adult-close-up-eye-946727

Funding provides breathing room

Biolight Life Sciences 9 July 2018 Update
Download PDF

Biolight Life Sciences

Funding provides breathing room

Financial update

Pharma & biotech

9 July 2018

Price*

NIS13.10

Market cap

NIS60m

*Priced at 05 July 2018

NIS3.65/US$

Net cash (NISm) at Q218e

36.3

Shares in issue

4.6m

Free float

43%

Code

BOLT

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.0)

(7.9)

5.4

Rel (local)

(1.4)

(14.3)

(0.1)

52-week high/low

NIS16.8

NIS12.3

Business description

Based in Israel, BioLight Life Sciences is an emerging ophthalmic company focused on the development and commercialisation of product candidates that address ocular conditions. VS-101 is directed towards the treatment of glaucoma and TeaRx is intended for use in dry eye diagnostics.

Next events

Start US pivotal study for TeaRx

H218

Start Phase IIb Eye-D VS-101 study

H218

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

BioLight raised NIS11.4m (gross) from the issuance of 908,540 shares in May 2018. We believe these funds should allow BioLight to fund its operations until at least H218, at which point we expect it to receive $12m from the second stage (out of four) of the IOPtima divestiture transaction. BioLight expects that upon completion of all stages (ie by mid-2021), it will receive gross proceeds of $23-27.3m for its entire holding.

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/16

2.1

(26.3)

(5.37)

0.0

N/A

N/A

12/17

1.2

(26.6)

(5.29)

0.0

N/A

N/A

12/18e

0.9

(26.3)

(5.21)

0.0

N/A

N/A

12/19e

0.9

(26.3)

(5.56)

0.0

N/A

N/A

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

IOPtima sale cash infusions can fund VS-101 pipeline

In the three remaining stages of the IOPtima acquisition transaction, Chengdu Kanghong Pharmaceutical Group (Chengdu) will purchase 81% of IOPtima shares from remaining shareholders (including BioLight). The next (second) stage is anticipated in H218 and involves Chengdu acquiring 41% of IOPtima for $17.2m. We estimate that BioLight will receive c $12m in this stage, which should be sufficient for it to resume clinical development of the EyeD VS-101. The product is designed to deliver continuous-dose delivery of approved glaucoma drug latanoprost. A Phase IIb study could start in H218. We also estimate that BioLight will receive between c $11m and $15.3m in total in the final two stages (slated for Q219 and Q221) of the IOPtima sale.

TeaRx to start US pivotal study in H218

BioLight announced positive results in April 2018 for its third US study, a two-site 82-patient trial on its TeaRx dry eye syndrome (DES) diagnostic assay. The study showed that TeaRx was successful in differentiating patients with DES from those without the condition. BioLight will need to complete another US study prior to obtaining FDA 510(k) clearance, which it plans to start in H218. If successful, it can lead to a potential US launch for TeaRx as a diagnostic tool in H219.

Valuation: rNPV of NIS112.1–127.2m

BioLight consumed NIS6.2m in Q118 operating cash flow and it reported Q118 cash and equivalents of NIS33.3m, which includes NIS29.6m held at IOPtima (consolidated in BioLight’s financials). Following the NIS11.4m financing, we estimate the parent company will have NIS11.3m net cash in Q218. We have not revised our EyeD VS-101 or TeaRx timing or US dollar-denominated sales forecasts, but adjustments for forex and the public market value of held Micromedic shares leads to an rNPV of NIS112.1–127.2m (vs NIS111.3-128.1m, previously). Once proceeds are received from the second tranche of the IOPtima sale (which we model will occur in Q318), we do not expect further funding to be needed to advance the development of BioLight’s EyeD VS-101 and TeaRx programmes.

BioLight raises NIS11.4m through rights offering

BioLight completed a shareholder rights offering in May 2018, whereby existing shareholders were granted rights to subscribe up to 971,208 ordinary shares at a subscription price of NIS12.5 per share. The actual subscription rate was about 94%, resulting in gross proceeds of about NIS11.4m, leading to the issuance of 908,540 shares. BioLight’s largest individual shareholders, Israel Makov, Dan Oren, Shanghvi Dilip and Lau Ngai Cheung together hold a total of about 56.62% of BioLight's issued and outstanding shares prior to the rights offering. They exercised their entire rights allocations (in accordance with their holdings prior to the rights offering) and have increased their collective share of BioLight ownership to 57.18%. We believe the additional funds raised through the rights offering should allow BioLight to fund its operations until and beyond the time (anticipated in H218) when it should receive proceeds from the second of four stages of the IOPtima divestiture transaction.

TeaRx to enter US pivotal trial in H218

BioLight’s DiagnosTear subsidiary (of which it holds an 88% ownership interest) is advancing TeaRx, a rapid, semi-quantitative, point-of-care diagnostic providing a multi-assay analysis of tear film constituents to identify and monitor patients with DES. TeaRx is differentiated from most existing DES diagnostic tools in that it provides a semi-quantitative objective measure (ie a scale of up to eight different ranges) of three separate biomarkers using a single 2μL patient sample of tear film.

BioLight concluded two US clinical studies (in 2015 and 2016) comparing TeaRx’s composite DES diagnostic measure with a composite of four established legacy DES assessment tests. The studies showed a strong positive correlation between TeaRx and the four applied diagnostic procedures. The company announced positive results in April 2018 for a third US study, an 82-patient TeaRx diagnostic study across two sites (41 healthy subjects, 41 with DES). The study confirmed the results from the two earlier US TeaRx studies, by again showing that TeaRx was successful in differentiating patients with DES from those without the condition. Given its discussions with the FDA, BioLight will need to complete another US study prior to obtaining FDA 510(k) regulatory clearance. BioLight plans to start the study in H218, which, if successful, can lead to a potential US launch for TeaRx as a diagnostic tool in H219.

BioLight also expects to submit the data from its completed studies as part of a CE mark filing in H218, which can lead to approval by the end of 2018. Although the company may conduct a ‘soft’ launch in certain smaller European markets in H218, we believe it plans to launch TeaRx in the larger European markets in conjunction with its planned US launch (H219), and hence we continue not to anticipate substantial TeaRx sales before H219.

Collaboration potential with Wize Pharma for TeaRx companion diagnostic

In February 2017, DiagnosTear entered into an agreement to provide development services to a undisclosed pharmaceutical company that would use TeaRx technology as part of a late-stage clinical trial for its DES drug candidate to help differentiate populations of drug responders or non-responders. Under their agreement, DiagnosTear was entitled to hundreds of thousands of NIS (company guidance). The clinical trial was finished in late 2017, and BioLight reports that initial data suggested TeaRx was effective in differentiating potential responsive and non-responsive subpopulations. BioLight recently disclosed that it is in discussions with another firm, Wize Pharma, to potentially to involve the TeaRx technology as a companion diagnostic device in Wize Pharma’s next, larger clinical study on its dry eye and Sjogren's disease product candidate (LO2A eye drops).

Q118 results unremarkable

BioLight reported Q118 results in May 2018, with revenue of NIS0.599m (up 69% year-on-year), an operating loss of NIS5.2m (down 18% year-on-year), and a reported net loss of NIS6.0m (down 21% year-on-year). The 2017 net loss figure included NIS3.1m in losses attributable to non-controlling interests, including those attributed to the Micromedic subsidiary (BioLight owns 24.4% of Micromedic and consolidates its financials in its results1). Excluding the non-controlling interests, the 2017 net loss attributable to BioLight shareholders was NIS2.9m. Although BioLight consolidates the financial results of the Micromedic subsidiary in its financials, our forecasts do not include projections or considerations for Micromedic.

At 31 March 2018 (Q118), BioLight held 27% of Micromedic shares. The percentage ownership has since decreased to 24.4% as Micromedic closed a public offering in Q218.

Of the reported Q118 revenue, NIS0.223m was attributable to Micromedic and the remaining NIS0.376m was related to BioLight’s commercial-stage ophthalmic businesses (primarily IOPtima2 sales and TeaRx through its collaboration with Wize Pharma). While BioLight does not break down its revenue by product line or subsidiary, we estimate the majority of reported Q118 revenue reflected IOPtima-related sales (including capital equipment sales and per-procedure recurring revenue), with a lesser portion due to residual TeaRx-related revenue from its collaboration with Wize Pharma.

IOPtima’s core product is IOPtiMate, a proprietary carbon-dioxide laser-assisted sclerectomy device marketed for the treatment of glaucoma

The majority of IOPtima sales are to Asian markets (eg, China) but sales activity had been restrained in recent quarters given that the primary distributor in China had suspended continuing sales due to IOPtima’s ongoing negotiations at the time for it to be sold to Chinese pharmaceutical company Chengdu. With the first portion of the IOPtima sales transaction now complete, Chengdu becomes the current distributor in Asia.

BioLight Q118 balance sheet reflects first stage of IOPtima deal

As reported in our 24 April 2018 update note, BioLight announced on 29 March that the first stage of the agreement for the sale of IOPtima to Chengdu was completed, whereby Chengdu placed a direct investment of $7m into IOPtima for a 19% stake in the company. This values IOPtima at about $37m (including the added capital infusion). No IOPtima shareholders (including BioLight) received any cash proceeds from this stage of the transaction.

Prior to the Chengdu investment, BioLight (through its wholly owned XL Vision Sciences subsidiary) owned about 70% of IOPtima’s share capital, and two investment funds held the majority of the remaining c 30%. Following the completion of the first stage, BioLight holds approximately 57% of the issued and outstanding share capital of IOPtima (and approximately 55% on a fully-diluted basis).

BioLight continues to consolidate IOPtima’s financials onto its results. BioLight reported Q118 cash and equivalents of NIS33.3m, up from NIS15.4m at YE17 despite the negative NIS6.2m in Q118 operating cash flow. The increase in BioLight’s reported consolidated cash position is due to the increase of IOPtima’s cash position following Chengdu’s investment. Of the NIS33.3m reported cash position at Q118, only NIS1.6m was held at the parent company (BioLight), as NIS29.6m was held at IOPtima, NIS1.4m was held at Micromedic, and NIS0.7m was held at other BioLight subsidiaries. The parent company’s net cash position at the end of Q118 being lower than the companywide quarterly operating burn rate, this explained the firm’s imminent need at the time to raise cash resources, which was successfully done as part of the rights offering transaction described earlier.

In parallel with the increase in IOPtima’s cash position and the decrease in BioLight’s proportionate ownership in IOPtima (as of Q118), BioLight reported a significant increase in non-controlling interests in its Q118 balance sheet; non-controlling interest rose to NIS22.6m at Q118, up from NIS1.9m at the end of 2017.

Remaining IOPtima stages can deliver cash inflows to BioLight

In the three subsequent stages of the IOPtima acquisition transaction, which are contingent on the fulfilment of several specified pre-conditions, Chengdu will purchase the outstanding IOPtima shares from the remaining shareholders (including BioLight), which should lead to cash infusions to BioLight. The preconditions include the completion of certain IOPtima operational objectives including the renewal of IOPtiMate’s registration with the Chinese Food and Drug Authority, as well as the continued approval by the applicable Chinese authorities to permit the outflow of investment capital (and the associated forex conversions) to purchase assets outside of China (to allow for the payment by Chengdu for the acquisition of IOPtima shares at each stage).

The second stage of the transaction has been guided to occur within six months of the first; hence we estimate it would occur in H218. In this second stage, Chengdu would acquire additional shares in IOPtima from the existing shareholders (reflecting 41% of total shares outstanding) for $17.2m (about NIS60.7m), thereby raising its stake to 60%. Based on such metrics, IOPtima would be valued at about $42m by this point, and BioLight’s equity ownership stake in IOPtima would be reduced to c 27-28%. If all necessary conditions are met, as we anticipate, we estimate that BioLight will receive approximately $12m in cash proceeds as part of this stage. BioLight expects to cease consolidating IOPtima in its financial statements once the second stage of the transaction is completed.

Up to $27.3m in total proceeds for IOPtima sale by mid-2021

In the final two stages, scheduled for Q219 and Q221, Chengdu would acquire the remaining shares in IOPtima (acquiring 20% in each stage), with the price to be paid determined using a formula dependent on IOPtima’s profitability and operational results (and calculated separately for each stage), and that can reflect an IOPtima valuation of between $40.5m and $56.25m. By the end of the fourth stage, Chengdu will have full ownership and control of IOPtima. If the transaction is completed in its entirety, BioLight expects it will generate gross cash flow proceeds between $23m and $27.3m (ie by mid-2021).

EyeD VS-101 awaiting return to clinic

The Eye-D VS-101 is an insert that is placed in the lower lid conjunctiva in an in-office procedure that delivers a controlled amount over several months of latanoprost, a widely used prostaglandin F2α analogue that lowers intraocular pressure (IOP) in patients with glaucoma. The product is being developed as an extended-dose treatment for glaucoma by BioLight’s ViSci subsidiary (in which it holds a 97% interest).

In July 2017, BioLight reported positive results from its 12-week Phase I/IIa study on Eye-D VS-101, which assessed 77 patients across 19 US clinical sites. The firm reported that a single placement of Eye-D VS-101 at one of the three tested doses provided a sustained reduction in diurnal IOP of 24% at 12 weeks; in this arm, baseline diurnal IOP was 23.5mmHg and 12-week diurnal IOP was 17.9mmHg. We continue to believe there is a strong unmet need for continuous-dosage glaucoma medication delivery systems, given that many patients are elderly and may have difficulties applying topical eye drops properly each day, and poor treatment compliance is associated with worsening glaucoma progression. We continue to estimate a continuous glaucoma drug delivery system such as Eye-D VS-101 could target up to 30% of the glaucoma population, or up to 0.83 million people in the US, reflecting those patients poorly compliant with topical medication.

We believe the next step for VS-101 development will likely be a larger Phase IIb study, which is based on the identified preferred dose found in the previously completed Phase I/IIa study. BioLight may seek to partner the product prior to starting the next study, but it may also do the trial on its own, and it has not yet provided guidance as to when it plans to start the study.

We continue to assume that BioLight will start the Phase IIb study in H218, and will spend c $7m in VS-101 R&D from mid-2018 through study completion in H219. We continue to assume a 505(b)2 development pathway, with BioLight partnering the product prior to the start of Phase III studies. We estimate the Phase III study would start in H219 at the earliest, and that commercialisation would occur in 2021. We continue to assume that BioLight will be entitled to a 25% royalty on net sales.

Financials

While BioLight reported NIS33.3m in cash and equivalents at Q118, only NIS1.6m was held at the parent company. Following the NIS11.4m equity raise through the shareholder rights offering, we expect BioLight will report NIS36.3m at Q218 in net consolidated cash and equivalents (which also includes amounts held at IOPtima and BioLight’s other subsidiaries). We estimate BioLight will report NIS11.3m in net cash at Q218 at the parent company level.

As BioLight expects to cease consolidating its financial reports with those of IOPtima once the second stage of the divestiture transaction is completed, we no longer project any IOPtima-related revenues and expenses in our forecasts starting in Q318.

Once proceeds are received from the second tranche of the IOPtima sale (which we model will occur in Q318), we do not expect further funding to be needed to support BioLight’s development programmes, as we expect BioLight to partner Eye-D VS-101 prior to the commencement of Phase III pivotal studies. We expect VS-101 to be launched in 2021 and BioLight would subsequently generate sustainable positive cash flows.

Valuation

Following the release of Q118 financials, we have made minor adjustments to our G&A forecasts for the remainder of 2018 and for 2019; we have not revised our R&D cost assumptions. We now expect 2018 G&A costs of NIS8.9m versus our prior estimate of NIS7.6m, while our 2019 G&A estimate remains NIS7.9m. We expect 2018 and 2019 operating cash burn rates of NIS27.6m and NIS24.6m, respectively, versus our prior estimates of NIS25.8m and NIS24.7m. We have not changed our US-dollar denominated sales or peak market share forecasts for TeaRx or Eye-D VS-101.

Although there are conditions attached to the remaining stages of the IOPtima transaction, including operational objectives that must be met for the second (and subsequent) stages to proceed, we view most of these as customary for a transaction of this nature and in our view it is likely the transaction will be completed as planned or guided by the company. That said, we continue to attach a discounted-factor analysis to the expected cash flows to BioLight as part of the different parts of the transaction.

The table below provides a summary analysis of the expected proceeds to BioLight and timing for stages two through four of the purchase transaction. We apply a 12.5% discount rate to these cash flows (for illustrative purposes only, the final column also shows the present value if a higher 25% discount rate is used). For stages three and four, for the assumed sales of BioLight’s remaining IOPtima shares, we assume the mid-point of the IOPtima value range provided by the terms of the transaction ($48.38m, or midway between $40.5m to $56.25m figures provided by the firm). Based on this analysis, we estimate that the total non-discounted proceeds to BioLight from the sale of its IOPtima stake would be $25.3m. Using a 12.5% annual discount rate, that the discounted proceeds would be $22.2m (NIS81.2m).

Exhibit 1: Assessment of cash flows to be received as part of IOPtima sale to Chengdu

Transactionsstage

Period

Estimated ownership (%) of IOPtima held by BioLight before sale*

Estimated change in BioLight's
IOPtima stake (%)*

Non-discounted
cash proceeds ($m)

Proceeds discounted
at 12.5% pa

Proceeds discounted
at 25.0% pa

1

Q118

70

15.0**

0.0**

0.0

0.0

2

Q318

55

27.5

12.0

11.7

11.3

3

Q219

27.5

13.75

6.65

5.9

5.3

4

Q221

13.75

13.75

6.65

4.7

3.4

Total

55

25.30

22.2

20.1

Source: Edison Investment Research. Note: *Expressed as a percentage of total IOPtima shares outstanding. ** In the first stage, Chengdu made a $7m direct investment into IOPtima for a 19% stake (resulting in the issuance of new IOPtima shares), and no proceeds were provided to existing IOPtima shareholders including BioLight.

We continue to apply an rNPV model with a 12.5% cost of capital. For both Eye-D VS-101 and TeaRx, we provide a weighted rNPV based on BioLight’s ownership of the associated subsidiary company.

Exhibit 2: BioLight Life Sciences rNPV assumptions

Product contributions (net of R&D costs)

Indication

rNPV (NISm)

rNPV/share (NIS)

Probability of success

Launch year

Peak sales (US$m)

VS-101 (97% weighted)

Glaucoma

128.6

27.91

30.0%

2021

72.3 in 2027

TeaRx (88% weighted)

DES diagnosis

27.6

6.00

50.0%

2019

20.7 in 2026

Corporate costs & expenses

SG&A expenses

(56.6)

(12.29)

Net capex, NWC & taxes

(57.2)

(12.41)

Discounted value of future IOPtima sale proceeds

81.2

17.62

Value of Micromedic shares (MCTC, TASE)*

3.4

0.75

Total rNPV

127.1

27.58

Net cash (debt) (Q218e) excluding net cash held by IOPtima subsidiary

11.3

2.45

Total equity value**

138.4

30.03

FD shares outstanding (000s) (Q218e)

4,608

Source: Edison Investment Research. Note: *6.64m shares held with 27 June 2018 price of NIS0.518 per share; **excludes the impacts from any dilution resulting from any future equity offerings

After including the discounted proceeds from the IOPtima sale in our valuation and adjusting the forex assumptions (and the public market value of held Micromedic shares), we now obtain an rNPV of NIS112.1-127.2m (vs NIS111.3-128.1m, previously). We continue to assume that none of the cash held at IOPtima will be returned to BioLight following the completion of the Chengdu transaction. Hence, the net cash position (NIS11.3m at Q218e) used in our equity valuation calculation now excludes the amount of net cash held at the IOPtima subsidiary (estimated at NIS25.0m at Q218).

Exhibit 3: Financial summary

NIS(000)

2015

2016

2017

2018e

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,391

2,111

1,209

949

927

7,913

Cost of Sales

(734)

(996)

(759)

(378)

(417)

(3,561)

Sales, General & Administrative

(11,956)

(10,360)

(12,424)

(8,943)

(7,871)

(9,499)

Research & Development

(13,045)

(10,982)

(14,794)

(15,666)

(17,000)

(5,800)

EBITDA

 

 

(24,344)

(20,227)

(26,768)

(24,038)

(24,361)

(10,947)

Depreciation

(1,306)

(3,190)

(351)

(2,000)

(2,400)

(2,400)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(25,650)

(23,417)

(27,119)

(26,038)

(26,761)

(13,347)

Exceptionals

(2,475)

(7,357)

(207)

0

0

0

Other

0

0

0

0

0

0

Operating Profit

(28,125)

(30,774)

(27,326)

(26,038)

(26,761)

(13,347)

Net Interest

543

(2,836)

483

(217)

485

333

Profit Before Tax (norm)

 

 

(25,107)

(26,253)

(26,636)

(26,255)

(26,276)

(13,014)

Profit Before Tax (FRS 3)

 

 

(27,582)

(33,610)

(26,843)

(26,255)

(26,276)

(13,014)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(16,784)

(14,467)

(17,053)

(22,745)

(25,607)

(13,256)

Profit After Tax and minority interests (FRS 3)

(19,259)

(21,824)

(17,260)

(22,745)

(25,607)

(13,256)

Average Number of Shares Outstanding (m)

2.4

2.7

3.2

4.4

4.6

4.6

EPS - normalised (NIS)

 

 

(6.96)

(5.37)

(5.29)

(5.21)

(5.56)

(2.88)

EPS - normalised and fully diluted (NIS)

 

(6.96)

(5.37)

(5.29)

(5.21)

(5.56)

(2.88)

EPS - (IFRS) (NIS)

 

 

(7.98)

(8.10)

(5.35)

(5.21)

(5.56)

(2.88)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

9,832

5,282

4,903

11,130

15,130

13,730

Intangible Assets

6,869

3,910

3,910

3,910

3,910

3,910

Tangible Assets

2,963

1,372

993

7,220

11,220

9,820

Current Assets

 

 

53,439

30,031

19,860

34,162

28,992

17,652

Short-term investments

385

417

412

387

387

387

Cash

50,697

25,057

15,355

33,775

27,503

12,931

Other

2,357

4,557

4,093

0

1,101

4,334

Current Liabilities

 

 

(6,605)

(6,988)

(7,259)

0

(153)

(669)

Creditors

(6,605)

(6,988)

(7,259)

0

(153)

(669)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(9,605)

(11,915)

(9,473)

(9,801)

(9,801)

(9,801)

Long term borrowings

0

0

0

0

0

0

Other long term liabilities

(9,605)

(11,915)

(9,473)

(9,801)

(9,801)

(9,801)

Net Assets

 

 

47,061

16,410

8,031

35,491

34,168

20,912

CASH FLOW

Operating Cash Flow

 

 

(24,580)

(24,106)

(25,801)

(27,646)

(24,641)

(13,906)

Net Interest

543

(2,836)

483

(217)

485

333

Tax

0

0

0

0

0

0

Capex

(182)

(370)

(117)

(8,149)

(6,400)

(1,000)

Acquisitions/disposals

(837)

(227)

(402)

43,822

24,284

0

Financing

47,320

2,554

10,976

11,400

0

0

Net Cash Flow

22,264

(24,985)

(14,861)

19,210

(6,271)

(14,573)

Opening net debt/(cash)

 

 

(28,604)

(51,082)

(25,474)

(15,767)

(34,162)

(27,890)

HP finance leases initiated

0

0

0

0

0

0

Other

214

(623)

5,154

(815)

0

0

Closing net debt/(cash)

 

 

(51,082)

(25,474)

(15,767)

(34,162)

(27,890)

(13,318)

Source: BioLight Life Sciences reports, Edison Investment Research. Note: The reported financial results (from 2017 and earlier)

consolidate Micromedic’s financials, and forecast financial results (2018e and beyond) do not include Micromedic operations.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 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

.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 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

.

Share this with friends and colleagues