F-1 1 s000527x4_f1.htm FORM F-1

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As filed with the Securities and Exchange Commission on June 23, 2014

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM F-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

MACROCURE LTD.
(Exact Name of Registrant as Specified in its Charter)

State of Israel
(State or Other Jurisdiction of
Incorporation or Organization)
2833
(Primary Standard Industrial
Classification Code Number)
Not Applicable
(I.R.S. Employer
Identification No.)

Macrocure Ltd.
25 Hasivim Street
Petach Tikva 4959383, Israel
Tel: +972-3-923-5556
(Address, including zip code, and telephone number, including
area code, of Registrant’s principal executive offices)

Puglisi & Associates
850 Library Avenue, Suite 204
Newark, Delaware 19711
+1 (302) 738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all correspondence to:

Phyllis G. Korff, Esq.
Andrea L. Nicolas, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Tel: +1 (212) 735-3000
Fax: +1 (212) 735-2000
David S. Glatt, Adv.
Ronen Bezalel, Adv.
Jonathan M. Nathan, Adv.
Meitar Liquornik Geva Leshem Tal
16 Abba Hillel Silver Rd.
Ramat Gan 5250608, Israel
Tel: +972-3-610-3100
Fax: +972-3-610-3111
F. Holt Goddard, Esq.
Colin J. Diamond, Esq.
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Tel: +1 (212) 819-8200
Fax: +1 (212) 354-8113
Chaim Friedland, Adv.
Ari Fried, Adv.
Gornitzky & Co.
Zion House
45 Rothschild Blvd.
Tel Aviv 6578403, Israel
Tel: +972-3-710-9191
Fax: +972-3-560-6555

Approximate date of commencement of proposed sale to the public:
As soon as practicable after effectiveness of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of each class of securities
to be registered
Proposed maximum
aggregate offering
price(1)(2)
Amount of
registration fee
Ordinary shares, par value NIS 0.01 per share
$
75,000,000
 
$
9,660
 

(1)Includes ordinary shares that the underwriters may purchase pursuant to their option to purchase additional ordinary shares, if any.
(2)Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) of the Securities Act.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 23, 2014

            Shares

Ordinary Shares

This is Macrocure Ltd.’s initial public offering. We are selling             of our ordinary shares.

Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price of our ordinary shares is expected to be between $             and $             per share. We have applied to have our ordinary shares listed on the NASDAQ Global Market under the symbol “MCUR.”

The underwriters have an option to purchase a maximum of             additional ordinary shares for up to 30 days after the date of this prospectus.

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 10 of this prospectus.

Price to Public
Underwriting Discounts
and Commissions(1)
Proceeds to Issuer,
Before Expenses
Per Share
$
 
 
$
 
 
$
 
 
Total
$
 
 
$
 
 
$
 
 

(1)See “Underwriting” for a description of the compensation payable to the underwriters.

Delivery of the ordinary shares will be made on or about         , 2014.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and will therefore be subject to reduced reporting requirements.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse Jefferies
Nomura Oppenheimer & Co.

The date of this prospectus is            , 2014.

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You should only rely on the information contained in this document or to which we have referred you. Neither we nor the underwriters have authorized anyone to provide information different from that contained in this prospectus, any amendment or supplement to this prospectus or in any free writing prospectus prepared by us or on our behalf. Neither we nor the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any information other than the information in this prospectus, any amendment or supplement to this prospectus, and any free writing prospectus prepared by us or on our behalf. The information in this document may only be accurate on the date of this document. Neither the delivery of this prospectus nor the sale of our ordinary shares means that information contained in this prospectus is correct after the date of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy our ordinary shares in any circumstances under which such offer or solicitation is unlawful. This document may only be used where it is legal to sell these securities.

Dealer Prospectus Delivery Obligation

Until           , 2014, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

This prospectus includes statistical data, market data and other industry data and forecasts, which we obtained from market research, publicly available information and independent industry publications and reports that we believe to be reliable sources. We have proprietary rights to our “CureXcell” trademark, which is registered under applicable intellectual property laws. Solely for convenience, our “CureXcell” trademark may appear without the “®” or “™” symbols in this prospectus, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights to this trademark. We do not intend our use or display of other companies’ tradenames, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other company. Each trademark, tradename or service mark of any other company appearing in this prospectus is the property of its respective holder.

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PROSPECTUS SUMMARY

This summary does not contain all of the information you should consider before investing in our ordinary shares. You should read this summary together with the more detailed information appearing in this prospectus, including “Risk Factors,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and our consolidated financial statements and the related notes included at the end of this prospectus, before making an investment in our ordinary shares. Unless the context otherwise requires, all references to “Macrocure,” “we,” “us,” “our,” the “company” and similar designations refer to Macrocure Ltd. and its wholly-owned U.S. subsidiary, Macrocure, Inc. The terms “shekel,” “Israeli shekel” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “US$” or “$” refer to United States dollars, the lawful currency of the United States.

Our Company

We are a regenerative medicine company focused on developing, manufacturing and commercializing novel cell therapy products to address unmet needs in the treatment of chronic and other hard-to-heal wounds. Our product candidate, CureXcell, is an advanced wound care, or AWC, therapy to treat such wounds by injecting living human white blood cells that have been activated to facilitate the healing process. CureXcell is currently in two pivotal, Phase 3, double-blind clinical trials targeting a broad indication for the treatment of diabetic foot ulcers, or DFUs, and venous leg ulcers, or VLUs. We anticipate results from our DFU clinical trial and interim data from our VLU clinical trial in the second half of 2015. We expect to submit our Biologics License Application, or BLA, to the United States Food and Drug Administration, or FDA, in late 2016. We also intend to pursue marketing authorization in Europe with the European Medicines Agency, or EMA. We already hold product approval for CureXcell as a medical device in Israel for the treatment of chronic and other hard-to-heal wounds, and have effectively and safely treated more than 5,000 patients in commercial or clinical study settings in Israel. To support our development and manufacturing initiatives for CureXcell, we have established operations in Philadelphia, Pennsylvania in the United States and the Tel Aviv region in Israel.

CureXcell has consistently demonstrated efficacy and safety, with efficacy having served as a measured outcome in all nine of CureXcell’s completed clinical studies and safety also having served as a measured outcome in six of these studies. For example, in a 131-patient post-marketing trial conducted in Israel and completed in 2011, CureXcell achieved full closure of hard-to-heal wounds in approximately 71% of patients in a study with a challenging patient population. In addition to clinical data, our technologies have been presented in several peer-reviewed publications, and CureXcell has support from key opinion leaders, or KOLs, in the wound care field. Based on nearly 15 years of clinical data and experience, we believe CureXcell provides patients and physicians significant clinical benefits.

CureXcell is an injectable suspension of living human white blood cells, including macrophages, neutrophils and lymphocytes, that are crucial to initiating, promoting and completing the process of cellular regeneration and wound healing. We use our proprietary cell activation technology to trigger these cells to release growth factors and other biochemical factors that improve the healing environment in the wound bed and stimulate wound closure. We source white blood cells from fully-screened, healthy volunteer blood donors through established relationships with blood banks, including the American National Red Cross, Penn-Jersey Region, which we refer to as the American Red Cross. CureXcell is an easy to administer, ready-to-use, monthly therapy. A physician draws CureXcell from its package using a standard syringe for superficial injection into a patient's wound.

Through CureXcell and our proprietary cell based technology, we intend to target a significant unmet market opportunity with a large patient population that imposes a financial burden on healthcare systems. Chronic and other hard-to-heal wounds represent a $25 billion burden on the U.S. healthcare system alone. With our initial focus on the treatment of patients with hard-to-heal DFUs and VLUs, we expect to target a market of approximately $5.3 billion worldwide with a patient population of more than 1.7 million in the United States and Europe. We believe CureXcell will offer patients and physicians a highly efficacious, safe and easy-to-use therapy to treat these wounds.

Our Market Opportunity

Chronic and other hard-to-heal wounds, which are wounds that do not close within four weeks following the use of conventional medical treatment, represent a significant global market opportunity and a substantial unmet medical need. In many cases, these wounds take several months to heal and, in some cases, never heal. Patients with hard-to-heal DFUs and VLUs are initially treated in either a primary care setting or an emergency room and, if the

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wound cannot be treated at these locations, patients are then referred to a wound care center, vascular surgeon, orthopedic surgeon or podiatrist. According to the research firm The Advisory Board Company, there are currently over 1,500 wound care centers in the United States treating such patients.

The Wound Healing Process

The normal wound healing process is a well-orchestrated, complex and interlinked series of phases in which cell interactions, growth factors and other biochemical factors mediated by white blood cells coordinate to restore function and rebuild damaged tissue. White blood cells are a major, widely dispersed cell population and the presence of activated white blood cells, such as macrophages, neutrophils and lymphocytes, at the wound surface is critical to maximizing a wound's healing potential.

Our Solution

Our novel approach is to treat and close chronic and other hard-to-heal wounds by injecting the human body’s own wound healing and regenerative components directly into the wound itself. CureXcell is a unique combination of living human white blood cells that have been activated to facilitate the healing process and stimulate wound closure. CureXcell addresses each phase of healing in the impaired wound, including the production of growth factors and other biochemical factors involved in fibroblast activation, cell migration and extracellular matrix production, stimulating the body’s natural healing process. Our delivery method of direct superficial injection into the chronic wound allows for precise delivery of the cells into the defective wound tissue where they can be most effective. This is in contrast to other AWC products that are applied to the surface of the chronic wound and thus do not come into direct contact with the impaired wound cells below the surface layer. We believe the clinically differentiated profile of CureXcell will be attractive to patients and healthcare providers to treat hard-to-heal DFUs and VLUs without the drawbacks of currently available AWC products.

In order to produce CureXcell, we source white blood cells from fully-screened, healthy volunteer blood donors through established relationships with blood banks. We then activate the white blood cells through our proprietary hypo-osmotic shock cell activation technology, a process in which we change the concentration and pH of the suspension surrounding the cells. Once activated, these cells undergo an increase in gene expression that results in an increase in the cells' secretion of numerous growth factors and other biochemical factors. The activated suspension is then placed into sterile packaging, akin to a blood bag. At the wound care clinic or other treatment site, a physician draws CureXcell from its package using a standard syringe for superficial injection into a patient's wound. The biochemical factors found in CureXcell stimulate the normal wound healing process to begin and recruit other necessary cells already found in the wound bed, to facilitate the healing process. Based on our experience in Israel and clinical trials, a typical course of CureXcell treatment involves injection applications administered once per month for three months to achieve complete wound closure.

CureXcell has been approved as a medical device in Israel and has been utilized in more than 5,000 patients in commercial or clinical study settings with consistent results. CureXcell has consistently demonstrated efficacy and safety, with efficacy having served as a measured outcome in all nine of CureXcell’s completed clinical studies and safety also having served as a measured outcome in six of these studies. Notably, in a 131-patient post-marketing trial we conducted in Israel and completed in 2011, CureXcell achieved complete wound closure in approximately 71% of hard-to-heal wounds. Patient inclusion criteria in this study were very broad, and permitted patients with large ulcers, poor circulation and co-morbidities, such as infection and amputation, to be included, while similar patients were excluded from many of the trials of other AWC products.

Our Competitive Strengths

A significant body of existing clinical and safety data supports CureXcell.    CureXcell has been approved as a medical device for the treatment of chronic and other hard-to-heal wounds by the Israeli Ministry of Health and is currently in two pivotal, Phase 3, double-blind clinical trials for the treatment of DFUs and VLUs. Based on our previous clinical trials in which safety and efficacy were measured outcomes and our practical clinical experience in Israel, we believe CureXcell has demonstrated a strong safety and efficacy profile for the treatment of hard-to-heal wounds, and we believe this positions us favorably for our current Phase 3 clinical trials. CureXcell has been the subject of nine clinical studies and has been used to treat more than 5,000 patients in commercial or clinical study settings suffering from a variety of hard-to-heal wounds, including DFUs, VLUs, pressure ulcers and post-surgical wounds. With respect to safety, we have observed 3% product-related severe adverse events, or SAEs, in patients

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treated with CureXcell in its six clinical trials in which safety was one of the measured outcomes. Such product-related SAEs were identified and classified as such solely by independent investigators in each clinical trial. Moreover, as a part of our ongoing Phase 3 study in DFUs, CureXcell has undergone five FDA required, bi-annual Data Safety Monitoring Board, or DSMB, reviews for which CureXcell has achieved the highest possible safety rating based on the DSMB’s review of the unblinded clinical trial data. With regards to efficacy as a measured outcome, CureXcell has been used to treat effectively a wide variety of hard-to-heal wounds in nine clinical trials. In its most recently completed clinical trial, a post-marketing trial in Israel involving 131 patients where the efficacy was a measured outcome, CureXcell achieved full closure in 68.4% of DFUs and 81.4% of VLUs, in a challenging patient population. We believe the very broad patient inclusion criteria in this study, which is replicated in our current Phase 3 clinical trials, is unique and highlights CureXcell’s high efficacy and capability to treat a wide spectrum of hard-to-heal DFUs and VLUs. Furthermore, based on its June 2014 review of interim efficacy data in our ongoing Phase 3 study in DFUs, the DSMB recommend that we continue the study.

CureXcell is a unique solution for a large addressable need in the worldwide market.    With our initial focus on the treatment of patients with hard-to-heal DFUs and VLUs, we expect to target a market of approximately $5.3 billion worldwide with a patient population of more than 1.7 million in the United States and Europe. We believe that beyond its demonstrated ability to close wounds effectively, CureXcell is well positioned to address this broad market in several other ways, including its convenience for physicians and patients, its natural composition and, once approved and commercialized in the United States and Europe, its competitive cost. In terms of convenience, CureXcell is a monthly injection application that requires no preparation other than a syringe draw for delivery. With respect to product composition, CureXcell is a biological product made up of living human white blood cells, activated through our proprietary cell activation technology. Our delivery methodology of direct superficial injection into the chronic wound allows for precise delivery of the cells into the defective wound tissue where they can be most effective. This is in contrast to other AWC products that are applied to the surface and thus do not come in direct contact with the impaired wound cells below the surface layer. Unlike some other AWC products, including certain skin substitutes, CureXcell contains no animal-sourced materials. In certain geographies, like the European Union, significant concerns have restricted the use of such non-human biological materials. We believe this provides CureXcell a meaningful opportunity should it enter this large market. Regarding cost of therapy, other AWC therapies for DFUs and VLUs can be expensive despite many limitations for a course of therapy. Given all these attributes, we believe CureXcell will be attractive to patients, physicians, major regulatory authorities and payers and, therefore, has meaningful potential to penetrate the worldwide DFU and VLU market.

Our biological regulatory strategy may provide us with a broad BLA label that, in conjunction with our intellectual property and know-how, will provide significant barriers to entry.    Our two pivotal, Phase 3, double-blind clinical trials for DFUs and VLUs will involve approximately 530 patients. In late 2016, we intend to submit a BLA for a broad label for the treatment of DFUs and VLUs. We believe we are the first company to pursue a BLA pathway for a living human cell based therapy to treat DFUs and VLUs. Furthermore, we believe we are conducting the most robust clinical trials ever executed for a treatment for DFUs and VLUs and are including patients with a broad range of wound sizes, wound severity and co-morbid conditions. The lack of a generic pathway for potential future products to compete against a BLA approved product, like CureXcell if approved, represents a significant competitive advantage. In addition, we have substantial proprietary technology surrounding CureXcell, including substantial know-how and also patents in the United States, the European Union and Australia with respect to our process for producing activated white blood cells.

Established, reproducible, proprietary manufacturing capability in place to meet future market demands.    To support our current U.S. clinical development initiatives and commercial manufacturing in Israel for CureXcell, we have established manufacturing operations in the United States and Israel. While sophisticated, our proprietary manufacturing process for CureXcell is highly reproducible, only requiring modest amounts of raw materials and the sourcing of white blood cells through relationships with highly recognized blood banks such as the American Red Cross. For example, one unit of whole blood from our blood bank partners is sufficient to produce enough CureXcell for 30 injection applications for wounds of an average size. If we receive marketing approval in the United States, we anticipate initially requiring two U.S. manufacturing facilities to serve this market; similarly, upon approval in Europe, we expect to initially require one European facility. Based on our experience, we estimate the capital requirements for each new facility would be less than $10 million. This low capital investment will enable us to build any needed manufacturing capacity next to major blood collection centers and shorten the supply cycle to meet future market demands.

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Highly experienced management team.    Our management team is led by our President and Chief Executive Officer, Nissim Mashiach, who has decades of industry and medical experience and a history of success in the biopharmaceutical industry. Mr. Mashiach successfully led the development and commercialization of EVITHROM and EVICEL with Omrix Biopharmaceuticals, Inc., taking the company public and ultimately selling it to Johnson & Johnson for $483 million in 2008. Our Vice President of Global Medical Affairs, Dr. Michael Molyneaux, has over 15 years of clinical experience as a practicing physician and most recently acted as full-time medical director at the Center for Advanced Wound Healing and Hyperbaric Oxygen Therapy at Passavant Area Hospital in Illinois. Dr. Molyneaux has been actively engaged in clinical trial research for the past ten years, serving as a Principal Investigator for numerous wound care companies. Our Chief Financial Officer, Shai Lankry, has over ten years of experience in finance and accounting and most recently served as Biologics Cluster Finance Director at a division of Johnson & Johnson, where he managed the finance biologics organization at multiple global sites.

Our Growth Strategy

Achieve regulatory approval for CureXcell and position it as the standard for advanced wound care.    We believe CureXcell provides a highly differentiated and effective solution for AWC. Our key, near-term strategy is to successfully complete our two Phase 3 clinical trials and seek regulatory approval for CureXcell in the United States. We are seeking a broad indication for the treatment of DFUs and VLUs. This broad label approach combined with CureXcell's extensive clinical data, ease-of-use and patient convenience aligns with our long-term strategy to position CureXcell as the standard of care for AWC. We also intend to pursue marketing authorization in Europe.

Commercialize CureXcell, initially in the United States and Europe.    We intend to build our own commercial organization in the United States and Europe after we receive the requisite regulatory approvals. We believe we can build and effectively manage an internal sales force to target leading wound care centers, hospitals and U.S. Veterans Administration health centers. Additionally, we intend to establish our own manufacturing facilities, set pricing and reimbursement in both the United States and Europe, and implement a comprehensive marketing campaign and branding and training programs. In executing this strategy, we will benefit from our statistically significant clinical data indicating the efficacy of CureXcell across DFUs and VLUs in all types of patients, including elderly patients with significant co-morbidities. We will also seek to educate physicians on the ease of preparation and administration of CureXcell, as we believe that this ease-of-use reduces the burden to clinicians and represents significant additional value to the physician. To facilitate a successful launch, we intend to initially target geographic regions having a high prevalence of DFUs and VLUs.

Expand our geographic coverage and penetrate new markets.    We also intend to apply CureXcell's clinical and regulatory experience to maximize the value of CureXcell outside of the United States and Europe. Upon approval in the United States and Europe, we believe that CureXcell's clinical testing, proven safety profile, simplified patient compliance requirements and ability to treat infected, hard-to-heal wounds will make it an attractive product for approval in international markets with well-developed medical systems, such as Eastern Europe, Latin America and certain Asian countries. Upon regulatory approval in such markets, we expect to target these markets through collaborations with local distributors. We also intend to partner with local whole blood cell providers and build manufacturing facilities in these geographies to address market demand.

Establish a platform for the development and commercialization of a broader range of regenerative medicine products.    We believe that we will be able to use our cell activation technology to adjust the concentration of living white blood cells to address different clinical needs and develop a regenerative medicine product platform for non-wound indications in attractive markets. For example, in the second quarter of 2015, we intend to commence a multinational study in the United States and Europe to test the safety and efficacy of a product using our technology for anti-reabsorbtive medication induced osteonecrosis of the jaw, or ONJ, a rare condition which occurs when the blood flow to the jaw bone is compromised resulting in bone death. We believe that we can address this disease with our technology and intend to seek an orphan drug designation for this niche indication. We have also begun in vitro and in vivo studies to refine our understanding of the mechanism of action of our cell activation technology, which we expect to conclude in the fourth quarter of 2014. Based on these studies, we expect to determine whether CureXcell may have potential applications in plastic surgery settings to more rapidly promote the wound healing process as well as in orthopedics and spine treatments.

Risk Factors

Investing in our ordinary shares involves risks. You should carefully consider the risks described in “Risk Factors” before making a decision to invest in our ordinary shares. If any of these risks actually occurs, our business,

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financial condition or results of operations would likely be materially adversely affected. In such case, the trading price of our ordinary shares would likely decline, and you may lose all or part of your investment. The following is a summary of some of the principal risks that we face:

we depend on the success of CureXcell and we may be unable to obtain approval of CureXcell for treatment of DFUs or VLUs in the United States and other markets;
clinical failure can occur at any stage of clinical development;
delays in the completion of our clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for CureXcell;
we may be required to complete additional Phase 3 trials in order to receive regulatory approval in the United States or in other countries;
we have no experience in marketing or distributing products and must establish the capacity to do so;
we expect to incur losses in the future and may never be profitable; and
our limited history makes it difficult to evaluate our business and prospects.

Implications of Being an Emerging Growth Company

As a company with less than $1.0 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. For example, the JOBS Act also provides that an emerging growth company may provide only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations disclosure and other disclosure. We have relied upon that exemption in providing the financial statements and other disclosure that appear in this prospectus. As a result, the information that we provide shareholders may be less comprehensive than what you might receive from other public companies. We have not elected to avail ourselves of an exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards. This election is irrevocable.

When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. Pursuant to the JOBS Act, we will remain an emerging growth company until the earliest of:

the last day of our fiscal year during which the fifth anniversary of the completion of this offering occurs;
the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more;
the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and
the date on which we are deemed to be a “large accelerated filer,” which will occur at such time as we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act.

Our Corporate Information

We were formed as a company under the laws of the State of Israel in 2008. Our principal executive offices are located at 25 Hasivim Street, Petach Tikva 4959383, Israel, and our telephone number is +972-3-923-5556. Our website is www.macrocure.com. The information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. Our agent for service of process in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204, Newark, Delaware 19711, and its telephone number is +1 (302) 738-6680.

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THE OFFERING

Ordinary shares we are offering
             ordinary shares
Underwriters’ option to purchase additional shares
             ordinary shares
Ordinary shares to be outstanding immediately after this offering
             ordinary shares (or             if the underwriters exercise in full their option to purchase additional ordinary shares)
Use of proceeds
We estimate that we will receive net proceeds from this offering of approximately $    , or $    if the underwriters exercise in full their option to purchase additional ordinary shares, based on an assumed initial public offering price of $    , the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses.

We currently intend to use the net proceeds we receive from this offering as follows:

between $    and $    for the clinical and regulatory development of CureXcell, which includes between $    and $    for our ongoing Phase 3 DFU clinical trial and between $    and $    for our ongoing Phase 3 VLU clinical trial;
between $    and $    to establish our commercial manufacturing capabilities in the United States; and
the balance, if any, for other general corporate purposes, which may include the development of our platform for regenerative medicine products.

We expect that the proceeds of this offering will be sufficient to allow us to complete our ongoing Phase 3 clinical trials, seek FDA approval for CureXcell and establish the manufacturing capabilities necessary to support the launch of CureXcell in the United States if we receive applicable marketing approvals, however, we are subject to substantial risks that could require us to obtain additional funding in order to achieve these objectives. See “Use of Proceeds.”

Risk Factors
Investing in our ordinary shares involves a high degree of risk and purchasers of our ordinary shares may lose part or all of their investment. See “Risk Factors” for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.
Listing
We have applied to have our ordinary shares listed on the NASDAQ Global Market under the symbol “MCUR.”

Unless otherwise stated, the number of ordinary shares to be outstanding after this offering is based on 234,840 ordinary shares outstanding as of March 31, 2014 and:

includes 81,435 ordinary shares issuable upon the automatic conversion on a one-to-one basis of an equivalent number of preferred A shares upon the consummation of this offering;
excludes 50,353 ordinary shares reserved for issuance under our stock option and share incentive plans, of which options to purchase 27,567 ordinary shares have been granted at a weighted average exercise price of $269 per share; and
excludes 31,426 ordinary shares issuable upon the exercise of warrants, including (i) 26,894 preferred A shares issuable upon the exercise of warrants, which preferred A shares will automatically convert to ordinary shares upon the consummation of this offering, assuming exercise thereof via payment of cash,

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(ii) warrants to purchase 3,404 ordinary shares, which are exercisable at an exercise price of NIS 0.01 per share and (iii) warrants to purchase 1,128 ordinary shares granted to service providers, which are exercisable at a weighted average price of $170 per share.

Unless otherwise indicated, all information in this prospectus:

assumes a price to the public in this offering of $    per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus;
assumes no exercise by the underwriters of their option to purchase up to an additional             ordinary shares from us;
reflects a            -for-1 share split to be effected prior to consummation of this offering by means of a share dividend of             ordinary shares for each ordinary share then outstanding; and
gives effect to the adoption of our amended and restated articles of association prior to the closing of this offering, which will replace our articles of association currently in effect.

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SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables set forth our summary consolidated financial data. We derived the summary consolidated statements of loss data for the years ended December 31, 2013 and 2012 and our summary consolidated statement of financial position data as of December 31, 2013 and 2012 from our audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus. We derived the summary consolidated statements of loss data for the three months ended March 31, 2014 and 2013 and the summary consolidated statement of financial position data as of March 31, 2014 from our unaudited condensed interim consolidated financial statements included elsewhere in this prospectus. The unaudited condensed interim consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. We have prepared our financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board.

The financial statements included in this prospectus may not be indicative of our future performance. You should read the following summary financial data in conjunction with “Use of Proceeds,” “Capitalization,” “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes thereto included elsewhere in this prospectus.

Year Ended
December 31,
Three Months Ended
March 31,
2013
2012
2014
2013
(in thousands, except share
and per share data)
Consolidated statements of loss data:
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses(1):
 
 
 
 
 
 
 
 
 
 
 
 
Research and development expenses, net
$
9,303
 
$
7,168
 
$
2,697
 
$
1,950
 
General and administrative expenses
 
4,567
 
 
1,631
 
 
655
 
 
366
 
Operating loss
 
(13,870
)
 
(8,799
)
 
(3,352
)
 
(2,316
)
Financing income (expenses), net
 
(4,305
)
 
1,043
 
 
(5
)
 
422
 
Loss before income tax
 
(18,175
)
 
(7,756
)
 
(3,357
)
 
(1,894
)
Taxes on income
 
(149
)
 
 
 
(40
)
 
 
Loss for the year
 
(18,324
)
 
(7,756
)
 
(3,397
)
 
(1,894
)
Net loss per share (basic and diluted)
$
(113.2
)
$
(48.1
)
$
(20.99
)
$
(11.70
)
Weighted average number of ordinary shares used in computing loss per share, basic and diluted
 
161,827
 
 
161,328
 
 
161,827
 
 
161,827
 
Historical
Pro forma, as
adjusted(2)
As of December 31,
As of March 31,
As of March 31,
2014
2013
2012
2014
(in thousands)
Consolidated statements of financial position data:
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
18,995
 
$
15,322
 
$
15,981
 
$
 
 
Working capital(3)
 
17,593
 
 
14,510
 
 
14,392
 
 
 
 
Total assets
 
20,738
 
 
17,709
 
 
18,218
 
 
 
 
Total current liabilities
 
1,971
 
 
1,499
 
 
2,746
 
 
 
 
Total non-current liabilities
 
 
 
3,114
 
 
 
 
 
 
Total shareholders’ equity
 
18,767
 
 
13,096
 
 
15,472
 
 
 
 

(1)Includes share-based compensation expenses as follows:

Year Ended
December 31,
Three Months Ended
March 31,
2013
2012
2014
2013
(in thousands)
Research and development expenses, net
$
 
$
210
 
$
16
 
$
5
 
General and administrative expenses
 
2,648
 
 
31
 
 
86
 
 
3
 
Total share-based compensation expenses
$
2,648
 
$
241
 
$
102
 
$
  8
 

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(2)The summary pro forma as adjusted data gives effect to: (i) the conversion of all our outstanding preferred A shares into 81,435 ordinary shares immediately prior to the closing of this offering, (ii) the issuance of ordinary shares in this offering, at an assumed price to the public of $    per share, the midpoint of the price range set forth on the cover page of this prospectus after deducting underwriting discounts and commissions and estimated offering expenses, (iii) the payment of up to $0.65 million in the aggregate to certain of our executive officers for their contribution to (and subject to) the completion of this offering and (iv) the issuance of warrants to purchase            ordinary shares as described in “Certain Relationships and Related Party Transactions—Convertible Loan Credit Line from Significant Shareholder.”
(3)We define working capital as total current assets minus total current liabilities.

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RISK FACTORS

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks and uncertainties described below, in addition to the other information set forth in this prospectus, including the consolidated financial statements and the related notes included elsewhere in this prospectus, before purchasing our ordinary shares. If any of the following risks actually occurs, our business, financial condition, cash flows and results of operations could be materially adversely affected. In that case, the trading price of our ordinary shares would likely decline and you might lose all or part of your investment. The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business operations.

Risks Relating to Our Business and Industry

We depend on the success of CureXcell, our only product candidate. We may be unable to obtain approval of CureXcell for treatment of diabetic foot ulcers or venous leg ulcers in the United States and other markets.

At the present time, our focus is on obtaining regulatory approval for CureXcell, our only current product candidate. Our success depends on our ability to obtain regulatory approvals for CureXcell in the United States and in other markets. In order to support a BLA submission to the FDA, we have begun two pivotal Phase 3 trials. We cannot predict whether these studies will be successful and, even if successful, whether the FDA will require additional studies before we make a BLA submission, how long the FDA will take to review CureXcell following our BLA submission or whether the FDA will ever approve our BLA submission. Similarly, we cannot predict how long regulatory authorities outside of the United States will take to provide CureXcell with marketing authorization in their jurisdictions or whether they will ever provide such authorizations. The grant of regulatory approval in one or more countries does not assure the grant of regulatory approval by other countries. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials. The failure to receive such regulatory approvals, especially in the United States, would have a materially adverse impact on our business, financial condition, cash flows and results of operations.

Clinical failure can occur at any stage of clinical development. Because the results of earlier clinical trials do not necessarily predict future results, any product candidate we advance through clinical trials may not have favorable results in later clinical trials or receive regulatory approval.

Clinical failure can occur at any stage of clinical development. Clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical or preclinical trials. In addition, data obtained from trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Success in prior clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate. In addition, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. Clinical trials of potential products often reveal that it is not practical or feasible to continue development efforts. For example, if the results of our Phase 3 trials of CureXcell do not demonstrate significant efficacy, the prospects for approval of CureXcell would be materially adversely affected. Furthermore, if these trials fail to meet their primary statistical and clinical end points they will be disqualified for FDA approval in which case we would need to replace the failed study with a new Phase 3 trial, which would require significant additional capital, cause substantial delays in commercialization and materially adversely affect our business, financial condition, cash flows and results of operations.

Delays in the completion of our clinical trials could result in increased costs to us and delay or limit our ability to obtain regulatory approval for CureXcell.

Our two pivotal Phase 3 trials are currently ongoing. These clinical trials may be delayed or not be completed. Clinical trials may be delayed or may proceed less quickly than intended due to delays and difficulty in recruiting, enrolling and maintaining subjects. This may occur for a variety of reasons, including the failure to identify candidates that meet applicable enrollment criteria, competition from other clinical trial programs for the same indication as our product candidates and the inability to retain subjects in clinical trials due to the treatment protocol, personal issues, side effects or lack of efficacy. Our clinical trials may also be delayed if we suffer an interruption in the supply of CureXcell. In addition, one of our Phase 3 trials is in its early stages, and could be delayed if we fail to establish test sites and recruit physicians, patients and coordinators in the time frame we expect.

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In addition, our Phase 3 clinical trials or any of our other clinical trials may be suspended or terminated by us, the FDA or other regulatory authorities due to a number of factors, including:

failure to conduct the clinical trial in accordance with Good Clinical Practices, or GCP, regulatory requirements or our clinical protocols;
failure to pass inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;
failure to comply with current Good Manufacturing Practices, or cGMP, or other applicable requirements;
unforeseen safety issues or any determination that a clinical trial presents unacceptable health risks;
changes in regulatory requirements and guidance; or
lack of adequate funding to continue the clinical trial due to unforeseen costs resulting from enrollment delays, requirements to conduct additional trials and studies, increased expenses associated with the services of our contract research organizations, or CROs, and other third parties or other reasons.

Delays in the completion of our trials would correspondingly delay our ability to apply for and receive the regulatory approvals necessary to commercialize our product. Delays could also increase the costs associated with a particular trial. There is no assurance that we will have or be able to access the capital necessary to fund our operations for a longer period of time prior to commercialization or to fund increased costs for clinical trials. Accordingly, delays in the completion of our clinical trials would have a material adverse effect on our business, financial condition, cash flows and results of operations.

We may be required to complete additional Phase 3 trials in order to receive regulatory approval in the United States or in other countries.

In order to provide BLA approval for a proposed indication, the FDA typically requires two well-controlled Phase 3 trials that demonstrate safety and effectiveness for that specific indication. The FDA has indicated to us that one robust, well-controlled Phase 3 trial that demonstrates the safety and efficacy of CureXcell for each of the proposed indications (DFU and VLU) may be sufficient for approval of a BLA for both of those indications; however, the FDA is under no obligation to grant approval under these circumstances and may require us to complete additional Phase 3 trials for one or both indications. Completing additional trials would involve considerable additional expense and would delay our ability to begin the commercialization of CureXcell, each of which would require substantial additional capital that we may not have or be able to access. In addition, it would prevent us from implementing and executing our business plan on a timely basis, which could harm our growth and prospects. Accordingly, a requirement that we complete additional Phase 3 clinical trials would have a material adverse effect on our business, financial condition, cash flows and results of operations. Further, even if the FDA does provide approval on the basis of our two planned Phase 3 trials, it is possible that regulators in other jurisdictions, including Europe, may require additional trials in order to grant approval.

We are a clinical stage regenerative medicine company with a history of operating losses. We expect to incur additional losses in the future and may never be profitable.

Since our inception in 2008, we have been focused on research and development and have not recognized any revenue. Additionally, we have incurred losses since inception, largely reflecting research and development and general and administrative expenses, and experienced net losses of $3.4 million in the three months ended March 31, 2014 and $18.3 million and $7.8 million in the years ended December 31, 2013 and 2012, respectively. As of March 31, 2014, we had an accumulated deficit of approximately $46.1 million. While we have obtained regulatory approval from the Israeli Ministry of Health for certain applications of CureXcell as a medical device, we will be required to conduct and successfully complete significant additional clinical trials and other tests and audits before we apply for regulatory approval for CureXcell in the United States, the European Union and other markets in order to commercialize CureXcell and start generating revenue. As a result, we anticipate that we will continue to incur significant additional losses and we may never be profitable or achieve revenue.

Our limited history makes it difficult to evaluate our business and prospects.

We have a limited operating history. While we have obtained regulatory approval from the Israeli Ministry of Health for certain applications of CureXcell as a medical device, we have only conducted limited sales of CureXcell in Israel for clinical purposes as part of our research and development activities. We have not fully commercialized

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CureXcell in any jurisdiction, and we have not received regulatory approvals for CureXcell as a biologic product from the FDA, the EMA or other foreign regulatory bodies for any applications. There remains substantial doubt regarding whether we will receive the regulatory approvals necessary to sell CureXcell in the United States, Europe or elsewhere and whether we will successfully commercialize this product. Consequently, any predictions about our future performance may not be as accurate.

We may need substantial additional capital in the future, which could cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights, and if additional capital is not available, we may have to delay, reduce or cease operations.

To date, we have funded our operations primarily through private offerings of our securities and have not recognized any revenue. We expect to generate revenue primarily through sales of CureXcell, however we still have to receive the approvals necessary to market this product in the United States, Europe and other jurisdictions outside of Israel. We expect this process will take at least several years to complete and to require substantial additional investment. In addition, before being able to market CureXcell, we would need to establish additional facilities to produce the product and hire and train a sales and marketing team, each of which would also require additional investment.

There are many factors that could cause us to need additional funding prior to product launch. These include that our estimates of the capital requirements necessary to complete these activities may have been too low or that our estimate of our net proceeds from this offering was too large; that we run into difficulties with our clinical trials that delay their completion or otherwise require additional investment; that we are required to complete additional clinical trials in order to obtain regulatory approvals; and that our regulatory approvals become delayed, thereby delaying our product launch. In addition, we will need to raise capital in order to commercialize CureXcell, including to build manufacturing facilities and establish a sales and marketing team.

In the event that these or other factors require that we obtain additional funding, we may not be able to raise this additional capital on reasonable terms or at all. Any additional funding may come from equity offerings, debt financings, collaborations, licensing arrangements or any other means. Further, securing additional financing may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize CureXcell.

If we are unable to raise additional capital when required or on acceptable terms, we may be required to:

delay, scale back or discontinue the development or commercialization of CureXcell;
seek corporate partners for CureXcell on terms that are less favorable than might otherwise be available; or
relinquish or license on unfavorable terms our rights to CureXcell, which we otherwise would seek to develop or commercialize ourselves.

Any such consequence may have a material adverse effect on our business, operating results and prospects and on our ability to develop our pipeline products.

If we raise additional capital through the sale of equity or convertible debt securities, your ownership interest in us will be diluted, and the terms of the new equity securities may include liquidation or other preferences that adversely affect your rights as a shareholder. The incurrence of indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also impose restrictive covenants, such as limitations on our ability to incur additional debt or to issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our ordinary shares to decline. In the event that we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to product candidates or intellectual property that we otherwise would seek to develop or commercialize ourselves or reserve for future potential arrangements when we might be able to achieve more favorable terms.

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Development and commercialization of CureXcell requires our successful completion of the regulatory approval process as well as ongoing regulatory compliance, and may suffer delays or fail.

In the United States, the European Union and other markets, we will be required to apply for and receive marketing authorization before we can commercialize CureXcell. This process can be time consuming and complicated and may result in unanticipated delays. To secure marketing authorization, an applicant generally is required to submit an application that includes the data supporting preclinical and clinical safety and efficacy as well as detailed information on the manufacturing and control of the product, proposed labeling and additional information.

Before marketing authorization is granted, regulatory authorities generally require the inspection of the facilities and quality systems (including those of third parties) at which the product candidate is manufactured and tested to assess compliance with strictly enforced cGMP, as well as potential audits of the non-clinical and clinical trial sites that generated the data cited in the marketing authorization application. In addition, if a product is approved, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include submission of safety and other post-marketing information and reports, registration and continued compliance with cGMP for any clinical trials that we conduct post-approval. Although our contract manufacturer’s facility in Israel is cGMP-certified, as is the manufacturing facility of the American Red Cross, our outsourced manufacturer in the United States, we may face difficulties in obtaining regulatory approval for any new manufacturing and quality control facilities we construct in order to commercialize our product.

We cannot predict how long the applicable regulatory authority or agency in any given jurisdiction will take to grant marketing authorization or whether any such authorizations will ultimately be granted. Regulatory agencies, including the FDA and the EMA, have substantial discretion in the approval process, and the approval process and the requirements governing clinical trials vary from country to country. The policies of the FDA, EMA or other regulatory authorities may change or may not be explicit, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of CureXcell. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States, Europe or elsewhere. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

Any delays or failures in obtaining or maintaining regulatory and marketing approval for CureXcell would adversely affect our business, prospects, financial condition and results of operations.

We have no experience in marketing or distributing products and no internal capability to do so, and are therefore subject to certain risks in relation to the commercialization of CureXcell.

We have not yet established a commercial organization for the marketing, sales and distribution of our single product candidate, CureXcell. Therefore, even if we receive approval to market CureXcell in the United States or other markets, in order to successfully commercialize CureXcell, we will need to build our marketing, sales, distribution, managerial and other non-technical capabilities. This involves many challenges, such as recruiting and retaining talented personnel; training employees; setting the appropriate system of incentives; managing additional headcount; and integrating new business units into an existing corporate infrastructure. The development of our own sales infrastructure will involve substantial expense, much of which we will incur well in advance of any marketing or sales. Moreover, we do not have experience as a company in establishing a significant sales infrastructure, and we cannot be certain that we will successfully develop this capability. We will have to compete with other pharmaceutical, biotechnology and wound care companies to recruit, hire, train and retain personnel for medical affairs, marketing and sales. If we fail to establish an effective sales and marketing infrastructure, we will be unable to successfully commercialize CureXcell, which in turn would have a material adverse effect on our business, financial condition and results of operations.

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The commercial success of CureXcell will depend upon its degree of market acceptance.

Even if it successfully obtains marketing approvals, CureXcell may not gain market acceptance by physicians and their teams, healthcare payers and others in the medical community. If CureXcell does not achieve an adequate level of acceptance, we may not generate sufficient revenue to achieve or sustain profitability. The degree of market acceptance of CureXcell, if we receive marketing approval, will depend on a number of factors, some of which are beyond our control, including:

the strength of our clinical data;
the willingness of physicians to administer our product and their acceptance of it as part of the medical department routine, which itself may be influenced by various factors including ease of use and the compensation that doctors receive for administering CureXcell relative to other alternative treatments;
the perceived risks of using a product derived from human blood;
our success in obtaining third-party coverage or reimbursement for CureXcell;
our ability to offer CureXcell for sale at a competitive price;
the efficacy and potential advantages of CureXcell relative to other advanced wound care products;
the prevalence and severity of side effects, if any;
our reputation and the reputation of CureXcell;
the efficacy, potential advantages and timing of introduction to the market of alternative treatments;
the shelf life of CureXcell and our ability to manage the logistics of the end user supply chain; and
our ability to reliably source sufficient raw materials and produce sufficient amounts of final product.

Failure to achieve market acceptance for CureXcell, if it is approved for commercial sale, would have a material adverse effect on our business, financial condition and results of operations.

We must receive adequate reimbursement policies for our product and the physicians that administer it in order to successfully commercialize CureXcell.

Should we receive the approvals necessary to market CureXcell, we will still need to apply to government and other third-party payers for them to reimburse physicians and patients to administer and use our product. Newly-approved healthcare products face significant uncertainty regarding both whether they are covered and their levels of reimbursement. Government and other healthcare payers, including Medicare, are increasingly attempting to contain healthcare costs by limiting both coverage and reimbursement levels. Even if CureXcell is approved by regulators, third-party payers may decline to cover it or may offer reimbursement rates that are insufficient to cover our cost to supply CureXcell or that otherwise fail to provide the revenue we expect to receive for the product. They may also set reimbursement rates for physicians who administer the product that are insufficient to cover the physicians’ costs or otherwise provide them with a disincentive to prescribe it. Further, once coverage and reimbursement rates are established, they may be changed or withdrawn in the future. The failure of government and other healthcare payers to cover or provide adequate reimbursement levels for CureXcell, could reduce its market acceptance, limit our growth and cause our revenue and results of operations to suffer. Further, delays in establishing coverage and reimbursement would delay the commercialization of our product, which would adversely affect our growth, operating results and financial position.

Prices in many countries, including many in Europe, are subject to local regulation and certain biological products, such as blood-derived products, are subject to price controls in several of the world’s principal markets, including many countries within the European Union. In these jurisdictions, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay or prevent our commercial launch of the product and negatively impact the revenue, if any, we are able to generate from the sale of the product in that country. The existence of direct and indirect price controls and pressures over our products could materially adversely affect our financial prospects and performance.

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Future changes in government regulation or in the administration of government healthcare programs could adversely affect our commercialization of our products.

The United States and several other jurisdictions are considering, and have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that may affect our current and future clinical trials and commercial sales, if and when CureXcell receives marketing approval. The continuing efforts of governments, insurance companies, managed care organizations and other payers of healthcare services to contain or reduce costs of healthcare may adversely affect:

the market acceptance or demand for CureXcell;
the ability to set a price that we believe is fair for CureXcell;
our ability to generate revenue and achieve or maintain profitability;
the level of taxes that we are required to pay; and
the availability of capital.

We rely on a limited number of suppliers of whole blood in order to manufacture CureXcell.

Our primary raw material for producing CureXcell is whole blood. In the United States, we purchase it from the American Red Cross and, in Israel, we purchase it from Magen David Adom, or MDA, Israel’s national blood bank. Our reliance on a limited number of suppliers involves risks. Specifically, our contract with the American Red Cross requires that we notify and seek pre-approval for significant changes to our manufacturing process, suppliers or operating procedures. This arrangement could delay our ability to make adjustments to our business which could negatively impact our operations. Additionally, because of the short shelf life of our product, we do not have a banked inventory to use in the event of an interruption in supply. Accordingly, if our supplier in a given region becomes temporarily unable or unwilling to provide us with whole blood, we would be unable to produce CureXcell until this interruption ceases or we obtain an alternate supply. Further, if we were to permanently lose a supplier it may take a substantial amount of time and expense for us to secure other suppliers and we may be required to relocate our manufacturing to facilities closer to the new suppliers. Our agreement with MDA expires in June 2015, and we may not be able to secure a new contract with MDA on commercially reasonable terms, or at all, in which case we would no longer produce CureXcell in Israel.

We must coordinate closely with our suppliers in order to obtain our raw materials.

Our need for a continuous supply of whole blood meeting certain specifications, often on short notice, involves risks. Our product has a short shelf life, which requires us to coordinate closely with each supplier in order to obtain the correct amount and type of raw materials on a day-to-day basis. Further, our regulatory approvals require that our product be manufactured from blood of the same type as the patient who will be using it and that the blood come from a donor meeting certain requirements, including for age and health. It may be difficult for our suppliers to provide us with the specific type of whole blood we need on short notice. If we are unable to obtain this supply on a regular basis it could make it difficult for us to meet our demand or could create logistical problems, either of which could adversely affect our current and future clinical trials and commercial sales if and when CureXcell receives marketing approval.

We currently rely on third parties to manufacture our product.

In the United States, the American Red Cross currently manufactures CureXcell for use in our clinical trials pursuant to a manufacturing agreement between the American Red Cross and us, which we refer to as the American Red Cross Manufacturing Agreement. Under this agreement, the American Red Cross performs the entire manufacturing process, including testing and quality assurance at its facility pursuant to the technical specifications provided by us, and then packages and ships the product to the various sites at which our clinical trials take place. Only American Red Cross personnel that have been trained by us may perform the services that the American Red Cross is required to provide under the American Red Cross Manufacturing Agreement. In Israel, the manufacturing of CureXcell is carried out by MDA technicians supervised by our employees at the MDA’s central facility where we have our own clean room pursuant to an agreement between us and MDA, which we refer to as the MDA Agreement. Accordingly, we do not directly control all aspects of the manufacturing of CureXcell. A failure by the American Red Cross or MDA to follow cGMP in the manufacturing of CureXcell may require that we recall and destroy the CureXcell that they produce and suspend their manufacturing.

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The American Red Cross or MDA may delay or cease altogether manufacturing CureXcell for us for many reasons, including because their facility is affected by a war, terrorist attack, earthquake, fire, explosion, equipment or power failure, or because they have failed to adhere to cGMP. In any of these situations, our manufacturing capacity could be shut down for an extended period, we could experience a loss of raw materials, work in process or finished goods inventory and our ability to operate our business would be harmed. In addition, in any such event, the construction or contracting of new manufacturing and storage facilities, and obtaining regulatory approval for the new facilities could be expensive and time-consuming. During this period, we may be unable to manufacture CureXcell, which could delay our clinical trials and, in the future, materially adversely affect our revenue. Further, our agreement with MDA expires in June 2015, and we may not be able to secure a new contract with MDA on commercially reasonable terms, or at all, in which case we would no longer produce CureXcell in Israel.

The ability of our third-party manufacturers to continue manufacturing and supplying CureXcell depends on their continued adherence to current good manufacturing practices regulations.

The manufacturing process for CureXcell is governed by detailed cGMP regulations. It is subject to the risk of product loss due to contamination, equipment failure or improper operation of equipment, validation activities or operator error. Failure by third-party manufacturers and quality operations units to adhere to established regulations or to meet a specification or procedure set forth in cGMP requirements could require that a CureXcell batch or materials be rejected and destroyed. Even minor deviations from normal manufacturing processes or quality requirements for our products could result in reduced production yields, defects and other supply disruptions.

Adherence to cGMP regulations and the effectiveness of our quality control systems are periodically assessed through inspections of manufacturing facilities by regulatory authorities. Such inspections could result in deficiency citations, which would require action to correct those deficiencies to the satisfaction of the applicable regulatory authorities. If critical deficiencies are noted or if recurrences are not prevented, we may have to recall CureXcell batches or suspend operations until appropriate measures are implemented. If microbial, viral or other contaminations are discovered in CureXcell or in the manufacturing facilities in which CureXcell is or will be made, such manufacturing facilities may need to be closed to investigate and remedy the contamination. Our manufacturing partners may be unable or unwilling to meet applicable regulatory and quality requirements. Any adverse developments affecting manufacturing operations for CureXcell may result in delays, inventory shortages, batch failures, withdrawals or recalls, or other interruptions in the supply of CureXcell, which, in turn, may have a material adverse effect on our current and future clinical trials and commercial sales if and when CureXcell receives marketing approval.

Since cGMP reflects ever-evolving standards, manufacturing processes and procedures must be regularly updated to comply with cGMP. These changes may cause us to incur additional costs and may adversely impact our results of operations. For example, more sensitive testing assays (if and when they become available) may be required or existing procedures or processes may require revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of CureXcell.

The short shelf life of our product exposes us to certain risks.

The FDA protocol for our clinical trials currently restricts the shelf life of a dose of CureXcell to seven days from completion of production, provided it is kept refrigerated between two to eight degrees Celsius. This exposes us to risks associated with production, storage and delivery of products with short shelf lives. These include the need to develop systems that can manage the complex logistics of obtaining the raw materials for CureXcell, manufacturing it and delivering each unit for administration to the patient, all in a very short period of time and within the prescribed temperature range. We will also need to anticipate the date CureXcell will be administered, coordinate with our suppliers, ensure timely delivery and coordinate the transfer of product between facilities to match the then current patient and clinical trial needs. If we fail to properly manage these logistics, we could gain a reputation for unreliability, which could harm our ability to complete our clinical trials and market acceptance of our product. We could also have to dispose of units that have expired at unacceptably high rates.

We depend on a sole supplier to obtain the transfusion and infusion bags in which our products are processed and packaged.

As CureXcell is a biologic product with living cells, it must be processed and packaged in kits consisting of sterile plastic transfusion and infusion bags that are designed to maintain the proper environment for CureXcell. We procure these bags from Maco Pharma, our sole supplier, which manufactures the bags on the basis of technological

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specifications that we provide pursuant to a manufacturing agreement. This agreement provides that Maco Pharma must manufacture the bags exclusively for us and that we must purchase the bags exclusively from it. The agreement also requires us to purchase a minimum amount of bags during each year. The agreement has an initial term of six years and is terminable by either party upon nine months’ notice. In the event that this agreement were to be terminated, identifying and qualifying an alternative source would require time and effort which may interfere with our ability to package CureXcell both for purposes of current and future clinical trials and commercial sales if and when CureXcell receives marketing approval. In addition, regulatory authorities could require that we conduct additional studies in support of a new supplier, which could result in significant additional costs or delays. Furthermore, we may not be able to procure an alternative source for CureXcell packages at all or at comparable quality or competitive prices or upon fair and reasonable contractual terms and conditions. Any interruption of our supply of bags in which to package CureXcell in a timely manner, or at all, would adversely affect our business, financial condition, cash flows and results of operations. Additionally, under our agreement with Maco Pharma, we are obligated to provide Maco Pharma with a right of first refusal for the manufacturing of any products containing specifications similar to those used in the manufacture of bags under the agreement.

Our products are derived from human blood, and there is an inherent risk of biological contamination and virus transmission in blood-derived products.

We derive CureXcell from donated human whole blood. Many disease-causing viruses, bacteria and other pathogens are present in the blood of infected individuals and if these infected individuals donate blood, the blood and possibly its byproducts would contain those pathogens. As a result, the FDA, EMA and other regulatory agencies extensively regulate the sourcing and screening of blood products and the production of products derived from whole blood. We rely on our suppliers to maintain compliance with these regulations. If any of our suppliers fail to adhere to regulations regarding the sourcing and screening of their blood or if the blood supply of any of our suppliers becomes contaminated, we could lose our ability to obtain blood from that supplier. If contaminated blood leads to our product becoming contaminated, we could become subject to substantial liability. If any of these were to occur, our reputation could be substantially harmed.

The safety concerns associated with blood-derived products in general may affect our ability to market our products. A significant contamination of the blood supply or studies that raise or substantiate concerns about the safety of our or other similar products could negatively impact public perception of all blood-derived products, which would adversely affect market acceptance of our product. Further, any failure in screening, whether by our manufacturers or manufacturers of other products, could adversely affect our reputation, the support we receive from the medical community and overall demand for our products.

New infectious diseases emerge in the human population from time to time. If a new infectious disease has a period during which the causative agent is present in the bloodstream but symptoms are not present, it is possible that blood donations could be contaminated by that infectious agent and remain undetected. Typically, early in an outbreak of a new disease, tests for the causative agent do not exist. During this early phase, our suppliers will need to rely on screening of donors (e.g., for behavioral risk factors or physical symptoms) to reduce the risk of blood contamination. Screening methods are generally less sensitive and specific than a direct test as a means of identifying potentially contaminated whole blood units. During the early phase of an outbreak of a new infectious disease, our ability to manufacture safe products would depend on the manufacturing process’ capacity to inactivate or remove the infectious agent. To the extent that a product’s manufacturing process is inadequate to inactivate or remove an infectious agent, our ability to manufacture and distribute that product would be impaired. If a new infectious disease were to emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the disease that would impair our ability to procure whole blood, manufacture our products or both. Such precautionary measures could be taken before there is conclusive medical or scientific evidence that a disease poses a risk for blood-derived products.

We rely on arrangements and third parties for the conduct of our clinical trials and for the provision of other services.

We rely on third parties, such as contract research organizations, medical institutions and clinical investigators to conduct our trials, which limits our control over these activities. The third-party contractors may not assign as great of a priority to our clinical development programs or pursue them as diligently as we would if we were undertaking such programs directly and, accordingly, may not complete activities on schedule, or may not conduct the studies or our clinical trials in accordance with regulatory requirements or with our trial design. If these third parties do not

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successfully carry out their contractual duties or meet expected deadlines, or if their performance is substandard or fails to meet regulatory requirements, our clinical trials may be negatively affected and we may be required to replace them. The replacement of these third parties would result in increased costs and delays, primarily due to the training and familiarization that their replacements would need to undergo. Consequently, our efforts to obtain regulatory approvals for, and to commercialize, CureXcell would be delayed. The third-party contractors may also have relationships with other commercial entities, some of whom may compete with us. If the third-party contractors work with our competitors, our competitive position may be harmed.

Our commercialization plans for CureXcell will require that we establish substantial manufacturing capacity, an undertaking that will involve a substantial amount of risk.

Should we receive the approvals necessary to market CureXcell, we will need to establish and obtain approval for the manufacturing facilities necessary to produce the quantities of product we hope to market. This effort will involve many risks. We will need to find space for these facilities that is close to our suppliers, meets our production needs and has ready access to the companies that ship our products. We may be unable to obtain production space that meets these requirements at reasonable cost or at all. We will also incur substantial expenses in order to build and outfit these new facilities, and the final costs to build them may be more than we anticipate. In addition, we may be asked by the FDA to conduct additional studies to obtain approval for the new facilities, which may be expensive and delay approval. We may fail to complete new manufacturing facilities on time or may not be able to obtain the regulatory and quality approvals, which would delay our ability to market CureXcell. We may also fail to properly construct the facilities which could lead to problems, inefficiencies or delays in manufacturing. Any of the foregoing could materially adversely affect our business, financial condition, cash flows and results of operations.

CureXcell may cause unanticipated and undesirable side effects or have other properties that are currently unknown to us.

Should we receive the approvals necessary to market CureXcell, we expect that, like with most pharmaceutical products, our approval label for CureXcell will list certain side effects. If we or others identify problems with CureXcell or its underlying technology, including adverse events of unanticipated severity or frequency, problems with our manufacturers or manufacturing processes, or failure to comply with regulatory requirements, the following consequences, among others, may occur:

restrictions on the clinical trials, marketing or manufacturing of the product, withdrawal of the product from clinical trials or the market, or voluntary or mandatory product recalls;
fines, warning letters or holds on clinical trials;
harm to our reputation, reduced demand for our products and loss of market acceptance;
refusal by the regulatory authority to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; and
injunctions or the imposition of civil or criminal penalties.

Any of these events could adversely affect our current and future clinical trials and commercial sales if and when CureXcell receives marketing approval, which may materially adversely affect our business, financial condition, cash flows and results of operations.

We could be subject to product liability lawsuits, which could result in costly and time-consuming litigation and significant liabilities.

The development of biologic products involves an inherent risk of product liability claims and associated adverse publicity. CureXcell may be alleged or found to be harmful or to contain harmful substances. This would expose us to substantial risk of litigation and liability or may force us to discontinue production of CureXcell. Although we have product liability insurance covering up to $10 million in claims, the coverage may not insure us against all claims made and in some instances we may be required to pay substantial deductibles. Product liability insurance is costly and often limited in scope. We may not be able to obtain or maintain insurance on reasonable terms or to otherwise protect ourselves against potential product liability claims that could impede or prevent commercialization of CureXcell. Furthermore, a product liability claim could damage our reputation, whether or not

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such a claim has merit or is covered by insurance. A product liability claim against us or the withdrawal of a product from the market could have a material adverse effect on our business or financial condition. Additionally, product liability lawsuits, regardless of their success, would likely be time consuming and expensive to resolve and would divert management’s time and attention, which could materially adversely affect our business, financial condition, cash flows and results of operations.

We face competition from potential changes in medical practice and technology and the possibility that our competitors may develop products, treatments or procedures that are similar, more advanced, safer or more effective than ours.

The medical, biotechnology and pharmaceutical industries are intensely competitive and subject to significant technological and practice changes. We may face competition from many difference sources. Possible competitors include medical practitioners, pharmaceutical and wound care companies, academic and medical institutions, governmental agencies and public and private research institutions, among others. Should any competitor’s product candidates receive regulatory or marketing approval prior to ours, they may establish a strong market position and be difficult to displace, or will diminish the need for our products.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product that we may develop. Currently, there are a number of commercially available AWC products for the treatment of chronic and other hard-to-heal wounds, including, but not limited to, negative pressure wound therapy, or NPWT, skin substitutes, amniotic allografts, hyperbaric oxygen therapy and other treatment approaches. In addition, we licensed a patent related to the production of macrophages using osmotic shock, which we refer to as the Danon patent. Our current, more effective processes and products are covered by different patents. When the Danon patent expires in June 2015, MDA, which currently manufactures CureXcell in Israel, or any other party, can develop, manufacture and commercialize products that could compete against our products using the manufacturing process described in the Danon patent or design another process that circumvents the intellectual property directed to our current manufacturing processes. If any competing products are cheaper, more effective, safer or more marketable than CureXcell, our business could be materially adversely affected.

Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we may have. Mergers and acquisitions in the pharmaceutical, biotechnology or wound care industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

If we fail to manage our growth effectively, our business could be disrupted.

Our future financial performance and ability to successfully commercialize CureXcell, and to compete effectively will depend, in part, on our ability to manage any future growth effectively. We expect to expand our work force and train, motivate and manage additional employees. Even following expansion, our facilities, personnel, systems, procedures and controls may not be adequate to support our future operations. Any failure to manage future growth effectively could have a material adverse effect on our business, financial condition, cash flows and results of operations.

We may not be successful in using our proprietary cell activation technology to establish a platform for the development and commercialization of a broad range of regenerative medicine products.

A key element of our long-term strategy is to use our proprietary cell activation technology to establish a platform for the development and commercialization of a broad range of regenerative medicine products, including product candidates for non-wound indications. Although we plan to expand our pipeline of product candidates, we may not be able to identify or develop product candidates that are safe and effective. Even if we are successful in building our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are

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unlikely to receive marketing approval and achieve market acceptance. Research and development to identify new product candidates requires substantial technical, financial and human resources, and we may expend these resources on product candidates that ultimately prove to be unsuccessful. If we do not establish a platform for the development and commercialization of a broad range of regenerative medicine products, we may face difficulty in obtaining revenues in future periods, which could have a materially adverse impact on our business, financial condition, cash flows and results of operations.

Our business could suffer if we are unable to attract and retain key employees.

Our success depends upon the continued service and performance of our senior management and other key personnel, which currently include Nissim Mashiach (our President and Chief Executive Officer), Michael Molyneaux, MD (our Vice President, Global Medical Affairs and Clinical Operations) and Shai Lankry (our Chief Financial Officer and Israel Site Manager). The loss of the services of these personnel could delay or prevent the successful completion of our clinical trials, the commercialization of CureXcell or otherwise affect our ability to manage our company effectively and to carry out our business plan. Members of our senior management team may resign at any time. A high demand exists for senior management and other key personnel in the medical technology industry and we may not be able to continue to retain and attract such personnel.

Our growth and success also depend on our ability to attract and retain additional highly qualified and skilled sales and marketing, research and development, operational, managerial and finance personnel. Competition for skilled personnel is intense and the unexpected loss of an employee with a particular skill could materially adversely affect our operations until a replacement can be found and trained. While we have not experienced issues retaining our personnel, if we cannot retain our existing skilled scientific and operational personnel and attract and retain sufficiently-skilled additional scientific and operational personnel as required for our operations on acceptable terms, we may not be able to carry out our business plan.

Exchange rate fluctuations between the U.S. dollar and the Israeli shekel, as well as other non-U.S. currencies, may negatively affect our earnings.

The dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in shekels. As a result, we are exposed to the risks that the shekel may appreciate relative to the dollar, or, if the shekel instead devalues relative to the dollar, that the inflation rate in Israel may exceed the rate of devaluation of the shekel, or that the timing of that devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. We cannot predict any future trends in the rate of inflation in Israel or the rate of appreciation (if any) of the shekel against the dollar. For example, the rate of devaluation of the dollar against the shekel was 7.5% and 2.3% in 2013 and 2012, respectively, which was compounded by inflation in Israel at a rate of 1.8% and 1.6%, respectively. This had the effect of increasing the dollar cost of our operations in Israel by 9.3% and 3.9% respectively, in such years. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.

In addition, we intend to commercialize CureXcell in Europe and other geographical markets, such as Japan. Accordingly we may in the future generate revenue in currencies other than the dollar and the shekel, such as the Euro or the Yen. In that case, our operating results and cash flows may also subject to fluctuations due to changes in the relative values of the dollar and these foreign currencies. These fluctuations could negatively affect our operating results and could cause them to vary from quarter to quarter.

Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

We are currently conducting a method of action study on rats. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, our research and development activities may be interrupted, delayed or become more expensive.

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Potential future acquisitions of or investments in companies or technologies may distract our management, may disrupt our business, negatively impact our financial condition and may not yield the returns expected.

We may acquire or make investments in businesses, technologies or products, whether complementary or otherwise, as a means to expand our business, if appropriate opportunities arise. We may be unable to identify future suitable acquisition or investment candidates, or, if we do identify suitable candidates, we may be unable to make the acquisitions or investments on reasonable terms or at all. In addition, we have no prior experience in integrating acquisitions and we could experience difficulties incorporating an acquired company’s personnel, operations, technology or product offerings into our own or in retaining and motivating key personnel from these businesses. We may also incur unanticipated liabilities. The financing of any such acquisition or investment, or of a significant general expansion of our business, may not be readily available on favorable terms. Any significant acquisition or investment, or major expansion of our business, may require us to explore external financing sources, such as an offering of our equity or debt securities. We cannot be certain that these financing sources will be available to us or that we will be able to negotiate commercially reasonable terms for any such financing, or that our actual cash requirements for an acquisition, investment or expansion will not be greater than anticipated. In addition, any indebtedness that we may incur in such a financing may inhibit our operational flexibility, while any equity securities that we may issue in connection with such a financing would dilute our shareholders. Any such difficulties could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations. Furthermore, we may not realize the anticipated benefits or synergies of any such acquisition or investment.

Regulatory approval for CureXcell may be limited to specific indications and conditions for which clinical safety and efficacy have been demonstrated, and the prescription or promotion of off-label uses could adversely affect our business.

Any regulatory approval we receive for CureXcell would be limited to those specific indications for which CureXcell has been deemed safe and effective by the FDA, the EMA or other regulatory authority. Additionally, labeling restrictions may also limit the manner in which a product may be used. For example, we anticipate that CureXcell’s approval, if any, will be limited to wounds without any exposed bone or tendons and that it will not be indicated for pressure and post-surgical wounds. Physicians may, however prescribe a product for an unapproved, or “off-label,” use or may use a product in a manner that is inconsistent with the manufacturer’s labeling. To the extent such off-label use is pervasive and results in reduced efficacy or other adverse effects, the reputation of CureXcell in the marketplace may suffer.

Furthermore, while physicians may choose to prescribe treatments for uses that are not described in the product’s labeling and for uses that differ from those approved by regulatory authorities, our ability to promote the products is limited to those indications that are specifically approved by the FDA, the EMA or other regulatory authorities. Although regulatory authorities generally do not regulate the behavior of physicians, they do restrict communications by companies on the subject of off-label use. If our promotional activities fail to comply with these regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In the United States, off-label promotion by pharmaceutical companies has resulted in significant litigation under the U.S. False Claims Act, violations of which may result in substantial civil penalties and fines. More generally, failure to follow the rules and guidelines of regulatory agencies relating to promotion and advertising, such as that promotional materials not be false or misleading, can result in refusal to approve a product, the suspension or withdrawal of an approved product from the market, product recalls, fines, disgorgement of money, operating restrictions, injunctions or criminal prosecution.

The implementation of healthcare reform in the United States may adversely affect our business.

Pursuant to the March 2010 adoption of the healthcare reform law in the United States, substantial changes are being made to the current system for paying for healthcare in the United States, including programs to extend medical benefits to millions of individuals who currently lack insurance coverage. The changes contemplated by the healthcare reform law are subject to rule-making and implementation timelines that extend for several years, and this uncertainty limits our ability to forecast changes that may occur in the future. However, implementation has already begun with respect to certain significant cost-saving measures under the healthcare reform law, for example with respect to several government healthcare programs that may cover the cost of our future products, including Medicaid, Medicare Parts B and D, and these efforts could have a materially adverse impact on our future financial prospects and performance.

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For example, in order for a manufacturer’s products to be reimbursed by federal funding under Medicaid, the manufacturer must enter into a Medicaid rebate agreement with the Secretary of the U.S. Department of Health and Human Services, and pay certain rebates to the states based on utilization data provided by each state to the manufacturer and to the Centers for Medicare and Medicaid Services, or CMS, and pricing data provided by the manufacturer to the federal government. The states share this savings with the federal government, and sometimes implement their own additional supplemental rebate programs. Under the Medicaid drug rebate program, the rebate amount for most branded drug products was previously equal to a minimum of 15.1% of the Average Manufacturer Price, or AMP, or the AMP less Best Price, whichever is greater. Effective January 1, 2010, the healthcare reform law generally increases the size of the Medicaid rebates paid by manufacturers for single source and innovator multiple source (brand name) drug product from a minimum of 15.1% to a minimum of 23.1% of the AMP, subject to certain exceptions, for example, for certain clotting factors, the increase is limited to a minimum of 17.1% of the AMP. For non-innovator multiple source (generic) products, the rebate percentage is increased from a minimum of 11.0% to a minimum of 13.0% of AMP. In 2010, the healthcare reform law also newly extended this rebate obligation to prescription drugs covered by Medicaid managed care organizations. These increases in required rebates may adversely affect our future financial prospects and performance.

The healthcare reform law also creates new rebate obligations for our products under Medicare Part D, a partial, voluntary prescription drug benefit created by the United States federal government primarily for persons 65 years old and over. The Part D drug program is administered through private insurers that contract with CMS. Beginning in 2011, the healthcare reform law generally requires that in order for a drug manufacturer’s products to be reimbursed under Medicare Part D, the manufacturer must enter into a Medicare Coverage Gap Discount Program agreement with the Secretary of the U.S. Department of Health and Human Services, and reimburse each Medicare Part D plan sponsor an amount equal to 50% savings for the manufacturer’s brand name drugs and biologics which the Part D plan sponsor has provided to its Medicare Part D beneficiaries who are in the “donut hole” (or a gap in Medicare Part D coverage for beneficiaries who have expended certain amounts for drugs). The Part D plan sponsor is responsible for calculating and providing the discount directly to its beneficiaries and for reporting these amounts paid to CMS’s contractor, which notifies drug manufacturers of the rebate amounts it must pay to each Part D plan sponsor. The rebate requirement could adversely affect our future financial performance, particularly if contracts with Part D plans cannot be favorably renegotiated or the Part D plan sponsors fail to accurately calculate payments due in a manner that overstates our rebate obligation.

The healthcare reform law also introduced a biosimilar pathway that will permit companies to obtain FDA approval of generic versions of existing biologics based upon reduced documentation and data requirements deemed sufficient to demonstrate safety and efficacy than are required for the pioneer biologics. The new law provides that a biosimilar application may be submitted as soon as four years after the reference product is first licensed, and that the FDA may not make approval of an application effective until 12 years after the reference product was first licensed. With the likely introduction of biosimilars in the United States, we expect in the future to face greater competition from biosimilar products, including a possible increase in patent challenges. The FDA has reported meeting with sponsors who are interested in developing biosimilar products, and is developing regulations to implement the abbreviated regulatory review pathway.

Regarding access to our products, the healthcare reform law established and provided significant funding for a Patient-Centered Outcomes Research Institute to coordinate and fund Comparative Effectiveness Research, or CER. While the stated intent of CER is to develop information to guide providers to the most efficacious therapies, outcomes of CER could influence the reimbursement or coverage for therapies that are determined to be less cost-effective than others. Should any of our products be determined to be less cost-effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our future financial prospects and results.

We may be limited in the promotional claims we can make and may not be able to use information about our competitors to promote or market CureXcell without incurring significant regulatory or enforcement risks.

Various U.S. governmental agencies, including the FDA and the Federal Trade Commission, or the FTC, regulate the promotion and advertising of FDA approved medical products. Promotional materials and statements must not be false or misleading. Among other things, the FDA requires that promotional claims be supported by “substantial evidence,” which requires adequate, well-controlled clinical trials. Promotional claims must also reflect “fair balance” between the risks and benefits of a medical product. The FDA also has found comparative claims to be “false and misleading” when they are not supported by adequate, well-controlled, head-to-head comparison trials.

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Disclaimers that the comparative claims are not based on head-to-head trials may not be sufficient to insulate the responsible party from an FDA or FTC enforcement action. False and misleading advertising and promotion is a violation of the Federal Food, Drug, and Cosmetic Act, or the FDCA, and subjects the responsible party to sanctions including, but not limited to, warning letters, injunctions, civil penalties and criminal prosecution. Additionally, a product is misbranded under the regulations if, in an effort to promote the product, a responsible party makes a false or misleading representation with respect to a competing drug, device or biologic. We have not conducted head-to-head trials with any other AWC therapy. As a result, we will be limited in our ability to market CureXcell using available data from separate trials of competing therapies. If we decide to market CureXcell’s benefits as compared to other AWC therapies, we will need to conduct head-to-head clinical trials which may be time consuming and expensive and may not be successful.

Certain of our business practices could become subject to scrutiny by regulatory authorities, as well as to lawsuits brought by private citizens. Failure to comply with applicable law or an adverse decision in lawsuits may result in adverse consequences to us.

The laws governing our conduct in the United States are enforceable by criminal, civil and administrative penalties. Violations of laws such as the FDCA the Public Health Service Act, the U.S. False Claims Act, provisions of the U.S. Social Security Act, including the provision known as the “Anti-Kickback Law,” or any regulations promulgated under their authority, may result in various administrative, civil and criminal sanctions, jail sentences, fines or exclusion from federal and state programs, as may be determined by Medicare, Medicaid, other regulatory authorities and the courts. We may come under the scrutiny of regulators and other government authorities or our practices may be found to violate applicable laws, rules and regulations or prompt lawsuits by private citizen “relators” under federal or state false claims laws.

For example, under the Anti-Kickback Law, and similar state laws and regulations, even common business arrangements, such as discounted terms and volume incentives for customers in a position to recommend or choose drugs and devices for patients, such as physicians and hospitals, can result in substantial legal penalties, including, among others, exclusion from Medicare and Medicaid programs. As a result, arrangements with potential referral sources must be structured with care to comply with applicable requirements. Also, certain business practices, such as payment of consulting fees to healthcare providers, sponsorship of educational or research grants, charitable donations, interactions with healthcare providers and financial support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of wrongfully influencing healthcare providers to prescribe or purchase particular products or of rewarding past prescribing.

In addition, significant enforcement activity has taken place under federal and state false claims act statutes and violations of the U.S. False Claims Act can result in treble damages, and penalty of up to $11,000 for each false claim submitted for payment. The U.S. False Claims Act, as well as certain state false claims acts, permit relators to file complaints in the name of the United States (and if applicable, particular states). These relators may be entitled to receive up to 30% of total recoveries and have been active in pursuing cases against pharmaceutical companies. Where practices have been found to involve improper incentives to use products, the submission of false claims, or other improper conduct, government investigations and assessments of penalties against manufacturers have resulted in substantial damages and fines. In addition, to avoid exclusion from participation in federal healthcare programs, many manufacturers have been required to enter into corporate integrity agreements that prescribe allowable corporate conduct. Failure to satisfy requirements under the FDCA can also result in a variety of administrative, civil and criminal penalties, including injunctions or consent decrees that prescribe allowable corporate conduct.

To enhance compliance with applicable healthcare laws, and mitigate potential liability in the event of noncompliance, regulatory authorities, such as the Office of Inspector General of the U.S. Department of Health and Human Services, or OIG, have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the elements of an effective compliance and ethics program described in Section 8B2.1 of the U.S. Sentencing Commission Guidelines Manual. Increasing numbers of U.S.-based pharmaceutical companies have such programs. As CureXcell is not yet approved for marketing in the United States, we have not adopted U.S. healthcare compliance and ethics programs that generally incorporate the OIG’s recommendations, but even if we do, we may still be unable to avoid any compliance issues.

In addition, we are subject to analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and

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the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances. Many of these laws differ from each other in significant ways and often are not preempted by the U.S. Health Insurance Portability and Accountability Act of 1996 thus complicating compliance efforts.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which could have a material adverse effect on our business. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which could also materially affect our business.

As a public company with securities registered under the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, we will be subject to the U.S. Foreign Corrupt Practices Act, or FCPA. The FCPA and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. We intend to implement policies mandating compliance with these anti-bribery laws, however, we may operate in parts of the world that have experienced governmental corruption to some degree and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than in the United States. Our internal control policies and procedures may not be sufficient to effectively protect us against reckless or criminal acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.

We are subject to environmental, health and safety and other laws and regulations.

We are subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures. Although we maintain workers’ compensation insurance to cover the costs and expenses that may be incurred because of injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. Additional or more stringent laws and regulations affecting our operations may be adopted in the future. We may incur substantial capital costs and operating expenses and may be required to obtain consents to comply with any of these or certain other laws or regulations and the terms and conditions of any permits required pursuant to such laws and regulations, including costs to modify our operations or perform other corrective actions at our respective facilities. In addition, fines and penalties may be imposed for noncompliance with environmental, health and safety and other laws and regulations or for the failure to have, or comply with the terms and conditions of, required environmental or other permits or consents.

Risks Related to Our Intellectual Property

Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our technology and products.

Our commercial success depends in part on our ability to obtain and maintain patent protection and trade secret protection for our intellectual property and proprietary technologies, our products and their uses, as well as our ability to operate without infringing upon the proprietary rights of others. We rely on a combination of patent, trademark and trade secret laws, non-disclosure and confidentiality agreements, licenses, assignments of invention agreements and other restrictions on disclosure and use to protect our intellectual property rights.

As of March 31, 2014, we had four patent families on file covering processes and resulting activated white blood cell compositions that we developed, from which we have been granted three patents covering our process for producing activated white blood cells (one in each of the United States, the European Union and Australia), with

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issued process claims in the United States and the European Union and issued product claims in Australia. We also have two allowed applications and 26 additional pending applications in various jurisdictions. However, the patent applications relating to our products, processes or technologies may not result in patents being issued, the claims that issue may have limited or no coverage of our products and technologies, and any patents that have been issued may not be adequate to protect our intellectual property or afford us patent protection for any significant period of time. To the extent our issued patents are limited to process claims, they may be less protective, and it may be difficult for us to detect infringing products and enforce our patents against them. Additionally, any issued patents may be challenged by third parties, and patents that we hold may be found by a judicial authority or the United States Patent and Trademark Office, or USPTO, or other relevant patent office or governmental authority, to be invalid or unenforceable. Other parties may independently develop similar or competing technology or design around any patents that may be issued to or held by us. In addition, we licensed the Danon patent, which relates to the production of macrophages using osmotic shock. Our current, more effective processes and products are covered by different patents. When the Danon patent expires in June 2015, MDA, which currently manufactures CureXcell in Israel, or any other party can develop, manufacture and commercialize products using the manufacturing process described in the Danon patent or design another process that circumvents the intellectual property directed to our current manufacturing processes. Further, the patents directed to the processes and products we developed will expire or they may otherwise cease to provide meaningful competitive advantage, and we may be unable to adequately develop new technologies and obtain future patent protection to preserve our competitive advantage or avoid adverse effects on our business.

At present, we consider the patents that we developed relating to our use of hypo-osmotic shock to activate white blood cells, the technology that underlies CureXcell, to be material to the operation of our business as a whole. When looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents that claim products or chemical structures that were previously unknown. If our patents covering CureXcell in various jurisdictions were subject to a successful challenge, our business and competitive advantage could be significantly affected. Also, if a competitor were able to successfully design around our patents, we may not be able to block competition, and furthermore the competitor’s products may be more effective or commercially successful than our products, and in either case our business and competitive advantage could be significantly affected.

In addition, the patent landscape in the biotechnology field is highly uncertain and involves complex legal, factual and scientific questions, and changes in either patent laws or in the interpretation of patent laws in the United States and other countries may diminish the value and strength of our intellectual property or narrow the scope of our patent protection. Particularly in recent years in the United States, there have been several major legislative developments and court decisions that have affected patent laws in significant ways. In addition, we may fail to apply for or be unable to obtain patents necessary to protect our technology, for example, due to prior uses of or claims to similar processes, or products or enforce our patents due to lack of information about the exact use of our process by third parties. Even if patents are issued to us, they may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to prevent competitors from using similar technology or marketing similar products, or limit the length of time our technologies and products have patent protection.

Our material patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many other jurisdictions are typically not published until 18 months after their filing, if at all, and because publications of discoveries in scientific literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in such patent applications (depending on the laws applicable in the relevant country at the time of filing). As a result, the patents we own and license may be invalidated in the future, and the patent applications we own and license may not be granted. For example, if a third party has also filed a patent application covering an invention similar to one covered in one of our patent applications, we may be required to participate in an adversarial proceeding known as an “interference proceeding,” declared by the USPTO or its foreign counterparts, to determine priority of invention. Also, as of March 16, 2013, the U.S. transitioned to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. The costs of these proceedings could be substantial and our efforts in them could be unsuccessful, resulting in a loss of our anticipated patent position. In addition, if a third party prevails in such a proceeding and obtains an issued patent, we

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may be prevented from practicing technology or marketing products covered by that patent. Additionally, patents and patent applications owned by third parties may prevent us from pursuing certain opportunities such as entering into specific markets or developing certain products. Finally, we may choose to enter into markets where certain competitors have patents or patent protection over technology that may impede our ability to compete effectively.

Our currently issued patents directed to the processes and products we developed are nominally due to expire in 2030, and the Danon patent, which we licensed before we developed our current processes and products, expires in June 2015. However, because of the extensive time required for development, testing and regulatory review of a potential product, and although such delays may entitle us to patent term extensions, it is possible that, before CureXcell can be commercialized in additional jurisdictions and/or before any of our future products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of the patent. Our pending and future patent applications may not lead to the issuance of patents or, if issued, the patents may not be issued in a form that will provide us with any competitive advantage. We also cannot guarantee that:

any of our present or future patents or patent claims or other intellectual property rights will not lapse or be invalidated, circumvented, challenged or abandoned;
our intellectual property rights will provide competitive advantages or prevent competitors from making or selling competing products;
our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties, financial constraints, market realities, competitive concerns or other factors;
any of our pending or future patent applications will be issued or have the coverage originally sought;
our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; or
we will not lose the ability to assert our intellectual property rights against, or to license our technology to, others and collect royalties or other payments.

In addition, our competitors or others may design around our patents or protected technologies. Effective protection of our intellectual property rights may also be unavailable or limited in some countries, and even if available, we may fail to pursue or obtain necessary intellectual property protection in such countries, including because filing, prosecuting, maintaining and defending patents on product candidates in all countries throughout the world would be prohibitively expensive. In addition, the legal systems of certain countries, such as China, may not favor the aggressive enforcement of patents and other intellectual property rights, and the laws of certain foreign countries do not protect our rights to the same extent as the laws of the United States, especially with respect to method claims. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and we may be unable to prevent such competitors from importing those infringing products into territories where we have patent protection but enforcement is not as strong as in the United States or into jurisdictions in which we do not have patent protection. These products may compete with our product candidates and our patents and other intellectual property rights may not be effective or sufficient to prevent them from competing in those jurisdictions.

In order to preserve and enforce our patent and other intellectual property rights, we may need to make claims or file lawsuits against third parties. Such lawsuits could entail significant costs to us and divert our management’s attention from developing and commercializing our products. Lawsuits may ultimately be unsuccessful and may also subject us to counterclaims and cause our intellectual property rights to be challenged, narrowed, invalidated or held to be unenforceable.

Additionally, unauthorized use of our intellectual property may have occurred or may occur in the future. Any failure to detect or identify unauthorized use of, and otherwise adequately protect, our intellectual property could adversely affect our business, including by reducing the demand for our products. Any reported adverse events involving counterfeit products that purport to be our products could harm our reputation and the sale of our products.

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Moreover, if we are required to commence litigation related to unauthorized use, whether as a plaintiff or defendant, such litigation would be time-consuming, force us to incur significant costs and divert our attention and the efforts of our management and other employees, which could, in turn, result in lower revenue and higher expenses.

In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how.

We rely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable, or that we believe is best protected by means that do not require public disclosure. We generally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with our employees, consultants, contractors, scientific advisors and third parties. However, we may fail to enter into the necessary agreements, and even if entered into, these agreements may be breached or otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. We have limited control over the protection of trade secrets used by our suppliers and service providers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, scientific advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our and relevant third parties’ proprietary rights, failure to obtain or maintain protection for our proprietary information could adversely affect our competitive business position and if third parties are able to establish that we are using their proprietary information without their permission, we may be required to obtain a license to that information, or if such a license is not available, re-design our products to avoid any such unauthorized use or temporarily delay or permanently stop manufacturing or sales of the affected products. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets. Any of the foregoing could deteriorate our competitive advantages, undermine the trade secret and contractual protections afforded to our confidential information and have material adverse effects on our business.

We also rely on physical and electronic security measures to protect our proprietary information, but these security measures may not be breached or provide adequate protection for our property. There is a risk that third parties may obtain and improperly utilize our proprietary information to our competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.

Some of our employees were previously employed at blood banks, universities or other biotechnology or pharmaceutical companies, including potential competitors. While we take steps to prevent our employees from using the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims successfully, in addition to paying monetary damages and possible ongoing royalties, we may lose valuable intellectual property rights or personnel.

If we are unable to protect our CureXcell trademark from infringement or other violation, our business prospects may be harmed.

We own the trademark CureXcell, and have registered this trademark in the United States and Israel. Although we take steps to monitor the possible infringement or misuse of this trademark, it is possible that third parties may infringe, dilute or otherwise violate our trademark rights. Any unauthorized use of our trademark could harm our reputation or commercial interests. In addition, our enforcement against third-party infringers or violators may be unduly expensive and time-consuming, and the outcome may be an inadequate remedy.

We may be subject to claims that we infringe, misappropriate or otherwise violate the intellectual property rights of third parties.

Our development, marketing or sale of CureXcell may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights. There may also be issued patents held by

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third parties that may be infringed or otherwise violated by our products, technologies and other activities, and we do not know whether or to what extent we are infringing or otherwise violating third party patents. We may also be subject to claims that we are infringing, misappropriating or otherwise violating other intellectual property rights, such as trademarks, copyrights or trade secrets. Third parties could therefore bring claims against us or our potential strategic partners that would cause us to incur substantial expenses, including litigation costs or costs associated with settlement, and, if successful against us, could cause us to pay substantial damages. Further, if such a claim were brought against us, we could be temporarily or permanently enjoined or otherwise forced to temporarily delay or permanently stop manufacturing or trials and sales of CureXcell.

If we are found to be infringing, misappropriating or otherwise violating the patent or other intellectual property rights of a third party, or in order to avoid or settle claims, we may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both, which could be substantial. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property, or such rights might be restrictive and limit our present and future activities. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened claims, we or our potential strategic partners are unable to enter into licenses on acceptable terms.

There have been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. For example, in May 2014, Cognate Bioservices, Inc. filed a motion in an ongoing litigation matter involving one of our former employees seeking leave to file an amended complaint to add us as a defendant. The proposed amended complaint includes allegations of violations of the Computer Fraud and Abuse Act, misappropriation of products and misappropriation of trade secrets. In addition, to the extent that we gain greater visibility and market exposure as a public company in the United States, we face a greater risk of being involved in such litigation. In addition to possible infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference, opposition, re-examination and similar proceedings before the USPTO and its foreign counterparts, regarding intellectual property rights with respect to CureXcell. Additionally, recent legislative changes to U.S. patent laws under the Leahy-Smith America Invents Act (signed into law on September 16, 2011) include new procedures for third parties to challenge issued patents in the USPTO, and lower evidentiary standards or other advantages to the challenger may apply in certain USPTO proceedings compared to litigation in courts. Third parties could attempt to use these or other procedures to invalidate our patents or prevent us from enforcing them. Furthermore, the cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. A negative outcome could result in liability for monetary damages, including treble damages and attorneys’ fees if, for example, we are found to have willfully infringed a patent. A finding of infringement could prevent us from developing, marketing or selling a product or force us to cease some or all of our business operations. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace, and patent litigation and other proceedings may also absorb significant management time.

Under applicable employment laws, we may not be able to enforce covenants not to compete.

We generally enter into non-competition agreements with our employees. These agreements prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us. For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property.

We may become subject to claims for remuneration or royalties for assigned service invention rights by our employees, which could result in litigation and adversely affect our business.

We have invested and expect to continue to invest a significant amount of resources in the development of intellectual property by our employees in the course of their employment for us. Under the Israeli Patent Law, 5727-1967, or the Patent Law, inventions conceived by an employee during the term and as part of the scope of his

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or her employment with a company are regarded as “service inventions,” which belong to the employer, absent a specific agreement between the employee and employer giving the employee service invention rights. The Patent Law also provides that if there is no such agreement between an employer and an employee, the Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Patent Law, shall determine whether the employee is entitled to remuneration for his inventions. Recent decisions by the Committee (which have been upheld by the Israeli Supreme Court on appeal) have created uncertainty in this area, as it held that employees may be entitled to remuneration for their service inventions despite having specifically waived any such rights. Further, the Committee has not yet determined the method for calculating this remuneration nor the criteria or circumstances under which an employee’s waiver of his right to remuneration will be disregarded. We generally enter into assignment-of-invention agreements with our employees pursuant to which such individuals assign to us all rights to any inventions created in the scope of their employment or engagement with us. Although our employees have agreed to assign to us service invention rights and have specifically waived their right to receive any special remuneration for such assignment beyond their regular salary and benefits, we may face claims demanding remuneration in consideration for assigned inventions. As a consequence of such claims, we could be required to pay additional remuneration or royalties to our current or former employees, or be forced to litigate such claims, which could negatively affect our business.

Risks Related to an Investment in Our Ordinary Shares

An active, liquid and orderly trading market for our ordinary shares may not develop, which may inhibit the ability of our shareholders to sell ordinary shares following this offering.

Prior to this offering there has been no public market for our ordinary shares. An active, liquid or orderly trading market in our ordinary shares may not develop upon completion of this offering, or if it does develop, it may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other companies by using our shares as consideration.

The market price of our ordinary shares may be subject to fluctuation and you could lose all or part of your investment.

The initial public offering price for the shares will be determined by negotiations between us and representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. The price of our ordinary shares may decline following this offering. The stock market in general has been, and the market price of our ordinary shares in particular will likely be, subject to fluctuation, whether due to, or irrespective of, our operating results and financial condition. The market price of our ordinary shares on the NASDAQ Global Market may fluctuate as a result of a number of factors, some of which are beyond our control, including, but not limited to:

actual or anticipated variations in our and our competitors’ results of operations and financial condition;
market acceptance of our products;
the mix of products that we sell;
changes in earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts;
development of technological innovations or new competitive products by others;
announcements of technological innovations or new products by us;
publication of the results of clinical trials for CureXcell or other products;
failure by us to achieve a publicly announced milestone;
delays between our expenditures to develop and market products and the generation of sales from those products;
developments concerning intellectual property rights, including our involvement in litigation;
regulatory developments and the decisions of regulatory authorities as to the approval or rejection of new or modified products;

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changes in the amounts that we spend to develop, acquire or license new products, technologies or businesses;
our sale or proposed sale, or the sale by our significant shareholders, of our ordinary shares or other securities in the future;
changes in key personnel;
success or failure of our research and development projects or those of our competitors;
the trading volume of our ordinary shares; and
general economic and market conditions and other factors, including factors unrelated to our operating performance.

These factors and any corresponding price fluctuations may materially adversely affect the market price of our ordinary shares and result in substantial losses being incurred by our investors. In the past, following periods of market volatility, public company shareholders have often instituted securities class action litigation. If we were involved in securities litigation, it could impose a substantial cost upon us and divert the resources and attention of our management from our business.

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.

The trading market for our ordinary shares will rely in part on the research and reports that equity research analysts publish about us and our business, if at all. We do not have control over these analysts and we do not have commitments from them to write research reports about us. The price of our ordinary shares could decline if no research reports are published about us or our business, or if one or more equity research analysts downgrades our ordinary shares or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

Future sales of our ordinary shares could reduce the market price of our ordinary shares.

If our existing shareholders, particularly our directors, their affiliates, or our executive officers, sell a substantial number of our ordinary shares in the public market, the market price of our ordinary shares could decrease significantly. The perception in the public market that our shareholders might sell our ordinary shares could also depress the market price of our ordinary shares and could impair our future ability to obtain capital, especially through an offering of equity securities. Substantially all of our shares outstanding prior to this offering and our shares issuable upon the exercise of warrants and vested options are subject to lock-up agreements with the underwriters that restrict the ability of their holders to transfer such shares for 180 days after the date of this prospectus. We intend to file one or more registration statements on Form S-8 with the U.S. Securities and Exchange Commission, or the Commission, covering all of the ordinary shares issuable under our stock option and share incentive plans and such shares will be available for resale following the expiration of the restrictions on transfer. The market price of our ordinary shares may drop significantly when the restrictions on resale by our existing shareholders lapse and these shareholders are able to sell our ordinary shares into the market. In addition, our sale of additional ordinary shares or similar securities in order to raise capital might have a similar negative impact on the share price of our ordinary shares. A decline in the price of our ordinary shares might impede our ability to raise capital through the issuance of additional ordinary shares or other equity securities, and may cause you to lose part or all of your investment in our ordinary shares.

Certain of our existing shareholders, including some of our directors, will continue to own a majority of our ordinary shares and as a result will be able to exercise significant control over us, and your interests may conflict with the interests of our existing shareholders and your ability to influence corporate matters may be limited.

Following completion of this offering, our existing shareholders are expected to own approximately    % of our ordinary shares, out of which our directors and executive officers together will hold    % and our three largest shareholders will hold    %. Accordingly, if certain directors, executive officers and major shareholders vote the shares that they own together, they may be able to significantly influence the outcome of matters required to be submitted to our shareholders for approval, including decisions relating to the election of our board of directors and the outcome of any proposed merger or consolidation of our company. These individuals’ interests may not be

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consistent with those of our other shareholders. In addition, these parties’ significant interest in us may discourage third parties from seeking to acquire control of us, which may adversely affect the market price of our ordinary shares.

Investors in this offering will experience immediate substantial dilution in net tangible book value.

The initial public offering price of our ordinary shares in this offering is considerably greater than the net tangible book value per share of our outstanding ordinary shares immediately after this offering. Accordingly, investors in this offering will incur immediate dilution of $       per share, based on an assumed initial public offering price of $       per share, the midpoint of the price range set forth on the cover page of this prospectus. In addition, if outstanding options to purchase our ordinary shares are exercised in the future, you will experience additional dilution. See “Dilution.”

We have broad discretion as to the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively could have a material adverse effect on our business, financial condition, cash flows and results of operations. Pending their use, we may invest the net proceeds from this offering in a manner that produces insignificant or no income.

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company whose ordinary shares are listed in the United States, we will incur accounting, legal, regulatory and other expenses that we did not incur as a private company, including costs associated with our reporting requirements under the Exchange Act. We also anticipate that we will incur costs associated with corporate governance requirements, including requirements under Section 404 and other provisions of Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules implemented by the Commission and the NASDAQ Stock Market. We expect that these rules and regulations will increase our legal and financial compliance costs, introduce new costs such as investor relations and stock exchange listing fees, and will make some activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

Changes in the laws and regulations affecting public companies will result in increased costs to us as we respond to their requirements. These laws and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount or timing of additional costs we may incur in order to comply with such requirements.

We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future.

We have never declared or paid cash dividends on our share capital, nor do we anticipate paying any cash dividends on our share capital in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our ordinary shares will be investors’ sole source of gain for the foreseeable future. In addition, Israeli law limits our ability to declare and pay dividends, and may subject our dividends to Israeli withholding taxes.

As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable Commission and NASDAQ requirements.

As a foreign private issuer, we will be permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the NASDAQ Stock Market rules for domestic U.S. issuers. For instance, we intend to follow home country practice in Israel with regard to the (i) quorum requirement for shareholder meetings and (ii) independent director oversight of director nominations requirement. See “Management—Corporate Governance Practices.” We may in the future elect to follow home country practices in

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Israel (and consequently avoid the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Global Market) with regard to other matters, as well, such as separate executive sessions of independent directors and non-management directors and the requirement to obtain shareholder approval for certain dilutive events (such as for the establishment or amendment of certain share-based compensation plans, issuances that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company and certain acquisitions of the stock or assets of another company). Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Global Market may provide less protection to you than what is accorded to investors under the NASDAQ Stock Market rules applicable to domestic U.S. issuers.

As a foreign private issuer, we will not be subject to U.S. proxy rules and will be exempt from filing certain Exchange Act reports.

As a foreign private issuer, we will be exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders will be exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file annual and current reports and financial statements with the Commission as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act, we will be permitted to disclose compensation information for our executive officers on an aggregate, rather than an individual, basis and we will generally be exempt from filing quarterly reports with the Commission under the Exchange Act. Moreover, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you may otherwise have been eligible in relation to a U.S. domestic issuer.

We would lose our foreign private issuer status if a majority of our directors or executive officers are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the Commission, which are more detailed and extensive than the forms available to a foreign private issuer. We may also be required to modify certain of our policies to comply with accepted governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.

We are an “emerging growth company” and the reduced disclosure requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not “emerging growth companies.” Most of such requirements relate to disclosures that we would only be required to make if we cease to be a foreign private issuer in the future. Nevertheless, as a foreign private issuer that is an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of this offering. We will remain an emerging growth company until the earliest of: (a) the last day of our fiscal year during which the fifth anniversary of the completion of this offering occurs; (b) the last day of our fiscal year in which we have annual gross revenue of $1.0 billion or more; (c) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (d) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act. We cannot predict if investors will find our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

We have not yet determined whether our existing internal control over financial reporting systems are compliant with Section 404 of the Sarbanes-Oxley Act.

Pursuant to Section 404 of the Sarbanes-Oxley Act and the related rules adopted by the Commission and the Public Company Accounting Oversight Board, starting with the second annual report that we file with the Commission after the closing of this offering, our management will be required to report on the effectiveness of our

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internal control over financial reporting. In addition, once we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions applicable to emerging growth companies discussed above, our independent registered public accounting firm will also need to attest to management’s assessment of the effectiveness of our internal control over financial reporting under Section 404 if we are an “accelerated filer” or “large accelerated filer” under the Exchange Act. We have not yet commenced the process of determining whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any material weaknesses or significant deficiencies in our existing internal controls. This process will require the investment of substantial time and resources, including by our chief financial officer and other members of our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this determination and whether we will need to implement remedial actions in order to implement effective controls over financial reporting. The determination and any remedial actions required could result in us incurring additional costs that we did not anticipate, including the hiring of outside consultants. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting or results of operations and could result in an adverse opinion on internal controls from our independent auditors.

Our U.S. shareholders may suffer adverse tax consequences if we are characterized as a passive foreign investment company.

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets (which may be determined in part by the market value of our ordinary shares, which is subject to change) are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. Our status as a PFIC may also depend on how quickly we use the cash proceeds from this offering in our business. Based on estimates of our gross income and gross assets (including tangible assets and intangible assets based on the anticipated market value of our ordinary shares), our intended use of proceeds of this offering, and the nature of our business, we do not expect to be classified as a PFIC for the taxable year ending December 31, 2014. There can be no assurance, however, regarding our PFIC status for any taxable year. If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Holders (as defined in “Taxation—U.S. Federal Income Tax Consequences”), and having interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. Holders to make qualified electing fund elections if we are classified as a PFIC.

Risks Primarily Related to Our Operations in Israel

Part of our research and development facilities and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military instability in Israel.

Part of our research and development facilities are located in Petach Tikva, Israel. In addition, certain of our key employees and officers, as well as the majority of our directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries.

In recent years, these have included hostilities between Israel and Hezbollah in Lebanon and Hamas in the Gaza strip, both of which resulted in rockets being fired into Israel causing casualties and disruption of economic activities. In addition, Israel faces threats from more distant neighbors, in particular, Iran.

Our commercial insurance does not cover losses that may occur as a result of an event associated with the security situation in the Middle East. Although the Israeli government is currently committed to covering the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflict involving Israel could adversely affect our operations and results of operations.

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Further, our operations could be disrupted by the obligations of personnel to perform military service. As of March 31, 2014, we had 17 employees based in Israel, certain of which may be called upon to perform up to 54 days in each three year period (and in the case of non-officer commanders or officers, up to 70 or 84 days, respectively, in each three year period) of military reserve duty until they reach the age of 40 (and in some cases, depending on their specific military profession up to 45 or even 49 years of age) and, in certain emergency circumstances, may be called to immediate and unlimited active duty. Our operations could be disrupted by the absence of a significant number of employees related to military service, which could materially adversely affect our business and results of operations.

Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies whether as a result of hostilities in the region or otherwise. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Such actions, particularly if they become more widespread, may adversely impact our ability to sell our products.

We received an Israeli government grant for certain research and development activities. The terms of the grant require us to satisfy specified conditions and to pay penalties in addition to repayment of the grant upon certain events.

Our research and development efforts were financed in part through a grant from the Israeli Office of the Chief Scientist, or OCS. The total gross amount of the grant actually received by us from the OCS, including accrued LIBOR interest as of March 31, 2014, totaled approximately $0.8 million. As of March 31, 2014, we had not paid any royalties to the OCS.

Even following full repayment of any OCS grants, we must nevertheless continue to comply with the requirements of the Israeli Law for the Encouragement of Industrial Research and Development, 5744-1984, and related regulations, or collectively, the R&D Law. When a company develops know-how, technology or products using OCS grants, the terms of these grants and the R&D Law restrict the transfer outside of Israel of such know-how, and the manufacturing or manufacturing rights of such products, technologies or know-how, without the prior approval of the OCS. Therefore, if aspects of our technologies are deemed to have been developed with OCS funding, the discretionary approval of an OCS committee would be required for any transfer to third parties outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the OCS may impose certain conditions on any arrangement under which it permits us to transfer technology or development out of Israel.

The transfer of OCS-supported technology or know-how or manufacturing or manufacturing rights related to aspects of such technologies outside of Israel may involve the payment of significant penalties and other amounts, depending upon the value of the transferred technology or know-how, the amount of OCS support, the time of completion of the OCS-supported research project and other factors. These restrictions and requirements for payment may impair our ability to sell our technology assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel of technology or know-how developed with OCS funding (such as a merger or similar transaction) may be reduced by any amounts that we are required to pay to the OCS.

Provisions of Israeli law and our amended and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, us, even when the terms of such a transaction are favorable to us and our shareholders.

Israeli corporate law regulates mergers, requires tender offers for acquisitions of shares above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to such types of transactions. For example, a tender offer for all of a company’s issued and outstanding shares can only be completed if the acquirer receives positive responses from the holders of at least 95% of the issued share capital. Completion of the tender offer also requires approval of a majority of the offerees that do not have a personal interest in the tender offer, unless, following consummation of the tender offer, the acquirer would hold at least 98% of the company’s outstanding shares. Furthermore, the shareholders, including those who indicated their acceptance of the tender offer, may, at any time within six months following the completion of the tender offer, petition an Israeli court to alter the consideration for the acquisition, unless the acquirer stipulated in its tender offer that a shareholder that accepts the offer may not seek such appraisal rights.

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Our amended and restated articles of association provide that our directors (other than external directors) are elected on a staggered basis, such that a potential acquiror cannot readily replace our entire board of directors at a single annual general shareholder meeting. This could prevent a potential acquiror from receiving board approval for an acquisition proposal that our board of directors opposes.

Furthermore, Israeli tax considerations may make potential transactions unappealing to us or to our shareholders whose country of residence does not have a tax treaty with Israel exempting such shareholders from Israeli tax. For example, Israeli tax law does not recognize tax-free share exchanges to the same extent as U.S. tax law. With respect to mergers, Israeli tax law allows for tax deferral in certain circumstances but makes the deferral contingent on the fulfillment of a number of conditions, including, in some cases, a holding period of two years from the date of the transaction during which sales and dispositions of shares of the participating companies are subject to certain restrictions. Moreover, with respect to certain share swap transactions, the tax deferral is limited in time, and when such time expires, the tax becomes payable even if no disposition of the shares has occurred.

It may be difficult to enforce a judgment of a U.S. court against us, our officers and directors or the Israeli experts named in this prospectus in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our officers and directors and these experts.

We are incorporated in Israel. Some of our executive officers and all of the Israeli experts and our directors listed in this prospectus reside outside of the United States, and most of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. See “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this prospectus.

Your rights and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders of U.S. companies.

The rights and responsibilities of the holders of our ordinary shares are governed by our amended articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S.-based companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company with regard to such vote or appointment. There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. companies.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms including “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements. The statements we make regarding the following matters are forward-looking by their nature:

the timing and conduct of our trials of CureXcell, including statements regarding the timing, progress and results of current clinical trials, and our research and development programs;
the clinical utility, potential advantages and timing or likelihood of regulatory filings and approvals of CureXcell;
our estimates regarding the market opportunity for CureXcell;
our plans for laying the groundwork for commercialization of CureXcell in the United States and elsewhere;
our plans to develop a platform for development and commercialization of a broader range of regenerative medicine products;
our strategy for expanding our geographical coverage and penetrating additional global markets;
our estimates regarding expenses, future revenue, capital requirements and the need for additional financing;
the impact of our research and development expenses as we continue developing CureXcell and additional regenerative medicine products;
our ability to obtain and maintain adequate intellectual property rights and adequately protect and enforce such rights;
our expectations regarding the time during that we will be an emerging growth company under the JOBS Act;
the impact of government laws and regulations; and
our expectations regarding the use of proceeds from this offering.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in “Risk Factors.”

You should not unduly rely on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus, to conform these statements to actual results or to changes in our expectations.

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $    , or $    if the underwriters exercise in full their option to purchase additional ordinary shares, based on an assumed price to the public in this offering of $    , the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses.

We currently intend to use the net proceeds we receive from this offering as follows:

between $      and $      for the clinical and regulatory development of CureXcell, which includes between $      and $      for our ongoing Phase 3 DFU clinical trial and between $      and $      for our ongoing Phase 3 VLU clinical trial;
between $      and $      to establish our commercial manufacturing capabilities in the United States; and
the balance, if any, for other general corporate purposes, which may include the development of our platform for regenerative medicine products.

We expect that the proceeds of this offering will be sufficient to allow us to complete our ongoing Phase 3 clinical trials, seek FDA approval for CureXcell and establish the manufacturing capabilities necessary to support the launch of CureXcell in the United States if we receive applicable marketing approvals, however, we are subject to substantial risks that could require us to obtain additional funding in order to achieve these objectives. See “Risk Factors—Risks Relating to Our Business and Industry—We may need substantial additional capital in the future, which could cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights, and if additional capital is not available, we may have to delay, reduce or cease operations.”

Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. The amounts and timing of our actual use of net proceeds will vary depending on numerous factors, including our ability to obtain additional financing, the relative success and cost of clinical and regulatory development programs and the amount and timing of product revenue, if any. In addition, we might decide to postpone or not pursue certain activities if, among other factors, the net proceeds from this offering and our other sources of cash are less than expected. As a result, management will have broad discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the net proceeds. Pending the uses described above, we intend to invest the net proceeds in interest-bearing investment-grade securities or deposits.

A $1.00 increase (decrease) in the assumed price to the public of $    would increase (decrease) the net proceeds that we receive from the offering by approximately $    million, assuming that the number of ordinary shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses. Similarly, each increase (decrease) of 100,000 shares in the number of ordinary shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $    , assuming that the assumed price to the public remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses.

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DIVIDEND POLICY

We have never declared or paid cash dividends to our shareholders, and we do not intend to pay cash dividends in the foreseeable future. We intend to reinvest any earnings in developing and expanding our business. Any future determination relating to our dividend policy will be at the discretion of our board of directors and will depend on a number of factors, including future earnings, our financial condition, operating results, contractual restrictions, capital requirements, business prospects, our strategic goals and plans to expand our business, applicable law and other factors that our board of directors may deem relevant.

See “Risk Factors—Risks Related to an Investment in Our Ordinary Shares—We have never paid cash dividends on our share capital, and we do not anticipate paying any cash dividends in the foreseeable future” and “Description of Share Capital—Dividend and Liquidation Rights.”

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CAPITALIZATION

The following table presents our cash and cash equivalents and capitalization as of March 31, 2014:

on an actual basis;

on a pro forma basis, to give effect to the conversion of all our outstanding preferred A shares into 81,435 ordinary shares immediately prior to the closing of this offering; and

on a pro forma as adjusted basis, to give further effect to (i) the issuance of             ordinary shares in this offering, at an assumed price to the public of $    per share, the midpoint of the price range set forth on the cover page of this prospectus after deducting underwriting discounts and commissions and estimated offering expenses, (ii) the payment of up to $0.65 million in the aggregate to certain of our executive officers for their contribution to (and subject to) the completion of this offering and (iii) the issuance of warrants to purchase            ordinary shares as described in “Certain Relationships and Related Party Transactions—Convertible Loan Credit Line from Significant Shareholder.”

This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

As of March 31, 2014
Actual
Pro
forma
Pro
forma, as
adjusted
(dollars in thousands)
Cash and cash equivalents
$
15,981
 
$
15,981
 
 
 
 
Shareholders’ equity:
 
 
 
Ordinary shares, NIS 0.01 par value: 99,875,141 shares authorized (actual, pro forma and pro forma, as adjusted); 153,405 shares issued and outstanding (actual); 234,840 shares issued and outstanding (pro forma) and             shares issued and outstanding (pro forma as adjusted)(1)
 
 
 
 
 
 
 
 
Series A Preferred shares, NIS 0.01 par value: 124,859 shares authorized (actual) and no shares authorized (pro forma and pro forma as adjusted); 81,435 issued and outstanding (actual) and zero shares issued and outstanding (pro forma and pro forma as adjusted)
 
 
 
 
 
 
 
 
Share premium
 
48,241
 
 
48,241
 
 
 
 
Capital reserve
 
5,156
 
 
5,876
 
 
 
 
Warrants held by shareholders
 
8,219
 
 
8,219
 
 
 
 
Accumulated deficit
 
(46,144
)
 
(46,864
)
 
 
 
Total shareholders’ equity
 
15,472
 
 
15,472
 
 
 
 
Total capitalization
$
15,472
 
$
15,472
 
 
 
 

(1)On       , 2014, we effected a            -for-1 share split by means of a share dividend of             ordinary shares for each ordinary share then outstanding. The number of outstanding shares has been adjusted to reflect this share split.

A $1.00 increase (decrease) in the assumed price to the public of $    would increase (decrease) the pro forma as adjusted amount of each of share premium, total shareholders’ equity and total capitalization by $    , assuming that the number of ordinary shares offered, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses.

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DILUTION

If you invest in our ordinary shares in this offering, your ownership interest will be immediately diluted to the extent of the difference between the price per share to the public in this offering and the net tangible book value per ordinary share after this offering. Our net tangible book value as of March 31, 2014 was $    per ordinary share.

After giving effect to the sale of ordinary shares that we are offering at an assumed price to the public of $    per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our net tangible book value on an adjusted basis as of March 31, 2014 would have been $    per ordinary share. This amount represents an immediate decrease in net tangible book value of $     per ordinary share to our existing shareholders and an immediate increase in net tangible book value of $         per ordinary share to new investors purchasing ordinary shares in this offering. We determine dilution by subtracting the as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for an ordinary share.

The following table illustrates this dilution:

Assumed initial public offering price per share
 
 
 
$
 
 
Net tangible book value per share as of March 31, 2014
$
 
 
 
 
 
Increase per share attributable to this offering
 
 
 
 
 
 
As adjusted net tangible book value per share after this offering
 
 
 
 
 
 
Dilution per share to new investors in this offering
 
 
 
$
 
 

A $1.00 increase (decrease) in the assumed price to the public of $    per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) as adjusted net tangible book value per share after this offering by $    , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional ordinary shares in full in this offering, the as adjusted net tangible book value after the offering would be $    per share, the decrease in net tangible book value per share to existing shareholders would be $    and the increase in net tangible book value per share to new investors would be $    per share, in each case assuming a price to the public in this offering of $    per ordinary share, the midpoint of the price range set forth on the cover page of this prospectus.

The following table summarizes, as of March 31, 2014, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing shareholders paid during the past five years, on the one hand, and new investors are paying in this offering, on the other hand. The calculation below is based on an assumed price to the public in this offering of $    per share before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Shares Purchased
Total Consideration
Average Price
Per Share
Number
Percent
Amount
Percent
Existing shareholders
 
 
 
 
 
%
$
 
 
 
 
%
$
 
 
New investors
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
100
%
 
 
 
 
100
%
 
 
 

To the extent any of outstanding options and warrants are exercised, there will be further dilution to new investors. To the extent all of such outstanding options and warrants had been exercised as of December 31, 2013, the as adjusted net tangible book value per share after this offering would be $    , and total dilution per share to new investors would be $    .

If the underwriters exercise their option to purchase additional shares in full, the percentage of ordinary shares held by existing shareholders will decrease to approximately    % of the total number of our ordinary shares outstanding after this offering and the number of shares held by new investors will increase to , or approximately    % of the total number of our ordinary shares outstanding after this offering.

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SELECTED CONSOLIDATED FINANCIAL DATA

We derived the selected consolidated statement of loss data for the years ended December 31, 2013 and 2012 and our selected consolidated statement of financial position data as of December 31, 2013 and 2012 from our audited consolidated financial statements and the related notes thereto included elsewhere in this prospectus. We derived the selected consolidated statements of loss data for the three months ended March 31, 2014 and 2013 and the consolidated selected statement of financial position data as of March 31, 2014 from our unaudited condensed interim consolidated financial statements included elsewhere in this prospectus. The unaudited condensed interim consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. We have prepared our financial statements in accordance with IFRS.

The financial statements included in this prospectus may not be indicative of our future performance. You should read the following selected financial data in conjunction with “Use of Proceeds,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes thereto included elsewhere in this prospectus.

Year Ended
December 31,
Three Months Ended
March 31,
2013
2012
2014
2013
(in thousands, except share
and per share data)
Consolidated statements of loss data:
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses(1):
 
 
 
 
 
 
 
 
 
 
 
 
Research and development expenses, net
$
9,303
 
$
7,168
 
$
2,697
 
$
1,950
 
General and administrative expenses
 
4,567
 
 
1,631
 
 
655
 
 
366
 
Operating loss
 
(13,870
)
 
(8,799
)
 
(3,352
)
 
(2,316
)
Financing income (expenses), net
 
(4,305
)
 
1,043
 
 
(5
)
 
422
 
Loss before income tax
 
(18,175
)
 
(7,756
)
 
(3,357
)
 
(1,894
)
Taxes on income
 
(149
)
 
 
 
(40
)
 
 
Loss for the year
 
(18,324
)
 
(7,756
)
 
(3,397
)
 
(1,894
)
Net loss per share (basic and diluted)
$
(113.2
)
$
(48.1
)
$
(20.99
)
$
(11.70
)
Weighted average number of ordinary shares used in computing loss per share, basic and diluted
 
161,827
 
 
161,328
 
 
161,827
 
 
161,827
 
As of December 31,
As of March 31,
2013
2012
2014
(in thousands)
Consolidated statements of financial position data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
18,995
 
$
15,322
 
$
15,981
 
Working capital(2)
 
17,593
 
 
14,510
 
 
14,392
 
Total assets
 
20,738
 
 
17,709
 
 
18,218
 
Total current liabilities
 
1,971
 
 
1,499
 
 
2,746
 
Total non-current liabilities
 
 
 
3,114
 
 
 
Total shareholders’ equity
 
18,767
 
 
13,096
 
 
15,472
 

(1)Includes share-based compensation expenses as follows:

Year Ended
December 31,
Three Months Ended
March 31,
2013
2012
2014
2013
(in thousands)
Research and development expenses, net
$
0
 
$
210
 
$
16
 
$
5
 
General and administrative expenses
 
2,648
 
 
31
 
 
86
 
 
3
 
Total share-based compensation expenses
$
2,648
 
$
241
 
$
102
 
$
  8
 
(2)We define working capital as total current assets minus total current liabilities.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly those in the “Risk Factors.”

Overview

We are a regenerative medicine company focused on developing, manufacturing and commercializing novel cell therapy products to address unmet needs in the treatment of chronic and other hard-to-heal wounds. Our product candidate, CureXcell, is an AWC therapy to treat such wounds by injecting living human white blood cells that have been activated to facilitate the healing process. CureXcell is currently in two pivotal, Phase 3, double-blind clinical trials targeting a broad indication for the treatment of DFUs and VLUs. We anticipate results from our DFU clinical trial and interim data from our VLU clinical trial in the second half of 2015. We expect to submit our BLA to the FDA in late 2016. We also intend to pursue marketing authorization in Europe with the EMA. We already hold product approval for CureXcell as a medical device in Israel for the treatment of chronic and other hard-to-heal wounds, and have effectively and safely treated more than 5,000 patients in commercial or clinical study settings in Israel. To support our development and manufacturing initiatives for CureXcell, we have established operations in Philadelphia, Pennsylvania in the United States and the Tel Aviv region in Israel.

To date, we have financed our operations primarily with the net proceeds from private placements of our ordinary and preferred shares and warrants, and to a significantly lesser extent, through a government grant. Since our inception, we have incurred significant operating losses. Our net losses were $3.4 million and $1.9 million for the three months ended March 31, 2014 and 2013, respectively, and $18.3 million and $7.8 million for the years ended December 31, 2013 and 2012, respectively. As of March 31, 2014, we had an accumulated deficit of $46.1 million. We have not recognized any revenue to date.

We expect to continue to incur significant expenses and operating losses for the foreseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We anticipate that our expenses will increase substantially if and as we:

continue our Phase 3 clinical trials for CureXcell to support a BLA submission to the FDA;
establish independent production facilities and our sales, marketing and distribution infrastructure to commercialize CureXcell in the United States;
seek marketing approvals for CureXcell in territories other than the United States;
maintain, expand and protect our intellectual property portfolio;
hire additional operational, clinical, quality control and scientific personnel;
add operational, financial and management information systems and personnel, including personnel to support our product development, any future commercialization efforts and our transition to a public company; and
invest in research and development and regulatory approval efforts in order to utilize our technology as a platform to develop regenerative medicine products for other indications.

Financial Operations Overview

Revenue

To date, we have not recognized any revenue, and we do not expect to recognize any revenue for the foreseeable future, if ever. We view the sale and use of CureXcell in Israel to be part of our research and development activities, rather than commercial in nature. Accordingly, we recognize the amounts that we receive from sales of CureXcell to health care professionals in Israel as an offset to our research and development expense. Our ability to generate recognizable revenue in the future will depend on the successful commercialization of CureXcell.

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Operating expenses

Research and development expenses, net

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as we progress with our Phase 3 clinical trials. We do not believe that it is possible at this time to accurately project total program-specific expenses to reach regulatory approval and commercialization. There are numerous factors associated with the successful regulatory approval and commercialization of CureXcell, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time. Additionally, future regulatory and commercial factors beyond our control will affect our clinical development programs and plans.

Research and development expenses are reduced by amounts that we receive from sales of CureXcell to health care professionals in Israel. We view these sales and use of CureXcell to be part of our research and development activities, rather than commercial in nature. Accordingly, we view and characterize these sales as an extension of our research and development activities, rather than as standalone revenues.

From 2012 through March 31, 2014, our cumulative research and development expenses for CureXcell were $19.2 million, which is net of $1.0 million that we received from sales of CureXcell to health care professionals in Israel. Our total research and development expenses in the year ended December 31, 2013 and the three months ended March 31, 2014 were $9.3 million and $2.7 million, respectively, which primarily related to the development of CureXcell. We charge all research and development expenses to operations as they are incurred. We expect research and development expenses to increase in the near term.

Research and development expenses consist primarily of costs incurred for our research activities, including:

employee-related expenses for research and development staff, including salaries, benefits and related expenses, including share-based compensation and travel expenses;
expenses incurred under agreements with third parties, including the American Red Cross, MDA, contract research organizations and consultants that conduct quality assurance and regulatory activities and clinical trials;
expenses incurred to design, develop and assess clinical trials;
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other operating costs;
costs associated with development, clinical and preclinical activities and regulatory operations;
costs associated with obtaining and maintaining patents and other intellectual property; and
depreciation of tangible and intangible fixed assets used to develop CureXcell.

The successful development of CureXcell and future product candidates, if any, is highly uncertain. At this time we cannot reasonably estimate the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, or the period, if any, in which material net cash inflows may commence from, CureXcell and future product candidates. This uncertainty is due to numerous risks and uncertainties associated with developing products, including the uncertainty of:

the scope, rate of progress and expense of our research and development activities;
preclinical and clinical trial results and the duration of the trials;
the terms and timing of regulatory approvals and the ability to obtain reimbursement for our product candidates;
our ability to build the manufacturing capacity and have the raw materials necessary to meet the future market demands;
the expense of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

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the ability to commercialize, market and achieve market acceptance.

A change in the outcome of any of these variables with respect to the development of CureXcell or other products that we may develop could result in a significant change in the costs and timing associated with their development. For example, if the FDA, EMA or other regulatory authority were to require us to conduct additional preclinical or clinical studies beyond those which we currently anticipate for the completion of clinical development of CureXcell or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of the clinical development.

General and administrative expenses

Our general and administrative expenses consist principally of:

employee-related expenses for employees other than research and development staff, including salaries, benefits and related expenses, including share-based compensation and travel expenses;
legal and professional fees for auditors and other consulting expenses not related to research and development activities;
costs of office leases, communication and office expenses;
information technology expenses; and
depreciation of tangible fixed assets related to our general and administrative activities.

We expect that our general and administrative expenses will increase in the future as our business expands and we incur additional general and administrative costs associated with being a public company in the United States, including compliance with the Sarbanes-Oxley Act and rules promulgated by the Commission. These public company-related increases will likely include, among other things, costs of additional personnel, additional legal fees, accounting and audit fees, directors’ liability insurance premiums and costs related to investor relations. We have agreed to pay up to $0.65 million in the aggregate to certain of our executive officers for their contribution to (and subject to) the completion of this offering.

Financing income (expenses), net

Financing income (expenses), net, is obtained by subtracting our financing expense from our financing income and adding or subtracting the gain or loss, as applicable, that we have realized due to the revaluation of warrants at fair value and reclassification of outstanding warrants from a liability into equity on our balance sheet. Financing income includes interest income and exchange rate differences and change in fair value of warrants held by investors. Financing expense consists primarily of bank charges and change in fair value of warrants held by investors.

Taxes on income

The standard corporate tax rate in Israel for the 2014 tax year is 26.5%, and was 25.0% for each of the 2013 and 2012 tax years. We do not generate taxable income in Israel, as we have historically incurred operating losses resulting in carry-forward losses for tax purposes totaling $26.4 million as of December 31, 2013. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. In 2013 and the three months ended March 31, 2014, taxes on income also included taxes on income of our U.S. subsidiary, which operates on a cost-plus basis.

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Comparison of the three months ended March 31, 2014 and 2013

The following table summarizes our results of operations for the three months ended March 31, 2014 and 2013.

Three months ended
March 31,
2014
2013
(in thousands)
Operating expenses:
 
 
 
 
 
 
Research and development expenses, net
$
2,697
 
$
1,950
 
General and administrative expenses
 
655
 
 
366
 
Operating loss
 
(3,352
)
 
(2,316
)
Financing income (expense), net
 
(5
)
 
422
 
Taxes on income
 
(40
)
 
 
Loss for the year
$
(3,397
)
$
(1,894
)

Operating expenses

Research and development expenses, net

Research and development expenses, net increased by $0.7 million, or 38%, to $2.7 million in the three months ended March 31, 2014 from $2.0 million in the three months ended March 31, 2013. The increase was primarily due to progress in the development of CureXcell, including increased expenditures due to the higher recruitment rate for our first Phase 3 trial, clinical trial protocol design changes and increased headcount of employees focused on clinical operations.

General and administrative expenses

General and administrative expenses increased by $0.3 million, or 79%, to $0.7 million in the three months ended March 31, 2014 from $0.4 million in the three months ended March 31, 2013. The increase primarily related to increased stock-based compensation expenses and changes in headcount of employees due to the progress in the development of CureXcell.

Financing income (expense), net

Financing income (expense), net decreased by $0.4 million to a small amount of expense in the three months ended March 31, 2014 from $0.4 million of income in the three months ended March 31, 2013, primarily due to exchange rate differences.

Loss for the year

Due to the cumulative effect of the factors described above, the most significant of which were the increase in our operating expenses, particularly due to increased research and development expenses, our net loss increased by $1.5 million, or 79%, to $3.4 million in the three months ended March 31, 2014 from $1.9 million in the three months ended March 31, 2013.

Taxes on income

In the three months ended March 31, 2014, we incurred a small amount of income tax expense due to the implementation of transfer pricing guidelines related to our U.S. subsidiary. We did not incur any taxes on income in the three months ended March 31, 2013.

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Comparison of the years ended December 31, 2013 and 2012

The following table summarizes our results of operations for the years ended December 31, 2013 and 2012.

Year ended
December 31,
2013
2012
(in thousands)
Operating expenses:
 
 
 
 
 
 
Research and development expenses, net
$
9,303
 
$
7,168
 
General and administrative expenses
 
4,567
 
 
1,631
 
Operating loss
 
(13,870
)
 
(8,799
)
Financing income (expense), net
 
(4,305
)
 
1,043
 
Taxes on income
 
(149
)
 
 
Loss for the year
$
(18,324
)
$
(7,756
)

Operating expenses

Research and development expenses, net

Research and development expenses, net increased by $2.1 million, or 30%, to $9.3 million in the year ended December 31, 2013 from $7.2 million in the year ended December 31, 2012. The increase was primarily due to progress in the development of CureXcell, including increased expenditures due to the higher recruitment rate for our first Phase 3 trial, clinical trial protocol design changes and increased headcount of employees focused on clinical operations.

General and administrative expenses

General and administrative expenses increased by $2.9 million, or 180%, to $4.6 million in the year ended December 31, 2013 from $1.6 million in the year ended December 31, 2012. The increase primarily related to increased stock-based compensation expenses and changes in headcount of employees due to the progress in the development of CureXcell.

Financing income (expense), net

Financing income (expense), net decreased by $5.3 million to $4.3 million of expense in the year ended December 31, 2013 from $1.0 million of income in the year ended December 31, 2012. For the year ended December 31, 2013, financing expense, net primarily represented the revaluation of warrants as part the 2013 financing round and for the year ended December 31, 2012, financing income, net primarily represented revaluation of warrants to fair value.

Loss for the year

Due to the cumulative effect of the factors described above, most significant of which were the increase in our operating expenses, particularly due to increased research and development expenses, as well as the other expenses that we recognized, our net loss increased by 136% to $18.3 million in the year ended December 31, 2013 from $7.8 million in the year ended December 31, 2012.

Taxes on income

In the year ended December 31, 2013, we incurred income tax expense of $0.1 million due to the implementation of transfer pricing guidelines related to our U.S. subsidiary. We did not incur any taxes on income in the year ended December 31, 2012.

Liquidity and Capital Resources

To date, we have financed our operations primarily with the net proceeds from private placements of our ordinary and preferred shares and warrants, and to a significantly lesser extent, through a government grant.

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We believe that based on our current business plan, our existing cash, cash equivalents and the net proceeds from this offering will be sufficient to meet our currently anticipated cash requirements through at least the next 12 months.

Cash flows

The following table summarizes our consolidated statement of cash flows for the years ended December 31, 2013 and 2012 and the three months ended March 31, 2014 and 2013.

Year ended
December 31,
Three months ended
March 31,
2013
2012
2014
2013
(in thousands)
Net cash provided by (used in):
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
$
(9,939
)
$
(7,550
)
$
(2,937
)
$
(1,800
)
Investing activities
 
(114
)
 
(136
)
 
(73
)
 
(6
)
Financing activities
 
13,750
 
 
12,294
 
 
 
 
 
Net increase in cash and cash equivalents
$
3,697
 
$
4,608
 
$
(3,010
)
$
(1,806
)

Net cash used in operating activities

The use of cash in all periods reflected primarily our net losses from operations, as adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net income for non-cash items include depreciation and amortization, gain or loss due to revaluation of our outstanding warrants and share-based compensation.

Net cash used in operating activities was $2.9 million in the three months ended March 31, 2014 compared to $1.8 million in the three months ended March 31, 2013. The increase was attributable primarily to an increase in our net loss to $3.4 million in the three months ended March 31, 2014 from $1.9 million in the three months ended March 31, 2013.

Net cash used in operating activities was $9.9 million in the year ended December 31, 2013 compared to $7.6 million in the year ended December 31, 2012. The increase was attributable primarily to the substantial increase in our net loss to $18.3 million in 2013 from $7.8 million in 2012, as offset, in part, by an adjustment due to the non-cash loss that we recorded in 2013 for the revaluation of our outstanding warrants and due to changes in our receivables and payables.

Net cash used in investing activities

The use of cash in investing activities has historically been primarily related to the purchases of property and equipment. Net cash used in investing activities was $0.1 million during each of the years ended December 31, 2013 and December 31, 2012 and $0.1 million and a small amount in the three months ended March 31, 2014 and 2013, respectively, reflecting non-material changes in amounts incurred in purchases of property and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $13.8 million during the year ended December 31, 2013 compared to $12.3 million during the year ended December 31, 2012. The increase was attributable primarily to an increase in the amount of cash proceeds that we raised pursuant to our preferred stock and warrant private placement financing that we consummated mainly with our existing shareholders in the year ended December 31, 2013 relative to the corresponding financing that we consummated in the year ended December 31, 2012. See “—Cash and funding sources.”

Cash and funding sources

Our primary sources of financing in the year ended December 31, 2013 primarily consisted of $14.1 million in proceeds that we raised from the issuance of preferred A shares to certain existing investors. Our primary sources of financing in the year ended December 31, 2012 were comprised of the $11.9 million in proceeds that we raised from the issuance of preferred A shares to certain existing investors and $0.4 million in proceeds from exercise of warrants. Other than lease guarantees, we have no ongoing material financial commitments, such as lines of credit, that we expect will affect our liquidity over the next five years.

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Funding requirements

We believe that our existing cash, cash equivalents and the net proceeds from this offering will be sufficient to meet our currently anticipated cash requirements through at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we currently expect.

Our present and future funding requirements will depend on many factors, including, among other things:

the progress, timing and completion of our Phase 3 clinical trials for CureXcell;
the time and costs involved in obtaining regulatory approval for CureXcell and any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to CureXcell in our clinical studies;
in connection with the anticipated commercialization of CureXcell, costs and time involved in the establishment of our own manufacturing facilities in the United States, Europe and rest of the world;
the amounts we invest in research and development and regulatory approval efforts in order to utilize our technology as a platform to develop regenerative medicine products for other indications; and
the costs involved in filing patent applications and maintaining and enforcing patents or defending against claims or infringements raised by third parties.

For more information as to the risks associated with our future funding needs, see “Risk Factors—Risks Relating to Our Business and Industry—We may need substantial additional capital in the future, which could cause dilution to our existing shareholders, restrict our operations or require us to relinquish rights, and if additional capital is not available, we may have to delay, reduce or cease operations.”

Royalties

Magen David Adom

We expect to pay MDA royalties of 1% of CureXcell net sales outside of Israel, defined as amounts we receive in connection with the marketing, distribution and sales of CureXcell, if and when CureXcell is offered for sale in such countries. For additional discussion of our relationship with MDA, see “Business—Supply and Production.”

Office of the Chief Scientist

We have received a grant as part of our research and development programs approved by the OCS. The requirements and restrictions for such grant are found in the R&D Law. Under the R&D Law, royalties of 3% to 4.5% of the revenues derived from sales of products or services developed in whole or in part using this OCS grant are payable to the Israeli government. The maximum aggregate royalties paid generally cannot exceed 100% of the grant made to us, plus annual interest generally equal to the 12-month LIBOR applicable to dollar deposits, as published on the first business day of each calendar year. The total gross amount of the grant actually received by us from the OCS, including accrued LIBOR interest as of March 31, 2014, totaled $0.8 million. As of March 31, 2014, we had not paid any royalties to the OCS.

In addition to paying any royalty due, we must abide by other restrictions associated with receiving such grant under the R&D Law that continue to apply following repayment to the OCS. These restrictions may impair our ability to outsource manufacturing, engage in change of control transactions or otherwise transfer our know-how outside of Israel by requiring us to obtain the approval of the OCS for certain actions and transactions and pay additional royalties and other amounts to the OCS. In addition, any change of control and any change of ownership of our ordinary shares that would make a non-Israeli citizen or resident an “interested party,” as defined in the R&D Law, requires prior written notice to the OCS. If we fail to comply with the R&D Law, we may be subject to criminal charges.

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Contractual obligations and commitments

Our significant contractual obligations as of December 31, 2013 are summarized in the following table.

Payments due by period
Less than 1
year
Between 1
and 2 years
Between 2
and 5 years
More than 5
years
Total
(in thousands)
Operating lease obligations(1)
$
180
 
$
114
 
$
341
 
$
34
 
$
669
 

(1)Operating lease obligations consist of payments pursuant to lease agreements for office and laboratory facilities and vehicle lease obligations.

The contractual obligations listed in the above table do not include royalties that we may pay to MDA or the OCS based upon future sales of our products as we are unable at this time to estimate the actual amount or timing of these costs that we will incur in the future to these parties. The obligations listed in the table also exclude amounts that we are obligated to pay to our supplier of sterile plastic transfusion and infusion bags, under the supply agreement to which we are party with it. While that agreement requires us to purchase minimum amounts during each year of the six year term of the agreement ending in February 2020, the agreement is terminable by either party upon nine months’ prior written notice without further obligation, and it is therefore not deemed a firm contractual commitment. Based on our past order volume and current expectations for order volume in the foreseeable future, we believe that the minimum annual purchase amount under the agreement is immaterial.

Off-balance Sheet Arrangements

As of the date of this prospectus, we do not have any, and during the periods presented we did not have any, off-balance sheet arrangements.

Quantitative and Qualitative Disclosure about Market Risk

Market risk is the risk of loss related to changes in market prices, including interest rates and foreign exchange rates, of financial instruments that may adversely impact our consolidated financial position, results of operations or cash flows.

Foreign currency exchange risk

The U.S. dollar is our functional and reporting currency. A portion of our expenses are denominated in shekels, accounting for 25%, 20% and 26% of our expenses in the three months ended March 31, 2014 and the years ended December 31, 2013 and 2012, respectively. This exposes us to risk associated with exchange rate fluctuations vis-à-vis the U.S. dollar. See “Risk Factors—Risks Relating to Our Business and Industry—Exchange rate fluctuations between the U.S. dollar and the Israeli shekel, as well as other non-U.S. currencies, may negatively affect our earnings.” Furthermore, we anticipate that a portion of our expenses, principally of salaries and related personnel expenses, will continue to be denominated in shekels.

To the extent the U.S. dollar weakens against the shekel, we will experience a negative impact on our profit margins. A devaluation of the shekel in relation to the U.S. dollar has the effect of reducing the U.S. dollar amount of our expenses or payables that are payable in shekels, unless those expenses or payables are linked to the U.S. dollar. Conversely, any increase in the value of the shekel in relation to the U.S. dollar has the effect of increasing the U.S. dollar value of our unlinked shekel expenses, which would have a negative impact on our profit margins. In 2013, the value of the shekel appreciated in relation to the U.S. dollar by 7.5%, the effect of which was compounded by inflation in Israel, at a rate of 1.8%. In 2012, the value of the shekel appreciated in relation to the U.S. dollar by 2.3%, the effect of which was compounded by inflation in Israel, at the rate of 1.6%.

Because exchange rates between the U.S. dollar and the shekel (as well as between the U.S. dollar and other currencies) fluctuate continuously, such fluctuations have an impact on our results and period-to-period comparisons of our results. The effects of foreign currency re-measurements are reported in our consolidated financial statements of loss.

We do not currently engage in currency hedging activities in order to reduce this currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

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Inflation-related risks

We do not believe that the rate of inflation in Israel has had a material impact on our business to date, however, our costs in Israel will increase if inflation in Israel exceeds the devaluation of the shekel against the U.S. dollar or if the timing of such devaluation lags behind inflation in Israel.

Application of Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with IFRS as issued by the IASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in the notes to our consolidated financial statements appearing elsewhere in this prospectus, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (a) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (b) changes in the estimate could have a material impact on our financial condition or results of operations.

Research and development expenses

Research expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date as of which it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This is generally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of our product candidate, no development expenditures have yet been capitalized. Intellectual property-related costs for patents are part of the expenditure for the research and development projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization.

Share-based compensation

We account for our share-based compensation for employees in accordance with the provisions of IFRS 2 “Share-based Payment,” which requires us to measure the cost of share-based compensation based on the fair value of the award on the grant date.

We selected the Black-Scholes model as the most appropriate method for determining the estimated fair value of our share-based awards. The resulting cost of an equity incentive award is recognized as an expense over the requisite service period of the award, which is usually the vesting period. We recognize compensation expense over the vesting period using the accelerated method pursuant to which each vesting tranche is treated as a separate amortization period from grant date to vest date, and classify these amounts in the consolidated financial statements based on the department to which the related employee reports.

Option Valuations

The determination of the grant date fair value of options using an option pricing model is affected by estimates and assumptions regarding a number of complex and subjective variables. These variables include the expected volatility of our share price over the expected term of the options, share option exercise and cancellation behaviors, risk-free interest rates and expected dividends, which are estimated as follows:

Fair Value of our Ordinary Shares.    Because our shares are not publicly traded, we must estimate the fair value of ordinary shares, as discussed below in “—Valuation of our ordinary shares.”
Volatility.    The expected share price volatility was based on the historical average equity volatility of the ordinary shares of comparable drug companies that are publicly traded.

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Expected Term.    The expected term of options granted represents the period of time that options granted are expected to be outstanding. Since adequate historical experience is not available to provide a reasonable estimate, the expected term is determined based on the midpoint between the available exercise dates (the end of the vesting periods) and the last available exercise date (the contracted expiry date).

Risk-Free Rate.    The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with a term equivalent to the expected life of the options.

Expected Dividend Yield.    We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero.

If any of the assumptions used in the Black-Scholes model change significantly, share-based compensation for future awards may differ materially compared with the awards granted previously.

The following table presents the weighted-average assumptions used to estimate the fair value of options granted to employees on the dates indicated.

August 2013
October 2013
December 2013
April 2014
Expected volatility 129% – 131% 128% – 131% 126% – 128% 126% - 127%
Expected term (in years) 5.2 – 6.7 4.9 – 6.8 5.5 – 7.0 5.5 - 7.0
Risk-free rate 1.83 – 2.36% 1.71 – 2.37% 1.88 – 2.41% 1.85% - 2.28%
Expected dividend yield 0% 0% 0% 0%

The following table presents the grant dates, number of underlying shares and related exercise prices of awards granted to employees and non-employees since January 1, 2012 as well as the estimated fair value of the underlying ordinary shares on the grant date.

Month of grant
Number of shares
subject to
awards granted
Average
exercise
price per share
Estimated fair value
per ordinary share
at grant date
June 2012
 
190
 
$
441.00
 
$
174
 
August 2013
 
12,458
 
$
150.00
 
$
221
 
August 2013
 
6,229
 
$
737.63
 
$
221
 
October 2013
 
560
 
$
150.00
 
$
167
 
December 2013
 
1,217
 
$
150.00
 
$
247
 
April 2014
 
8,046
 
$
469.00
 
$
451
 

Based on the assumed initial public offering price of per share, the midpoint of the price range set forth on the cover page of this prospectus, the intrinsic value of the awards outstanding as of March 31, 2014 was $         million, of which $         million related to vested options and $         million related to unvested options.

Valuation of our ordinary shares

Due to the absence of an active market for our ordinary shares, the fair value of our ordinary shares for purposes of determining the exercise price for award grants was determined in good faith by our management and approved by our board of directors. In connection with preparing our financial statements, our management considered the fair value of our ordinary shares based on a number of objective and subjective factors consistent with the methodologies outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, referred to as the AICPA Practice Aid.

We have set out below the application of the above methodologies with respect to the value of our ordinary shares as of each grant date set forth below.

The valuation of our ordinary shares requires us to make highly complex and subjective estimates because our ordinary shares are not publicly traded. We will not need these estimates to determine the fair value of new ordinary share-based compensation awards once our underlying ordinary shares begin trading publicly.

August 2013.    We determined that the fair value of our ordinary shares was $221 per share. This determination of fair value is supported by the third-party valuation prepared in April 2014 with respect to the value of our ordinary shares as of the grant date. For the purpose of that valuation, we used an options pricing model and then estimated

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our implied discount rate of 36% taking into account the likelihood of positive FDA feedback regarding our clinical trials. In addition, it was assumed that no material events had happened between the July 2013 investment round and the grant date.

October 2013.    We determined that the fair value of our ordinary shares was $167 per share. This determination of fair value is supported by the third-party valuation prepared in April 2014 with respect to the value of our ordinary shares as of the grant date. For the purpose of that valuation, we used the price per share of $221 mentioned above (based on the assumption that no material events had happened between the July 2013 investment round and the grant date), and applied an updated discount for lack of marketability of 32% because the August 2013 options were granted to a major stakeholder. Major stakeholders have access to exit markets that minor stakeholders do not, thus they do not have to wait for a liquidity event to realize value from their shares. Hence, equity interests held by major stakeholders are considered to be marketable or to exhibit shorter periods of lack of marketability. Accordingly, we reached a value of $167 per share.

December 2013.    We determined that the fair value of our ordinary shares was $247 per share. This determination of fair value is supported by the third-party valuation prepared in April 2014 with respect to the value of our ordinary shares as of the grant date. For the purpose of that valuation, we applied updated assumptions, including lower research and development expenses, net and reduced time to potential marketing approval, based on our correspondence with the FDA related to our clinical trials.

April 2014.    We determined that the fair value of our ordinary shares was $451 per share. This determination of fair value is supported by the third-party valuation prepared in April 2014 with respect to the value of our ordinary shares as of the grant date. For purposes of that valuation, we applied the same assumptions as were applied for the December 2013 valuation, only we assumed a higher probability of an initial public offering.

Impairment of non-financial assets

The intangible assets are reviewed for impairment at each reporting date until they begin generating net cash inflows and subsequently whenever there is an indication that the asset may be impaired. We evaluate the need to record an impairment of the carrying amount of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs and is calculated based on the projected cash flows that will be generated by the cash generating unit.

An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. Reversal of an impairment loss, as above, may not increase the value above the lower of (i) the carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the asset in prior years, and (ii) its recoverable amount.

Recent Accounting Pronouncements

There are no IFRS standards as issued by the IASB or interpretations issued by the IFRS interpretations committee (e.g., IFRS 10, 11, 12, 13 and IAS 19R) that are effective for the first time for the financial year beginning on or after January 1, 2013 that would be expected to have a material impact on our financial position.

JOBS Act Exemptions

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards. We have not elected to avail ourselves of an exemption. This election is irrevocable.

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BUSINESS

Overview

We are a regenerative medicine company focused on developing, manufacturing and commercializing novel cell therapy products to address unmet needs in the treatment of chronic and other hard-to-heal wounds. Our product candidate, CureXcell, is an AWC therapy to treat such wounds by injecting living human white blood cells that have been activated to facilitate the healing process. CureXcell is currently in two pivotal, Phase 3, double-blind clinical trials targeting a broad indication for the treatment of DFUs and VLUs. We anticipate results from our DFU clinical trial and interim data from our VLU clinical trial in the second half of 2015. We expect to submit our BLA to the FDA in late 2016. We also intend to pursue marketing authorization in Europe with the EMA. We already hold product approval for CureXcell as a medical device in Israel for the treatment of chronic and other hard-to-heal wounds, and have effectively and safely treated more than 5,000 patients in commercial or clinical study settings in Israel. To support our development and manufacturing initiatives for CureXcell, we have established operations in Philadelphia, Pennsylvania in the United States and the Tel Aviv region in Israel.

CureXcell has consistently demonstrated efficacy and safety, with efficacy having served as a measured outcome in all nine of CureXcell’s completed clinical studies and safety also having served as a measured outcome in six of these studies. For example, in a 131-patient post-marketing trial conducted in Israel and completed in 2011, CureXcell achieved full closure of hard-to-heal wounds in approximately 71% of patients in a study with a challenging patient population. In addition to clinical data, our technologies have been presented in several peer-reviewed publications, and CureXcell has support from key opinion leaders, or KOLs, in the wound care field. Based on nearly 15 years of clinical data and experience, we believe CureXcell provides patients and physicians significant clinical benefits.

CureXcell is an injectable suspension of living human white blood cells, including macrophages, neutrophils and lymphocytes, that are crucial to initiating, promoting and completing the process of cellular regeneration and wound healing. We use our proprietary cell activation technology to trigger these cells to release growth factors and other biochemical factors that improve the healing environment in the wound bed and stimulate wound closure. We source white blood cells from fully-screened, healthy volunteer blood donors through established relationships with blood banks, including the American Red Cross. CureXcell is an easy to administer, ready-to-use, monthly therapy. A physician draws CureXcell from its package using a standard syringe for superficial injection into a patient's wound. Based on our experience in Israel and clinical trials, a typical course of CureXcell treatment involves injection applications administered once per month for three months to achieve complete wound closure.

Through CureXcell and our proprietary cell based technology, we intend to target a significant unmet market opportunity with a large patient population that imposes a financial burden on healthcare systems. Chronic and other hard-to-heal wounds represent a $25 billion burden on the U.S. healthcare system alone. With our initial focus on the treatment of patients with hard-to-heal DFUs and VLUs, we expect to target a market of approximately $5.3 billion worldwide with a patient population of more than 1.7 million in the United States and Europe. We believe CureXcell will offer patients and physicians a highly efficacious, safe and easy-to-use therapy to treat these wounds.

Our Market Opportunity

Chronic and other hard-to-heal wounds, which are wounds that do not close within four weeks following the use of conventional medical treatment, represent a significant global market opportunity and a substantial unmet medical need. In many cases, these wounds take several months to heal and, in some cases, never heal. Patients with hard-to-heal DFUs and VLUs are initially treated in either a primary care setting or an emergency room and, if the wound cannot be treated at these locations, patients are then referred to a wound care center, vascular surgeon, orthopedic surgeon or podiatrist. According to the research firm The Advisory Board Company, there are currently over 1,500 wound care centers in the United States treating such patients.

Diabetic Foot Ulcers

Diabetes is a chronic, life-threatening disease with no known cure. According to the International Diabetes Foundation, or IDF, the worldwide prevalence of diabetes was approximately 380 million in 2013 and is expected to grow to approximately 590 million by 2035, due in part to an aging population and the rising incidence of obesity. In the United States alone, the IDF estimated that approximately 25 million people, or approximately 11% of the adult population, had diabetes in 2013.

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If left untreated or mismanaged, diabetes can cause an increase in blood glucose levels, which in turn can lead to a reduction in blood flow to the feet and nerve damage that can cause patients to lose sensation in their feet. This loss of sensation may prevent these patients from noticing injuries to the feet that can develop into very difficult to heal open sores or ulcers. In the United States, 3.5% of the diabetic patients, or approximately 0.9 million people, develop DFUs every year, making DFUs one of the most significant, prevalent and recurring co-morbidities of diabetes. Unhealed DFUs can lead to amputation, significant disability or potentially death.

Venous Leg Ulcers

Chronic venous insufficiency, or the inability of blood vessels in the leg to properly return blood to the heart, varicose veins and chronic venous hypertension can result in reduced blood flow and pooling of blood in the legs. This can lead to fluid leakage into surrounding tissue, swelling, increased pressure on the veins and eventually the formation of VLUs. The risk of VLUs can be increased by heart disease and other vascular diseases, blood clots, obesity, smoking, lack of physical activity or work that requires many hours of standing. These slow-to-heal ulcers usually form on the sides of the lower leg, above the ankle and below the knee, and often recur if preventative steps are not taken. In the United States and Europe, VLUs affect more than 2.2 million people annually. VLUs can have a dramatic impact on a patient's quality of life due to pain, odor and reduced mobility.

The Wound Healing Process

The normal wound healing process is a well-orchestrated, complex and interlinked series of phases in which cell interactions, growth factors and other biochemical factors mediated by white blood cells coordinate to restore function and rebuild damaged tissue. White blood cells are a major, widely dispersed cell population and the presence of activated white blood cells, such as macrophages, neutrophils and lymphocytes, at the wound surface is critical to maximizing a wound's healing potential. Although wound healing occurs in a continuous, integrated manner, the overall process can be divided into three phases.

Inflammation (days 1-4) – After a wound develops, inflammatory mediators are released and cause blood vessels adjacent to the injured area to become more permeable leading to localized heat, swelling and discomfort. The wound produces straw colored liquid that bathes the wound with nutrients, actively cleanses the wound surface and facilitates healing by neutrophils (which clean the wound) and macrophages (which produce a variety of substances that regulate and promote healing). An individual's ability to heal a wound is influenced by a number of systemic factors, such as age, co-morbidities and lifestyle as well as conditions at the wound site, such the quality of blood circulation.
Proliferation (days 4-21) – A decrease in wound size is achieved by a combination of the physiological processes of filling of the wound (granulation), reduction in wound size (contraction), and covering of the wound with skin (epithelialization). During granulation, new tissue forms while macrophages and lymphocytes produce a variety of substances that stimulate new blood vessel formation and recruit fibroblasts to the site. Fibroblasts are a type of cell that synthesizes the extracellular matrix and collagen fibers that form a scaffold for new tissue. After tissue production, fibroblasts congregate around the edge of the wound and work to pull the wound's edges together which plays a significant part in the healing of large, open wounds. The regeneration of skin cells across the wound surface occurs during the final stage of proliferation.
Remodeling (day 21-year 2) – Remodeling of scar tissue is stimulated by macrophages and results in the reorganization of collagen fibers to maximize the strength of the wound area over time.

In healthy individuals with no underlying conditions, an acute wound should heal within three weeks with remodeling occurring over the next year or two. Conditions that impair blood circulation and suppress the immune response, such as diabetes or venous insufficiency, can disrupt the wound healing process leaving the wound in the inflammatory stage. CureXcell provides activated living human white blood cells that are crucial to restarting and completing the natural wound healing process in these patients.

Current Standard of Care and Other Advanced Wound Care Products

Initial treatment for DFUs and VLUs focuses on good ulcer care, or GUC. The key components of GUC include:

the optimal control of the underlying disease (for example, medical management of diabetes, vascular insufficiency or elevated venous pressure);

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offloading of DFUs using shoe modification, casts, walkers or other means;
compression therapy for VLUs where the affected limb is wrapped with elastic bandages or support stockings to reduce swelling;
local wound care, including the cleaning and removal of non-viable tissue (referred to as debridement) and application of wound dressings or bandages;
the prevention and control of wound infection, including through the use of antibiotics; and
ensuring the limb has adequate blood circulation.

After failing to respond to GUC for four weeks, DFUs or VLUs are considered hard-to-heal, at which point AWC therapies are often administered.

Currently, there are a number of commercially available AWC products for the treatment of chronic and other hard-to-heal wounds, including, but not limited to, NPWT, skin substitutes, amniotic allografts, hyperbaric oxygen therapy and other treatment approaches.

Negative pressure wound therapy
NPWT (such as products marketed by Kinetic Concepts, Inc. and Smith & Nephew plc), which is used to treat DFUs, is a topical treatment that promotes wound healing by applying a vacuum, continuously or intermittently (often daily or a number of times each week), through a special sealed dressing to draw fluid out from the wound and increase blood flow to the wound area.
This therapy can be very demanding for patients, often requiring frequent use over two to three months to achieve wound closure, which is a significant burden in both therapy time and physician costs.
Skin substitutes
Skin substitutes (such as Apligraf and Dermagraft, both marketed by Organogenesis Inc.) are swatches of tissue derived from human or animal materials that are typically applied to, or draped over, a wound.
These products generally require weekly treatment over the course of one to two months. Moreover, because many of these products utilize non-human biological material, such as animal collagen, these products are not broadly approved for use in Europe due to concerns there regarding the use of non-human biologic materials. In addition, depending on the size of the wound, there is costly product wastage due to the fixed size of the tissue swatches.
Amniotic allografts
Amniotic allografts (such as EpiFix, marketed by MiMedx Group, Inc., and Grafix, marketed by Osiris Therapeutics, Inc.) are products made from human placenta, but they do not contain living cells, other than Grafix, which contains living stem cells.
Many of these products obtained FDA approval under the human cell and tissue products, or HCT/P, regulatory pathway, which does not require rigorous clinical data and FDA supervised clinical trials. As a result, many of these products have not demonstrated meaningful clinical benefits, which often reduces their adoption by providers and reimbursement by payers.
Hyperbaric oxygen therapy
Hyperbaric oxygen therapy, which is used to treat DFUs, involves exposing the wound to an oxygen-rich environment under air pressure.
We are not aware of any randomized placebo controlled trials that support the clinical efficacy of expensive therapy.
Other treatment approaches
Other treatment approaches include acellular non-human skin substitutes and growth factors (such as Oasis and Regranex, respectively, both of which are marketed by Smith & Nephew plc).

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Our Solution

Our novel approach is to treat and close chronic and other hard-to-heal wounds by injecting the human body’s own wound healing and regenerative components directly into the wound itself. CureXcell is a unique combination of living human white blood cells that have been activated to facilitate the healing process and stimulate wound closure. CureXcell addresses each phase of healing in the impaired wound, including the production of growth factors and other biochemical factors involved in fibroblast activation, cell migration and extracellular matrix production, stimulating the body’s natural healing process. Our delivery method of direct superficial injection into the chronic wound allows for precise delivery of the cells into the defective wound tissue where they can be most effective. This is in contrast to other AWC products that are applied to the surface of the chronic wound and thus do not come into direct contact with the impaired wound cells below the surface layer. We believe the clinically differentiated profile of CureXcell will be attractive to patients and healthcare providers to treat hard-to-heal DFUs and VLUs without the drawbacks of currently available AWC products.

In order to produce CureXcell, we source white blood cells from fully-screened, healthy volunteer blood donors through established relationships with blood banks. We then activate the white blood cells through our proprietary hypo-osmotic shock cell activation technology, a process in which we change the concentration and pH of the suspension surrounding the cells. Once activated, these cells undergo an increase in gene expression that results in an increase in the cells' secretion of numerous growth factors and other biochemical factors. The activated suspension is then placed into sterile packaging, akin to a blood bag. At the wound care clinic or other treatment site, a physician draws CureXcell from its package using a standard syringe for superficial injection into a patient's wound. The biochemical factors found in CureXcell stimulate the normal wound healing process to begin and recruit other necessary cells already found in the wound bed, to facilitate the healing process. Based on our experience in Israel and clinical trials, a typical course of CureXcell treatment involves injection applications administered once per month for three months to achieve complete wound closure.

CureXcell has been approved as a medical device in Israel and has been utilized in more than 5,000 patients in commercial or clinical study settings with consistent results. CureXcell has consistently demonstrated efficacy and safety, with efficacy having served as a measured outcome in all nine of CureXcell’s completed clinical studies and safety also having served as a measured outcome in six of these studies. Notably, in a 131-patient post-marketing trial we conducted in Israel and completed in 2011, CureXcell achieved complete wound closure in approximately 71% of hard-to-heal wounds. Patient inclusion criteria in this study were very broad, and permitted patients with large ulcers, poor circulation and co-morbidities, such as infection and amputation, to be included, while similar patients were excluded from many of the trials of other AWC products.

Comparison of Published Clinical Results of Hard-To-Heal and Chronic AWC Products

The first chart below compares the wound closure rate CureXcell achieved in a post-marketing clinical trial to the published wound closure rates reported for certain AWC products in the largest of their respective published clinical trials for DFUs. While these comparisons are not based on head-to-head studies of these AWC therapies and as a result the wound closure rates derived from these separate clinical trials may not be comparable and would not form a basis for marketing CureXcell, if approved, we believe these data suggest that CureXcell has the potential to achieve a high wound closure rate even though our trial had the broadest inclusion criteria among the studies presented. Specifically, our CureXcell trial included patients that would be expected to have the slowest healing rates, such as those with large ulcers, poor circulation and co-morbidities such as infection and amputation, while the trials of other AWC products excluded such patients. CureXcell closed approximately 68% of the wounds in this more challenging patient population over an average of 12 weeks and 2.9 treatments. CureXcell's clinical trial did not include a sham treatment arm because CureXcell was already approved in Israel, which was the site of the trial. To assess the statistical significance of the trial data, we used an assumed sham closure rate, or AR, of 36%. We chose what we believe is a higher AR than would have been observed based on the patient inclusion criteria in our trial because it results in a more rigorous test of statistical significance. Despite using this more demanding AR, we still

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achieved statistically significant results as shown in the table below. We believe that had this trial included a sham treatment arm, the actual sham rate would have been lower than the AR. Based on our review of various published clinical trial reports for AWC therapies, we believe our actual sham rate would have been closer to that of three trials conducted by others that had patient inclusion criteria most comparable to those used in our trial; those trials observed sham closure rates between 15% and 20%.

This comparison does not reflect a head-to-head trial. Please see “Risk Factors—Risks Relating to Our Business and Industry—We may be limited in the promotional claims we can make and may not be able to use information about our competitors to promote or market CureXcell without incurring significant regulatory or enforcement risks” for additional information.
AR*This bar represents an assumed sham closure rate, or AR, of 36%. This trial did not include a sham treatment arm because CureXcell was already approved in Israel, which was the site of the trial. We chose what we believe is a higher AR than what would be expected based on the patient inclusion criteria in our trial because the higher AR results in a more rigorous test of statistical significance.
RE*The Oasis trial’s control patients were treated with Regranex. This bar represents the percentage of Regranex-treated patients who had complete wound closure after 12 weeks of treatment in this trial.

This comparison does not reflect a head-to-head trial. Please see “Risk Factors—Risks Relating to Our Business and Industry—We may be limited in the promotional claims we can make and may not be able to use information about our competitors to promote or market CureXcell without incurring significant regulatory or enforcement risks” for additional information.
(1)Data Not Available: This portion of the trial’s complete results and protocol has not been formally published.
(2)As NPWT is continuously applied and the trial patient’s dressings were changed no fewer than three times per week, the chart assumes three treatments per week.
(3)As the clinician had discretion whether to reapply Oasis at weekly clinic visits, the chart assumes one treatment per week.

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This comparison does not reflect a head-to-head trial. Please see “Risk Factors—Risks Relating to Our Business and Industry—We may be limited in the promotional claims we can make and may not be able to use information about our competitors to promote or market CureXcell without incurring significant regulatory or enforcement risks” for additional information.
(1)The CureXcell study was a post-marketing, observational, open-label single-arm trial conducted in Israel in 2010 and 2011; 131 patients were enrolled in the study, 58 of whom were treated for DFUs. The NPWT study was a post-marketing, multicenter, randomized, controlled trial studying DFUs with results published in 2008. The Apligraf study was a pivotal, Phase 3 randomized, controlled, prospective, multicenter trial studying noninfected neuropathic DFUs with results published in 2001. The Dermagraft study was a pivotal, Phase 3 randomized, controlled, prospective, single blind, multicenter trial studying chronic DFUs with results published in 2003. The Oasis study was a randomized, controlled, prospective, multicenter trial comparing Oasis wound matrix to Regranex gel for diabetic ulcers with results published in 2005. The Grafix study was a randomized, controlled, single blind multicenter trial for the treatment of chronic DFUs with an overview of results published by Osiris Therapeutics, Inc. in 2013. The GraftJacket study was a randomized, controlled, prospective, multicenter study comparing the proportion of healed DFUs and mean healing time between patients receiving acellular matrix and standard of care therapies with results published in 2009. The Regranex study was a Phase 3 randomized, placebo controlled, double-blind, multicenter trial for patients with chronic neuropathic diabetic ulcers with results published in 1998.
(2)ABI, or ankle-brachial index, is the ratio of the systolic blood pressure in a patient's ankle to the systolic blood pressure in the patient's arm. Lower measurements of ABI generally indicate poorer blood circulation in a patient's leg, with corresponding adverse implications for wound healing.
(3)Data Not Available: The published results did not include an ABI lower limit; however, to ensure that arterial circulation was adequate, other measurements were taken.
(4)Any infection or cellulitis present before debridement had to be well-controlled before randomization and patients were excluded if osteomyelitis affecting the area of the target ulcer was present.
(5)“P-value” (relative to placebo) means the probability that no true difference exists between the rates for wound closure for the relevant patient group and the control group based on the observed results. For example, a “P-value” of less than 0.0001 indicates that there is a less than 1 in 10,000 chance that the rates in the treatment group and the observed result in the control group are the same. A “P-value” equal or less than 0.05 is generally accepted as meaning a given difference is statistically significant.
(6)To assess the statistical significance of the trial data, we used an assumed sham closure rate, or AR, of 36%. This trial did not include a sham treatment arm because CureXcell was already approved in Israel, which was the site of the trial. We chose what we believe is a higher AR than what would be expected based on the patient inclusion criteria in our trial because it results in a more rigorous statistical analysis. Using this more demanding AR, we still achieved statistically significant results as shown in the table above.

We believe the clinical efficacy of CureXcell and its ease-of-therapy and lower cost to achieve wound closure will drive adoption if CureXcell is approved in the United States and Europe. CureXcell is a once per month injection application and requires limited product preparation. This is in contrast to other AWC therapies that require daily or weekly applications and often significant product preparation. Accordingly, we believe CureXcell is easier for physicians to deliver and supports patient compliance. In addition, we can customize the CureXcell dosage size to different wound sizes and avoid the significant product waste that can be associated with other AWC products, especially skin substitutes. We believe that these features will position CureXcell to become a frontline AWC treatment for hard-to-heal DFUs and VLUs while also enjoying favorable reimbursement policies from payers. Accordingly, we believe the product will bring advantages to all primary stakeholders in the wound care space, namely patients, physicians and payers.

Our Competitive Strengths

A significant body of existing clinical and safety data supports CureXcell.    CureXcell has been approved as a medical device for the treatment of chronic and other hard-to-heal wounds by the Israeli Ministry of Health and is currently in two pivotal, Phase 3, double-blind clinical trials for the treatment of DFUs and VLUs. Based on our previous clinical trials in which safety and efficacy were measured outcomes and our practical clinical experience in

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Israel, we believe CureXcell has demonstrated a strong safety and efficacy profile for the treatment of hard-to-heal wounds, and we believe this positions us favorably for our current Phase 3 clinical trials. CureXcell has been the subject of nine clinical studies and has been used to treat more than 5,000 patients in commercial or clinical study settings suffering from a variety of hard-to-heal wounds, including DFUs, VLUs, pressure ulcers and post-surgical wounds. With respect to safety, we have observed 3% product-related SAEs in patients treated with CureXcell in its six clinical trials in which safety was one of the measured outcomes. Such product-related SAEs were identified and classified as such solely by independent investigators in each clinical trial. Moreover, as a part of our ongoing Phase 3 study in DFUs, CureXcell has undergone five FDA required, bi-annual Data Safety Monitoring Board, or DSMB, reviews for which CureXcell has achieved the highest possible safety rating based on the DSMB’s review of the unblinded clinical trial data. With regards to efficacy as a measured outcome, CureXcell has been used to treat effectively a wide variety of hard-to-heal wounds in nine clinical trials. In its most recently completed clinical trial, a post-marketing trial in Israel involving 131 patients where efficacy was a measured outcome, CureXcell achieved full closure in 68.4% of DFUs and 81.4% of VLUs, in a challenging patient population. We believe the very broad patient inclusion criteria in this study, which is replicated in our current Phase 3 clinical trials, is unique and highlights CureXcell’s high efficacy and capability to treat a wide spectrum of hard-to-heal DFUs and VLUs. Furthermore, based on its June 2014 review of interim efficacy data in our ongoing Phase 3 study in DFUs, the DSMB recommend that we continue the study.

CureXcell is a unique solution for a large addressable need in the worldwide market.    With our initial focus on the treatment of patients with hard-to-heal DFUs and VLUs, we expect to target a market of approximately $5.3 billion worldwide with a patient population of more than 1.7 million in the United States and Europe. We believe that beyond its demonstrated ability to close wounds effectively, CureXcell is well positioned to address this broad market in several other ways, including its convenience for physicians and patients, its natural composition and, once approved and commercialized in the United States and Europe, its competitive cost. In terms of convenience, CureXcell is a monthly injection application that requires no preparation other than a syringe draw for delivery. With respect to product composition, CureXcell is a biological product made up of living human white blood cells, activated through our proprietary cell activation technology. Our delivery methodology of direct superficial injection into the chronic wound allows for precise delivery of the cells into the defective wound tissue where they can be most effective. This is in contrast to other AWC products that are applied to the surface and thus do not come in direct contact with the impaired wound cells below the surface layer. Unlike some other AWC products, including certain skin substitutes, CureXcell contains no animal-sourced materials. In certain geographies, like the European Union, significant concerns have restricted the use of such non-human biological materials. We believe this provides CureXcell a meaningful opportunity should it enter this large market. Regarding cost of therapy, other AWC therapies for DFUs and VLUs can be expensive despite many limitations for a course of therapy. Given all these attributes, we believe CureXcell will be attractive to patients, physicians, major regulatory authorities and payers and, therefore, has meaningful potential to penetrate the worldwide DFU and VLU market.

Our biological regulatory strategy may provide us with a broad BLA label that, in conjunction with our intellectual property and know-how, will provide significant barriers to entry.    Our two pivotal, Phase 3, double-blind clinical trials for DFUs and VLUs will involve approximately 530 patients. In late 2016, we intend to submit a BLA for a broad label for the treatment of DFUs and VLUs. We believe we are the first company to pursue a BLA pathway for a living human cell based therapy to treat DFUs and VLUs. Furthermore, we believe we are conducting the most robust clinical trials ever executed for a treatment for DFUs and VLUs and are including patients with a broad range of wound sizes, wound severity and co-morbid conditions. The lack of a generic pathway for potential future products to compete against a BLA approved product, like CureXcell if approved, represents a significant competitive advantage. In addition, we have substantial proprietary technology surrounding CureXcell, including substantial know-how and also patents in the United States, the European Union and Australia with respect to our process for producing activated white blood cells.

Established, reproducible, proprietary manufacturing capability in place to meet future market demands.    To support our current U.S. clinical development initiatives and commercial manufacturing in Israel for CureXcell, we have established manufacturing operations in the United States and Israel. While sophisticated, our proprietary manufacturing process for CureXcell is highly reproducible, only requiring modest amounts of raw materials and the sourcing of white blood cells through relationships with highly recognized blood banks such as the American Red Cross. For example, one unit of whole blood from our blood bank partners is sufficient to produce enough CureXcell for 30 injection applications for wounds of an average size. If we receive marketing approval in the United States, we anticipate initially requiring two U.S. manufacturing facilities to serve this market; similarly,

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upon approval in Europe, we expect to initially require one European facility. Based on our experience, we estimate the capital requirements for each new facility would be less than $10 million. This low capital investment will enable us to build any needed manufacturing capacity next to major blood collection centers and shorten the supply cycle to meet future market demands.

Highly experienced management team.    Our management team is led by our President and Chief Executive Officer, Nissim Mashiach, who has decades of industry and medical experience and a history of success in the biopharmaceutical industry. Mr. Mashiach successfully led the development and commercialization of EVITHROM and EVICEL with Omrix Biopharmaceuticals, Inc., taking the company public and ultimately selling it to Johnson & Johnson for $483 million in 2008. Our Vice President of Global Medical Affairs, Dr. Michael Molyneaux, has over 15 years of clinical experience as a practicing physician and most recently acted as full-time medical director at the Center for Advanced Wound Healing and Hyperbaric Oxygen Therapy at Passavant Area Hospital in Illinois. Dr. Molyneaux has been actively engaged in clinical trial research for the past ten years, serving as a Principal Investigator for numerous wound care companies. Our Chief Financial Officer, Shai Lankry, has over ten years of experience in finance and accounting and most recently served as Biologics Cluster Finance Director at a division of Johnson & Johnson, where he managed the finance biologics organization at multiple global sites.

Our Growth Strategy

Achieve regulatory approval for CureXcell and position it as the standard for advanced wound care.    We believe CureXcell provides a highly differentiated and effective solution for AWC. Our key, near-term strategy is to successfully complete our two Phase 3 clinical trials and seek regulatory approval for CureXcell in the United States. We are seeking a broad indication for the treatment of DFUs and VLUs. This broad label approach combined with CureXcell's extensive clinical data, ease-of-use and patient convenience aligns with our long-term strategy to position CureXcell as the standard of care for AWC. We also intend to pursue marketing authorization in Europe.

Commercialize CureXcell, initially in the United States and Europe.    We intend to build our own commercial organization in the United States and Europe after we receive the requisite regulatory approvals. We believe we can build and effectively manage an internal sales force to target leading wound care centers, hospitals and U.S. Veterans Administration health centers. Additionally, we intend to establish our own manufacturing facilities, set pricing and reimbursement in both the United States and Europe, and implement a comprehensive marketing campaign and branding and training programs. In executing this strategy, we will benefit from our statistically significant clinical data indicating the efficacy of CureXcell across DFUs and VLUs in all types of patients, including elderly patients with significant co-morbidities. We will also seek to educate physicians on the ease of preparation and administration of CureXcell, as we believe that this ease-of-use reduces the burden to clinicians and represents significant additional value to the physician. To facilitate a successful launch, we intend to initially target geographic regions having a high prevalence of DFUs and VLUs.

Expand our geographic coverage and penetrate new markets.    We also intend to apply CureXcell's clinical and regulatory experience to maximize the value of CureXcell outside of the United States and Europe. Upon approval in the United States and Europe, we believe that CureXcell's clinical testing, proven safety profile, simplified patient compliance requirements and ability to treat infected, hard-to-heal wounds will make it an attractive product for approval in international markets with well-developed medical systems, such as Eastern Europe, Latin America and certain Asian countries. Upon regulatory approval in such markets, we expect to target these markets through collaborations with local distributors. We also intend to partner with local whole blood cell providers and build manufacturing facilities in these geographies to address market demand.

Establish a platform for the development and commercialization of a broader range of regenerative medicine products.    We believe that we will be able to use our cell activation technology to adjust the concentration of living white blood cells to address different clinical needs and develop a regenerative medicine product platform for non-wound indications in attractive markets. For example, in the second quarter of 2015, we intend to commence a multinational study in the United States and Europe to test the safety and efficacy of a product using our technology for anti-reabsorbtive medication induced osteonecrosis of the jaw, or ONJ, a rare condition which occurs when the blood flow to the jaw bone is compromised resulting in bone death. We believe that we can address this disease with our technology and intend to seek an orphan drug designation for this niche indication. We have also begun in vitro and in vivo studies to refine our understanding of the mechanism of action of our cell activation technology, which we expect to conclude in the fourth quarter of 2014. Based on these studies, we expect to determine whether CureXcell may have potential applications in plastic surgery settings to more rapidly promote the wound healing process as well as in orthopedics and spine treatments.

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CureXcell and its Clinical History

Since its initial development, CureXcell has been tested in a total of 11 clinical studies designed to investigate its safety and efficacy, of which nine have been completed and two are still ongoing. CureXcell has been approved for treatment of chronic wounds by the Israeli Ministry of Health as a medical device and has been included in the Israeli health basket of reimbursable medications since 2011, enabling use of CureXcell for treatment of various types of chronic wounds throughout the country. Since 2000, more than 5,000 patients suffering from chronic and other hard-to-heal wounds were treated with CureXcell either in commercial or clinical study settings in Israel.

Our company was founded in 2008 with the goal of further developing and commercializing CureXcell and its underlying technology. After in-licensing the intellectual property underlying the development and manufacturing of CureXcell, in 2011, we submitted an investigational new drug application, or IND, to the FDA based on the conducted clinical studies of CureXcell’s safety and efficacy. Additionally, the FDA considered the results from our completed clinical trials and as these studies showed a good safety and efficacy profile for CureXcell when considered together, the FDA allowed us to proceed directly to Phase 3 trials without completing Phase 1 and 2 trials. We have not sought, and do not intend to seek, a Special Protocol Assessment from the FDA.

CureXcell is currently in two pivotal Phase 3, double-blind clinical trials targeting a broad indication for the treatment of DFUs and VLUs. We anticipate results from our DFU clinical trial and interim data from our VLU clinical trial in the second half of 2015. We expect to submit our BLA to the FDA in late 2016. We also intend to pursue marketing authorization in Europe with the EMA. In August 2013, we retained a CRO to carry out our clinical trials and implement the trial process planned by our clinical trials team.

CureXcell Current and Planned Phase 3 Clinical Trials

Pivotal Phase 3 Clinical Trial for Treatment of DFUs

We began this study in September 2011 and expect it to conclude in the second half of 2015. It is composed of two main phases: a core double-blind treatment phase and a follow-up phase. To ensure the blinding of the core double-blind phase, the study treatment is administered by an unblinded treatment administrator, who is not involved with any other aspects of the study, including patient assessments (except those related to treatment administration); both patient and evaluator remain blinded.

The study will include a total of 280 enrolled patients who will be allocated to either treatment with CureXcell or a control in combination with GUC based on a 2:1 assignment ratio, respectively. Up to 30 wound centers located primarily in the United States, with additional centers in Canada and Israel, are enrolled as sites in the study.

The primary efficacy endpoint is the proportion of patients with complete closure of their target ulcer at any time during the core double-blind treatment period, with sustained complete closure for four additional weeks. The target ulcer is the largest lower extremity ulcer at baseline that meets all entry criteria, provided it has not decreased in area more than 25% subsequent to patient screening. For purposes of this clinical trial, complete closure is defined as the achievement of 100% ulcer re-epithelialization with no drainage present and no dressing required.

The secondary efficacy endpoints include the following:

proportion of patients with at least 50% closure of target ulcer during the core double-blind treatment phase;
time to complete closure of the target ulcer during the core double-blind treatment phase with sustained complete closure for four additional weeks;
proportion of patients whose target ulcer completely closed during the core double-blind treatment phase and remained closed after twelve weeks;
proportion of patients with certain negative ulcer-related outcomes; and
proportion of patients whose target ulcer recurred during the follow-up period after achieving closure during the core double-blind treatment phase.

As of March 31, 2014, a total of 200 patients have been enrolled into the study. An independent data monitoring committee last met in June 2014 to review the patient data and the committee recommended that the study continue unmodified.

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Phase 3 Clinical Trial for Treatment of VLUs

We began this study in April 2014, expect to complete an interim analysis in the second half of 2015, and expect the study to conclude in the second half of 2016. This study has two main phases: a core double-blind treatment phase and a follow-up phase. To ensure the blinding of the core double-blind phase, the study treatment will be administered by an unblinded treatment administrator, who will not be involved with any other aspects of the study, including patient assessments (except those related to treatment administration); both patient and evaluator will remain blinded.

The study will include a total of 252 enrolled patients who will be allocated to either treatment with CureXcell or a control in combination with GUC. We plan to enroll up to 30 wound centers, located in the United States, in the study.

The primary efficacy endpoint is time to complete closure of the target ulcer. For purposes of this clinical trial, complete closure of target ulcer is defined as 100% re-epithelialization without drainage or dressing requirements. Complete closure is confirmed at consecutive study visits two weeks apart. The time of complete closure will be the visit when 100% re-epithelialization without drainage or dressing requirements was first confirmed. The final confirmation of complete closure will occur two weeks after the first confirmation of complete closure.

The secondary efficacy endpoints include the following:

proportion of complete closure of target ulcer within the treatment phase;

percentage change from baseline in target ulcer surface area at the end of the treatment phase;

proportion of complete closure of target ulcer at each visit within the treatment phase;

percentage surface area reduction from baseline, at each visit within the treatment phase;

proportion of target ulcer recurrence, during the follow-up phase;

change in quality of life assessments from baseline; and

reduction in pain from baseline.

Other Ongoing Studies

Mechanism of Action Study

This study seeks to evaluate the effect of CureXcell on wound healing in rats. The study is intended to provide scientific data to clinical and regulatory teams supporting the biological activity of CureXcell. It is expected to demonstrate CureXcell’s effects on multiple aspects of wound repair, including inflammation, cytokines, angiogenesis and other steps of healing.

CureXcell Completed Clinical Studies

Study
Year
Design
Endpoint
Number
Treated
(CureXcell
/control)
CureXcell
Results(a)
Control
Results(a)
Post-marketing multi-center study to define procedures for the use in a community setting
2010-11
Observational,
open-label, Phase 4
Full Wound Closure(b)
131/0
70.9%
N/A
Post-marketing multi-center observational study
2009-12
Observational, Phase 4
Adverse Events(b)
70/0
5.7%(c)
N/A
Proof-of-concept study for the treatment of anal fissures
2008-09
Open-label, proof of
concept
Full Wound Closure
5/0
40.0%
N/A

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Study
Year
Design
Endpoint
Number
Treated
(CureXcell
/control)
CureXcell
Results(a)
Control
Results(a)
Prophylaxis of post-sternotomy incision site infection study
2007
Prospective, single-blind,
randomized
Infection Prevention(b)
33/31
97.0%(d)
83.9%(d)
Treatment of wounds with exposed bone study
2006-07
Observational,
open-label, Phase 4
Full Wound Closure
6/0
83.3%
N/A
Hard-to-heal pressure ulcers study
2004-06
Prospective, open-label,
non-randomized, Phase 4
Full Wound Closure(b)
66/38
59.1%
5.3%
Prophylaxis of saphenous vein harvesting incision site infection study
2004-06
Prospective, single-blind,
randomized
Infection Prevention(b)
22/22
100%(d)
72.7%(d)
Infected leg wounds following saphenous vein harvesting study
2000-04
Retrospective,
historically controlled,
non-randomized, Phase 4
Full Wound Closure
95/113
97.9%
85.8%
Deep sternal wound infections study
2000-03
Historically controlled,
retrospective,
non-randomized, Phase 4
Mortality(b)
66/64
3.0%(e)
29.7%(e)

(a)Results reported as percent of healed patients unless otherwise noted.
(b)Included safety as a measured outcome.
(c)Results reported as percent of patients experiencing product-related Serious Adverse Events, or SAEs.
(d)Results reported as percent of uninfected patients.
(e)Results reported as percent of patient mortality; none of these were associated with the treatment.

Post-Marketing Multi-Center Study to Define Procedures for Use in a Community Setting.    This study was a post-marketing, observational, open-label single-arm study conducted in Israel in 2010 and 2011. In this study, 131 patients with chronic wounds, including DFUs, pressure ulcers, VLUs and post-operative wounds, with no improvement for at least three weeks were treated with CureXcell. The patients enrolled into this study had significant co-morbid medical conditions and long-standing histories of diabetes or vascular disease. These patients were studied for complete wound closure or for a period of 24 weeks.

Complete wound closure was observed in 68.5% and 70.9% of treated patients at 24 weeks and at study completion, respectively. The wound type with the highest rate of wound closure at 24 weeks was VLUs, with a closure rate of 81.4%, followed by post-operative wounds, with a closure rate of 70.0%, and diabetic wounds, with a closure rate of 68.4%. Pressure wounds demonstrated a smaller wound closure rate at 24 weeks of 35.3%. Additionally, a total of 38 SAEs were reported in 29 patients, out of which seven were considered product-related. These events included four cases of wound infections and three cases of cellulitis.

Post-Marketing Multi-Center Observational Study.    This study was a post-marketing, observational, open-label, single-arm study conducted in Israel from 2009 through 2012, and the primary endpoint was safety, as measured by incidence of adverse events. In this study, 70 patients with chronic and/or refractory wounds, including DFUs, sinus ulcers, pressure ulcers, post-operative ulcers and burn ulcers, with no improvement for at least four weeks were treated with CureXcell. The patients enrolled into this study had significant co-morbid medical conditions and long-standing histories of diabetes and vascular disease leading to limb amputations. The secondary endpoint was complete wound closure.

Complete wound closure was achieved in 51.4% of the treated patients. A total of 38 SAEs were reported in 22 patients, four of which were considered to be product-related. These events included one case of each of cellulitis, wound infection, osteopenia and necrosis of the toe with subsequent amputation. Wound infection, cellulitis and amputation are common clinical findings in patients with hard-to-heal wounds and complex underlying disease such as diabetes mellitus.

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Proof-of-Concept Study on the Treatment of Anal Fissures.    This study was a post-marketing, observational, open-label, proof-of-concept study conducted in Israel in 2008 and 2009. Patients were followed for fissure closure for four weeks. In 40%, or two out of five patients, the fissures were completely closed within four weeks from treatment. Two other patients experienced pain relief and a decrease in size of the wound. No adverse events were reported.

Prophylaxis of Post-Sternotomy Incision Site Infection Study.    This study was a post-marketing, prospective, controlled, randomized, single-blind study conducted in Israel in 2007. In this study, 64 patients undergoing cardiac surgery were randomized to either CureXcell with standard of care treatment or standard of care treatment alone; 33 patients were in the CureXcell treated group and 31 patients were in the control group. Patients were followed for infection at the incision site throughout the study period of three months after hospital discharge. In the CureXcell treated group, 3.0%, or one of 33, of the patients experienced a deep sternal wound infection, compared to 16.1%, or five of 31, of the patients in the control group. No product-related SAEs were observed in this study.

Treatment of Wounds with Exposed Bone Study.    This study was an observational, open-label, Phase 4 study conducted in Israel in 2006 and 2007. Six patients suffering from chronic wounds with exposed bone and refractory to other treatments were treated with CureXcell. Patients were followed until full wound closure was obtained. Five out of six, or 83.3%, of the wounds were closed within four to ten weeks. Additionally, no product-related adverse events were observed in the treated patients.

Hard-to-Heal Pressure Ulcers Study.    This study was a historically prospective, Phase 4, open-label, non-parallel study conducted in Israel from 2004 through 2006. In this study, patients were treated with a standard of care treatment during the first year of the study and, during the second year of the study, patients were treated with CureXcell. The investigators designed the study in this manner to reduce the seasonal effect of wound-healing, as patients of each group were treated throughout the entire year. A total of 100 patients with stage III-IV pressure ulcers were enrolled into the study, out of which 66 patients were treated with CureXcell and four patients were included in both groups at different time periods. Patients were eligible if they suffered from at least one pressure ulcer at stage III-IV, and all patients were hospitalized, with most suffering from multiple co-morbidities and generally poor health. Patients were followed for complete wound closure and time to wound closure.

Of the ulcers treated with CureXcell in this study, 69.5%, or 98 out of 141, achieved wound closure compared to 13.3%, or 10 out of 75, of the ulcers in the control group (p<0.001). In addition, 59.1%, or 39 out of 66, of the patients treated with CureXcell achieved complete wound closure in comparison to 5.3%, or two out of 38, of the control patients (p<0.001). Also, a faster median healing time of 87.0 days was noted in patients treated with CureXcell when compared to a median healing time of 117.7 days in the control group, though this difference was not found to be statistically different.

For the different population subsets studies (patients with diabetes mellitus, patients with lower leg pressure ulcers, and patients with diabetes mellitus with baseline wounds greater than or equal to 15 cm2), similar results were observed. No adverse or SAEs related to CureXcell were reported.

Prophylaxis of Saphenous Vein Harvesting Incision Site Infection Study.    This study was a post-marketing, prospective, randomized, single-blind study conducted in Israel from 2004 through 2006. In this study, 44 patients undergoing coronary artery bypass, or CABG, surgery were randomized to either CureXcell with standard of care treatment or standard of care treatment alone; 22 patients were placed in each group. Patients were followed for infection at the incision site throughout the study period of three months after hospital discharge. None of the patients in the CureXcell group experienced an infected saphenous vein incision site. This is compared to 27%, or six of 22, of the patients experiencing infection in the control group. No product-related SAEs were observed in this study.

Infected Leg Wounds following Saphenous Vein Harvesting Study.    This study was a retrospective, historically controlled, non-randomized, Phase 4 study conducted in Israel from 2000 through 2004. A total of 208 patients suffering from infected leg wounds post-CABG surgery were enrolled into the study, out of which 95 patients were treated with CureXcell. Patients were followed for complete wound closure and time to wound closure.

Of the patients treated with CureXcell, 97.9%, or 93 out of 95, achieved wound closure compared to 85.8%, or 97 out of 113, of the patients in the control group (p<0.001). Additionally, the average time to wound closure was 47 days in the CureXcell group compared to 66.5 days in the control group.

Deep Sternal Wound Infections Study.    This study was a historically controlled, retrospective, non-randomized, Phase 4 study conducted in Israel from 2000 through 2003. A total of 130 patients with deep sternal wound infections

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were included in the study, of which 66 patients were treated with CureXcell and data from 64 patients were retrospectively collected. All patients had previously undergone open heart surgery, with most of them suffering from multiple co-morbidities. Patients were followed for mortality and percent of wound closure.

Two out of 66, or 3.0%, the treatment group patients suffered late deaths, compared to 19 late deaths, or 29.7%, in the control group. Both deaths in the treatment group were considered unrelated to CureXcell. Sixty patients, or 90.9%, in the CureXcell group achieved complete wound closure. No CureXcell-related adverse events were observed. Furthermore, no deterioration or worsening of wound condition was observed in the treated patients.

In parallel to the groups above, an additional group of 50 patients with superficial sternal wound infection were treated by CureXcell and were monitored for complete wound closure. All of these patients achieved full closure in 22.6 days after a single CureXcell treatment.

Research and Development

A significant portion of our historical research and development efforts have focused on the CureXcell production process. Specifically, we have invested significantly in order to enable production in closed systems of kits containing transfusion bags. Similarly, our research and development strategy is centered on further developing the CureXcell production process so as to extend the shelf life of the product and to enable its packaging in containers other than transfusion bags, which will enable us to produce a greater range of dosages so as to further maximize product utilization. We are also researching the mode of action of our cell activation technology in order to leverage the technology for the development of a regenerative medicine product platform for non-wound indications. In addition, we intend to commence a multinational study to test the safety and efficacy of a product using our technology for anti-reabsorbtive medication induced ONJ. Our research and development team is located at our facilities in Israel and the United States, and consisted of 20 employees as of March 31, 2014.

In the past, we received government grants that were subject to the payment of royalties as part of our research and development programs approved by the OCS. The total gross amount of grants actually received by us from the OCS, including accrued LIBOR interest, totaled approximately $0.8 million as of March 31, 2014. According to the terms of the grants, the OCS is entitled to royalties equal to 3.0% to 4.5% of our sales, up until the amount of the grants is repaid in full. As of March 31, 2014, we had not paid any royalties to the OCS.

We incurred approximately $2.7 million, $9.3 million and $7.2 million in research and development expenses, net in the three months ended March 31, 2014 and the years ended December 31, 2013 and 2012, respectively.

Supply and Production

The production of CureXcell begins with whole blood units from healthy donors. The whole blood is separated into three components, red blood cells, plasma and white blood cells, through centrifugation. The white blood cells and plasma are the raw materials we use for production. These raw materials are processed in clean rooms in a process that currently takes approximately 20 hours from production initiation to product release and that involves transformation of plasma into serum (plasma without any blood cells and clotting proteins), activation of white blood cells through controlled hypo-osmotic shock achieved by the introduction of water and certain salt solutions, further centrifugation to separate out the activated white blood cells and suspension of the white blood cells in serum. The entire manufacturing process subsequent to processing of the raw materials occurs in a closed system of six plastic transfusion and infusion bags. We test for transfusion transmitted diseases and sterility at various points in the process.

In the United States, the American Red Cross currently supplies our raw material and manufactures CureXcell under agreements that we entered in March 2013 and July 2010, which we refer as the American Red Cross Supply Agreement and the American Red Cross Manufacturing Agreement, respectively. Under the American Red Cross Supply Agreement, the American Red Cross procures, pursuant to our request, white blood cells and plasma from human donors. Under the American Red Cross Manufacturing Agreement, after sourcing those materials, the American Red Cross performs the entire manufacturing process, including testing and quality assurance at its facility pursuant to the technical specifications provided by us, and then packages and ships the product to the sites at which our clinical trials take place. Only American Red Cross personnel that have been trained by us may perform the services that the American Red Cross is required to provide under the American Red Cross Manufacturing Agreement, and we are entitled to have a representative at the manufacturing plant for purposes of real time observation of production, testing, packaging, quality assurance, shipment and related activities.

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The terms of each of the American Red Cross Supply Agreement and American Red Cross Manufacturing Agreement, each as amended in April 2014, will extend through April 25, 2017. If either party desires to extend either agreement further, it must notify the other party at least nine months prior to the end of the then-current term, and if the parties mutually agree to such an extension, they may negotiate an amendment. Each such agreement may be terminated by either party in the event of an uncured material breach by, or bankruptcy event (or, in the case of the American Red Cross Supply Agreement, the cessation of operations) of, the other party. Under our agreements with the American Red Cross, we pay the American Red Cross a fixed monthly payment, as well as additional fees that are tied to the amount of raw materials it supplies to, and the amount of CureXcell that it produces for, us.

In Israel, the source of our raw material is the whole blood inventory of MDA. In addition, the manufacturing of CureXcell is carried out by MDA technicians supervised by our employees at the MDA’s central blood bank facility where we have our own clean room. Pursuant to the MDA Agreement, we are obligated to pay MDA fixed per unit prices (subject to adjustment for the Israeli consumer price index and for significant changes in the costs of production). The MDA Agreement terminates upon the expiration of the Danon patent in June 2015, a material breach of the MDA Agreement or upon certain bankruptcy events. When the Danon patent expires in June 2015, MDA, or any other party can develop, manufacture and commercialize products using the manufacturing process described in the Danon patent or design another process that circumvents the intellectual property directed to our current manufacturing processes. In addition, we expect to pay MDA royalties of 1% of CureXcell net sales outside of Israel, defined as amounts we receive in connection with the marketing, distribution and sales of CureXcell, if and when CureXcell is offered for sale in such countries.

While we believe that our current production capacity is sufficient to meet the needs for our current and planned clinical studies as well as the expected initial demand for CureXcell if it receives FDA approval, in anticipation of approval and commercialization of CureXcell we intend to invest in the establishment of our production facilities equipped to receive raw material from blood banks and to produce commercial quantities of CureXcell in clean rooms.

As CureXcell is a biologic product with living cells, it must be processed and packaged in kits consisting of sterile plastic transfusion and infusion bags that are designed to maintain the proper environment for CureXcell. We procure these bags from a supplier located in France, which manufactures the bags on the basis of technological specifications that we provide.

The FDA protocol for our clinical trials currently restricts the shelf life of CureXcell to seven days from production completion. Further, our regulatory approvals require that we manufacture our product from blood of the same type as the patient who will be using it and that the blood come from a donor meeting certain requirements, including for age and health.

Marketing and Sales

We intend to commercialize CureXcell in the United States and Europe by building our commercial organization, establishing pricing and reimbursement and implementing a comprehensive marketing campaign and branding and training programs. In anticipation of (and subject to) regulatory approval of CureXcell, we will establish a focused commercial organization in the United States and certain targeted markets in Europe. We also intend to initiate processes with insurance companies and health maintenance organizations for reimbursement coverage in our target markets in the United States and to file for reimbursement in our target markets in the European Union. We will also commence marketing CureXcell to physicians. Furthermore, we intend to build an internal sales force to target hospitals and U.S. Veterans Administration health centers that treat wounds and private wound care centers.

We also plan to enter into other international markets through collaboration with local distributors and leverage our approved registration files in the United States and Europe to obtain regional marketing authorizations. At that point, we anticipate entering into local distribution agreements for distribution in individual countries, subject to country-by-country regulatory approval, which may take additional time.

We have commissioned ongoing third-party preliminary pricing studies in the United States and in various European countries in order to suggest an approximate sales price per CureXcell treatment sample. We expect that the price point for CureXcell will reflect CureXcell’s benefits and potential cost savings relative to alternative treatments.

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Intellectual Property

Our intellectual property and proprietary technology are important to the development and production of CureXcell. We seek to protect our intellectual property, core technologies and other know-how, through a combination of patents, trademarks, trade secrets, non-disclosure and confidentiality agreements, licenses, assignments of invention and other contractual arrangements with our employees, consultants, partners, suppliers, customers and others. Additionally, we rely on our research and development program, clinical trials and know-how to advance CureXcell. As of March 31, 2014, we had four patent families on file covering processes and resulting activated white blood cell compositions that we developed, from which we have been granted three patents covering our process for producing activated white blood cells (one in each of the United States, the European Union and Australia), with issued process claims in the United States and the European Union and issued product claims in Australia. We also have two allowed applications and 26 additional pending applications in various jurisdictions, the most important of which separately cover the (i) method for activating white blood cells through hypo-osmotic shock and (ii) the composition of CureXcell. We submit applications under the Patent Cooperation Treaty, or PCT, which is an international patent law treaty that provides a unified procedure for filing a single initial patent application to seek patent protection for an invention simultaneously in each of the member states. Although a PCT application is not itself examined and cannot issue as a patent, it allows the applicant to seek protection in any of the member states through national-phase applications.

Although the protection that we have achieved through our issued patents is significant for CureXcell, when looking at our patents’ ability to block competition, the protection offered by our patents may be, to some extent, more limited than the protection provided by patents which claim products or chemical structures which were previously unknown. To the extent our issued patents are limited to process claims it may also be difficult for us to detect infringing products and enforce our patents against them. Absent patent-term extensions, our key patents are nominally due to expire in 2030.

While our policy is to obtain patents by application, license or otherwise, to maintain trade secrets and to seek to operate without infringing on the intellectual property rights of third parties, technologies related to our business have been rapidly developing in recent years. Additionally, patent applications that we may file or license from third parties may not result in the issuance of patents, the claims that issue may have limited or no coverage of our products and technologies, and our issued patents and any issued patents that we may receive in the future may be challenged, invalidated or circumvented. For example, we cannot predict the extent of claims that may be allowed or enforced in our patents nor be certain of the priority of inventions covered by pending third-party patent applications. If third parties prepare and file patent applications that also claim technology or therapeutics to which we have rights, we may have to partake in proceedings to determine priority of invention, which could result in substantial costs to us, even if the eventual outcome is favorable to us. Moreover, because of the extensive time required for clinical development and regulatory review of a product we may develop, it is possible that, before CureXcell can be commercialized, whether for its currently anticipated applications or otherwise, related patents will have expired or will expire a short period following commercialization, thereby reducing the advantage of such patent. Loss or invalidation of certain of our patents, or a finding of unenforceability or limited scope of certain of our intellectual property, could have a material adverse effect on us. See “Risk Factors—Risks Related to Our Intellectual Property—Our success depends in part on our ability to obtain and maintain protection for the intellectual property relating to or incorporated into our technology and products.”

In addition to patent protection, we also rely on trade secrets, including unpatented know-how, technology innovation, drawings, technical specifications and other proprietary information in attempting to develop and maintain our competitive position. We also rely on protection available under trademark laws, and we currently hold a registered trademark for the mark “CureXcell” in the United States and Israel.