adult-close-up-eye-946727

Promising Eye-D VS-101 Phase I/IIa data

Biolight Life Sciences 7 August 2017 Update
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BioLight Life Sciences

Promising Eye-D VS-101 Phase I/IIa data

Clinical trial data

Pharma & biotech

6 August 2017

Price

NIS16.40

Market cap

NIS60m

NIS3.58/US$

*Priced as at 02 August 2017

Net cash (NISm) at H117e

27.2

Shares in issue

3.6m

Free float

43%

Code

BOLT

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

32.7

29.0

16.9

Rel (local)

33.1

26.5

14.7

52-week high/low

NIS16.6

NIS8.4

Business description

Based in Israel, BioLight Life Sciences is an emerging ophthalmic company focused on the development and commercialisation of products and product candidates that address ocular conditions. Lead products IOPtiMate and VS-101 are directed towards the treatment of glaucoma.

Next events

H117 results

August 2017

Decision on IOPtiMate US regulatory strategy

H217

Analysts

Pooya Hemami

+1 646 653 7026

Maxim Jacobs

+1 646 653 7027

BioLight reported positive results from a 77-patient US Phase I/IIa study on Eye-D VS-101, being developed as an extended-dose platform for treating glaucoma. We have raised our estimate for the candidate’s probability of commercial success to 30% (from 20%), which, with other adjustments, leads to an increase in our rNPV valuation to NIS121.6-135.7m.

Year end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/15

1.4

(25.1)

(6.96)

0.0

N/A

N/A

12/16

2.1

(26.3)

(5.55)

0.0

N/A

N/A

12/17e

4.9

(27.0)

(6.93)

0.0

N/A

N/A

12/18e

11.3

(33.7)

(8.63)

0.0

N/A

N/A

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

24% reduction in Diurnal IOP at 12 weeks

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 of latanoprost. In the Phase I/IIa study, patients were randomised into four groups, with three receiving a VS-101 insert (at differing dose levels per group) and the control group receiving latanoprost 0.005% eye drops. BioLight has not yet specified the precise dosing quantities for the VS-101 treatment arms, but indicated that one of the doses showed a 24% reduction in diurnal (daytime average) intraocular pressure (IOP) from baseline (from 23.5mmHg to 17.9mmHg). The firm reported that the VS-101 insert was well-tolerated, and most adverse events were expected, and found to be mild and transient, although we await further details in a subsequent publication or conference presentation.

Next step could be a Phase IIb study

We believe there is a strong unmet need for continuous-dosage glaucoma medication delivery systems for up to 30% of glaucoma patients, given that many patients are elderly and may have difficulties applying topical eye drops properly each day. BioLight indicates that the next step for VS-101 development will likely be a larger Phase IIb study using as a base, the identified preferred dose found in the now-completed Phase I/IIa study.

Valuation: Risk-adjusted rNPV of NIS121.6-135.7m

After raising our EyeD VS-101 probability of success estimate from 20% to 30%, factoring in the completed June 2017 NIS11.5m rights offering at NIS11.20 per share (which increased shares outstanding by 39%), and adjusting other forex and market changes, we now obtain an rNPV of NIS121.6-135.7m (up from NIS92.9-103.4m, previously). We estimate that BioLight’s H117 net cash position will be NIS27.2m (with NIS11.6m held at the parent company and the remainder at its subsidiaries), with it having sufficient funds on hand to maintain operations into Q417. Our base case model assumes that BioLight will raise NIS18m in H217 and NIS30m in 2018 to maintain its operations and development strategy. For modelling purposes, we assign these financings to long-term debt. We have not adjusted our model for the potential IOPtima sale to Chengdu.

Eye-D VS-101 positive Phase I/IIa data

On 24 July 2017, BioLight reported positive results from the Phase I/IIa study on Eye-D VS-101, which is being developed as an extended-dose treatment for glaucoma by BioLight’s ViSci subsidiary (of which it holds a 97% interest). The Eye-D VS-101 is a non-biodegradable insertable product that is placed in the lower lid conjunctiva in an in-office procedure. Over several months, it delivers a controlled amount of latanoprost, a widely used Prostaglandin F2α analogue (PGA) that lowers intraocular pressure (IOP) in patients with glaucoma.

In this first-in-human study on Eye-D VS-101, patients with open angle glaucoma (OAG) or ocular hypertension were randomised and divided into four groups, with three receiving VS-101 inserts (at differing dose levels per group) and the control group receiving latanoprost 0.005% eye drops once daily. BioLight has not yet specified the precise dosing quantities of each of the three treatment arms. The sustained release Eye-D VS-101 inserts were tested for 12 weeks and compared to once-daily latanoprost 0.005% eye drops for the same period.

The Phase I/IIa results reflect data from 77 patients, collected from 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 IOP1 of 24% at 12 weeks; in this arm baseline diurnal IOP was 23.5mmHg and 12-week diurnal IOP was 17.9mmHg. The firm has not yet specified whether there was a positive dose-response relationship among the three treatment arms, and what percentage changes occurred in each of those arms, but we expect further data will be released as part of a research article publication or at a conference.

  As IOP can fluctuate throughout the day, a diurnal measure comprising the mean average of three measures throughout the day (8:00am, 10:00am, and 4:00pm) was used to measure IOP across all study arms at all tested intervals.

Adverse effect profile appears favourable, but awaiting further details

BioLight reported that the VS-101 insert was well-tolerated, and most adverse events were found to be mild and transient. The company has not yet specified whether there were any patient discontinuations/drop-outs and which specific adverse events occurred, but with any foreign body implant or insert, the risk of dry eye or mechanical corneal irritation is to be considered. In addition, it would be helpful to know whether the VS-101 insert has any effect on central corneal thickness (CCT), given that prolonged topical PGA usage has been associated with a reduction in CCT (some studies find an inverse relationship between CCT and glaucoma risk or progression).

Strong market potential for continuous-dosage glaucoma product

As stated in our initiation report, 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. Okeke et al.2 determined that 50% of glaucoma patients do not adhere to their regimen 75% of the time. Poor treatment compliance is associated with worsening glaucoma progression and to date, we are not aware of a viable approved continuous-dosage glaucoma drug delivery system. 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.

  Okeke CO, Quigley HA, Jampel HD, et al. Ophthalmology. 2009;116:191–9

Next step for Eye-D VS-101 could be larger Phase IIb study

BioLight indicates the next step for VS-101 development will likely be a larger Phase IIb study using as a base, the identified preferred dose found in the now-completed Phase I/IIa study. It may also entertain partnership considerations. If the next study is successful, the firm plans a pivotal Phase III under the 505(b)(2) regulatory pathway. Under 505(b)(2), the applicant may rely on much of the existing data already established on latanoprost, and hence the pivotal study would likely be shorter and less costly than what would be required for a new drug application (NDA) or premarket approval (PMA). Our model continues to assume a 505(b)(2) pathway, with BioLight spending c $8m on VS-101 R&D across 2017 and 2018, before partnering the product prior to starting a Phase III study (funded by the partner) in late 2018.

Competition emerging in continuous-dose glaucoma market

While the early VS-101 Phase I/IIa data appears potentially promising, there are emerging competitive products under development for extended-dose glaucoma treatment. Many extended-dose PGA-drug eluting platforms are in development, and several are at more advanced stages than Eye-D VS-101 and may reach the market more quickly.

Exhibit 1: Selected extended-dose glaucoma treatment platforms under development

Product

Company

Stage or status

Description

Notes

Bimatoprost SR

Allergan plc

Phase III underway

Biodegradable, intracameral (injection into anterior chamber angle) implant providing gradual release of bimatoprost (a PGA)

In Phase I/II study (n=75), a single administration maintained IOP reduction in 92% of patients at 4 months, and 71% at 6 months, with favourable efficacy and safety

ENV515 (travoprost XR)

Envisia Therapeutics

Phase II underway

Biodegradable proprietary nanoparticle formulation of PGA travoprost, injected into anterior chamber, aiming for lower IOP for up to 6 months per dose

Interim 11-month analysis of first Phase II study cohort showed sustained IOP reduction of 25% vs baseline and favourable safety, dose escalation phase of trial is underway

Helios insert

ForSight Vision5

Phase II

Non-invasive ring that rests on ocular surface (under the eyelids) and slowly releases approved PGA (bimatoprost) over several months, to lower IOP

Non-invasive nature of device a potential differentiator vs most other extended-dose products; Phase III study planned in H217; 130-pt Phase II study showed mean IOP reduction of 4-6mmHg at 12 weeks, and sustained reduction at 6 months

iDose

Glaukos

Phase II

Implant that is injected and secured in the anterior chamber, and designed to provide a sustained release of a PGA (travoprost) to lower IOP

US Phase II study (n=150) recruitment completed May 2017, with data expected H217

L-PPDS

Mati Therapeutics

Phase II

Punctal plug (placed in nasolacrymal duct) that slowly elutes PGA drug latanoprost

120-pt Phase II study assessing effect on IOP at 12-wks (NCT02014142)

OTX-TP

Ocular Therapeutix

Phase III planned

Depot placed non-invasively into punctum and designed to slowly deliver PGA travoprost onto ocular surface for up to 90 days

First of two planned Phase III studies started in October 2016 (n=550), with IOP changes at weeks 2, 6, and 12 as primary endpoints; second study to start in H217

Source: Edison Investment Research, company reports

Allergan’s Bimatoprost SR is in Phase III studies but requires a more invasive injection into the ocular globe (and not simply into conjunctiva, like VS-101); Envisia’s ENV515 and Glaukos’s iDose similarly use ocular injections. Some competing platforms use more recent approved PGA drugs like travoprost or bimatoprost.

A less invasive extended-dose treatment alternative is the Helios insert (ForSight Vision5, acquired by Allergan in August 2016 for $95m plus milestones), which is a ring that rests on the ocular surface and elutes bimatoprost. This insert is scheduled to enter Phase III trials in H217. Given positive Phase I/IIa data with prolonged IOP reduction and the non-invasive nature of EyeD VS-101 instillation, one could start to compare the Eye-D VS-101 programme’s stage and status with that of the Helios programme at the time of its purchase by Allergan. The $95m price tag paid by Allergan is decidedly above BioLight’s current market capitalisation, although we highlight that the Helios insert had considerably more human data (251 human patients treated across three clinical studies) at the time of the Allergan deal.

Products inserted into the punctum (also relatively non-invasive) are Mati’s L-PPDs and Ocular Therapeutix’s OTX-TP. Ultimately, the success of VS-101 will depend on its competitive profile in terms of IOP-lowering and ease of application, and patient comfort compared to alternatives.

Financials

BioLight’s shareholder rights offering (described in our 19 June 2017 update note) was subscribed at a 96% level, which led to the sale of 1.028m new shares at NIS11.20 per share, and gross proceeds of NIS11.5m. The offering increased BioLight’s shares outstanding by 39%. The completion of the rights offering helped fulfil the firm’s imminent need to raise additional funds, as although BioLight finished Q117 with NIS20.2m in net cash (NIS19.8m cash and equivalents and NIS0.4m in short-term deposits), NIS12.5m was held at IOPtima and NIS3.1m was held at its other subsidiaries (including Micromedic). Hence, the parent company (BioLight) only had c NIS4.7m in net cash available at Q117.

Given our forecast Q217 operating cash burn rate of NIS4.3m and the NIS11.5m rights offering, we estimate BioLight, including all subsidiaries, had an end-H117 net cash position of NIS27.2m. However, we assume that no inter-company transfers took place since Q117 (and that the c NIS15.6m held by subsidiaries in Q117 would not be directly available to the parent company), and that the parent company (BioLight) would have NIS11.6m net cash available in H117. We assume this would be sufficient for BioLight to fund its operations into Q417.

This runway could potentially also be sufficient to allow for the closing or finalisation of the IOPtima sale to Chengdu, described in our 2 May 2017 research note. The currently proposed terms of this transaction (term sheet) value IOPtima in its current form (pre-closing) at above $30m (given that the first step of the proposed transaction involves a $7m investment into IOPtima for a 19% stake in the company). Hence, if the deal is finalised, there may be a positive upward response to BioLight’s share price, given that its entire market capitalisation and enterprise value at present are lower than the implied valuation of BioLight’s IOPtima stake (70%) under the terms applied to the current term sheet offer. Hence, we believe that the company would be justified in anticipating an uplift in its share price in the near future (upon a conclusion of the IOPtima sale, if it is successful), at which point another financing round may be envisioned.

Following the completion of the rights offering, we now model that BioLight will raise NIS18.0m in H217 (compared to our prior estimate of NIS30.0m for the entire 2017 fiscal year) in debt to sustain its operations and R&D projects. We continue to model that BioLight will raise NIS30.0m in 2018 and NIS25.0m in 2019. For modelling purposes, we assign these financings to long-term debt.

Given the uncertainty as to whether the Chengdu transaction will proceed, we have not adjusted our model or valuation for this potential transaction (our model continues to assume that IOPtima will operate as a separate, BioLight-controlled entity). We continue to assume that IOPtiMate ex-US sales will account for the majority of near-term BioLight revenue, and that R&D and other operating costs will exceed sales growth in the near term. We have not materially changed our G&A and R&D estimates for the remainder of 2017 and for 2018.

Valuation

As we do not include completion of the Chengdu transaction in our forecasts, our BioLight valuation continues to include the prospects for IOPtiMate, Eye-D VS-101 and TeaRx. We apply a risk-adjusted net present value (rNPV) model with a 12.5% cost of capital. For each of these projects, we provide a weighted rNPV based on BioLight’s ownership of the associated subsidiary company. For IOPtiMate, we continue to apply a lower probability of success for our US forecasts than our ex-US market forecasts, as the product has yet to receive US regulatory clearance, while it is already cleared for sale in Europe and China. Eye-D VS-101 remains the largest potential source of revenue for the company, and following the Phase I/IIa data, we have raised our probability of success estimate to 30% (from 20% previously). After rolling forward our forecasts and adjusting forex assumptions (and the public market value of held Micromedic shares), we now obtain an rNPV of NIS121.6-135.7m (up from NIS92.9-103.4m, previously).

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)

IOPtiMate for ex-US Markets (70% weighted)

Glaucoma

94.2

25.92

70.0%

2015

$21.4 in 2023

IOPtiMate in US Market (70% weighted)

Glaucoma

25.2

6.94

40.0%

2021

$22.6 in 2026

VS-101 (97% weighted)

Glaucoma

124.1

34.15

30.0%

2020

$69.8 in 2026

TeaRx (80% weighted)

DES diagnosis

26.5

7.30

50.0%

2017

$19.8 in 2025

Corporate costs & expenses

SG&A expenses

(57.8)

(15.90)

Net capex, NWC & taxes

(92.4)

(25.41)

Value of Micromedic shares (MCTC, TASE)*

5.0

1.38

Total rNPV

125.0

34.39

Net cash (debt) (H117e)

27.2

7.49

Total equity value**

152.2

41.88

FD shares outstanding (000) (H117e)

3,634

Source: Edison Investment Research. Note: *5.29m shares held with 1 August 2017 price of NIS0.946 per share. **Excludes the impact from any dilution resulting from any future equity offerings.

Exhibit 3: Financial summary

NIS000s

2014

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

941

1,391

2,111

4,877

11,255

23,260

Cost of Sales

(538)

(734)

(996)

(2,288)

(5,065)

(10,467)

Sales, General & Administrative

(8,529)

(11,956)

(10,360)

(9,328)

(9,573)

(12,193)

Research & Development

(18,560)

(13,045)

(10,982)

(17,794)

(27,800)

(21,800)

EBITDA

 

 

(26,686)

(24,344)

(20,227)

(24,533)

(31,182)

(21,200)

Depreciation

(3,884)

(1,306)

(3,190)

(1,616)

(2,400)

(2,400)

Amortization

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(30,570)

(25,650)

(23,417)

(26,149)

(33,582)

(23,600)

Exceptionals

(5,886)

(2,475)

(7,357)

241

0

0

Other

0

0

0

0

0

0

Operating Profit

(36,456)

(28,125)

(30,774)

(25,908)

(33,582)

(23,600)

Net Interest

448

543

(2,836)

(874)

(123)

(757)

Profit Before Tax (norm)

 

 

(30,122)

(25,107)

(26,253)

(27,023)

(33,706)

(24,357)

Profit Before Tax (FRS 3)

 

 

(36,008)

(27,582)

(33,610)

(26,782)

(33,706)

(24,357)

Tax

0

0

0

0

0

0

Profit After Tax and minority interests (norm)

(17,216)

(16,784)

(14,467)

(23,392)

(31,352)

(23,830)

Profit After Tax and minority interests (FRS 3)

(23,102)

(19,259)

(21,824)

(23,151)

(31,352)

(23,830)

Average Number of Shares Outstanding (m)

1.9

2.4

2.6

3.4

3.6

3.6

EPS - normalised (NIS)

 

 

(8.91)

(6.96)

(5.55)

(6.93)

(8.63)

(6.56)

EPS - normalised and fully diluted (NIS)

 

(8.91)

(6.96)

(5.55)

(6.93)

(8.63)

(6.56)

EPS - (IFRS) (NIS)

 

 

(11.96)

(7.98)

(8.37)

(6.85)

(8.63)

(6.56)

Dividend per share (NIS)

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

8,002

9,832

5,282

7,953

13,792

17,792

Intangible Assets

7,106

6,869

3,910

3,910

3,910

3,910

Tangible Assets

896

2,963

1,372

4,043

9,882

13,882

Current Assets

 

 

32,432

53,439

30,031

31,838

20,095

18,115

Short-term investments

6,408

385

417

381

381

0

Cash

22,196

50,697

25,057

26,542

12,064

5,059

Working Cap./other

3,828

2,357

4,557

4,915

7,650

13,056

Current Liabilities

 

 

(6,552)

(6,605)

(6,988)

(5,460)

(908)

(1,759)

Creditors

(6,552)

(6,605)

(6,988)

(5,460)

(908)

(1,759)

Short term borrowings

0

0

0

0

0

0

Long Term Liabilities

 

 

(8,144)

(9,605)

(11,915)

(29,617)

(59,617)

(84,617)

Long term borrowings

0

0

0

(18,000)

(48,000)

(73,000)

Other long term liabilities

(8,144)

(9,605)

(11,915)

(11,617)

(11,617)

(11,617)

Net Assets

 

 

25,738

47,061

16,410

4,714

(26,638)

(50,468)

CASH FLOW

Operating Cash Flow

 

 

(27,435)

(24,580)

(24,106)

(24,857)

(36,115)

(24,847)

Net Interest

448

543

(2,836)

(874)

(123)

(757)

Tax

0

0

0

0

0

0

Capex

(402)

(182)

(370)

(4,386)

(8,239)

(6,400)

Acquisitions/disposals

0

(837)

(227)

0

0

0

Financing

38,374

47,320

2,554

11,510

0

0

Net Cash Flow

10,985

22,264

(24,985)

(18,606)

(44,478)

(32,004)

Opening net debt/(cash)

 

 

(17,901)

(28,604)

(51,082)

(25,474)

(8,923)

35,555

HP finance leases initiated

0

0

0

0

0

0

Other

(282)

214

(623)

2,055

0

0

Closing net debt/(cash)

 

 

(28,604)

(51,082)

(25,474)

(8,923)

35,555

67,560

Source: BioLight Life Sciences reports, Edison Investment Research. Note: The reported financial results consolidate Micromedic’s

financials, and forecast financial results (2017e and beyond) do not include Micromedic operations.

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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 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

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

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

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

Herzilya Pituach, 46766

Israel

Edison 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, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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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.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2017 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

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

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205, 95 Pitt Street,

Sydney , NSW 2000,

Australia

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

Herzilya Pituach, 46766

Israel

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