COMMITMENTS AND CONTINGENT LIABILITIES

9 Months Ended

Sep. 30, 2016

COMMITMENTS AND CONTINGENT LIABILITIES

NOTE 5: - COMMITMENTS AND CONTINGENT LIABILITIES

The Company’s lease agreement for its Israeli offices had a 24 months term ending December 31, 2017. Inc.’s lease agreement for its U.S. offices had a four-year term ending May 2019.

During the years 2005- 2010, the Company received grants under the royalty-bearing programs administered by the Office of the Chief Scientist (“OCS”), and from the Incubator, RAD BioMed Ltd. In May 2015, the OCS approved the Company’s request to transfer manufacturing rights outside of Israel, noting that the Company would be required to pay an increased royalty rate without providing any specifics. Therefore, if income will be generated from the funded research program, the Company will be obligated to pay royalties on such revenue at a rate between 3% to 4% for the first three years and between 3.5% to 4.5% commencing the fourth year (based on the portion of manufacturing out of Israel while non-product related revenues are subject to the lower end of the ranges) and up to 150% to 300% of the amount received, linked to the LIBOR. The revenues under the Agreement with Cardiome are subject to royalties under the above programs. As of September 30, 2016, the total amount of grants received from the OCS and the Incubator, including interest, was $759 and royalties paid and accrued was amounted to $35 and $14 during the year ended December 31, 2015 and nine months period ended September 30, 2016, respectively.

In the event that intellectual property rights are deemed to be transferred out of Israel, the grants received from the OCS and the Incubator may become a loan to be repaid immediately at up to 600% of the grants amounts. Currently, the Company’s management believes no intellectual property has been transferred out of Israel and disclosure of the Company’s know how is made solely in connection with the transfer of manufacturing rights of the Company’s products to subcontractors. Accordingly, no provision has been recorded in such respect.

In October 2015, the Company filed a petition with the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office for an inter partes review of U.S. Patent No. 8,497,393 (the “‘393 Patent”) granted to United Therapeutics Corporation (“UTC”), seeking to invalidate this patent. The ‘393 Patent relates to a process for preparing prostacyclin derivatives such as treprostinil. Treprostinil is used in Trevyent. UTC filed a response to the Company’s petition in January 2016, defending the ‘393 Patent. In April 2016, the PTAB decided to institute the review of the ‘393 Patent. A final decision by the PTAB is expected in April 2017.