pre-transplant absolute neutrophil count (ANC) ≤ 500 cells/µl, successfully underwent a single 5/8 or 6/8 HLA-matched NiCord-expanded UCBT (UCB transplant) combined with haploidentical CD34+ cells from a haploidentical donor as a stem cell backup. For the three NiCord-expanded transplants, the median time to neutrophil and platelet recovery was six days (range six to seven) and 31 days (range 15–40), respectively. All three patients achieved cord engraftment (ANC>500 cells/µl) at a median of six days, which was sustained at day 100. Moreover, these patients were alive and free of graft-versus-host-disease at a median follow-up of 11 months (range four to 18 months). It is important to note these findings are based on only a small number of patients and significant variability between subjects was observed.

According to the company, patient inclusion in cohort one is complete, and it expects to proceed with cohort two to evaluate engraftment and transplantation outcomes with the NiCord-expanded unit alone (in other words, without a haploidentical donor) in 20 patients with SAA.

NAM-NK cells

Gamida Cell is also developing donor-derived natural killer (NK) cells for blood and solid cancers. NK cells are a type of lymphocyte, or white blood cell, that play a central role in lysing infected or transformed cells and therefore offer an innovative approach to cancer treatment. The company previously initiated a 24-patient Phase I trial with the University of Minnesota evaluating the safety and activity of nicotinamide (NAM)-NK cells in patients with Non-Hodgkin’s lymphomas and multiple myeloma (MM). In February, preliminary data from 14 patients (Exhibit 2) were presented at the TCT annual meeting.

Exhibit 2: Patient and disease characteristics

Disease

No. of patients (n=14)

MM

8

Follicular lymphoma

3

Transformed lymphoma

2

DLBCL

1

Disease status

Relapsed

10

Refractory

4

Disease

MM

Follicular lymphoma

Transformed lymphoma

DLBCL

Disease status

Relapsed

Refractory

No. of patients (n=14)

8

3

2

1

10

4

Source: Gamida Cell

The objective of this Phase I study is to determine the maximum tolerated dose of NAM-NK. NAM-NK was generally well tolerated with no dose-limiting toxicities or infusion toxicity. However, several grade 3/4 hematologic toxicities were observed as well as low-grade non-haematological toxicities. The maximum target dose (MTD) of 2x108 cells/kg were achieved. Some clinical activity was observed in six patients with lymphomas and an additional six patients with MM who were evaluable for response (Exhibit 3). The trial remains ongoing and additional patients will be treated at the MTD to continue to evaluate safety and clinical activity. Gamida Cell expects to initiate a multi-centre Phase I/II study of NAM-NK in patients with blood cancers in 2020.

Exhibit 3: Clinical activity observed in 12 evaluable patients

Disease

No. of patients

Clinical response

Non-Hodgkin’s lymphomas (n=6)

3

CR

1

PR

2

PD

MM (n=6)

1

CR

2

SD

3

PD

Source: Gamida Cell. Notes: CR: complete response; PR: partial response; PD: progressive disease; SD: stable disease.

Also in February 2019, Gamida Cell announced an agreement with Editas Medicine, a genome-editing company, to evaluate the potential use of its CRISPR technology to edit Gamida’s NAM-NK cells. The two companies will engage in joint research focused on improving the tumour-killing properties of NAM-NK cells with CRISPR editing technology.

Gamida Cell (NASDAQ: GMDA, market capitalisation of $210m) recently reported its full-year financial results. The company reported a post-tax loss of $52.9m in FY18. R&D expenditure was $22.0m for FY18, which is up roughly 47% from FY17 ($15.0m), primarily attributed to the increase in clinical activities related to the advancement of the NiCord Phase III clinical programme in haematological malignancies and the initiation of the NAM-NK clinical programme. R&D spending is expected to increase substantially as the company advances its product candidates through clinical development. According to Gamida Cell, its cash position of $60.7m (including cash and equivalents, available-for-sale financial assets and short-term deposits) at 31 December 2018 will provide a runway through March 2020, which is roughly in line with company expectations for delivering top-line NiCord data. The company foresees the need for significant financing in the future.

Exhibit 4: Investment portfolio

Investment

Technology

% held

Founded

Status

Advantages

Targets

InSightec

MRgFUS to treat various indications with thermal tissue ablation

~22%
(~18% 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 PD.

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

Gamida Cell

Cord stem cell transplant for hematologic diseases

~11%
(~8% fully diluted)

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 underway for a Phase III study of NiCord and on track for completion in H219 with top-line results expected in H120 and BLA filing in H220.

Source: Elbit Medical Technologies

Valuation

We have increased our valuation of Elbit Medical Technologies to NIS507.4m or NIS2.19 per share, from NIS424m or NIS1.83 per share. These changes are primarily driven by increasing the potential market share of ExAblate Neuro systems to include the possibility of installing units on Siemens MR scanners. Previously, both the ExAblate Neuro and Body systems were exclusively compatible with GE Healthcare’s MR scanners. The completion of the compatibility project with Siemens provides InSightec with the opportunity to expand its presence in the global MR market and increase the number of active ExAblate units. This change in overall valuation was also compounded by rolling forward our NPVs and the slightly lower net debt. These changes were partially offset by the decrease in strength of the US dollar (NIS3.62/US$), the decrease of Elbit Medical’s stake (fully diluted) in Gamida Cell following its October 2018 IPO, and the slight decrease of Elbit Medical’s stake (fully diluted) in InSightec.

Exhibit 5: Valuation of Elbit Medical Technologies

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

903

100%

100%

756

18%

136.0

Gamida cell

Leukaemia (AML, ALL, CML, CLL)

Phase III

2020

437

50%

100%

477

8%

38.2

Portfolio total ($m)

174.2

Net debt (as of 31 December 2018) ($m)

(34.0)

Overall valuation ($m)

140.2

Shekel/dollar conversion rate

3.6

Overall valuation in shekels (NISm)

507.4

Shares outstanding (m)

231.5

Per share (NIS)

2.19

Source: Company reports, Edison Investment Research

Financials

Elbit Medical recently announced its full-year 2018 financial results. Its FY18 post-tax gain was $26.8m, mainly from its reduced stake in Gamida Cell following its IPO. General and admin costs for the year were $0.9m, which includes management fees, professional services and other related expenses. The company had cash of $5m (including cash and equivalents as well as restricted cash) at 31 December 2018 and $39.0m in debt. We outline historical financials in Exhibit 6. However, we are not providing forecasts at this time.

Exhibit 6: Financial summary

US$'000s

2016

2017

2018

Year end 31 December

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

0

0

23,016

Cost of Sales

0

0

0

Gross Profit

0

0

23,016

R&D expenses

0

0

0

SG&A expenses

(553)

(677)

(918)

EBITDA

 

 

(553)

(677)

22,098

Operating Profit (before amort. and except.)

 

(553)

(677)

22,098

Intangible Amortisation

0

0

0

Exceptionals

(15,000)

(5,518)

0

Operating Profit

(15,553)

(6,195)

22,098

Other

(3,101)

(4,557)

4,723

Net Interest

0

0

0

Profit Before Tax (norm)

 

 

(3,654)

(5,234)

3,805

Profit Before Tax (FRS 3)

 

 

(18,654)

(10,752)

26,821

Tax

0

0

0

Profit After Tax (norm)

(3,654)

(5,234)

3,805

Profit After Tax (FRS 3)

(18,654)

(10,752)

26,821

Average Number of Shares Outstanding (m)

1,851.9

1,851.9

231.5

EPS - normalised (c)

 

 

(0.00)

(0.00)

0.12

EPS - FRS 3 (USD)

 

 

(0.01)

(0.01)

0.12

Dividend per share (c)

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

5,518

50

24,233

Intangible Assets

0

0

23,016

Tangible Assets

0

0

0

Other

5,518

50

1,217

Current Assets

 

 

30

40

3,797

Stocks

0

0

0

Debtors

15

8

11

Cash

15

32

3,786

Other

0

0

0

Current Liabilities

 

 

(57)

(60)

(1,526)

Creditors

(57)

(60)

(1,526)

Short term borrowings

0

0

0

Short term leases

0

0

0

Other

0

0

0

Long Term Liabilities

 

 

(37,126)

(42,415)

(41,998)

Long term borrowings

(37,126)

(42,415)

(39,030)

Long term leases

0

0

0

Other long term liabilities

0

0

(2,968)

Net Assets

 

 

(31,635)

(42,385)

(15,494)

CASH FLOW

Operating Cash Flow

 

 

(3,394)

(4,858)

4,533

Tax

0

0

0

Capex

0

0

0

Acquisitions/disposals

0

0

0

Financing

0

0

0

Dividends

0

0

0

Other

0

0

0

Net Cash Flow

(3,394)

(4,858)

4,533

Opening net debt/(cash)

 

 

33,776

37,111

42,383

HP finance leases initiated

0

0

0

Other

59

(414)

2,606

Closing net debt/(cash)

 

 

37,111

42,383

35,244

Source: Company reports, Edison Investment Research


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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

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Germany

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United Kingdom

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United States of America

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Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
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Herzilya Pituach, 46766

Israel

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New Zealand

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United Kingdom

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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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