zk1415086.htm


This is a second confidential draft submission to the U.S. Securities and Exchange Commission
on June 12, 2014 and is not being filed under the Securities Act of 1933, as amended.
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM F-1
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
Gamida Cell Ltd.
___________________________________________________________________
(Exact name of registrant as specified in its charter)
 
 
State of Israel
___________________
(State or other
jurisdiction of
incorporation or
organization)
2836
___________________
(Primary Standard
Industrial
Classification Code
Number)
Not applicable
___________________
(I.R.S. Employer
Identification No.)
 
5 Nahum Hafzadi Street, Jerusalem 95484, Israel, +972 2 6595666
___________________________________________________________________
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 
Gamida Cell Inc.
c/o Corporation Service Company, 2711 Centerville Rd Ste 400, Wilmington, New Castle, DE, 19808, (302) 636-5401
___________________________________________________________________
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
Copies to
 
Mark S. Selinger, Esq.
Joel L. Rubinstein, Esq.
McDermott Will & Emery LLP
340 Madison Avenue
New York, NY 10173
+1 212 547 5400
Shlomo Landress, Adv.
Amit, Pollak, Matalon & Co.
Nitsba Tower, 19th Floor
17 Yitzhak Sadeh St.
Tel Aviv 67775, Israel
+972 3 568 9000
Michael J. Lerner, Esq.
John D. Hogoboom, Esq.
Lowenstein Sandler LLP
1251 Avenue of the Americas
New York, NY 10020
+1 212 262 6700
Barry Levenfeld, Adv.
Eric Spindel, Adv.
Yigal Arnon & Co.
22 Rivlin Street
Jerusalem 9424018, Israel
+972 2 623 9200
 
 
 

 
 
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement is declared effective.
 
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. ¨
 
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. ¨
 
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. ¨
 
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. ¨
 
CALCULATION OF REGISTRATION FEE
 
Title of each class of securities to be registered
 
Proposed maximum aggregate offering price(1)(2)
 
Amount of registration fee(3)
Ordinary Shares,
nominal value NIS 0.01 per share
 
$_____
 
$_____
 
 
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.
 
 
(2)
Includes Ordinary Shares that the underwriters may purchase pursuant to their 30-day option to purchase additional shares, if any.
 
 
(3)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
 
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 of 1933, as amended, 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.
 
 
i

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission has declared this registration statement effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state or jurisdiction where such offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS  SUBJECT TO COMPLETION DATED                    , 2014
 
[__________] Shares
 
Ordinary Shares
 
 

This is the initial public offering of ordinary shares of Gamida Cell Ltd., an Israeli company. We are offering _____ ordinary shares. The estimated initial public offering price is between $_____ and $_____ per share.
 
We intend to apply to list our ordinary shares on the NASDAQ Capital Market, under the symbol “CORD”. No public market for our ordinary shares existed before this offering. We are offering all of the ordinary shares offered by this prospectus.
 
We are an emerging growth company, as defined in the U.S. Jumpstart Our Business Startups Act of 2012 and will be subject to reduced public company reporting requirements.
 
Investing in our ordinary shares involves a high degree of risk. See “Risk Factors” beginning on page _____.
 
Neither the United States Securities and Exchange Commission, nor the Israel Securities Authority, nor any other regulatory body, 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.
 
   
Per Share
   
Total
 
Initial public offering price
  $       $    
Underwriting discounts and commissions
  $       $    
Proceeds to us (before expenses)
  $       $    
 
Within 30 days of the date of this prospectus, the underwriters may purchase up to an additional _____ ordinary shares from us at the initial public offering price, less underwriting discounts and commissions. The underwriters will receive compensation in addition to the underwriting discounts and commissions. See “Underwriting” for a description of compensation payable to the underwriters.
 
The underwriters expect to deliver the ordinary shares to the purchasers in this offering on or about _____, 2014.
 
Book Running Manager
 
Aegis Capital Corp
 
The date of this prospectus is _____.
 
 
ii

 
 
TABLE OF CONTENTS
 
1
12
55
57
58
59
61
63
65
76
107
131
134
142
144
152
160
160
160
162
162
F - 1
II - 1
II - 4
 
 
iii

 
 
For investors outside of the United States: Neither we nor the underwriters have taken any action to permit a public offering of ordinary shares outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to this offering and the distribution of this prospectus.
 
You should rely only on the information contained in this prospectus or in any free writing prospectus that we file with the Securities and Exchange Commission (the “SEC”). Neither we nor the underwriters have authorized anyone to provide you with information different from the information contained in this prospectus or in any free writing prospectus that we may provide you in connection with this offering. Neither we nor the underwriters take any responsibility for, or provide any assurance as to the reliability of, any information other than the information in this prospectus or in any free writing prospectus that we may provide you in connection with this offering. We are offering to sell, and seeking offers to buy, ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares.
 
 
iv

 
 
 
 
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our ordinary shares. Before making an investment in our ordinary shares, you should read this summary together with the more detailed information appearing in this prospectus, including the section titled “Risk Factors” and the financial statements and related notes included in this prospectus. Unless the context requires otherwise, the terms “Gamida Cell”, “we”, “us”, “our”, “the Company”, and similar designations refer to Gamida Cell Ltd. The terms “shekel”, “NIS”, “ILS”, and “” refer to the Israeli new shekel, the official currency of the State of Israel. The terms “dollar”, “USD”, “US$”, and “$” each refer to the United States dollar, the official currency of the United States of America. The terms “euro”, “EUR”, and “€” each refer to the euro, the official currency of the “euro area”. Unless otherwise indicated, U.S. dollar translations of Israeli shekel amounts presented in this prospectus are translated using the rate of ILS _____ to USD 1.00, the exchange rate reported by _____ on _____. Unless otherwise indicated, U.S. dollar translations of euro amounts presented in this prospectus are translated using the rate of EUR _____ to USD 1.00, the exchange rate reported by _____ on _____.
 
Our Company
 
Overview
 
We are a clinical-stage biopharmaceutical company focused on developing and commercializing cell therapeutic products for patients with blood cancer and severe genetic blood diseases. We use our proprietary platform technology to expand, in culture, highly functional cells derived from umbilical cord blood, peripheral blood or bone marrow, which we believe will enhance the therapeutic efficacy of these cells.
 
We are developing our lead product candidate, NiCord, for potential use as a hematopoietic (blood) stem cell, or HSC, transplantation product in patients with blood cancer, such as leukemia and lymphoma, and serious genetic blood diseases, such as sickle cell disease and thalassemia. HSC transplantation is currently the only potential cure available for these patients. HSC transplantation is primarily performed through bone marrow transplantation, which requires a complete tissue match between the patient and the donor in order to mitigate the risk of certain medical complications. Approximately 40% of the patients who are indicated for an HSC transplantation are unable to receive a transplant. We believe that a substantial portion of those patients who fail to receive a transplant do not receive a transplant because they are not able to identify a suitable bone marrow donor in a timely manner. As a result, there is a significant unmet need for patients who could potentially be cured by HSC transplantation but fail to receive a transplant because they cannot identify a fully matched bone marrow donor in a timely manner. HSC transplantation from umbilical cord blood, or cord blood, is an alternative to HSC transplantation from bone marrow and does not require full tissue matching between the patient and the HSC from the donor's cord blood cells, thereby making HSC transplantation from cord blood available to those patients who cannot identify a fully matched bone marrow donor. However, HSC transplantation from cord blood is limited by the small number of HSC in a unit of cord blood. A sufficient number of HSC is required for a successful transplant. NiCord is a graft derived from a unit of cord blood that has been expanded in culture using our NAM technology. We believe that NiCord has the potential to address this unmet need in HSC transplantation because it has demonstrated the ability to effectively increase HSC in cord blood, which is rapidly available, and does not require full tissue matching between the patient and the donor.
 
 
 

 
 
Using our NAM technology, we are developing a suite of product candidates targeting a variety of clinical indications.  The following table lists our current product candidates and projects using our NAM technology and their respective stages of development:
 
 
Hematopoietic Stem Cell Transplantation
 
HSC transplantation from bone marrow is the standard of care treatment for many patients with a variety of serious diseases, including blood cancers, such as leukemia and lymphoma, nonmalignant severe blood diseases, such as sickle cell disease and thalassemia, genetic metabolic disorders, such as Hurler syndrome and Krabbe disease, bone marrow failure syndromes and severe refractory autoimmune diseases. Bone marrow, the soft tissue inside bones, contains blood-making cells known as HSC. These blood-making cells produce the mature blood cells that constitute and renew human blood and the immune system.
 
When a patient’s HSC are causing disease, the patient’s clinician may recommend treating the patient with bone marrow transplantation, a procedure intended to replace the disease-causing cells in the patient’s bone marrow with healthy HSC from a donor. However, transplantation of a bone marrow graft requires full tissue matching between the patient and the HSC from the bone marrow of the donor in order to mitigate the risk of certain medical complications. A full match is often difficult to find. Approximately 40% of patients in need of a transplant fail to receive a transplant. We believe that a substantial portion of those patients who were unable to receive a transplant did not receive a transplant because they were not able to identify a suitable bone marrow donor in a timely manner.
 
Because of the difficulty in finding a suitable bone marrow donor, transplanting HSC taken from cord blood has developed as an alternative to HSC transplantation from bone marrow.  Cord blood is readily available from many cord blood banks worldwide, and cord blood transplantation does not require full tissue matching between the patient and the cord blood cells of the donor.
 
The Challenge in Using Cord Blood for HSC Transplantation
 
Although cord blood units are rich with HSC, a unit of cord blood contains a small volume of blood and therefore also a small number of HSC compared to HSC grafts derived from bone marrow.  A sufficient dosage of HSC is required for a successful HSC transplant, with the dosage determined based on the patient’s body weight. The dose of HSC provided by a unit of cord blood (calculated per kilogram of the patient’s body weight) is sufficient for small children but increases the risk of transplant-related illness and death for adults and older children with a body weight of more than approximately 40 kilograms. For this reason, cord blood remains an underutilized source of HSC for transplantation in the adult patient population.
 
 
 
2

 
 
Several methods have been developed to expand HSC populations in culture. However, clinical studies have shown that these methods do not preserve the potential of the expanded cord blood unit to “engraft”, or replace the patient’s bone marrow cells in a sustained manner. As a result, patients who receive these treatments also receive a second, unmanipulated unit of cord blood. Using two units of cord blood significantly increases costs and usually results in the HSC in the unmanipulated cord blood displacing the HSC in the enriched unit.
 
Market
 
According to reports by World Marrow Donor Association (WMDA), or the WMDA Reports, each year approximately 50,000 patients worldwide who were indicated for HSC transplantation performed a formal search for HSC. However, in 2012, only approximately 18,000 of those patients received an HSC transplant. We believe the lack of timely available suitable donors accounts for a significant number of the indicated patients that did not receive HSC transplantation and represents a significant unmet medical need.
 
Of the patients receiving HSC transplantation in 2012, according to the WMDA Reports, only approximately 3,000 received HSC from cord blood transplants. According to the Center for International Blood and Marrow Transplant Research, or CIBMTR, approximately 40% of pediatric patients and less than 10% of adult patients undergoing HSC transplantations in 2009 and 2010 received cord blood transplants. The CIBMTR reports that the number of HSC transplants from unrelated donors, which includes both cord blood transplants and bone marrow transplants, increased in the past 10 years by approximately 7.7% in the United States, which we believe represents a market opportunity for a product to serve those patients who are unable to receive a transplant from a related donor.
 
According to information published by H.M. Blommestein et al., Annals of Hematology, 2012, for the years 2007 through 2009, the average cost of HSC transplantation from a bone marrow donor (including selection and retrieving of the graft and one-year follow-up of the patient) was approximately $235,000 and the average cost of HSC transplantation from cord blood was approximately $350,000. The average cost of cord blood unit is approximately $45,000.
 
We believe that the relatively low number of cord blood transplants and the higher cost of such transplants is primarily a result of the low HSC counts in cord blood, which results in complications, including delayed engraftment, longer hospitalization stays and increased morbidity.  We believe that a product that effectively increases the HSC count in cord blood transplantation would significantly reduce the cost of HSC transplantation from cord blood, reduce the complications associated with the lower HSC count in cord blood, increase the demand for cord blood transplants and address the existing unmet medical need and be used as an alternative source for all HSC transplants.
 
We are developing NiCord as a cord blood transplantation product to address this unmet medical need, and as alternative to HSC transplantation from bone marrow.  We believe that NiCord has the potential to increase the number of HSC transplantation procedures by providing an alternative graft for patients with blood cancers with no family related matched donor.
 
Our Solution
 
We have developed our NAM technology to expand HSC populations in culture which have been shown in clinical trials to yield a clinically effective therapeutic dose of HSC from a single unit of cord blood.  Our technology uses the small molecule nicotinamide, or NAM, a form of vitamin B3, to expand therapeutic cells in culture while preserving their functionality. Using NAM, we developed NiCord as a cord blood HSC transplantation product candidate. We filed an investigational new drug, or IND, application for NiCord in August 2010, and the IND was approved in the fourth quarter of 2010 for the treatment of patients with hematological malignancies.
 
 
3

 
 
In February 2013, we completed a Phase I/II study of NiCord transplanted with the support of a second, unmanipulated cord blood unit as a treatment for blood cancers at Duke University Medical Center. In eight of the 11 patients treated with NiCord, HSC from NiCord out-competed the HSC from the unmanipulated cord blood unit and successfully engrafted. The eight patients that engrafted with NiCord also had a significantly shorter hospitalization length (an average of 23.5 days compared to 42.2 days) and shortened times to hematopoietic recovery, or resumption of healthy blood production (an average of 10.5 days compared to 25 days), compared to an historical control group of patients treated with two units of unmanipulated cord blood during the same time and period and using the same conditioning regimen. In light of the results of this study, we are currently testing the clinical effectiveness of transplanting NiCord without the support of an unmanipulated unit of cord blood.
 
We are also developing NiCord for transplantation in patients with rare nonmalignant diseases for which HSC transplantation is currently the only available potential cure. These diseases include: hemoglobinopathies, such as sickle cell disease and thalassemia; bone marrow failure syndromes, such as severe aplastic anemia; genetic metabolic diseases; and severe autoimmune diseases. We are currently engaged in a Phase I/II clinical trial of NiCord for treatment of pediatric sickle cell disease. In the third quarter of 2014, we plan to submit a new IND application for NiCord under the trademark CordIn for the treatment of patients with non-malignant diseases such as sickle cell disease and thalassemia. The NiCord IND will continue to cover hematological malignancies. CordIn will initially have the same composition as NiCord, but with a different product release process. In the fourth quarter of 2014, we intend to start a clinical trial of CordIn for sickle cell disease and thalassemia. This clinical trial of CordIn will use a cryopreserved (frozen) product, as described below under the heading “Cryopreservation”.
 
We are also applying our NAM technology to develop a product candidate for cancer immunotherapy, a process that harnesses the body’s immune system to fight cancer cells. This product candidate is based on natural killer cells, or NK cells, taken from the patient or a donor. NK cells are blood cells that can kill cancer cells and have the potential for broad clinical application in treating cancer. Researchers are currently conducting clinical trials to evaluate the safety and efficacy of transplanting donated NK cells in cancer patients.
 
Our NAM technology also enables the rapid expansion of mesenchymal stem cells, or MSC, in culture while preserving their functionality. MSC are attractive candidates for use in regenerative medicine and treatment of inflammatory conditions. Our MSC product candidate is currently in preclinical development.
 
All of our product candidates based on our NAM technology are fully owned by Gamida Cell.
 
Advantages
 
NiCord is designed to address certain limitations of existing HSC transplants. The main potential advantages of NiCord over existing options are:
 
 
·
 
Limited HSC differentiation during HSC expansion. Because a sufficient number of HSCs is required in order for the donor’s HSC to successfully engraft, or generate new blood cells, in the patient, clinicians have attempted different approaches to expand the number of HSC in cord blood ex vivo (in culture). However, during expansion in culture, HSC typically go through a process of differentiation and lose their functionality and effectiveness. In contrast to other technologies for expansion of HSC in culture, in which HSC undergoes a process of differentiation and loss of effectiveness, expanding HSC in culture using our NAM technology limits cell differentiation during expansion and preserves the effectiveness of the HSC. Our culture studies have demonstrated that our NAM technology has the ability to limit changes in gene expression in cultured HSC when compared to HSC cultured without NAM.
 
 
 
4

 
 
 
·
Increased engraftment potential. Our 2013 Phase I/II trial of NiCord demonstrated the ability of NiCord to effectively engraft and outcompete an unmanipulated cord blood unit. Of the 11 patients treated with NiCord and a second unmanipulated unit of cord blood, eight of the patients engrafted with NiCord. We believe that NiCord is the first HSC cord blood product candidate that has demonstrated an ability to successfully engraft in patients. Our trial demonstrated that NiCord can shorten the time to hematopoietic recovery (resumption of healthy blood production), improve the one-year and two-year overall survival and progression-free survival rates for patients and reduce the average hospitalization length for patients.
 
 
·
Potential treatment savings from using a single unit of cord blood. The 11 patients treated with NiCord in our 2013 Phase I/II study were treated with a second unmanipulated unit of cord blood so that they would not remain myeloablated, or depleted of active bone marrow cells, in the event that the NiCord failed to engraft. We believe that the rapid and sustained engraftment of NiCord in this study suggests that transplantation of a second, unmanipulated unit of cord blood might not be necessary for the treatment of myeloablated patients. In September 2013, we commenced a 20-patient Phase I/II study of NiCord in which NiCord is being transplanted without the support of a second unmanipulated unit of cord blood. A unit of cord blood costs approximately $45,000. If this trial and other studies demonstrate that transplantation with NiCord is a safe and effective treatment without a second unit of cord blood, we believe NiCord could offer substantial cost saving benefits to healthcare providers.
 
 
·
Potential treatment savings from shortening hospital stays. Clinical data from our 2013 Phase I/II study of NiCord demonstrated that the eight patients that engrafted with NiCord were discharged from the hospital significantly earlier than an historical control group (an average of 23.5 days compared to 42.2 days). If additional studies demonstrate a similar outcome, we believe that NiCord could offer a substantial cost savings benefit to healthcare providers.
 
 
·
Safety Profile. We have designed NiCord to be a safe alternative to traditional HSC transplants. In our 2013 Phase I/II study of NiCord, all safety endpoints were met and the study did not raise any safety concerns surrounding the use of NiCord. We believe that NiCord may be an alternative to traditional HSC transplantation for treatment of blood cancers
 
Cryopreservation
 
To date, our product candidates have consisted of fresh blood products that needed to be transplanted within 18 hours after their release from the manufacturing site. This limitation substantially restricts the location of manufacturing sites and increases the cost of shipping and logistical support required during the process of manufacturing and delivery.  In 2013, we developed a process to effectively freeze (cryopreserve) NiCord to lengthen its shelf life to approximately 18 weeks. Based on our discussions with the U.S. Food and Drug Administration (FDA), we plan to begin supplying NiCord in the cryopreserved formulation in all our ongoing clinical trials by the third quarter of 2014, using our own manufacturing facilities.
 
We believe that cryopreservation will enable us to centralize our manufacturing facilities and optimize our delivery systems, yielding significant savings.
 
 
5

 
 
Our Strategy
 
Our goal is to develop, obtain marketing approval for, and commercialize NiCord and CordIn for the treatment of blood cancer and other non-malignant severe genetic diseases for which bone marrow transplantation is currently the only available cure. We plan to seek orphan drug designation for NiCord and CordIn, a special status granted to products by the FDA and the European Medicines Agency (EMA) which, if granted, may confer several years of market exclusivity and certain tax benefits. In addition, we intend to explore additional applications of our current product candidates. We also plan to continue to develop our NK cell product candidate and our MSC project and, in the future, to explore the development of new products using our NAM technology.
 
To achieve this objective, we intend to:
 
 
 
 
·
complete necessary clinical trials for our current product candidates;
 
 
·
obtain marketing approval from the FDA, the EMA, and additional non-U.S. regulatory bodies to market our product candidates;
 
 
·
build and maintain robust sales, manufacturing, distribution and marketing capabilities, either on our own or in collaboration with strategic partners;
 
 
·
continue to refine our manufacturing processes;
 
 
·
maintain and expand our relationships with transplant physicians and hospitals; and
 
 
·
continue researching potential additional applications of our NAM platform technology.
 
Our Risks
 
Our business is subject to many risks, as more fully described in the section of this prospectus titled “Risk Factors” immediately following this prospectus summary. You should read and carefully consider these risks before you invest in our ordinary shares. In particular, our risks include, but are not limited to, the following:
 
 
·
We have a limited relevant operating history and we have incurred significant operating losses since our inception, and we anticipate that we will incur continued losses for the foreseeable future.
 
 
·
Our business will depend on sales of our current product candidates if they receive regulatory approval.  If we fail to commercialize any approved product candidate, our business would be materially harmed and the value of our securities would likely decline significantly.
 
 
·
We have not yet completed all required pre-market clinical trials for any of our current product candidates and have not yet obtained regulatory approvals to market and sell any of our product candidates in any jurisdiction.
 
 
·
If our product candidates do not demonstrate safety and efficacy sufficient to obtain regulatory approval, they will not receive regulatory approval and we will be unable to market them.
 
 
·
Regulatory authorities may not approve our product candidates even if they demonstrate safety and efficacy in clinical trials.
 
 
 
6

 
 
 
·
If serious or unexpected adverse side effects are identified during the development of our product candidates, we may need to abandon or limit our development of some or all of our product candidates.
 
 
·
Our product candidates are based on a novel technology, which may raise development issues that we may not be able to resolve, regulatory issues that could delay or prevent approval or personnel issues that may keep us from being able to develop our product candidates.
 
 
·
We have never manufactured our product candidates or their components at commercial scale and there can be no assurance that they can be manufactured in compliance with regulations at a cost or in quantities necessary to make them commercially viable.
 
 
·
We have never marketed or sold any products and there can be no assurance that our products, if approved, can be marketed or sold in quantities necessary to make them commercially viable.
 
 
·
Our competitors may develop and market products that are less expensive, more effective, safer or reach the market sooner than our product candidates, which may diminish or eliminate the commercial success of any products that we may commercialize.
 
 
·
We will need to obtain additional financing to complete the development of and commercialize our product candidates.
 
 
·
We are subject to various governmental regulations, including those restricting our ability to market our product candidates, and we may incur significant expenses to comply with, experience delays in our product commercialization as a result of, and be subject to material sanctions if we violate, these regulations.
 
 
·
We may face delays in the clinical development of our product candidates and may fail to commence, resume, or complete any of our planned development activities.
 
 
·
We currently rely on third parties to manufacture our product candidates and provide the equipment necessary to manufacture our product candidates and to manage various aspects of our clinical trials.
 
 
·
We may face difficulties in protecting and maintaining our intellectual property rights, including intellectual property rights that are licensed to us.
 
 
·
We currently do not have the infrastructure to commercialize any of our product candidates if such products receive regulatory approval.
 
 
·
We expect to face significant uncertainty over pricing and reimbursement of any of our product candidates that are approved for commercialization.
 
Emerging Growth Company and Foreign Private Issuer Status
 
We qualify as an “emerging growth company” under Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from reporting requirements that generally apply to public companies, including the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, delayed application of newly adopted or revised accounting standards, exemption from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
 
 
 
7

 
 
 
We are also a foreign private issuer and we are exempt from certain rules and regulations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and we are permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the NASDAQ Stock Market for domestic U.S. issuers. Notably, most of the requirements relating to our emerging growth company status described above 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.
 
With respect to home country corporate governance practices under the Listing Rules of the NASDAQ Stock Market, we intend to follow home country practice in Israel with regard to, among other things, director nomination procedures and approval of compensation for officers. In addition, we may follow our home country law instead of the Listing Rules of the NASDAQ Stock Market that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and certain acquisitions of the stock or assets of another company.
 
In relation to the Exchange Act, as a foreign private issuer, we are 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 are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic U.S. issuers whose securities are registered under the Exchange Act.
 
We may choose to take advantage of any, some, or all of the exemptions available to us as an emerging growth company and/or as a foreign private issuer. We have taken advantage of reduced reporting requirements in this prospectus.
 
Accordingly, the information contained in this prospectus may be different from the information you receive from other public companies in which you hold stock. Please see the section of this prospectus titled “Risk Factors—Risks Related to an Investment in Our Ordinary Shares” for a description of exemptions that apply to emerging growth companies and foreign private issuers.
 
Corporate Information
 
We were incorporated under the laws of the State of Israel in 1998. Our principal executive office is located at 5 Nahum Hafzadi Street, Jerusalem 95484, Israel, and our telephone number is +972 2 6595666. Our website address is www.gamida-cell.com. We have included our website address in this prospectus solely as an inactive textual reference. We do not incorporate the information on or accessible through our website into this prospectus, and you should not consider any information on or accessible through our website a part of this prospectus.
 
We own various trademark registrations, trademark applications, unregistered trademarks, and trade names, including the following: Gamida Cell, our corporate logo, NiCord®, StemEx®, and CordIn™. All other trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, trademarks and trade names in this prospectus may be referred to without the symbols ® and ™, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights to those trademarks or trade names.
 
 
 
8

 
 
 
The Offering
 
Ordinary shares offered by us
 
_____ shares
Ordinary shares to be outstanding immediately after this offering
 
_____ shares
Overallotment option
 
The underwriters have an option for 30 days to purchase up to _____ additional ordinary shares.
Use of proceeds
 
We intend to use the proceeds from this offering to continue the development of our product candidates and for working capital and general corporate purposes.  See the section of this prospectus titled “Use of Proceeds”.
Risk factors
 
You should read the “Risk Factors” section starting on page _____ of this prospectus for a discussion of factors to consider carefully before deciding to invest in ordinary shares.
Proposed NASDAQ Capital Market symbol
 
“CORD”
 
The number of our ordinary shares to be outstanding immediately after this offering is based on 689,898 ordinary shares outstanding as of March 31, 2014 and 7,881,374 ordinary shares issuable upon the conversion of all of our preferred shares outstanding as of March 31, 2014. This number excludes (i) 560,520 ordinary shares issuable upon the exercise of share options under our equity incentive plans, (ii) 714,461 ordinary shares issuable upon the conversion of preferred shares issuable upon the exercise of warrants outstanding as of March 31, 2014, and (iii) 676,043 ordinary shares reserved for issuance under our equity incentive plans as of March 31, 2014.
 
Unless otherwise indicated, all information in this prospectus reflects or assumes the following:
 
 
·
the adoption of our amended and restated articles of association, which will occur immediately prior to the completion of this offering;
 
 
·
the conversion of all of our outstanding convertible preferred shares as of March 31, 2014 into 7,881,374 ordinary shares upon the completion of this offering; and
 
 
·
no exercise by the underwriters of their option to purchase up to an additional _____ ordinary shares in this offering.
 
 
 
9

 
 
 
Summary Financial Data
 
The following summary financial information should be read together with our audited financial statements and accompanying notes and our unaudited financial statements and related notes, as well as the information under the section of this prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Our historical results are not necessarily indicative of results that may be expected in the future.
 
We have derived the following summary statements of operations data for the three months ended March 31, 2014 and March 31, 2013 and as of March 31, 2014 from our unaudited financial statements included elsewhere in this prospectus, and for the years ended December 31, 2013 and December 31, 2012 from our audited financial statements included elsewhere in this prospectus.
 
(in thousands of U.S. dollars, except
share and per share amounts)
 
Three months ended
March 31,
             
Statements of Comprehensive Income: (1)
 
2014
(unaudited)
   
2013
(unaudited)
   
Year ended
Dec. 31,
2013
   
Year ended
Dec. 31, 2012
 
                   
Operating Expenses
                       
Research and development expenses, net
    1,309       805       2,602       2,292  
General and administrative expenses
    183       121       557       495  
Operating Loss
    1,492       926       3,159       2,787  
Finance Expenses
    71       430       127       891  
Finance Income
    (14 )     (41 )     (775 )     (246 )
Share of loss (profit) of joint venture
    256       762       (2,573 )     1,377  
Net Loss (Income)
    1,805       2,077       (62 )     4,809  
Basic and diluted loss per share for the year
    --       --       11.5       17.3  
Weighted average number of ordinary
shares used in computing basic and
diluted net loss per share
    --       --       689,898       689,898  
                                 
 
(1)
See the Notes to our financial statements for the three months ended March 31, 2014 and March 31, 2013 and for the years ended December 31, 2013 and 2012 for details regarding these statements of comprehensive income.
 
 
 
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(in thousands of U.S. dollars)
 
 
Statements of Financial Position:
 
Actual, as of
Mar. 31, 2014 (unaudited)
   
As adjusted, as of
Mar. 31, 2014 (unaudited)(1)
 
Current assets (including cash and cash equivalents)
  $ 3,603          
Non-current assets
    1,994          
Total assets
    5,597          
Current liabilities
    1,233          
Non-current liabilities
    1,567          
Accumulated deficit
    (51,359 )        
Total shareholders’ equity
    2,797          
Total liabilities and shareholders’ equity
 
    5,597          
 
(1)
The unaudited as-adjusted column above gives effect to the conversion of outstanding preferred shares into ordinary shares and to the sale of _____ ordinary shares in this offering at an assumed public offering price of $_____ per share, the midpoint of the range printed on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, as if the sale had occurred on March 31, 2014.
 
 
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RISK FACTORS
 
Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks we describe below, along with all of the other information set forth in this prospectus, including the section entitled “Cautionary Note Regarding Forward-Looking Statements” and our financial statements and the related notes beginning on page _____, before deciding to purchase our ordinary shares. If any of the adverse events described in the following risk factors actually occurs, our business, results of operations, and financial condition may suffer significantly. As a result, the trading price of our ordinary shares could decline, and you could lose all or part of your investment.
 
Risks Related to Clinical Trials, Regulatory Approval, and Commercialization
 
We depend on the success of our product candidates, and we may not obtain regulatory approval for them, or we may be unable to successfully commercialize them.
 
We are focused on the development of our product candidates, including NiCord and CordIn. Accordingly, our business depends on our ability to complete the development of, obtain regulatory approval for, and successfully commercialize, one or more of these product candidates.
 
The research, testing, manufacturing, labeling, approval, sale, marketing, and distribution of therapeutic products are subject to extensive regulation by the FDA in the United States and comparable regulatory agencies in other countries. These regulations differ from country to country. We are not permitted to market any product candidate in the United States until we receive approval of a Biologic License Application (BLA) from the FDA, or in any other countries until we receive the requisite approval from regulatory agencies in such countries.
 
 The process to complete clinical trials of, obtain regulatory approval for, and commercialize these products is long, complex, and costly, and the outcome is uncertain. Delay or failure can occur at any stage of the process, for one or more of the reasons described in this prospectus.
 
A delay or failure in completing clinical trials, obtaining regulatory approvals, or commercializing any of our products could harm our business, financial condition, and future prospects. If we do not complete clinical trials successfully, obtain regulatory approvals, and commercialize our products successfully, we may never become profitable.
 
We are a clinical-stage company with a limited operating history and no approved products, which makes it difficult to assess our future viability.
 
We are a clinical-stage biopharmaceutical company with a limited operating history. We have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, specifically in the biopharmaceutical industry. For example, to execute our business plan, we will need to successfully:
 
 
·
execute product candidate development activities;
 
 
·
obtain required regulatory approvals for the development and commercialization of our product candidates in the U.S. and other countries that we target for commercialization within a predictable timeframe;
 
 
·
maintain, leverage and expand our intellectual property portfolio;
 
 
·
build and maintain robust sales, manufacturing, distribution and marketing capabilities, either on our own or in collaboration with strategic partners;
 
 
·
gain market acceptance for our products;
 
 
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·
develop and maintain any strategic relationships we elect to enter into; and
 
 
·
manage our spending as costs and expenses increase due to research, pre-clinical development, clinical trials, regulatory approvals and commercialization.
 
If we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand our business or continue our operations.
 
The commencement and completion of clinical trials can be delayed or prevented for a number of reasons, which could prevent us from obtaining marketing approvals for our products.
 
We may not be able to commence or complete the clinical trials necessary to apply for or obtain regulatory approvals for our product candidates. Biological product development is a long, expensive, and uncertain process, and delay or failure can occur at any stage of any of our clinical trials. Clinical trials can fail or be delayed, prevented, or terminated, for a variety of reasons, including:
 
 
·
difficulties obtaining regulatory approval to commence a clinical trial or complying with conditions imposed by a regulatory authority regarding the scope, protocol, or term of a clinical trial;
 
 
·
delays in reaching, or failing to reach, agreement on acceptable terms with prospective contract research organizations, or CROs, contract manufacturing organizations, or CMOs, and trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
 
 
·
failure of our third-party contractors, such as CROs and CMOs, or our investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner;
 
 
·
insufficient or inadequate supply or quality of a product candidate or other materials necessary to conduct our clinical trials, or delays or failures of delivery of any of those materials;
 
 
·
difficulties obtaining institutional review board, or IRB, approval to conduct a clinical trial at a prospective site;
 
 
·
the FDA or another regulatory body requiring alterations to any of our study designs, our pre-clinical strategy, or our manufacturing plans;
 
 
·
challenges in recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including the size and nature of the subject population, the proximity of subjects to clinical sites, eligibility criteria for the trial, the nature of the trial protocol, the availability of approved effective products for the relevant disease, and competition from other clinical trial programs for similar indications;
 
 
·
difficulties in maintaining contact with subjects after product, which may result in incomplete data;
 
 
·
governmental or regulatory delays and changes in regulatory requirements, policy, or guidelines;
 
 
·
varying interpretations of data by the FDA and other regulatory agencies; and
 
 
·
ambiguous or negative results.
 
 
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In addition, a clinical trial may be suspended or terminated by us, the FDA, an IRB at a trial site, a data safety monitoring board overseeing the clinical trial at issue, or another regulatory authority, for a variety of reasons, including:
 
 
·
failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;
 
 
·
inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities;
 
 
·
unforeseen safety issues, including serious adverse events associated with a product candidate, or lack of effectiveness; and
 
 
·
lack of adequate funding to continue the clinical trial.
 
We have not yet completed all required pre-market clinical trials for our product candidates. If we do not successfully complete all required pre-market clinical trials, we may not be able to obtain marketing approvals for our product candidates, and our business, financial condition, and future prospects could be harmed.
 
We may not be able to commercialize any of our product candidates if our clinical trials do not demonstrate safety or efficacy, or if we are required to conduct additional clinical trials.
 
Before obtaining regulatory approval for the sale of any of our product candidates, we must provide the FDA and similar non-U.S. regulatory authorities with clinical data that demonstrate safety and effectiveness. Clinical trials must comply with regulation by numerous federal, state and local government authorities in the United States, principally the FDA, and by similar agencies in other countries. We may decide, or be required by regulators to conduct additional clinical trials or testing for any of our products.
 
If we decide, or are required by regulators, to conduct additional clinical trials or other testing of our products beyond those that we have completed and currently contemplate, if we are unable to successfully complete our clinical trials or other testing or if the results of these trials or tests are not positive, we may:
 
 
·
be delayed in obtaining marketing approval for our product candidates;
 
 
·
not be able to obtain marketing approval; or
 
 
·
obtain approval for indications that are not as broad as intended.
 
Our product development costs will also increase if we experience delays in testing or approvals. Such delays also could allow our competitors to bring products to market before we do and impair our ability to commercialize our product candidates. If any of these events occur, our business will be materially harmed.
 
Moreover, if the FDA provides marketing approval for any of our product candidates, the approval may not be for indications that are as broad as we intend, and the label could prescribe safety limits or warnings that reduce the market for the product. We may be required, or we may elect, to conduct additional clinical trials for such narrow indications or for other indications. In addition, we may seek marketing approval from regulatory authorities in jurisdictions outside the United States, such as the EMA, and they may require us to submit data from supplemental clinical trials in addition to data from the clinical trials that supported our United States filings with the FDA. Any requirements to conduct supplemental trials would add to the cost of developing our products and we may not be able to complete such supplemental trials. Additional trials could also produce findings that are inconsistent with the trial results we have previously submitted to the FDA, in which case we would be obligated to report those findings to the FDA. This could result in additional restrictions on a marketing approval or could force us to stop selling the product altogether. Inconsistent trial results could also lead to delays in obtaining marketing approval in the United States for other indications for our product candidates, which could cause regulators to impose restrictive conditions on marketing approvals and could even make it impossible for us to obtain marketing approval. Any of these results could materially impair our ability to generate revenues and to achieve or maintain profitability.
 
 
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Positive results in previous pre-clinical and clinical trials of our product candidates may not be replicated in future clinical trials of our product candidates, which could result in development delays or a failure to obtain marketing approval.
 
Positive results in previous pre-clinical and clinical studies of our product candidates may not be predictive of similar results in future clinical trials. Also, interim results during a clinical trial do not necessarily predict final results. A number of companies in the pharmaceutical and biopharmaceutical industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed pre-clinical studies and clinical trials for our product candidates may not be predictive of the results we may obtain in later stage trials. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials.
 
Obtaining marketing approval, even after clinical trials that are believed to be successful, is an uncertain process.
 
Even if we complete our planned clinical trials and believe the results to be successful, all of which are uncertain, obtaining FDA approval of a Biologic License Application (BLA) in the United States is an extensive, lengthy, expensive and uncertain process, and the FDA (and other regulatory agencies) may delay, limit or deny approval of our product candidates for many reasons, including:
 
 
·
we may not be able to demonstrate to the satisfaction of the FDA that our product candidates are safe and effective for any indication;
 
 
·
the results of clinical trials may not meet the level of statistical significance or clinical significance required by the FDA for approval;
 
 
·
the FDA may disagree with the number, design, size, conduct or implementation of our clinical trials;
 
 
·
the FDA may not find the data from pre-clinical studies and clinical trials sufficient to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks;
 
 
·
the FDA may disagree with our interpretation of data from pre-clinical studies or clinical trials;
 
 
·
the FDA may not accept data generated at our clinical trial sites;
 
 
·
the data collected from pre-clinical studies and clinical trials of our product candidates may not be sufficient to support the submission of a BLA;
 
 
·
the FDA may have difficulties scheduling an advisory committee meeting in a timely manner, or the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional pre-clinical studies or clinical trials, limitations on approved labeling, or distribution and use restrictions;
 
 
15

 
 
 
·
the FDA may require development of a Risk Evaluation and Mitigation Strategy, or REMS, as a condition of approval;
 
 
·
the FDA may identify deficiencies in the manufacturing processes or facilities of third party manufacturers with which we enter into agreements for clinical and commercial supplies;
 
 
·
the FDA may change its approval policies or adopt new regulations; and
 
 
·
the FDA may require simultaneous approval for both adults and for children and adolescents delaying needed approvals, or we may have successful clinical trial results for adults but not children and adolescents, or vice versa. 
 
In general, before we can submit a BLA to the FDA, we must conduct clinical testing that typically involves a three phase process, which phases may overlap or be combined: Phase I clinical trials are conducted in a limited number of volunteers or patients to assess the early tolerability and safety profile, and the pattern of drug absorption, distribution and metabolism; Phase II clinical trials are conducted in a limited patient population afflicted with a specific disease in order to assess appropriate dosages and dose regimens, expand evidence of the safety profile and evaluate preliminary efficacy; and Phase III larger scale, multicenter, well-controlled clinical trials are conducted on patients with a specific disease to generate enough data to statistically evaluate the efficacy and safety of the product for approval, as required by the FDA, to establish the overall benefit risk relationship of the drug and to provide adequate information for the labeling of the drug. In addition, we will also need to agree on a protocol with the FDA for the clinical trials before commencing those trials. Phase III clinical trials frequently produce unsatisfactory results even though prior clinical trials were successful. Therefore, the results of the additional trials that we conduct may not be successful. The FDA may suspend all clinical trials or require that we conduct additional clinical, nonclinical, manufacturing validation or drug product quality studies and submit those data before it will consider or reconsider the BLA. Depending on the extent of these issues or the requirements for any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we may have available. It is also possible that additional studies, if performed and completed, may not be considered sufficient by the FDA to approve the BLA. If any of these outcomes occur, we would not receive approval for our product candidates and may be forced to cease operations. 
 
Even if we obtain FDA approval for our product candidates, the approval might contain significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications, or may be subject to significant post-marketing studies or risk mitigation requirements. If we are unable to successfully commercialize our product candidates, we may be forced to cease operations.
 
Before we market our products in any country outside the United States, we must first obtain all necessary regulatory approvals and make all necessary registrations in that country. Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The marketing approval process in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside the United States, a product must receive pricing and reimbursement approval before the product can be commercialized. This can result in substantial delays in such countries. In other countries, product approval depends on showing superiority to an approved alternative therapy. This can result in significant expense for conducting complex clinical trials.
 
We do not have any products approved for sale in any jurisdiction, and we have limited experience in the regulatory process of countries outside the United States If we fail to comply with regulatory requirements in non-U.S. markets or to obtain and maintain required approvals, or if regulatory approvals in non-U.S. markets are delayed, our target market will be reduced, and our ability to realize the full market potential of our products will be harmed.
 
 
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Marketing approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the regulatory process in others. This would reduce our target markets and limit the full commercial potential of our products.
 
We have not yet obtained any marketing approval for our products. We cannot guarantee that we will receive all desired marketing approvals, or any marketing approval, for all or any of our products. If we cannot obtain the necessary regulatory approvals, we will not be able to market or sell our products.
 
Our product candidates are based on a novel technology, which may raise development issues that we may not be able to resolve, regulatory issues that could delay or prevent approval or personnel issues that may keep us from being able to develop our products.
 
Regulatory approval of product candidates that utilize novel technology such as ours can be more expensive and take longer than for other products that are based on more well-known or more extensively studied technology, due to our and the regulatory agencies’ lack of experience with them. This may lengthen the regulatory review process, require us to perform additional studies, including clinical trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of these product candidates or lead to significant post-approval limitations or restrictions.  For example, NiCord is a complex biologic product that is manufactured from donated umbilical cord blood that must be appropriately assayed so that its identity, strength, quality, purity and potency may be characterized prior to release for treatment. No product based on NAM technology has been approved for marketing by the FDA or any other regulatory agency. The tests that we use to make identity, strength, quality, purity and potency determinations on these products may not be sufficient to satisfy the FDA’s expectations regarding the criteria required for release of products for patient use and the FDA may require us to employ additional testing measures for this purpose, which could require us to undertake additional testing and/or additional clinical trials.

The novel nature of our product candidates also means that fewer people are trained in or experienced with products of this type, which may make it difficult to recruit, hire and retain capable personnel for the research, development and manufacturing positions that will be required to continue development and commercialization of our product candidates.

Even if our product candidates receive marketing approval, there could be adverse effects not discovered during development.
 
Even if our product candidates receive marketing approval, we or others may later identify undesirable side effects caused by the products or problems with our manufacturing processes, and in either event a number of potentially significant negative consequences could result, including:
 
 
·
regulatory authorities may suspend or withdraw their approval of the product;
 
 
·
regulatory authorities may require the addition of labeling statements, such as warnings or contraindications or distribution and use restrictions;
 
 
·
regulatory authorities may require us to issue specific communications to healthcare professionals, such as “Dear Doctor” letters;
 
 
·
regulatory authorities may issue negative publicity regarding the affected product, including safety communications;
 
 
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·
we may be required to change the way the product is administered, conduct additional pre-clinical studies or clinical trials or restrict the distribution or use of the product;
 
 
·
we could be sued and held liable for harm caused to patients;
 
 
·
our reputation may suffer; and
 
 
·
regulatory authorities may require a REMS program which, depending on its components, might inhibit our ability to market our products or reduce the size of the potential patient population.
 
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase commercialization costs or even force us to cease operations.
 
We have only limited pre-clinical or clinical data that support the applicability of our product candidates to other clinical indications, and ultimate regulatory approval for any additional applications is highly uncertain. 
 
We plan to investigate the use of our product candidates to treat a variety of diseases and conditions other than the current clinical indications for which our product candidates are being considered. To date, we have obtained very little data regarding such uses. The regulatory approval process for additional indications may be as complex, time consuming and expensive as that for our product candidates in their current indications. As a result, ultimate regulatory approval for one or more of such indications is highly uncertain.
 
Obtaining regulatory approval for clinical trials of our product candidates in children will be more difficult than obtaining such approvals for adult clinical trials because the requirements for regulatory approval to conduct pediatric clinical trials are more stringent.
 
In connection with pediatric drug development, regulators may require that we undertake additional non-clinical work (such as animal studies in juvenile animals and additional reproductive toxicity work), as well as staged clinical work in determining safe dosing and monitoring. These additional tasks involve investment of significant additional resources beyond those needed for approval of the drug for adults. Approval of our product candidates for children may be significantly delayed due to these additional requirements.
 
We may not be able to obtain orphan designation for our product candidates. In addition, we might be prevented from commercializing our product candidates if, for instance, another company receives orphan drug marketing exclusivity for the treatment of diseases targeted by our product candidates. 
 
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate products for relatively small patient populations as “orphan” drugs. Under the U.S. Orphan Drug Act, the FDA may designate a product as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States.
 
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of marketing exclusivity, which precludes the FDA or the EMA from approving another marketing application for the same drug for that time period. The applicable period is seven years in the United States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
 
 
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Even if we obtain orphan drug exclusivity for one or more of our product candidates, that exclusivity may not effectively protect the subject products from competition. First, different products can be approved for the same condition. Second, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. If any of the above happens, our ability to commercialize and generate revenue from our product candidates will be limited.
 
Our business may be harmed if we do not adequately predict the market size or customer demand for our products as a result of labeling requirements.
 
The market size, and the timing and amount of customer demand, for each product that we develop will be difficult to predict. Ultimately, if we are able to bring a particular product to market, the size of the market and demand for the product will be based on the final approved label language, which may be different than what we expected it to be and on which market estimates are based. If the FDA or another regulatory authority provides marketing approval for a product, but with labeling that is materially different than the labeling we propose, the market for such product could be significantly smaller than we expect. As a result, our future revenues would be lower than we expect and our business could be materially harmed.
 
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
 
Because we have limited financial and managerial resources, we have focused on research programs and product candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products.

We are currently focusing research and development efforts on product candidates using our NAM technology. Notwithstanding our large investment to date and anticipated future expenditures on these product candidates, we have not yet developed, and may never successfully develop, any marketed products using this approach. As a result of pursuing the development of product candidates based on our NAM technology, we may fail to develop product candidates or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of success.

Our long-term business plan is to develop our NAM technology for the treatment of blood cancers and other serious blood diseases. We may not be successful in our efforts to identify or discover additional product candidates that may be manufactured using our NAM technology platform. Research programs to identify new product candidates require substantial technical, financial and human resources. These research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.

If we do not accurately evaluate the commercial potential or target market for a particular product, we may relinquish valuable rights to that product through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product.
 
 
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Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates or any other product candidate that we develop and affect the prices we may obtain.
 
In the United States and some non-U.S. jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our current product candidates or any other product candidate that we develop, restrict or regulate post-approval activities and affect our ability to profitably sell our current product candidates or any other product candidate for which we obtain marketing approval. 
 
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We are not sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
 
If we in-license molecules or new technologies, this may delay or otherwise adversely affect the development of our existing product candidates, which may negatively impact our business, results of operations and financial condition.
 
In addition to our own internally developed product candidates, we may seek opportunities to in-license and advance other technologies that have value-creating potential, to take advantage of our development know-how and experience in this market. If we in-license any additional technology, our capital requirements may increase significantly. In addition, in-licensing additional technologies may place a strain on the time of our existing personnel, which may delay or otherwise adversely affect the development of our existing product candidates or cause us to re-prioritize our product pipeline. If we do not have the necessary capital, managerial and other resources to develop all of our product candidates, this could adversely impact our business, results of operations and financial condition.
 
We have not yet marketed or sold our products, and we do not know the degree to which the market will accept our products. If the market does not accept our products to a sufficient degree or at all, our business may not become or remain profitable.
 
Sales of our products will depend on the degree to which physicians, patients, healthcare payers, and other decision makers in the medical community choose to purchase our products. We have not yet marketed or sold any products, and we cannot guarantee the degree to which this market will accept any product that we develop, or that the market will accept our products at all.
 
Market acceptance of our products will depend on many factors, including:
 
 
·
the actual or perceived safety, efficacy, convenience, ease of administration, price, and cost-effectiveness of our products;
 
 
·
the actual or perceived advantages or disadvantages of our products compared to other products and products;
 
 
·
the prevalence, incidence, and severity of any adverse side effects associated with our products;
 
 
·
limitations or warnings contained in the approved labeling for our products;
 
 
·
distribution and use restrictions imposed by the FDA or other regulatory bodies, or agreed to by us as part of a mandatory or voluntary risk management plan;
 
 
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·
receipt by a competitor of marketing approval for a product targeting an indication that our product targets, such that our product candidate is not “first to market”;
 
 
·
our success in finding and collaborating with one or more partners for marketing and selling our products;
 
 
·
our success in developing our sales and marketing operations and the effectiveness of those operations; and
 
 
·
our ability to obtain regulatory clearance to market our products for additional product indications in the United States and other jurisdictions that we target for commercialization.
 
If our products do not achieve an adequate level of market acceptance, we may not generate sufficient revenues from our products to become or remain profitable.
 
It will be difficult for us to profitably sell our product candidates if reimbursement for the product is limited.
 
Market acceptance and sales of our product candidates will depend on reimbursement policies and may be affected by healthcare reform measures. Government authorities and third-party payers, such as private health insurers, pharmacy benefit managers and health maintenance organizations, decide which products they will pay for and establish reimbursement levels. A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payers have attempted to control costs by limiting coverage and the amount of reimbursement for particular treatments. We cannot be sure that reimbursement will be available for our product candidates and, if reimbursement is available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. In addition, third-party payers are likely to impose strict requirements for reimbursement in order to limit off label use of a higher priced drug. Reimbursement by a third-party payer may depend upon a number of factors including the third-party payer’s determination that use of a product candidate is:
 
 
·
a covered benefit under its health plan;
 
 
·
safe, effective and medically necessary;
 
 
·
appropriate for the specific patient;
 
 
·
cost effective; and
 
 
·
neither experimental nor investigational.
 
Obtaining coverage and reimbursement approval for a product candidate from a government or other third-party payer is a time-consuming and costly process that could require us to provide supporting scientific, clinical, and cost effectiveness data for the use of our product candidates to the payer. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our product candidates. If reimbursement is not available or is available only to limited levels, we may not be able to commercialize all or certain of our product candidates profitably, or at all, even if approved.
 
 
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We have limited experience with sales and marketing, and any failure to build and manage effectively our sales and marketing operations could have a material adverse effect on our business.
 
 In order to meet our anticipated sales objectives, we intend to collaborate with a strategic partner, or grow our sales and marketing organization significantly over the next several years. There are significant risks involved in building and managing our sales and marketing organization, including risks related to our ability to:
 
 
·
hire qualified individuals as needed;
 
 
·
generate sufficient leads within our target customer group for our sales force;
 
 
·
provide adequate training for the effective sale and marketing of our technologies;
 
 
·
retain and motivate our direct sales and marketing professionals; and
 
 
·
effectively oversee geographically dispersed sales and marketing teams.
 
 Our failure to adequately address these risks could have a material adverse effect on our ability to market our product candidates, which would cause our revenues to be lower than expected and harm the results of our operations.
 
To successfully market and sell our products in markets outside the United States, we must address many issues with which we have limited experience.
 
If we are able to obtain marketing approvals in those jurisdictions that we target for commercialization, we believe that a significant percentage of our business will come from sales in markets outside the United States, such as Europe, Japan, China, India, Hong Kong, Singapore, and Israel. Any such sales will be subject to a number of risks, including:
 
 
·
difficulties in staffing and managing international operations;
 
 
·
increased competition as a result of more products and procedures receiving regulatory approval or otherwise being freely marketable in non-U.S. markets;
 
 
·
potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings;
 
 
·
reduced or varied protection for intellectual property rights in some countries;
 
 
·
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
 
 
·
export and import restrictions, trade regulations, tariffs, trade barriers, and non-U.S. tax laws;
 
 
·
fluctuations in currency exchange rates;
 
 
·
non-U.S. certification and regulatory clearance or approval requirements;
 
 
·
difficulties in developing effective marketing campaigns in unfamiliar non-U.S. countries;
 
 
·
customs clearance and shipping delays;
 
 
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·
political, social, and economic instability abroad, terrorist attacks, natural disasters, and security concerns in general;
 
 
·
potential liability resulting from development work conducted by distributors abroad;
 
 
·
preference for locally produced products;
 
 
·
production shortages resulting from any events affecting raw material supplies or manufacturing capabilities abroad;
 
 
·
the burdens of complying with a wide variety of non-U.S. laws and different legal standards;
 
 
·
workforce uncertainties in countries with an elevated risk of labor unrest;
 
 
·
different reimbursement systems; and
 
 
·
increased financial accounting and reporting burdens and complexities.
 
If one or more of these risks were realized, our revenues from non-U.S. sales could be lower than expected and our costs could be significantly increased.
 
Our inability to effectively compete with our competitors may prevent us from achieving significant market penetration or improving our operating results.
 
The medical technology and cell therapy product markets are competitive and dynamic, and are characterized by rapid and substantial technological development and product innovations. Demand for our technologies could be limited by the products and technologies offered by our competitors. Due to less stringent regulatory requirements, there are many more cell therapy products and procedures available for use in certain non-U.S. markets, such as China, than are approved for use in the United States. There are also fewer limitations on the claims our competitors in those international markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we face even greater competition in these markets than in the United States.
 
We will also generally compete against medical technology companies, including those offering products and technologies unrelated to cell therapy such as new medications to treat hematological malignancies. Some of our potential competitors have a broad range of product offerings, large direct sales forces, and long-term customer relationships with our target physicians, which could inhibit our market penetration efforts.
 
Many of our potential competitors are large, experienced companies that have substantially greater financial, technical, and human resources; significantly greater experience in the discovery and development of drug candidates, obtaining FDA and other regulatory approvals of products and the commercialization of those products; and significantly greater brand recognition than we do. Accordingly, our competitors may be more successful than we may be in obtaining FDA and other marketing approvals for products, securing advantageous reimbursement status, and achieving widespread market acceptance. Our competitors’ products may be more effective, or more effectively marketed and sold, than any product we may commercialize and may render our current product candidates or any other product candidate that we develop obsolete or non-competitive before we can recover the expenses of developing and commercializing the product. We anticipate that we will face intense and increasing competition as new products enter the market and advanced technologies become available. Finally, the development of new treatment methods for the diseases we are targeting could render our current product candidates or any other product candidate that we develop non-competitive or obsolete. Competition in the biopharmaceuticals market could result in price-cutting, reduced profit margins, and limited market share. Any of these risk factors could harm our business, financial condition, and results of operations.
 
 
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We have limited experience in producing our product candidates, and if we are unable to manufacture our products in high-quality commercial quantities successfully and consistently to meet demand, our growth will be limited.
 
We have some experience in manufacturing our StemEx product candidate in our own manufacturing facility, which is located at our headquarters in Israel. This facility is now being adjusted to manufacture NiCord through the end of phase II clinical studies. To date, NiCord has been manufactured by a third party. See “Risks Related to Our Reliance on Third Parties—We rely on a third party to manufacture NiCord”. Our manufacturing capabilities will need to be further improved to meet the standard requirements for Phase III clinical studies and for the commercial phase. To manufacture our products in the quantities that we believe will be required to meet anticipated market demand, we will need to increase manufacturing capacity, which will involve significant challenges. In addition, the development of commercial-scale, regulation-compliant manufacturing capabilities will require us to invest substantial additional funds and hire and retain the technical personnel who have the necessary manufacturing experience. We may not successfully complete any required increase to existing manufacturing processes in a timely manner, or at all.
 
If there is a disruption to our manufacturing operations, we will have no other means of producing our products until we restore the affected facilities or develop alternative manufacturing facilities, which would delay our clinical trials or cause us to be unable to meet commercial demand for our products. In such case, we may need to arrange for third-party manufacturing of our products, which would be expensive and time-consuming, assuming we can identify an appropriate third party manufacturer. Additionally, any damage to or destruction of our facilities or equipment may significantly impair our ability to manufacture our products on a timely basis.
 
If we are unable to produce our products in sufficient quantities to meet anticipated customer demand, our revenues, business, and financial prospects would be harmed. The lack of experience we have in producing commercial quantities of our products may also result in quality issues, and result in product recalls. Any recall could be expensive and generate negative publicity, which could impair our ability to market our products and further affect our results of operations. Manufacturing delays related to quality control could negatively impact our ability to bring our technologies to market, harm our reputation, and decrease our revenues.
 
We will forecast sales to determine requirements for components and materials used in our products, and if our forecasts are incorrect, we may experience delays in shipments or increased inventory costs.
 
Our lack of commercial history means that we may not be able to consistently and accurately predict future demand for our products. If our business expands and our demand for components and materials increases beyond our estimates, we may be unable to meet the demand, which would negatively affect our financial performance and the level of satisfaction our customers have with our business.
 
We intend to increase the size of our company significantly, and difficulties managing our growth could adversely affect our business, operating results, and financial condition.
 
We plan to hire a substantial number of additional employees as we undertake commercialization activities for our product candidates. This growth may place a strain on our management and our administrative, operational, and financial infrastructure. Our ability to manage our operations and growth requires the continued improvement of our operational, financial and management controls, reporting systems, and procedures, particularly to meet the reporting requirements of the Exchange Act. If we are unable to manage our growth effectively or if we are unable to attract and successfully integrate additional highly qualified personnel, our business, operating results, and financial condition may be harmed.
 
 
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We depend on skilled and experienced personnel to operate our business effectively. If we are unable to recruit, hire, and retain these employees, our ability to manage and expand our business will be harmed, which would impair our future revenue and profitability.
 
Our success largely depends on the skills, experience, and efforts of our executive officers and other key employees. We do not have employment contracts with any of our executive officers or other key employees that require these officers to stay with us for any period of time. Any of our executive officers and other key employees may terminate their employment with us at any time. In addition, although we are party to non-compete agreements with our executive officers and key employees, such agreements provide for restrictions that are limited in duration and may be found by courts to not be enforceable. The loss of any of our executive officers or other key employees could weaken our management expertise and harm our business operations. Our key employees include the Company’s officers: Dr. Yael Margolin, Tony Peled, Dorit Harati, Naftali Brikashvili, and Dr. David Snyder. We only maintain key man insurance for such officers.
 
In addition, our ability to retain our skilled employees and our success in attracting, hiring, retaining, managing, and motivating new skilled employees will be a critical factor in determining whether we will be successful in the future. Competition for employees in the biopharmaceutical industry is intense. We may not be able to meet our future hiring needs or retain our existing employees. We will face significant challenges and risks in hiring, training, managing, and retaining sales and marketing, product development, financial reporting, and regulatory compliance employees. Failure to attract and retain personnel, particularly our sales and marketing, product development, financial reporting, and regulatory compliance personnel, would materially harm our ability to compete effectively and grow our business.
 
Some of our product candidates require manufacturing biologics that are specific to each patient. The physical properties of biologics are variable, which may adversely impact the quality of products we manufacture or prevent us from fulfilling orders as expected.
 
Due to the nature of human blood, there will be variations in the biological properties of the umbilical cord blood units that we receive from blood banks for the purpose of expanding HSC populations for transplantation in particular patients. In addition, deviations or errors in the delivery and manufacturing process could lead to defects in our products or require us to discard units that are delivered or manufactured. These variations in the biological properties, handling, and processing of umbilical cord blood units and HSC may adversely affect the quality of particular products we manufacture, and may prevent us from fulfilling orders on time, or at all. For example, in the event that cord blood units were not handled properly prior to freezing, the cells may not survive the thawing and their viability may be very low. If these variations harm the quality, production speed, or successful delivery of our products, market acceptance of our products could decline and our reputation could be harmed.
 
Risks Related to Our Financial Condition
 
We have a limited operating history and we have incurred significant operating losses since our inception, and we anticipate that we will incur continued losses for the foreseeable future.
 
We are a development stage biotechnology company with a limited operating history. To date, we have not generated any revenues from product sales and have incurred significant expenses in developing our current product candidates. We have funded our operations to date primarily through proceeds from government grants and sales of equity shares in our company. As of March 31, 2014, we had an accumulated deficit of approximately $51 million. We have only a limited relevant operating history upon which you can evaluate our business and prospects. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields. We do not possess the required regulatory approvals to market any of our product candidates in any jurisdiction. We have incurred operating losses in each year since our founding in 1998. Substantially all of our operating losses resulted from costs incurred in connection with our development program and from general and administrative costs associated with our operations. Our operating losses for the three months ended March 31, 2014 and March 31, 2013 were $1,492,000 and $926,000, respectively. Our operating losses for the years ended December 31, 2013 and December 31, 2012 were $3,159,000 and $2,787,000, respectively. We expect proceeds from this offering to meet our capital requirements for approximately two years.
 
 
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We expect our research and development expenses to increase in connection with our planned expanded clinical trials. In addition, if we obtain marketing approval for our product candidates, we will likely incur significant sales, marketing and manufacturing expenses, as well as continued research and development expenses. Furthermore, following the initial public offering of our ordinary shares, we expect to incur additional costs associated with operating as a public company, which we estimate will be at least several hundred thousand dollars annually. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing biologic products, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
 
We may not be able to continue as a going concern.
 
Our audited financial statements for the year ended December 31, 2013 and our unaudited financial statements for the three months ended March 31, 2014 were prepared assuming that we will continue to operate as a going concern. However, the report issued by our independent registered public accounting firm, which is included elsewhere in this prospectus, includes an explanatory paragraph with respect to  our recurring losses from operations and our net accumulated deficit, which raise substantial doubt about our ability to continue as a going concern, meaning that our ability to continue to operate is dependent on our receiving additional financial support, and there are no assurances that we will be successful in obtaining an adequate level of financing needed for the long-term development of our products. Our financial statements included in this prospectus do not include any adjustments to the Company’s assets and liabilities that may result from the outcome of this uncertainty. Uncertainty about our ability to continue as a going concern could materially limit our ability to raise additional funds, and in any case, there is a risk that we will not be able to obtain necessary financing to continue our operations on terms acceptable to us, or at all. A perception that we may not be able to continue as a going concern could also make it more difficult to operate our business due to concerns about our ability to meet our contractual obligations. If we cannot continue to operate as a going concern, our shareholders may lose their entire investment in our ordinary shares.
 
We will require substantial additional capital in order to complete necessary pre-market clinical trials of our product candidates, to apply for regulatory approval, and to manufacture and market our products.
 
We will require substantial additional capital in order to complete pre-market clinical trials, obtain regulatory approvals, and market our product candidates. If we cannot obtain sufficient funding to complete clinical trials, obtain marketing approvals, and commercialize our product candidates, our business, financial condition, and future prospects will be materially harmed, and we may never become profitable.
 
We have no committed external sources of funds. Additional financing may not be available when we need it or may not be available on terms that are favorable to us. If adequate funds are not available to us on a timely basis, or at all, we may be required to:
 
 
·
delay, limit, reduce, or terminate clinical trials or other development activities for our product candidates; or
 
 
·
delay, limit, reduce or terminate our establishment of sales and marketing capabilities or other activities that may be necessary to commercialize our product candidates, if we obtain marketing approval.
 
 
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Raising additional capital may cause dilution to our existing shareholders, and may restrict operations or require us to relinquish rights.
 
If we raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our ordinary shares could be significantly diluted and these newly issued securities may have rights, preferences, or privileges senior to those of holders of our ordinary shares. If we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we could be required to relinquish significant rights to our technologies and products or grant licenses on terms that are not favorable to us.
 
We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.
 
Our operating expenses may fluctuate significantly in the future for various reasons, many of which are outside of our control. These reasons may include:
 
 
·
the time, resources, and expenses required to conduct clinical trials of, seek regulatory approvals for, manufacture, market, and sell our current product candidates and/or any additional product candidates we may develop;
 
 
·
the time, resources, and expenses required to research and develop, conduct clinical trials of, and seek regulatory approvals for additional product indications of our current product candidates;
 
 
·
the costs of preparing, filing, prosecuting, defending, and enforcing patent claims and other patent related costs, including litigation costs, or the results of such litigation;
 
 
·
any product liability or other lawsuits related to our products and the costs associated with defending them or the results of such lawsuits;
 
 
·
the costs to attract and retain personnel with the skills required for effective operations; and
 
 
·
the costs associated with being a public company.
 
We have not generated any revenue from our current product candidates or any other product candidate and may never be profitable.
 
Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any revenue from our development stage product candidates, and we do not know when, or if, we will generate any revenue. We do not expect to generate significant revenue unless or until we obtain marketing approval and commercialize our product candidates. Our ability to generate revenue depends on a number of factors, including our ability to:
 
 
·
obtain favorable results from and progress the clinical development of our product candidates;
 
 
·
develop and obtain regulatory approval for clinical studies protocols for our product candidates;
 
 
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·
apply for and obtain marketing approval in the United States and those other jurisdiction that we target for commercialization;
 
 
·
manufacture commercial quantities of our product candidates at acceptable cost levels if marketing approval is received; and
 
 
·
establish sales and marketing capabilities, both internal and external, to effectively market and sell our product candidates in the United States and other countries that we target for commercialization.
 
Even if our product candidates are approved for commercial sale, they may not gain market acceptance or achieve commercial success. In addition, we anticipate incurring significant costs associated with commercializing our products. We may not achieve profitability soon after generating product revenue, if ever. If we are unable to generate product revenue, we will not become profitable and would be unable to continue operations without continued funding.
 
It is difficult to forecast our future performance, which may cause our financial results to fluctuate unpredictably.
 
Because we do not yet have a commercial operating history, and because medical technology markets may rapidly evolve, it is hard for us to predict our future performance. A number of factors, many of which are outside of our control, may contribute to fluctuations in our financial results assuming that we receive marketing authorizations and begin selling our products. These factors may include variations in:
 
 
·
market demand for, and acceptance of, our products;
 
 
·
our sales and marketing operations, or the effectiveness of these operations;
 
 
·
performance of our third-party contractors;
 
 
·
media coverage of our technologies, the procedures or products of our competitors, or our industry;
 
 
·
our ability to obtain or maintain regulatory approvals;
 
 
·
the availability of procedures or products that compete with our products; and
 
 
·
general economic and political conditions, including changes in general consumer confidence.
 
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, our shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our ordinary shares.
 
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the U.S. Sarbanes-Oxley Act of 2002, or “Sarbanes-Oxley Act,” may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our ordinary shares.
 
 
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We are required to disclose changes made in our internal controls and procedures on a quarterly basis and our management is required to assess the effectiveness of these controls annually. However, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
 
Risks Related to Our Reliance on Third Parties
 
We currently depend on third parties to conduct our clinical trials, and if they fail to perform as expected, our ability to obtain regulatory approvals and commence product sales could be harmed.
 
We rely on third parties, such as CROs, CMOs, medical institutions, academic institutions and clinical investigators, to conduct preclinical studies and clinical trials. We are responsible for confirming that our preclinical studies are conducted in accordance with applicable regulations and that each of our clinical trials is conducted in accordance with its general investigational plan and protocol. Regulatory agencies require us to comply with current Good Laboratory Practices, or cGLP, for conducting and recording the results of our preclinical studies and current Good Clinical Practices, or cGCP, for conducting, monitoring, recording and reporting the results of clinical trials, to assure that data and reported results are accurate and that the clinical trial participants are adequately protected. Our reliance on third parties does not relieve us of these responsibilities. If the third parties conducting our clinical trials do not perform their contractual obligations or duties, do not meet expected deadlines, fail to comply with cGLP or cGCP, do not adhere to our clinical trial protocols or otherwise fail to generate reliable clinical data, our clinical trials may be more costly than expected or budgeted, extended, delayed or terminated or may need to be repeated and we may not be able to obtain regulatory approval for or commercialize the product being tested in the clinical trials.
 
If we fail to enter into any needed collaboration agreements for our products, we may be unable to commercialize them effectively or at all.
 
To successfully develop and commercialize our product candidates, we will need substantial financial resources as well as expertise and physical resources and systems. We may elect to develop some or all of these physical resources and systems and expertise ourselves or we may seek to collaborate with another company that can provide some or all of such physical resources and systems as well as financial resources and expertise. If we are not able to enter into a collaboration for one or more of our product candidates on acceptable terms, we might elect to delay or scale back the development and commercialization of the product candidate in order to preserve our financial resources or to allow us adequate time to develop the required physical resources and systems and expertise ourselves.
 
The risks in a collaboration agreement include the following:
 
 
·
the collaborator may not apply the expected financial resources, efforts or required expertise in developing the physical resources and systems necessary to successfully develop and commercialize a product candidate;
 
 
·
the collaborator may not invest in the development of a sales and marketing force and the related infrastructure at levels that ensure that sales of the product reach their full potential;
 
 
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·
we may be required to undertake the expenditure of substantial operational, financial and management resources;
 
 
·
we may be required to issue equity securities that would dilute our existing shareholders’ percentage ownership;
 
 
·
we may be required to assume substantial actual or contingent liabilities;
 
 
·
strategic partners could decide to move forward with a competing product developed either independently or in collaboration with others, including our competitors;
 
 
·
disputes may arise between us and a collaborator that delay the development or commercialization or adversely affect the sales or profitability of the product candidate; or
 
 
·
the collaborator may independently develop, or develop with third parties, products that could compete with our product candidates.
 
In addition, a collaborator for one or more of our product candidates may have the right to terminate the collaboration at its discretion. Any termination may require us to seek a new collaborator, which we may not be able to do on a timely basis, if at all, or require us to delay or scale back our development and commercialization efforts. The occurrence of any of these events could adversely affect the development and commercialization of our product candidates and materially harm our business and stock price by delaying the development of our product candidates, and the sale of any products that may be approved by the FDA or other regulatory agencies, by slowing the growth of such sales, by reducing the profitability of the product and/or by adversely affecting the reputation of the product.
 
We rely on a third party to manufacture NiCord.
 
We have an agreement with Lonza Walkersville Inc., or Lonza, for manufacturing NiCord. If Lonza fails to comply with the terms of this agreement or if this agreement is terminated prior to the time when we are able to commence manufacturing NiCord at our own manufacturing facility, there may be a significant delay in our ability to manufacture NiCord. Such a delay could prevent us from completing clinical trials as expected and could significantly delay the launch of NiCord, which could materially harm our business, financial condition, and future prospects.
 
We rely on purchased third-party equipment that enables us to separate HSC from umbilical cord blood.
 
We purchase equipment and materials from Miltenyi Biotec GmbH, or Miltenyi, that enables us to separate HSC from umbilical cord blood. We are dependent on Miltenyi for supplying this equipment and materials. We do not have an agreement with Miltenyi for the provision of this equipment or materials. In the event that we are unable to obtain the necessary equipment and materials from Miltenyi, we would be required to find a substitute supplier, make adjustments in the process of separating the cells using other equipment, and obtain new approvals from the FDA and the EMA, all of which could require us to incur substantial additional costs and lead to delays in the development of our product candidates.
 
 
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 We rely on third-party suppliers for provision of growth factors that are necessary for our cell proliferation technologies and the manufacture of our product candidates. If our suppliers cease providing these materials and we are unable to find substitute suppliers on short notice, our ability to manufacture our products, complete clinical trials, obtain regulatory approvals, and market our products could be significantly delayed.
 
We purchase the growth factors that are necessary for HSC proliferation (cytokines) from third party suppliers. If our suppliers cease providing us with the supplies we need, and we are unable to find substitute suppliers on a timely basis, our ability to manufacture our products could be significantly delayed, which could delay completion of our clinical trials or the commercialization of our product candidates. We may also incur additional costs in locating suitable substitute suppliers or be forced to pay increased amounts to such substitute suppliers for the growth factors and supplies we need. Any disruption in supply could cause a delay in our completion of clinical trials or commercialization of our product candidates, and if there is a significant delay in our completion of clinical trials or commercialization of our product candidates, our business, financial condition and future prospects could be significantly harmed.
 
Risks Related to Regulation
 
We are subject to various governmental regulations, including those restricting our ability to market our product candidates, and we may incur significant expenses to comply with, experience delays in the development and commercialization of our product candidates as a result of, and be subject to material sanctions if we violate these regulations.
 
Before we can market any of our product candidates in any jurisdiction, we must obtain the necessary marketing approvals in that jurisdiction. Even if marketing approval is obtained, a regulatory authority may still impose significant restrictions on a product’s indications, conditions for use, distribution or marketing or impose ongoing requirements for potentially costly post-market surveillance, post-approval studies or clinical trials. For example, any labeling ultimately approved by the FDA for our product candidates, if they are approved for marketing, may include significant restrictions on use. The FDA may impose further requirements or restrictions on the distribution or use of our product candidates as part of a mandatory plan, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. Our product candidates will also be subject to ongoing FDA requirements governing the labeling, packaging, storage, advertising, manufacturing, distribution, promotion, recordkeeping and submission of safety and other post-market information. The FDA has significant post-market authority, including, for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to evaluate serious safety risks related to the use of a drug. These risks include adverse drug—drug interactions and concomitant therapy with other medications. In addition, manufacturers of drug products and their facilities and clinical trial sites are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with Current Good Manufacturing Practice regulations (cGMPs), GCPs, GLPs and other regulations.
 
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 or in other jurisdictions. 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, which would adversely affect our business.
 
Our manufacturing processes and facilities are required to comply with FDA regulations and other relevant guidelines, which cover the procedures and documentation of the design, production, control, testing, quality assurance, packaging, labeling, storage, and shipping of our products. The FDA checks compliance with these regulations and guidelines by conducting inspections of manufacturing facilities. We anticipate in the future being subject to inspections by the FDA and other regulatory agencies.
 
 
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Failure to comply with applicable regulatory requirements in the United States, Israel, and every other country in which we conduct operations or market our products, or later discovery of previously unknown problems with our products, clinical trials or manufacturing processes, including our failure or the failure of one of our third-party manufacturers to take satisfactory corrective action in response to an adverse inspection, can result in, among other things:
 
 
·
administrative or judicially-imposed sanctions;
 
 
·
injunctions or the imposition of civil penalties or fines;
 
 
·
recall or seizure of our products;
 
 
·
total or partial suspension of production or distribution;
 
 
·
refusal by regulators to grant pending future clearance or pre-market approval for our products;
 
 
·
withdrawal or suspension of marketing clearances or approvals;
 
 
·
clinical holds or suspension of clinical trials;
 
 
·
warning letters or untitled letters;
 
 
·
refusal to allow us to enter into supply contracts;
 
 
·
refusal to permit the import or export of our products; and
 
 
·
criminal prosecution of us or our employees.
 
Any of these actions, in combination or alone, could prevent us from marketing, distributing, or selling our products and would likely harm our business. In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. We believe that the FDA would request that we initiate a voluntary recall or impose a mandatory recall if a product was defective or presented a risk of injury or gross deception. Regulatory agencies in other countries have similar authority. Any recall would divert management attention and financial resources, could cause the price of our ordinary shares to decline and expose us to product liability or other claims, including contractual claims from parties to whom we sold products and harm our reputation with customers. A recall involving our products would be particularly harmful to our business and financial results and, even if we remedied a particular problem, would have a lasting negative effect on our reputation and demand for our products.
 
Any government notice or investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.
 
 
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We will be subject to significant liability if we are found to have improperly promoted our product candidates for off-label uses.
 
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about cleared products. In particular, a product may not generally be promoted for uses that are not approved by the FDA or another regulatory agency as reflected in the product’s approved labeling. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe our product candidates to their patients in a manner that is inconsistent with the approved label. If we are found to have inappropriately marketed for such off-label uses, we may become subject to significant liability. The U.S. government has levied large civil and criminal fines against companies for alleged improper promotion and entered into agreements with several companies that require cumbersome reporting and oversight of sales and marketing practices. In some cases, companies have been excluded from doing business with the U.S. government. The FDA has also required companies to enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
 
Our products may cause or contribute to adverse medical events, and we are required to report any such adverse medical events to the FDA and other regulatory authorities. If we fail to do so, we could be subject to sanctions that would materially harm our business.
 
FDA regulations require that we report certain information about adverse medical events if our products may have caused or contributed to those adverse events. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA could take action including criminal prosecution, the imposition of civil monetary penalties, revocation of our product  approvals, seizure of our products, or delay in approval or clearance of future products. We will have similar reporting obligations and be subject to similar risks in other countries in which we operate or market our products.
 
Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of our products and to produce, market, and distribute our products after clearance or approval is obtained.
 
From time to time, legislation is drafted and introduced in the U.S. Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture, or marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products, including changes in the process for obtaining clearance for our current product candidates. For example, in the future, the FDA may require more burdensome premarket approval of our procedures rather than the clearance process we have used to date and anticipate primarily using in the future. Our products will also be subject to state regulations and regulations in jurisdictions outside the United States which are, in many instances, in flux. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products. We cannot determine what effect changes in regulations, statutes, legal interpretation, or policies, when and if promulgated, enacted, or adopted, may have on our business in the future. Such changes could, among other things, require:
 
 
·
changes to manufacturing methods;
 
 
·
completion of additional clinical trials;
 
 
·
recall, replacement, or discontinuance of certain products; and
 
 
·
additional record keeping.
 
 
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Each of these would likely entail substantial time and cost and could materially harm our financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for our products would harm our business, financial condition, and results of operations.
 
Our relationships with customers and third-party payers in the United States and elsewhere will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.
 
Our commercial, research, and other financial relationships with healthcare providers and institutions may be subject to various U.S. federal and state laws and non-U.S. laws intended to prevent health care fraud and abuse. Healthcare providers, physicians and third-party payers in the United States and elsewhere play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payers and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable U.S. federal and state healthcare laws and non-U.S. healthcare laws and regulations include, among others, the following:
 
 
·
the U.S. Medicare-Medicaid Anti-Fraud and Abuse Act, as amended (the “Anti-Kickback Statute”), prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
 
 
·
the U.S. federal False Claims Act imposes criminal and civil penalties, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government and also includes provisions allowing for private, civil whistleblower or “qui tam” actions;
 
 
·
the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the U.S. Health Information Technology for Economic and Clinical Health Act, or HITECH, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program. HIPAA and HITECH also regulate the use and disclosure of identifiable health information by health care providers, health plans and health care clearinghouses, and impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of identifiable health information as well as requiring notification of regulatory breaches. HIPAA and HITECH violations may prompt civil and criminal enforcement actions as well as enforcement by state attorneys general;
 
 
·
the U.S. federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with delivery of or payment for healthcare benefits, items or services;
 
 
·
the U.S. federal transparency requirements under the Health Care Reform Law requires manufacturers of drugs, devices, biologics and medical supplies to report to the U.S. Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests;
 
 
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·
analogous U.S. state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures or prohibit certain expenditures;
 
 
·
the U.S. Foreign Corrupt Practices Act prohibits companies and their intermediaries from making improper payments or providing anything of value to improperly influence non-U.S. government officials for the purpose of obtaining or retaining business, or obtaining an unfair advantage; and
 
 
·
analogous anti-kickback, fraud and abuse and healthcare laws and regulations in countries outside the United States may also apply.
 
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will 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, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded healthcare programs.
 
If our employees commit fraud or other misconduct, including noncompliance with regulatory standards and requirements and insider trading, our business may experience serious adverse consequences.
 
We are exposed to the risk of employee fraud or other misconduct by our employees and the employees of third party contractors. Misconduct by employees could include intentional failures to comply with FDA regulations and the regulations of comparable regulatory authorities outside the United States, to provide accurate information to the FDA and comparable regulatory authorities outside the United States, to comply with manufacturing standards we have established, to comply with U.S. federal and state and non-U.S. healthcare fraud and abuse laws and regulations, to report financial information or data accurately or to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the inaccurate reporting or improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted, effective upon consummation of this offering, a Code of Business Conduct and Ethics, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions.
 
 
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In addition, during the course of our operations, our directors, executives and employees may have access to material, nonpublic information regarding our business, our results of operations or potential transactions we are considering. We plan to adopt an Insider Trading Policy, but we may not be able to prevent a director, executive or employee from trading in our ordinary shares on the basis of, or while having access to, material nonpublic information. If a director, executive or employee was to be investigated, or an action was to be brought against a director, executive or employee for insider trading, it could have a negative impact on our reputation and our stock price. Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.
 
We are subject to numerous environmental, health, and safety laws and regulations, and must maintain licenses or permits, and non-compliance with these laws, regulations, licenses, or permits may expose us to significant costs or liabilities.
 
We are subject to numerous foreign, national, and local environmental, health, and safety laws and regulations relating to, among other matters, safe working conditions and environmental protection, including laws and regulations governing the generation, storage, handling, use, transportation, and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently, and have tended to become more stringent over time. If we violate or fail to comply with these laws, regulations, licenses, or permits, we could be fined or otherwise sanctioned by regulators. We cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.
 
Risks Related to Manufacturing
 
We are preparing to move all production and manufacturing operations to our Jerusalem headquarters. If our own manufacturing facility is not completed on schedule, or if our facility runs into a problem that prevents or delays manufacturing, there may be a significant delay in our ability to manufacture our product candidates.
 
We are currently preparing to move all production and manufacturing operations to our Jerusalem headquarters, which is expected to eliminate our dependency on Lonza for manufacturing NiCord in our clinical trials. We expect to complete this process by the third quarter of 2014. Our manufacturing facility may not be completed on schedule due to factors that we may not be able to control. Such a delay could prevent us from completing clinical trials as expected and could significantly delay the launch of NiCord, which could materially harm our business, financial condition, and future prospects.
 
Following the contemplated improvements to our manufacturing facility, we intend to perform all manufacturing processes internally for our clinical trials. We have limited manufacturing experience. In the event of a disruption of our operations at our manufacturing facility, we would experience costly delays in reestablishing manufacturing capacity due to a lack of redundancy in manufacturing capability. Certain events, such as natural disasters, fire, political disturbances, sabotage or business accidents, which could impact our current or future facilities, could have a significant negative impact on our operations by disrupting our product development efforts until such time as we are able to repair our facility or put in place third party contract manufacturers to assume this role.  In addition, we intend to use a single manufacturing site to manufacture our product candidates.   Thus, any disruption in the operations of our manufacturing facility would have a significant negative impact on our ability to manufacture the product candidates for clinical testing and would result in delays and increased costs and losses.
 
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We currently carry business personal property insurance in the amount of up to $5,000,000 in the aggregate. We may not have adequate insurance to cover our losses resulting from natural disasters, political disturbances, sabotage, business accidents or other similar significant business interruptions, and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business and financial condition.
 
We have never manufactured our products at commercial scale and there can be no assurance that they can be manufactured in compliance with regulations at a cost or in quantities necessary to make them commercially viable.
 
We have no experience in commercial-scale manufacturing, the management of large-scale information technology systems or the management of a large-scale distribution system. Despite the improvements we are currently making to our manufacturing facility, our manufacturing facility will not be able to support commercial activities. We may develop our manufacturing capacity in part by further expanding or replacing our existing manufacturing facility. These activities would require substantial additional funds and we would need to hire and train significant numbers of qualified employees to staff these facilities. We may not be able to develop commercial-scale facilities that are sufficient to produce the product candidates for Phase III clinical trials and/or commercial use.
 
Furthermore, we must supply all necessary documentation, including product characterization and process validation, to regulatory authorities in support of our BLA on a timely basis and must adhere to cGMP regulations and current Good Tissue Practices, or cGTP, enforced by the regulatory authority through its facilities inspection program. We have not validated our manufacturing process. We intend to complete this validation between completion of a Phase III clinical study and the submission of a marketing application for a BLA from the FDA.  If the FDA determines that the product candidates used in our clinical trials were not sufficiently characterized, we may be required to repeat all or a portion of those trials. If our facilities cannot pass a pre-approval plant inspection, the regulatory approval of the product candidates will not be granted.
 
We are subject to significant regulation with respect to manufacturing of our products.
 
All entities involved in the preparation of a therapeutic biological for clinical trials or commercial sale are subject to extensive regulation. The various components of a product candidate that is used in late-stage clinical trials, or approved for commercial sale must be manufactured in accordance with cGMP and cGTP. These regulations govern manufacturing processes and procedures and the implementation and operation of quality systems to control and assure the quality of investigational product candidates and products, including product component characterization and process validation, approved for sale. Our facilities and quality systems and the facilities and quality systems of some or all of our third party suppliers must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of any product candidate. If any inspection or audit of our manufacturing facilities identifies a failure to comply with applicable regulations, or if a violation of applicable regulations occurs independent of an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales of the temporary or permanent closure of a facility. Any such remedial measures imposed on us or third parties with whom we contract could materially harm our business.
 
 
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Lack of coordination internally among our employees and externally with physicians, hospitals and third-party suppliers and carriers, could cause manufacturing difficulties, disruptions or delays and cause us to not have sufficient supply of product to meet our expected clinical trial requirements or potential commercial requirements.
 
Manufacturing our product candidates requires coordination internally among our employees and externally with physicians, hospitals and third-party suppliers and carriers. For example, a patient’s physician or clinical site will need to provide us with the planned date of transplantation, and we will need to coordinate with them for the shipping of our product to them. In addition, we will need to coordinate with cord blood banks to obtain the cord blood required to manufacture our product candidates, and confirm that the cord blood used matches the requirements for our manufacturing process and that it is the cord blood unit selected by the physician.  Such coordination involves a number of risks that may lead to failures or delays in manufacturing our product candidates, including:
 
 
·
failure to obtain a sufficient supply of key raw materials of suitable quality;
 
 
·
difficulties in manufacturing our product candidates for multiple patients simultaneously;
 
 
·
difficulties in obtaining adequate patient-specific material, such cord blood units, from cord blood banks;
 
 
·
difficulties in completing the development and validation of the specialized assays required to ensure the consistency of our product candidates;
 
 
·
failure to ensure adequate quality control and assurances in the manufacturing process as we increase production quantities;
 
 
·
difficulties in the timely shipping of patient-specific materials to us or in the shipping of the product candidates to the treating physicians due to errors by third-party carriers, transportation restrictions or other reasons;
 
 
·
loss or destruction of, or damage to, patient-specific materials or our product candidates during the shipping process due to improper handling by third-party carriers, hospitals, blood banks, physicians or us;
 
 
·
loss or destruction of, or damage to, patient-specific materials or our product candidates during storage at our facilities or at the clinical site; and
 
 
·
loss or destruction of, or damage to, our product candidates stored at clinical and future commercial sites due to improper handling or holding by clinicians, hospitals or physicians.
 
If we are unable to coordinate appropriately, we may encounter delays or additional costs in achieving our clinical and commercialization objectives, including in obtaining regulatory approvals of our product candidates and supplying products, which could materially damage our business and financial position.

If we fail to comply with manufacturing regulations, our financial results and financial condition will be adversely affected.
 
Before we can begin commercial manufacture of our product candidates, we must obtain regulatory approval of the manufacturing facilities we use and the processes and quality systems we employ. In addition, biopharmaceutical manufacturing facilities are continuously subject to inspection by the FDA and non-U.S. regulatory authorities before and after product approval. Due to the complexity of the processes used to manufacture biopharmaceutical products and product candidates, we may be unable to continue to pass or initially pass U.S. federal and state or non-U.S. regulatory inspections or pass them in a cost effective manner.
 
If we are unable to comply with manufacturing regulations, we may be subject to fines, unanticipated compliance expenses, recall or seizure of our products, total or partial suspension of production and/or enforcement actions, including injunctions, and criminal or civil prosecution. These possible sanctions would adversely affect our business, financial results and financial condition.
 
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Risks Related to Our Intellectual Property
 
If we are unable to obtain, maintain, and enforce intellectual property protection covering our technologies and products we develop, others may be able to make, use, or sell products substantially the same as ours, which could adversely affect our ability to compete in the market.
 
Our commercial success is dependent in part on obtaining, maintaining, and enforcing our intellectual property rights, including our patents. If we are unable to obtain, maintain, and enforce intellectual property protection covering our technologies and any products we develop, others may be able to make, use, or sell products that are substantially the same as ours without incurring the sizable development and licensing costs that we have incurred, which would adversely affect our ability to compete in the market.
 
We seek to obtain and maintain patents and other intellectual property rights to restrict the ability of others to market products that compete with our products. As of March 9, 2014, our patent portfolio was comprised of 12 issued U.S. patents (of which 7 patents related to StemEx are owned jointly by us and Hadasit Medical Research Services and Development Ltd., and exclusively licensed to us by Hadasit), 27 issued non-U.S. patents (of which 11 patents related to StemEx are owned jointly by us and Hadasit, and exclusively licensed to us by Hadasit), 7 pending U.S. patent applications, 19 pending non-U.S. patent applications, and 2 pending patent applications under the Patent Cooperation Treaty. All patents and patent applications related to our NAM platform technology and to product candidates which are based on this technology, including NiCord, CordIn, our NK cell product candidate and our MSC product candidate, are fully owned by Gamida Cell only.
 
Our NAM platform technology patent portfolio is comprised of eighteen issued U.S. and non-U.S. patents. We have two issued patents in each of the United States, South Africa, Japan, and Israel; three issued patents in Europe (two of which are validated in Belgium, Switzerland, Germany, Spain, France, UK, Ireland and Italy, and the other is validated in Germany, Spain, France, UK and Italy); four issued patents in Australia; and one issued patent in each of Canada, Hong Kong, and Singapore.  Our issued patents in the United States include use and process claims, and our issued patents in all other countries included composition of matter, use and process claims. Our issued NAM platform technology patents will expire between 2023 and 2026. In addition, we have eighteen pending U.S. and non-U.S. applications on our NAM platform technology, which include applications in the United States, China, Japan, Israel, Canada, Europe, and Australia, and international applications under the Patent Cooperation Treaty.
 
Patents may not be issued on any pending patent applications or future patent applications we file and, moreover, issued patents owned or licensed to us now or in the future may be found by a court to be invalid or otherwise unenforceable. Also, even if our patents are determined by a court to be valid and enforceable, they may not be drafted or interpreted sufficiently broadly to prevent others from marketing products and services similar to ours or designing around our patents. We may not have freedom to produce and market our products unimpeded by the patent rights of others.
 
We have a number of patents and applications in jurisdictions outside the United States, and expect to continue to pursue patent protection in the jurisdictions in which we do or intend to do business. However, the laws of some jurisdictions, such as China, do not protect intellectual property rights to the same extent as laws in the United States, and many companies have encountered significant difficulties in obtaining, protecting, and defending such rights in such jurisdictions. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in certain jurisdictions, our business prospects could be substantially harmed.
 
 
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The patent positions of medical technology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States or in many other jurisdictions. Both the U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted, including narrowing the scope of subject matter that is eligible for patenting. In addition, the U.S. Congress is currently considering legislation that would change provisions of the patent law (Innovation Act, H.R. 3309). We cannot predict future changes in the interpretation of patent laws or changes to patent laws which might be enacted into law. Those changes may materially affect our patents, our ability to obtain patents or the patents and applications of our collaborators and licensors. The patent legal framework in the medical technology fields outside the United States is even more uncertain.
 
Future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage, which could adversely affect our financial condition and results of operations. For example:
 
 
·
others may be able to make systems or products that are similar to ours but that are not covered by the claims of our patents;
 
 
·
others may assert that our licensors or we were not the first to make the inventions covered by our issued patents or pending patent applications;
 
 
·
our pending patent applications may not result in issued patents;
 
 
·
our issued patents may not provide us with any competitive advantages or may be held invalid or unenforceable as a result of legal challenges by third parties;
 
 
·
the claims of our issued patents or patent applications when issued may not cover our technologies or the products we develop;
 
 
·
there may be dominating patents relevant to our technologies of which we are not aware;
 
 
·
there may be prior public disclosures that could invalidate our inventions or parts of our inventions of which we are not aware;
 
 
·
additional proprietary technologies that we develop may not be patentable;
 
 
·
a court could determine that a competitor’s technology or product does not infringe our issued patents or future patents, if issued;
 
 
·
our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
 
 
·
our issued patents and future patents, if issued, could irretrievably lapse due to failure to pay fees or otherwise comply with regulations, or could be subject to compulsory licensing; and
 
 
·
if we encounter delays in our development or clinical trials, the period of time during which we could market our products under patent protection would be reduced.
 
From time to time, we analyze our competitors’ products and services, and may in the future seek to enforce our patents or other rights to counter perceived infringement. However, prosecuting intellectual property infringement claims can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that the patent we seek to enforce is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that the patent in question does not cover the technology in question. An adverse result in any litigation could put one or more of our patents at risk of being invalidated or interpreted narrowly. Similarly, some of our competitors may be able to devote significantly more resources to intellectual property litigation, and may have significantly broader patent portfolios to assert against us if we assert our rights against them. Finally, because of the substantial discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be disclosed or otherwise compromised during this type of litigation.
 
 
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We may not be able to enforce our intellectual property rights throughout the world.
 
The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. This could make it difficult for us to stop the infringement of any in-licensed patents we may acquire or the misappropriation of our other intellectual property rights. For example, many countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
 
Proceedings to enforce our patent rights in certain jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and other countries may affect our ability to obtain adequate protection for our technology and the enforcement of intellectual property.
 
If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.
 
We rely on trade-secret protection to protect our interests in our proprietary information, know-how and processes for which patents are difficult or impossible to obtain or enforce. We may not be able to protect our trade secrets adequately. We have limited control over the protection of trade secrets used by our third-party contractors. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, and outside scientific advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. We rely, in part, on non-disclosure and confidentiality agreements with our employees, consultants and other parties to protect our trade secrets and other proprietary information. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. Any disclosure of confidential information into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us, which could adversely affect our competitive advantage.
 
Our technologies and any future products or services we develop could be alleged to infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our products.
 
Our commercial success depends on our ability to develop, manufacture, and market our products and use our proprietary technologies without infringing the patents and other proprietary rights of third parties. As the medical technology industry expands and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our products and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Our products may infringe or may be alleged to infringe such patents.
 
 
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In addition, because patent applications in the United States and many other jurisdictions are typically not published until eighteen months or more after filing (or, in some cases, are not published until they issue as patents) and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications. Another party may have filed, and may in the future file, patent applications covering our products or technology similar to ours. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe. For example, pending applications that were filed before our patent applications may exist that provide support for a claim that if issued in a patent would be infringed by our product. We may be required to obtain rights to any such applications or issued patents in order to carry out our business as planned. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.
 
Moreover, our patents and patent applications, or those of our licensors, could face other challenges, such as interference proceedings, opposition proceedings, and re-examination proceedings. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our patents and patent applications subject to challenge.
 
There is substantial litigation involving patent and other intellectual property rights in the medical technology industry generally. If a third party claims that we or any collaborator infringes its intellectual property rights, we may face a number of issues, including, but not limited to:
 
 
·
infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;
 
 
·
substantial damages for infringement, which we may have to pay if a court decides that the product at issue infringes on or violates the third party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;
 
 
·
a court prohibiting us from selling or licensing our products unless the third party licenses its product rights to us, which it is not required to do at a commercially reasonable price or at all;
 
 
·
if a license is available from a third party, we may have to pay substantial royalties, pay upfront fees, or grant cross-licenses to intellectual property rights for our products;
 
 
·
even if we or any future strategic partners were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property; and
 
 
·
redesigning our products or processes so they do not infringe, which may not be possible at all or may require substantial financial expenditures and time, during which our products may not be available for sale.
 
 
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Some of our potential competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our ordinary shares. Finally, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.
 
Our ability to develop, manufacture, and commercialize StemEx, if we proceed with commercialization of StemEx, depends in part on patent licenses we received from another biopharmaceutical company. If the licensor terminates those patent licenses, we may not be able to develop, manufacture, and commercialize StemEx.
 
On July 11, 2008, we contracted with a multinational biopharmaceutical company for a license to use several patents that belong to that company in the area of growth factors, which we used to produce StemEx. The company provided us with a nonexclusive license to use several of these growth factors for production of StemEx only, which we sublicense to our joint venture with Teva Pharmaceutical Industries Ltd., or Teva, which we refer to as our Joint Venture.  Among other terms, the agreement stipulated that if we did not commercialize StemEx within five years from the date of the agreement in one of several countries listed in the agreement, then the licensor can cancel the license. Since we have not begun commercialization of StemEx within five years of that date, the licensor could cancel our license at any time.
 
As of the date of this prospectus, the licensor has not indicated that it intends to cancel our license. Termination of the license would prevent us from continuing the development of and marketing StemEx.
 
Under applicable employment laws, we may not be able to enforce covenants not to compete and therefore may be unable to prevent our competitors from benefiting from the expertise of some of our former employees. In addition, employees may be entitled to seek compensation for their inventions irrespective of their agreements with us.
 
We generally enter into non-competition agreements with our employees and certain key consultants. These agreements prohibit our employees and certain key consultants, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period of time. 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 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 secrecy of a company’s confidential commercial information or the protection of its intellectual property. If we cannot demonstrate that such interests will be harmed, we may be unable to prevent our competitors from benefiting from the expertise of our former employees or consultants and our ability to remain competitive may be diminished. In addition, although the employment agreements of our employees include a waiver of royalties related to intellectual property generated by the employee during his employment. In view of recent Israeli case law, these waivers may be deemed insufficient and our employees could be able to assert claims for compensation with respect to our future revenue. As a result, we may receive less revenue from future products if such claims are successful which in turn could impact our future profitability.
 
 
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Risks Related to Product Liability
 
We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability which our insurance may inadequate to cover. 
 
The use of our product candidates exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers, or others coming into contact with our product candidates. If we cannot successfully defend ourselves against product liability claims, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:
 
 
·
decreased demand for any product candidate for which we obtain marketing approval;
 
 
·
impairment of our business reputation and exposure to adverse publicity;
 
 
·
increased warnings on product labels;
 
 
·
withdrawal of clinical trial participants;
 
 
·
costs of related litigation;
 
 
·
distraction of management’s attention from our primary business;
 
 
·
substantial monetary awards to patients or other claimants;
 
 
·
loss of revenue; and
 
 
·
the inability to successfully commercialize NiCord, CordIn, our NK cell product candidate, or any other product candidate.
 
We have obtained clinical trial insurance coverage for our clinical trials with an annual aggregate coverage limit of $5,000,000, and we expect that we will obtain additional insurance as we conduct additional clinical trials. However, our insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for our current product candidates or any other product candidate, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in mass tort or class action lawsuits based on therapeutic products that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial. A successful product liability claim or series of claims brought against us could cause our share price to decline and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
 
The product liability insurance we will need to obtain in connection with the commercial sales of our product candidates if and when they receive regulatory approval may be unavailable in meaningful amounts or at a reasonable cost. If we are the subject of a successful product liability claim that exceeds the limits of any insurance coverage we obtain, we would incur substantial charges that would adversely affect our earnings and require the commitment of capital resources that might otherwise be available for our operations.
 
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Risks Related to an Investment in Our Ordinary Shares
 
Concentration of ownership among our existing shareholders may prevent new investors from influencing significant corporate decisions.
 
After this offering, our four major shareholders will, in the aggregate, beneficially own approximately _____% of our ordinary shares. As a result, these shareholders, if they acted together, could significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combination transactions. In addition, these shareholders, acting together, have significant influence over our management and affairs. The interests of these shareholders may not always coincide with our interests or the interests of other shareholders. This concentration of ownership might harm the market price of our ordinary shares.
 
Future sales of our ordinary shares could reduce the market prices of our ordinary shares.
 
If we or our shareholders sell substantial amounts of our ordinary shares, or if there is a public perception that these sales may occur in the future, the market prices of our ordinary shares may decline. We and the beneficial owners of _____% of our outstanding ordinary shares (such shares representing holdings immediately prior to the consummation of this offering) have agreed with the underwriters of this offering not to sell any ordinary shares, other than the shares offered through this prospectus, for a period of at least 180 days following the date of this prospectus. The ordinary shares we are offering for sale in this offering will be freely tradable immediately following this offering.
 
Consequently, upon expiration of the lock-up agreements, an additional approximately _____ of our ordinary shares will be eligible for sale in the public market of which approximately _____ will be subject to restrictions on volume and manner of sale pursuant to Rule 144 under the Securities Act. In addition, shares issued upon exercise of options and warrants may be eligible for sale at that time. Sales of shares by these shareholders could have a material adverse effect on the trading price of our ordinary shares.
 
Investors in this offering will immediately experience substantial dilution in net tangible book value.
 
The initial public offering price of our ordinary shares in this offering is considerably greater than the pro forma net tangible book value per share of our outstanding ordinary shares. Investors purchasing ordinary shares in this offering will incur immediate dilution of $_____ per share, based on an assumed initial public offering price of $_____ per share, the mid-point of the range shown on the cover page of this prospectus. In addition, as of _____, there were outstanding and exercisable options to purchase _____ of our ordinary shares, at a weighted average exercise price equal to approximately $_____ To the extent these outstanding options are exercised at a price below net tangible book value per share, there will be additional dilution to our then-shareholders.
 
For more information, please refer to the section of this prospectus entitled “Dilution”.
 
We have broad discretion as to the use of the net proceeds from this offering and may not use them effectively.
 
We cannot specify with certainty the particular uses of the net proceeds that we will receive from this offering. Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described under the section of this prospectus titled “Use of Proceeds”. Our shareholders may not agree with the manner in which our management chooses to allocate and spend 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, and results of operations. Pending the use of such proceeds, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
 
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Active, liquid, and orderly trading markets for our ordinary shares may not develop, the prices of our ordinary shares may be volatile, and you could lose all or part of your investment.
 
Prior to this offering, there has been no public market for our ordinary shares. The initial public offering price of our securities in this offering will be determined through negotiation with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our ordinary shares following this offering. Even if our ordinary shares are approved for listing on the NASDAQ Capital Market, an active trading market for our ordinary shares may never develop or may not be sustained following this offering. If an active market for our ordinary shares does not develop, it may be difficult to sell your ordinary shares. The market price of our ordinary shares after the closing of this offering is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
 
The following factors, in addition to other risk factors described in this section, may have a significant impact on the market price of our ordinary shares:
 
 
·
success or failure of research and development projects;
 
 
·
the general volatility of market prices for shares of biopharmaceutical companies;
 
 
·
changes in the financial projections we may provide to the public or failure to meet these projections;
 
 
·
inability to obtain the approvals necessary to commence further clinical trials;
 
 
·
unsatisfactory results of clinical trials;
 
 
·
announcements of regulatory approval or the failure to obtain it, or specific label indications or patient populations for its use, or changes or delays in the regulatory review process;
 
 
·
changes in earnings estimates or recommendations by securities analysts, if our ordinary shares are covered by analysts;
 
 
·
announcements of technological innovations or new products or applications of products by us or others;
 
 
·
adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;
 
 
·
changes or developments in laws or regulations applicable to our product candidates;
 
 
·
any adverse changes to our relationship with manufacturers or suppliers;
 
 
·
any intellectual property infringement actions threatened or filed against us or in which we may otherwise become involved;
 
 
·
announcements concerning our competitors or the pharmaceutical industry in general;
 
 
·
achievement of expected product sales and profitability or our failure to meet expectations;
 
 
·
lawsuits threatened or filed against us;
 
 
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·
public concern as to the safety of products that we or others develop;
 
 
·
fluctuations in currency exchange rates;
 
 
·
developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and
 
 
·
other events or factors, including those resulting from war or incidents of terrorism, or responses to these events.
 
In addition, the stock market in general, and The NASDAQ Stock Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of small companies. Broad market and industry factors may negatively affect the market price of our ordinary shares, regardless of our actual operating performance, and could result in substantial losses for our investors. These fluctuations may be even more pronounced in the trading market for our ordinary shares shortly following this offering. Further, a systemic decline in the financial markets and related factors beyond our control may cause our share price to decline rapidly and unexpectedly.
 
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our shares, our share price and trading volume could decline. 
 
The trading market for our ordinary shares will be influenced by the research and reports that industry or securities analysts may publish about us, our product candidates or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our shares, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.
 
We may be subject to securities litigation, which is expensive and could divert management attention. 
 
In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
 
We do not expect to declare any dividends in the foreseeable future.
 
We do not anticipate declaring any cash dividends to holders of our ordinary shares in the foreseeable future. Consequently, investors may need to rely on sales of their ordinary shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our ordinary shares. Please see the section of this prospectus titled “Dividend Policy”.
 
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We will incur significant costs as a result of registering our ordinary shares with the SEC, under the Securities Exchange Act of 1934, as amended, upon consummation of this offering, and our management will be required to devote substantial time to new compliance initiatives.
 
As a publicly traded company, we will incur additional significant accounting, legal, and other expenses that we did not incur before this offering. We also anticipate that we will incur costs associated with the corporate governance requirements of Israeli law, the SEC, and the Listing Rules of the NASDAQ Stock Market applicable to us after the consummation of this offering, as well as the requirements under the Israeli Companies Law, the Israeli Securities Law, and Section 404 and other provisions of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our legal and financial compliance costs, introduce new costs, such as investor relations, stock exchange listing fees and shareholder reporting, and to make some activities more time consuming and costly. These requirements may require us to hire outside consultants and incur other significant costs. Although we will likely be exempt from the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act due to our status as an emerging growth company under the Securities Act of 1933, as amended, we will still be subject to the annual requirements related to management’s assessment of internal control over financial reporting, which are costly. Changes in the laws and regulations affecting public companies, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC, and the Listing Rules of the NASDAQ Stock Market, will result in increased legal, accounting, and administrative costs to us as we respond to such requirements. These laws, rules, 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.
 
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 and/or results of operations and could result in an adverse opinion on internal controls from our independent auditors.
 
As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and NASDAQ requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
 
As a foreign private issuer, we are permitted, and intend, to follow certain home country corporate governance practices instead of those otherwise required under the Listing Rules of the NASDAQ Stock Market for domestic U.S. issuers. For instance, we intend to follow home country practice in Israel with regard to, among other things, director nomination procedures and approval of compensation of officers. In addition, we may follow our home country law instead of the Listing Rules of the NASDAQ Stock Market that require that we obtain shareholder approval for certain dilutive events, such as the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or greater 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 United States company listed on NASDAQ may provide less protection to you than what is accorded to investors under the Listing Rules of the NASDAQ Stock Market applicable to domestic U.S. issuers.
 
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In addition, as a foreign private issuer, we are 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 are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic U.S. issuers whose securities are registered under the Exchange Act. Furthermore, we are not subject to SEC Regulation FD (Fair Disclosure), which generally prohibits selective disclosure of material nonpublic information. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
 
The recently enacted JOBS Act will allow us to postpone the date by which we must comply with some of the laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC, which could undermine investor confidence in our company and adversely affect the market price of our ordinary shares.
 
For so long as we remain an “emerging growth company” as defined in the JOBS Act, we intend to take advantage of certain exemptions from various requirements that are applicable to 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 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 intend to take advantage of these exemptions until we are no longer an “emerging growth company.” We could remain an emerging growth company until the earliest of: (a) the last day of the first fiscal year in which we have total annual gross revenues of at least $1,000,000,000 (as indexed for inflation as provided in the Securities Act of 1933); (b) the last day of our fiscal year following the fifth anniversary of our initial public offering date; (c) the date on which we have, during the previous three-year period, issued more than $1,000,000,000 in non-convertible debt; or (d) the date on which we are deemed to be a “large accelerated filer”, as defined in rules promulgated by the SEC.
 
Exemptions that apply to emerging growth companies include the following, among others:
 
 
·
We are not required to comply with the shareholder approval requirements of Section 14A(a) and Section 14A(b) of the Securities Exchange Act of 1934, regarding shareholder approval of executive compensation.
 
 
·
We are not required to provide information that shows the relationship between executive compensation actually paid and our financial performance when we disclose a description of compensation in a proxy or consent solicitation material for an annual meeting of our shareholders.
 
 
·
We are not required to present more than two years of audited financial statements in order for our registration statement with respect to this initial public offering to be declared effective.
 
 
·
We are not required to comply with the auditor attestation requirements of section 404(b) of the Sarbanes-Oxley Act, regarding management’s assessment of the effectiveness of internal controls over financial reporting.
 
 
·
We are not required to comply with any new or revised financial accounting standard until companies that are not issuers (as defined under section 2(a) of the Sarbanes-Oxley Act are required to comply with such new or revised accounting standard.
 
 
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Specifically, we have elected not to opt out of the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of these benefits until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our ordinary shares.
 
We cannot predict if investors will find our ordinary shares less attractive because we may rely on these exemptions. 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 and may decline.
 
Risks Related to Our Operations in Israel
 
Our headquarters and other significant operations are located in Israel and, therefore, our results may be adversely affected by political, economic and military conditions in Israel.
 
Our executive offices are located in Jerusalem, Israel. Also, it is expected that all of our manufacturing operations will be located at our Israel headquarters by the third quarter of 2014. In addition, the majority of our officers and 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. Any hostilities involving Israel or the interruption or curtailment of trade between Israel and its trading partners could adversely affect our operations and results of operations. During November 2012, Israel was engaged in an armed conflict with a militia group and political party that controls the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist Shiite militia group and political party. These conflicts involved missile strikes against civilian targets in various parts of Israel, including areas in which our employees and some of our consultants are located, and negatively affected business conditions in Israel. Any armed conflicts, terrorist activities or political instability in the region could adversely affect business conditions and could harm our results of operations and could make it more difficult for us to raise capital. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary in order to meet our business partners face to face. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements.
 
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 in the past covered the reinstatement value of certain damages that were 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 conflicts or political instability in the region would likely negatively affect business conditions generally and could harm our results of operations.
 
Further, in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business.
 
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Our operations may be disrupted as a result of the obligation of management or key personnel or consultants to perform military service.
 
Our employees and consultants in Israel, including members of our senior management, may be obligated to perform one month, and in some cases longer periods, of annual military reserve duty. In the event of a military conflict, our key personnel or consultants may be called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that there will be similar large-scale military reserve duty call-ups in the future. Our operations could be disrupted by the absence of a significant number of our officers, directors, employees and consultants. Such disruption could materially and adversely affect our business and operations.
 
Because we incur a portion of our expenses in currencies other than the U.S. dollar, our financial condition and results of operations may be harmed by currency fluctuations and inflation.
 
While our reporting and functional currency is the U.S. dollar, we pay a meaningful portion of our expenses in NIS and other currencies. All of the salaries of our employees, our general and administrative expenses (including rent for our real property facility in Israel), and the fees that we pay to certain of our partners, are denominated in NIS. As a result, we are exposed to the currency fluctuation risks relating to the denomination of our future expenses in U.S. dollars. More specifically, if the U.S. dollar devaluates against the NIS, our NIS denominated expenses will be greater than anticipated when reported in U.S. dollars. Inflation in Israel compounds the adverse impact of such devaluation by further increasing the amount of our Israeli expenses. Israeli inflation may also (in the future) outweigh the positive effect of any appreciation of the U.S. dollar relative to the NIS, if, and to the extent that, it outpaces such appreciation or precedes such appreciation. The Israeli rate of inflation has not had a material adverse effect on our financial condition during 2011 or 2012. Given our general lack of currency hedging arrangements to protect us from fluctuations in the exchange rates of the NIS and other foreign currencies in relation to the U.S. dollar (and/or from inflation of such foreign currencies), we may be exposed to material adverse effects from such movements. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the NIS against the U.S. dollar.
 
We received Israeli government grants for certain of our research and development activities. The terms of those grants may require us, in addition to payment of royalties, to satisfy specified conditions in order to manufacture products and transfer technologies outside of Israel. If we transfer certain technology or know-how or manufacturing out of Israel, we may be required to pay penalties in addition to repayment of the grants.
 
Our research and development efforts, during the period between 2003 and 2014, were financed in part through royalty-bearing grants that we and the Joint Venture received from Israel’s Office of the Chief Scientist (OCS) of the Ministry of Industry, Trade and Labor (now the Ministry of Economy) in the total amount of approximately $30.3 million, for the development of our NAM technology and related products and projects, and of StemEx.
 
With respect to such grants, we are committed to pay royalties to the OCS at a rate of 3% to 5% on sales proceeds from our product candidates. According to the OCS approvals, we are required to pay royalties from any income generated in connection with our product candidates up to the total amount of grants received, linked to the dollar and bearing interest at an annual rate of LIBOR applicable to dollar deposits. As of March 31, 2014, we had a contingent obligation to the OCS in the amount of $11,500,000 and the Joint Venture had a similar contingent obligation to the OCS in the amount of $23,122,000.
 
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We also are required to comply with the requirements of the Israeli Encouragement of Industrial Research and Development Law, 5744-1984, and related regulations (the “Research Law”). When a company develops know-how, technology or products using OCS grants, the terms of these grants and the Research Law restrict the transfer of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside of Israel, without the prior approval of the OCS. Therefore, our technologies that were developed with OCS funding will require the discretionary approval of an OCS committee for any transfer to third parties outside of Israel of know-how or manufacturing or manufacturing rights related to those aspects of such technologies, and may result in payment of increased royalties (both increased royalty rates and increased royalties ceilings) and/or payment of additional amounts to the OCS. 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 (including for the purpose of manufacturing). Currently, under the Research Law, there is no mechanism for the approval of licensing transactions of OCS-supported technologies, however, licensing OCS supported technologies may under certain circumstances be considered a transfer of know-how and therefore requires approval as aforementioned.
 
The transfer of OCS-supported technology or know-how outside of Israel may involve the payment of additional 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 up to a maximum of six times the amount of grants received. 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 (particularly since currently there is no mechanism for the approval of licensing transactions of OCS supported technologies). 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.
 
Our obligations and limitations pursuant to the Research Law are not limited in time and may not be terminated by us at will. As of the date of this prospectus, we have not been required to pay any royalties with respect to the OCS grants.
 
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, our company, which could prevent a change of control, 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 merger may not be consummated unless at least 50 days have passed from the date on which a merger proposal is filed by each merging company with the Israel Registrar of Companies and at least 30 days have passed from the date on which the shareholders of both merging companies have approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, 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.
 
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. See “Taxation—Israeli Tax Considerations and Government Programs” for additional information. 
 
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Our amended and restated articles of association will also contain provisions that could delay or prevent changes in control or changes in our management without the consent of our Board of Directors. These provisions include the following:
 
 
·
no cumulative voting in the election of directors, as well as an ex-officio appointment of the Chief Executive Officer as a director of the Company, all of which limits the ability of minority shareholders to elect director candidates; and
 
 
·
the right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death or removal of a director, which may prevent shareholders from being able to fill vacancies on our Board of Directors.
 
It may be difficult to enforce a judgment of a United States court against us and our officers and directors and the Israeli experts named in this prospectus in Israel or the United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.
 
We were incorporated in Israel. The vast majority of our executive officers and directors reside outside of the United States, and all 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 necessarily 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. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to United States securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of United States 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 United States law is applicable to the claim. If United States law is found to be applicable, the content of applicable United States 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 United States or non-U.S. 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 liabilities and responsibilities as a shareholder will be governed by Israeli law, which differs in some material respects from the U.S. law that governs the liabilities and responsibilities of shareholders of U.S. companies.
 
The liabilities and responsibilities of the holders of our ordinary shares are governed by our amended and restated articles of association and by Israeli law. These liabilities and responsibilities differ in some material respects from the liabilities and responsibilities of shareholders in typical U.S.-based corporations. In particular, a shareholder of an Israeli company has certain duties to act in good faith and fairness towards the company and other shareholders, and to refrain from abusing its power in the Company. See “Corporate Governance Practices—Approval of Related Party Transactions under Israeli Law—Shareholder Duties” for additional information. There is limited case law available regarding 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. corporations.
 
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Risks Related to Taxation
 
The tax benefits that are available to us require us to continue to meet various conditions and may be terminated or reduced in the future, which could increase our costs and taxes.
 
In 2000, our production facilities in Israel were granted “approved enterprise” status under the Law for the Encouragement of Capital Investments, 5719-1959 (the “Investment Law”). The main benefit arising from such status is a tax exemption for 10 years on income derived from the approved enterprise. The period of tax benefits is subject to a limitation of 12 years from commencement of production, or 14 years from the approval date, whichever is earlier. Such limitation does not apply to the exemption period. If the retained tax-exempt income is distributed (or deemed as distributed), it would be taxed at the corporate tax rate applicable to such profits as if the Company had not elected the alternative tax benefits. These benefits are conditional upon our fulfillment of the conditions stipulated by the Investment Law and regulations promulgated under it. These conditions include: (1) at least 30% of the investments in fixed assets will be funded by equity (ordinary shares); (2) the manufacturing of the Company’s products will be in Jerusalem, Israel; and (3) the Company will manufacture the products as stated in its application to the Investment Center of the Israeli Ministry of Economy, which referred to a platform technology to expand, in culture, highly functional stem cells derived from umbilical cord blood. If we fail to comply with these conditions, our benefits may be canceled and we may be required to refund the amount of the benefits, in whole or in part, including interest. Because the Company has not yet received benefits under the Investment Law, the Company would not currently be required to refund any amounts.
 
U.S. holders of our ordinary shares may suffer adverse tax consequences if we were characterized as a passive foreign investment company, or PFIC.
 
We may be classified as passive foreign investment company, or PFIC, for U.S. federal income tax purposes. 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 are held for the production of, or produce, passive income, we would be characterized as a PFIC for United States federal income tax purposes. Our status as a passive foreign investment company may also depend on how quickly we utilize the cash proceeds from this offering in our business. Because PFIC status is determined annually and is based on our income, assets and activities for the entire taxable year, there can be no assurance that we will not be considered a PFIC for any taxable year. If we were to be characterized as a PFIC in any taxable year during which a U.S. holder owns ordinary shares, such U.S. holder could be liable for additional taxes and interest charges upon certain distributions by us and any gain recognized on a sale, exchange or other disposition, including a pledge, of the ordinary shares, whether or not we continue to be a PFIC. If we are characterized as a PFIC, certain elections may be available that would alleviate some of the adverse consequences of PFIC status and result in an alternative treatment of our ordinary shares. We are not obligated, however, and do not currently intend to provide the information necessary for U.S. holders to make qualified electing fund (QEF) elections if we are classified as a PFIC.
 
 
54

 
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This prospectus, including the sections titled “Summary”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Business”, contains forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management.
 
All statements contained in this prospectus, other than statements of historical fact, including statements of estimated and projected revenue, margins, costs, expenditures, cash flows, growth rates, financial results, and prospects, are forward-looking statements. You can generally identify forward-looking statements by terminology such as “may,” “could,” “should,” “expects,” “plans,” “projects,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “pursue,” “target,” or “continue,” or the negative of these terms or other similar expressions that concern our strategy, plans, or intentions, although not all forward-looking statements contain these words. We have based these forward-looking statements largely on our historical performance, our current expectations, and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs.
 
Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties, and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy, and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results, levels of activity, performance, or achievements may be materially and possibly adversely different from any future results, levels of activity, performance, or achievements that are expressed, anticipated, or implied by these forward-looking statements. Accordingly, we cannot guarantee future results, levels of activity, performance, or achievements.
 
We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors” and elsewhere in this prospectus.
 
The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. Except as required by law, we undertake no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this prospectus.
 
Forward-looking statements in this prospectus include, but are not limited to, statements about:
 
 
·
the projected timing, duration, cost, and other aspects of our clinical trials for our product candidates, including whether such clinical trials will be conducted or completed at all;
 
 
·
our ability to obtain consent from applicable regulatory agencies and IRBs to our clinical trial protocols;
 
 
·
our plans to continue or to commence clinical or preclinical trials of our product candidates;
 
 
·
completion and receiving favorable results of clinical trials;
 
 
·
the timing of our submission to the FDA or other regulatory agencies of, and any review or comments on, product data that we will need to generate for our products;
 
 
·
our ability to satisfy regulatory requirements with respect to our product candidates;
 
 
55

 
 
 
·
FDA approval of, or other regulatory action in the United States or elsewhere with respect to, our product candidates;
 
 
·
the potential for our product candidates to receive orphan drug designation and the implications if they do not receive such designation;
 
 
·
the development and approval of the use of our current product candidates for additional indications other than the current indications for which they have been approved for clinical trials;
 
 
·
our ability to update our manufacturing facility and consistently manufacture our product candidates under the proper conditions;
 
 
·
the performance of third-party contractors upon whom we rely to conduct our clinical trials and to manufacture certain components of our product candidates and platform technologies;
 
 
·
our ability to discover, develop, and commercialize innovative therapeutics using our proprietary platform technologies;
 
 
·
our ability to develop sales and marketing capabilities or to enter into strategic partnerships to develop and commercialize our product candidates;
 
 
·
the timing, cost, success, and other aspects of the commercialization of our product candidates;
 
 
·
our ability to achieve favorable pricing for our product candidates;
 
 
·
the degree of market acceptance of HSC transplant therapies in general and our product candidates in particular;
 
 
·
the size and growth of the potential markets for our product candidates and our ability to serve those markets;
 
 
·
regulatory developments in the United States and other countries;
 
 
·
our ability to obtain, maintain, defend, and enforce intellectual property rights protecting our product candidates;
 
 
·
issuance of patents to us by the U.S. Patent and Trademark Office, or USPTO, and other governmental patent agencies;
 
 
·
third-party payer reimbursement for our products;
 
 
·
our estimates regarding anticipated expenses and capital requirements; and
 
 
·
our use of proceeds from this offering.
 
 
56

 

USE OF PROCEEDS
 
We estimate that the net proceeds to us from our issuance and sale of _____shares of our ordinary shares in this offering will be approximately $_____, 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, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 
If the underwriters’ option to purchase additional shares in this offering is exercised in full, we estimate that the net proceeds from this offering will be approximately $_____, based on an assumed offering price of $_____ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 
We currently expect to use the net proceeds from this offering for:
 
 
·
continuing the development of our product candidates, estimated at approximately $33,350,000, which we expect will be sufficient to complete a Phase I/II study of NiCord as a treatment for blood cancers, complete a reduced-intensity regimen study of NiCord as a treatment for blood cancers, recruit patients for a Phase II/III study of NiCord as a treatment for blood cancers, complete two Phase I/II studies of CordIn as a treatment for nonmalignant diseases, and commence a Phase I/II study of our NK cell product candidate as a cancer treatment;
 
 
·
completing construction and preparation of self-owned manufacturing facilities at our headquarters in Jerusalem, estimated at approximately $9,400,000;
 
 
·
the remainder for working capital and general corporate purposes, including funding the costs of operating as a public company.
 
These expected uses of net proceeds from this offering represent our intentions based upon our current plans and business conditions which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly and will depend upon numerous factors, including the progress of our development and commercialization efforts, the status of and results from our clinical trials and preclinical studies, whether or not we enter into strategic collaborations or partnerships, the amount of cash available from other sources, and our operating costs and expenditures. Accordingly, our management will have significant flexibility and broad discretion in applying the net proceeds of this offering.
 
We expect proceeds from this offering to meet our capital requirements for approximately two years. We will need to obtain additional financing to complete the development of and commercialize our product candidates.
 
Pending these uses, we intend to invest the net proceeds in high quality, investment-grade instruments, certificates of deposit, or direct or guaranteed obligations of the United States government or other governments, or hold as cash.
 
We have no current commitments or binding agreements with respect to any material acquisition of or investment in any technologies, products, or companies.
 
57

 
 
DIVIDEND POLICY
 
We have never declared or paid any cash dividends on our ordinary shares and do not anticipate paying any cash dividends in the foreseeable future.  We currently intend to retain future earnings, if any, for use in the operation of our business and to fund future growth. Payment of cash dividends, if any, in the future will depend on our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our Board of Directors may deem relevant.
 
The Israeli Companies Law imposes further restrictions on our ability to declare and pay dividends. See “Description of Share Capital—Dividend and Liquidation Rights” for additional information.
 
Payment of dividends may be subject to Israeli withholding taxes. See “Taxation—Israeli Tax Considerations” for additional information.
 
58

 
 
CAPITALIZATION
 
The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2014:
 
 
·
on an actual basis;
 
 
·
on a pro forma basis to reflect:
 
 
o
the issuance of an aggregate of _____ ordinary shares upon the conversion of all outstanding shares of our convertible preferred shares immediately prior to the completion of this offering; and
 
 
o
the effectiveness of our amended and restated articles of association; and
 
 
·
on a pro forma, as adjusted basis, to reflect:
 
 
o
the issuance and sale of _____ ordinary shares in this offering at an assumed initial public offering price of $_____ per share (the midpoint of the price range indicated on the cover page of this prospectus), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
 
The pro forma as adjusted information below is illustrative only. Our cash and cash equivalents and capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at the pricing of this offering. You should read the following table in conjunction with the sections titled “Selected Financial Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Description of Share Capital” and our financial statements and related notes included elsewhere in this prospectus.
 
59

 
 
(U.S. dollars in thousands)
 
Actual (unaudited)
   
Pro forma (unaudited)
   
Pro forma, as adjusted (unaudited)
 
Share capital
 
_____
   
_____
   
_____
 
Common shares of NIS 0.01 par value – 13,643,763 shares authorized, 689,898 shares issued and outstanding, actual; _____ shares authorized, _____ shares issued and outstanding, pro forma; _____ shares authorized, _____ shares issued and outstanding, pro forma as adjusted
    2    
_____
   
_____
 
Preferred shares of NIS 0.01 par value – 10,718,837shares authorized; 7,881,374shares issued and outstanding
    19              
Share premium
    51,614    
_____
   
_____
 
Capital reserve due to actuarial gains (losses)
    12                  
Accumulated deficit
    (49,555 )  
_____
   
_____
 
Total shareholders’ equity
    2,092    
_____
   
_____
 
Total liabilities and shareholders’ equity
    4,707    
_____
   
_____
 
 
The number of our ordinary shares to be outstanding immediately after this offering is based on 689,898 ordinary shares outstanding as of March 31, 2014 and 7,881,374 ordinary shares issuable upon the conversion of all of our preferred shares outstanding as of March 31, 2014. This number excludes:
 
 
·
560,520 ordinary shares issuable upon the exercise of share options outstanding as of March 31, 2014 under our equity incentive plans;
 
 
·
714,461 ordinary shares issuable upon the conversion of preferred shares underlying warrants outstanding as of March 31, 2014; and
 
 
·
676,043 ordinary shares reserved for issuance under our equity incentive plans as of March 31, 2014.
 
 
 
60

 

DILUTION
 
If you invest in our ordinary shares, you will experience immediate and substantial dilution to the extent of the difference between the initial public offering price of our ordinary shares and the pro forma as adjusted net tangible book value (deficit) per share of our ordinary shares immediately after the offering.
 
Our historical net tangible book value (deficit) per share is determined by dividing our total tangible assets, less total liabilities, by the actual number of outstanding ordinary shares. The historical net tangible book value (deficit) of our ordinary shares as of March 31, 2014 was $_____, or $_____ per share.
 
The pro forma increase in net tangible book value per share attributable to conversion of preferred shares reflects the conversion of _____ of our preferred shares into an aggregate of _____ ordinary shares, as if such conversion had occurred on March 31, 2014.
 
The pro forma net tangible book value also gives effect to the exercise of our outstanding warrants to purchase 556,165 preferred shares and the conversion of such preferred shares into an aggregate of _____ ordinary shares, as if such conversion had occurred on March 31, 2014.
 
The pro forma as adjusted net tangible book value of our ordinary shares as of _____ was $_____, or $_____ per share. The pro forma as adjusted net tangible book value gives effect to the sale of ordinary shares in this offering at an assumed initial public offering price 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. The difference between the initial public offering price per share and the pro forma as adjusted net tangible book value (deficit) per share represents an immediate dilution of $_____ per share to new investors purchasing ordinary shares in this offering.
 
The following table illustrates this dilution on a per share basis to new investors:
 
Assumed public offering price per share
$_____
Historical Net tangible book value per share before this offering, as of March 31, 2014
$_____
Pro forma increase in net tangible book value per share attributable to conversion of preferred shares
$_____
Pro forma as adjusted net tangible book value as of March 31, 2014
$_____
Increase in net tangible book value per share attributable to new investors in this offering
$_____
Pro forma net tangible book value per share after offering
$_____
Dilution in pro forma tangible book value per share to new investors
$_____
 
If the underwriters’ over-allotment option to purchase additional shares from us is exercised in full, and based on an assumed initial public offering price of $_____ per share, the pro forma as adjusted net tangible book value per share after this offering would be approximately $_____ per share, the increase in the pro forma net tangible book value per share attributable to new investors would be approximately $_____ per share, and the dilution to new investors purchasing shares in this offering would be approximately $_____ per share.
 
The table below summarizes as of March 31, 2014, on the pro forma as adjusted basis described above, the number of ordinary shares we issued and sold, the total consideration we received and the average price per share (1) paid by our existing shareholders and (2) to be paid by new investors purchasing our ordinary shares in this offering at the initial public offering price of $_____ per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.
 
 
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Shared Purchased
   
Total Consideration
   
Average Price
 
   
Number
   
Percent
   
Amount
   
Percent
   
Per Share
 
Existing shareholders
    ______       ______ %   $ ______       ______ %   $ ______  
New investors
    ______       ______ %   $ ______       ______ %   $ ______  
Total
    ______       100.0 %   $ ______       100.0 %   $ ______  
 
If the underwriters’ over-allotment option is exercised in full, the percentage of ordinary shares held by existing shareholders will be reduced to _____% of the total number of shares of our ordinary shares outstanding after this offering, and the number of shares held by new investors will increase to _____ shares, or _____% of the total number of ordinary shares outstanding after this offering.
 
The number of our ordinary shares to be outstanding immediately after this offering is based on 689,898 ordinary shares outstanding as of March 31, 2014 and 7,881,374 ordinary shares issuable upon the conversion of all of our preferred shares outstanding as of March 31, 2014. This number reflects the conversion of all of our outstanding preferred shares into ordinary shares, but excludes:
 
 
·
560,520 ordinary shares issuable upon the exercise of share options outstanding as of March 31, 2014 under our 2003 Options Plan;
 
 
·
714,461 ordinary shares issuable upon the conversion of preferred shares underlying warrants outstanding as of March 31, 2014; and
 
 
·
676,043 ordinary shares reserved for issuance under our equity incentive plans as of March 31, 2014.
 
To the extent that new options are granted under our employee options plans, there will be further dilution to investors purchasing ordinary shares in this offering.
 
 
62

 

SELECTED FINANCIAL DATA
 
We have derived the following selected statements of operations data for the three months ended March 31, 2014 and March 31, 2013 and as of March 31, 2014 from our unaudited financial statements included elsewhere in this prospectus, and for the years ended December 31, 2013 and December 31, 2012 and as of December 31, 2013 from our audited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of results that may be expected in the future. The selected financial data should be read together with our financial statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, appearing elsewhere in this prospectus.
 
The financial statements in this prospectus have been prepared in accordance with the international financial reporting standards (“IFRS”) issued by the International Accounting Standards Board of the International Financial Reporting Standards Foundation. None of the financial information in this prospectus has been prepared in accordance with accounting principles generally accepted in the United States. Our functional currency and reporting currency is the United States dollar.
 
(in thousands of U.S. dollars, except
share and per share amounts)
 
Three months ended
March 31,
             
Statements of Comprehensive Income: (1)
 
2014
(unaudited)
   
2013
(unaudited)
   
Year ended
Dec. 31,
2013
   
Year ended
Dec. 31, 2012
 
                   
Operating Expenses
                       
Research and development expenses, net
    1,309       805       2,602       2,292  
General and administrative expenses
    183       121       557       495  
Operating Loss
    1,492       926       3,159       2,787  
Finance Expenses
    71       430       127       891  
Finance Income
    (14 )     (41 )     (775 )     (246 )
Share of loss (profit) of joint venture
    256       762       (2,573 )     1,377  
Net Loss (Income)
    1,805       2,077       (62 )     4,809  
Basic and diluted loss per share for the year
    5.7       5.8       11.5       17.3  
Weighted average number of ordinary
shares used in computing basic and
diluted net loss per share
   
689,898
     
689,898
      689,898       689,898  
 
 
(1)
See the Notes to our financial statements for the three months ended March 31, 2014 and March 31, 2013 and for the years ended December 31, 2013 and 2012 for details regarding these statements of comprehensive income.
 
 
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(in thousands of U.S. dollars)
 
Statements of Financial Position:
 
As of Mar. 31,
2014
(unaudited)
   
As of Dec. 31,
2013
 (audited)
 
             
Current assets (including cash and cash equivalents)
  $ 3,603     $ 2,650  
Non-current assets
    1,994       2,057  
Total assets
    5,597       4,707  
Current Liabilities
    1,233       1,478  
Non-current liabilities
    1,567       1,137  
Accumulated deficit
    (51,359 )     (49,555 )
Total shareholders’ equity
    2,797       2,092  
Total liabilities and shareholders’ equity
    5,597       4,707  
 
 
64

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of the prospectus contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.
 
Introduction
 
We are a clinical-stage biopharmaceutical company primarily focused on developing and commercializing cell therapeutic products for patients with blood cancer and severe genetic blood diseases. Using our proprietary platform technology for expanding populations of highly functional stem cells derived from umbilical cord blood, we are developing a suite of product candidates targeting a variety of clinical indications, including our lead product candidate NiCord for blood cancer.
 
We are currently conducting or preparing to conduct clinical trials of our current product candidates, at various phases of the clinical study process. Our product candidates have not yet received marketing approval from the FDA or other regulatory agencies.
 
To date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue unless and until we obtain marketing approval of, and commercialize, our cell product candidates. As of March 31, 2014, we had an accumulated deficit of approximately $51,359. Our financing activities are described below under “Liquidity and Capital Resources”.
 
Financial Overview
 
Our current expenses consist of four components: research and development expenses, general and administrative expenses, finance expenses, and our share of loss of our Joint Venture.
 
Research and Development Expenses
 
Our research and development expenses consist primarily of salaries and related personnel expenses, cost of subcontractors, materials, rent and maintenance for our premises in Jerusalem, travel and trade shows, depreciation, and other expenses. During the periods of three months ended March 31, 2014 and March 31, 2013, we received grants from the Office of the Chief Scientist amounting to $30 and $(49), respectively, which were deducted from our research and development expenses. During the years ended December 31, 2012 and December 31, 2013, we received grants from the Office of the Chief Scientist amounting to $1,352 and $1,265, respectively, which were deducted from our research and development expenses.
 
 
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The following table discloses the breakdown of research and development expenses:
 
(U.S. dollars in thousands)
 
Three months ended Mar. 31, 2014
   
Three months ended Mar. 31, 2013
   
Year ended
Dec. 31, 2013
   
Year ended
Dec. 31, 2012
 
Salaries and social benefits
    545       338     $ 1,303     $ 944  
Subcontractors
    472       242       1,530       1,712  
Materials
    182       99       648       680  
Rent and maintenance
    32       31       126       124  
Travel and trade shows
    41       33       171       86  
Depreciation
    66       13       58       45  
Other expenses
    (8 )     0       31       53  
OCS grant
    21       (49 )     1,265       1,352  
Total
    1,309       805       2,602       2,292  
 
The following table sets forth the costs incurred for our significant research and development projects:
 
(U.S. dollars in thousands)(1)
 
Three months ended
Mar. 31, 2014
   
Three months ended
Mar. 31, 2013
   
Year ended
Dec. 31, 2013
   
Year ended
Dec. 31, 2012
   
Inception through
Mar. 31, 2014
 
Copper chelator technology: StemEx product
  $ 207     $ 889     $ (7,210 )(2)   $ (566 )(2)   $ 61,000  
Copper chelator technology: non-StemEx
                          $ 1,785  
NAM technology (mainly NiCord product)
  $ 1,309     $ 805     $ 2,602     $ 2,292     $ 15,215  
 
(1) 
These numbers reflect net expenses after OCS grants of $30.3 million ($20.1 million for StemEx and $10.2 million for NAM).
 
(2) 
Due to reversal of OCS liability.
 
We expect that our research and development expenses will materially increase in the near future as we undertake and complete clinical trials for NiCord, CordIn, and our natural killer cell product candidate, and as we complete our planned transition to using exclusively our self-owned manufacturing facility for manufacturing our product candidates.
 
General and Administrative Expenses
 
Our general and administrative expenses consist primarily of salaries and related personnel expenses, professional service expenses, rent and maintenance for our premises in Jerusalem, depreciation, travel and car expenses, and other expenses.
 
We expect that our general and administrative expenses, such as salaries, accounting, and legal fees, will increase in the near future as we transition to becoming a publicly traded company and due to the anticipated growth of our company.
 
Finance Expenses
 
Our finance expenses consist primarily of bank charges and expenses arising from foreign currency translation adjustments. Finance income includes interest income, revaluation of financial derivatives, and foreign currency translation adjustments.
 
Share of Loss of Joint Venture
 
Our share of loss of our Joint Venture is based on our ownership of 50% of the voting rights of our Joint Venture. For additional information see Note 9 to our financial statements for the year ended December 31, 2013.
 
Critical Accounting Policies
 
We describe our accounting policies in Note 2 to our financial statements for the years ended December 31, 2013 and 2012. We believe that the accounting policies below are critical in order to fully understand and evaluate our financial condition and results of operations.
 
 
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We prepare our financial statements in accordance with IFRS issued by the International Accounting Standards Board of the International Financial Reporting Standards Foundation. The Company’s financial statements have been prepared on a cost basis, except for financial liabilities, which are measured at fair value through profit and loss, and the joint venture accounted for using the equity method. The Company has elected to present profit or loss items using the function of expense method.
 
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments, and assumptions, as well as judgment in the process of adopting significant accounting policies. Our management believes that the estimates, judgments, and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The matters which required the exercise of significant judgment and the use of estimates, which have a material effect on amounts recognized in the financial statements, are specified in Note 3 to our financial statements as of December 31, 2013.
 
We periodically evaluate our estimates, which are based on historical experience and on various other assumptions that management believes to be reasonable under the circumstances. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s subjective or complex judgments, resulting in the need for management to make estimates about the effect of matters that are inherently uncertain. If actual performance should differ from historical experience or if the underlying assumptions were to change, our financial condition and results of operations may be materially impacted.
 
While our accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this prospectus, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.
 
Warrants
 
Some of our outstanding warrants are deemed to be derivative instruments that require liability classification and mark-to-market accounting.
 
The fair value of warrants presented as a financial liability classified as Level 3 in the fair value disclosure hierarchy as per IFRS 7 is determined using an acceptable option pricing model. The assumptions used in the model include the share price, exercise price, expected volatility, expected life, expected dividend and risk-free interest rate.
 
Impairment of Non-Financial Assets
 
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 is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. 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. Impairment losses are recognized in profit or loss.
 
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, will not be increased above the lower of 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 its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognized in profit or loss.
 
 
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We did not recognize any impairment of non-financial assets for any of the periods presented.
 
Government Grants from the Office of the Chief Scientist
 
Research and development grants received from the OCS are recognized upon receipt as a liability if future economic benefits are expected from the project that will result in royalty-bearing sales. The amount of the liability for the loan is first measured at fair value using a discount rate that reflects a market rate of interest that reflects the appropriate degree of risks inherent in our business. We used a discount rate of 16%-21% based in part on our cost of capital determined by an independent valuation analysis conducted at the time of our initial recognition of OCS grants as a liability on our balance sheets. The difference between the amount of the grant received and the fair value of the liability is accounted for as a government grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Royalty payments are treated as a reduction of the liability. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as a contingent liability in accordance with IAS 37, “Provisions, Contingent Liabilities and Contingent Assets.”
 
At the end of each reporting period, we evaluate whether there is reasonable assurance that the liability recognized will be repaid based on our best estimate of future sales and, if not, the appropriate amount of the liability is derecognized against a corresponding reduction in research and development expenses.
 
JOBS Act
 
On April 5, 2012, the United States government enacted the JOBS Act. We qualify as an “emerging growth company” under Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) as amended by the JOBS Act. Our status as an emerging growth company affects the accounting standards and reporting requirements that apply to us.
 
Specifically, we have elected not to opt out of the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. We have elected to take advantage of these benefits until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of this exemption. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. Because our financial statements may not be comparable to companies that comply with public company effective dates, investors may have difficulty evaluating or comparing our business, performance or prospects in comparison to other public companies, which may have a negative impact on the value and liquidity of our ordinary shares.
 
Please see the section of this prospectus titled “Risk Factors—Risks Related to an Investment in Our Ordinary Shares” for a description of certain accounting standards and reporting requirements that may not apply to our company.
 
 
68

 
 
Results of Operations
 
The following table summarizes our results of operations for the three month periods ended March 31, 2014 and March 31, 2013, and for the years ended December 31, 2013 and December 31, 2012:
 
(in thousands of U.S. dollars, except
share and per share amounts)
 
Three months ended
March 31,
             
 
Statements of Comprehensive Income: (1)
 
2014
(unaudited)
   
2013
(unaudited)
   
Year ended
Dec. 31,
2013
   
Year ended
Dec. 31, 2012
 
                   
Operating Expenses
                       
Research and development expenses, net
    1,309       805       2,602       2,292  
General and administrative expenses
    183       121       557       495  
Operating Loss
    1,492       926       3,159       2,787  
Finance Expenses
    71       430       127       891  
Finance Income
    (14 )     (41 )     (775 )     (246 )
Share of loss (profit) of joint venture
    256       762       (2,573 )     1,377  
Net Loss (Income)
    1,805       2,077       (62 )     4,809  
Basic and diluted loss per share for the year
    --       --       11.5       17.3  
Weighted average number of ordinary shares used in computing basic and diluted net loss per share
    --       --       689,898       689,898  
 
 
(1)
See the Notes to our financial statements for the three months ended March 31, 2014 and March 31, 2013 and for the years ended December 31, 2013 and 2012 for details regarding these statements of comprehensive income.
 
Comparison of the three months ended March 31, 2014 to the three months ended March 31, 2013
 
Research and development expenses, net
 
Our research and development expenses for the three months ended March 31, 2014 amounted to $1,309, representing an increase of $504 or 62.6%, compared to $805 for the three months ended March 31, 2013. The increase was primarily attributable to an increase in salaries and social benefits, due to the termination of the participation of the joint venture salaries and social benefits costs and an increase in payments to subcontractors and materials.
 
General and administrative expenses
 
Our general and administrative expenses totaled $183 for the three months ended March 31, 2014, an increase of $62, or 51.2%, compared to $121 for the three months ended March 31, 2013. The increase resulted primarily from an increase in salaries and social benefits, due to the termination of the participation of the joint venture salaries and social benefits costs and an increase in payments for professional services.
 
Operating loss 
 
As a result of the foregoing, our operating loss for the three months ended March 31, 2014 was $1,492, as compared to an operating loss of $926 for the three months ended March 31, 2013, an increase of $566, or 61.1%.
 
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Financial expenses
 
For the three months ended March 31, 2014, we recognized financial expenses of $71 representing a decrease of 359 or 83.5%, compared to financial expenses of $430 for the three months ended March 31, 2013. The decrease resulted mainly from The decrease resulted mainly from the conversion in 2012 of the convertible bridge loan extended to the Company in 2011, and its impact on the related accrued interest and amortization of embedded discount.
 
Finance Income
 
Finance income for the three months ended March 31, 2014 was $14, as compared to finance income of $41 for the three months ended March 31, 2013, a decrease of $27, or 66%. The increase in finance income was in the ordinary course of business.
 
Share of Loss (Profit) of Joint Venture
 
Share of loss for the three months ended March 31, 2014 was $256, as compared to share of loss for the three months ended March 31, 2013, which was $762. The decrease resulted mainly from the decrease in most of the activities of the Joint Venture.
 
Loss / Income
 
Our net loss (income) for the three months ended March 31, 2014 was $1,804 as compared to $2,077 for the three months ended March 31, 2013, a decrease of $273, or 13.1%.
 
Comparison of the year ended December 31, 2013 to the year ended December 31, 2012 (in thousands)
 
Research and development expenses, net
 
Our research and development expenses for the year ended December 31, 2013 amounted to $2,602, representing an increase of $310, or 13.53%, compared to $2,292 for the year ended December 31, 2012. The increase was primarily attributable to an increase in salaries and social benefits, due to the termination of the participation of the joint venture salaries and social benefits costs, a decrease in grants from the Office of the Chief Scientist, and a reduction in payments to subcontractors. 
 
General and administrative expenses
 
Our general and administrative expenses totaled $557 for the year ended December 31, 2013, an increase of $62, or 12.53%, compared to $495 for the year ended December 31, 2012. The increase resulted primarily from a one-time property insurance reimbursement in 2012. 
 
Operating loss 
 
Operating loss for the year ended December 31, 2013 was $3,159, as compared to an operating loss of $2,787 for the year ended December 31, 2012, an increase of $372, or 13.35%. 
 
Financial expenses
 
For the year ended December 31, 2013, we recognized financial expenses of $127 representing a decrease of $764, or 85.75%, compared to financial expenses of $891 for the year ended December 31, 2012. The decrease resulted mainly from the conversion in 2012 of the convertible bridge loan extended to the Company in 2011, and its impact on the related accrued interest and amortization of embedded discount.
 
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Finance Income
 
Finance income for the year ended December 31, 2013 was $775, as compared to finance income of $246 for the year ended December 31, 2012, an increase of $529, or 215%. The increase in finance income resulted mainly from the revaluation of the warrants to purchase Preferred E-2 Shares that were granted to the investors in May 2012.
 
Share of Loss (Profit) of Joint Venture
 
Share of profit for the year ended December 31, 2013 was $2,573, as compared to share of loss for the year ended December 31, 2012, which was $1,377. The increase derives from the liability related to the Office of the Chief Scientist, which was reversed and carried to profit in 2013.
 
Loss / Income
 
Our net loss (income) for the year ended December 31, 2013 was ($62) as compared to $4,809 for the year ended December 31, 2012, a decrease of $4,871, or 101.3%.
 
Liquidity and Capital Resources
 
Overview
 
Since our inception in 1998 through March 31, 2014, we have funded our operations principally with:
 
 
1.
research and development grants from Israel’s Office of the Chief Scientist;
 
 
2.
issuances of equity stock in the Company; and
 
 
3.
convertible debt, which has since been converted.
 
As of March 31, 2014, we had $3,047 thousands in cash and cash equivalents and other current assets totaling $109 thousands , and $447 thousands in receivables from related party transactions.
 
(U.S. dollars in thousands)
 
Three months ended
Mar. 31, 2014
   
Three months ended
Mar. 31, 2013
   
Year ended
Dec. 31, 2013
   
Year ended
Dec. 31, 2012
 
Operating activities
  $ (1,211 )   $ (100 )   $ (4,864 )   $ (3,720 )
Investing activities
  $ (9 )   $ (1,238 )   $ 679     $ (2,216 )
Financing activities
  $ 2,882       --       --     $ 5,905  
Exchange difference on balances of cash and cash equivalents
  $ 4     $ 10     $ 15     $ (4 )
Net increase (decrease) in cash and cash equivalents
  $ 1,666     $ (1,328 )   $ (4,170 )   $ (35 )
 
Operating Activities 
 
Net cash used in operating activities during the three months ended March 31, 2014 was comprised mainly of a net loss of $1,804, a decrease of $290 in accrued expenses, $256 representing our share in the profit of the Joint Venture, and $340 that was due to a decrease in the current balance of intercompany transactions with the Joint Venture.
 
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Net cash used in operating activities during the three months ended March 31, 2013 was comprised mainly of a net loss of $2,077, a decrease of $415 in trade payables, $762 representing our share in the profit of the Joint Venture, $372 from revaluation of financial derivatives, and $1,319 that was due to a decrease in the current balance of intercompany transactions with the joint venture.
 
Net cash used in operating activities during the year ended December 31, 2013 was comprised mainly of $2,573 representing our share in the profit of the joint venture and of $1,293 that was due to a decrease in the current balance of intercompany transactions with the joint venture.
 
Net cash used in operating activities during the year ended December 31, 2012 was comprised primarily from a net loss of $4,809, out of which $1,377 representing our share in the loss of the joint venture, and a $1,531 decrease in the current balance of transactions with the joint venture.
 
Investing Activities
 
Net cash used in investing activities of $9 during the three months ended March 31, 2014 reflected primarily purchases of equipment.
 
Net cash used in investing activities of $1,238 during the three months ended March 31, 2013 reflected primarily investment in the Joint Venture.
 
Net cash provided by investing activities of $679 during the year ended December 31, 2013 reflected primarily proceeds from withdrawal of short-term bank deposits in the amount of $2,000 less cash used in investment in the joint venture in the total amount of $1,230.
 
Net cash used in investing activities of $2,216 during the year ended December 31, 2012 reflected primarily our use of cash in investment in the joint venture in the total amount of $2,363.
 
Financing Activities
 
Net cash provided by financing activities of $2,882 in the three months ended March 31, 2014 related to the issuance of series E preferred shares and warrants. We had no net cash provided by financing activities in the three months ended March 31, 2013.
 
We had no net cash provided by financing activities in the year ended December 31, 2013. Net cash provided by financing activities of $5,905 in the year ended December 31, 2012 related to net proceeds from issuances of Series E-2 preferred shares and warrants to purchase Series E-2 preferred shares of the Company, net of issuance costs.
 
Current Outlook
 
We have financed our operations to date primarily through research and development grants, issuances of equity stock in our company, and convertible debt. We have incurred losses and generated negative cash flows from operations since inception. To date, we have not generated any revenue from the sale of products and we do not expect to generate revenues from sale of our products in the near future. Even if we are able to raise funds in the offering contemplated herein, we believe that we will need to raise additional funds before we have any cash flow from operations.
 
As of March 31, 2014, our cash, cash equivalents, short term deposits, and other currents assets totaled approximately $3,603. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus.
 
We believe that our existing cash resources and the net proceeds from this offering will be sufficient to fund our projected cash requirements through the end of 2016. We will require significant additional financing in the future to fund our operations if and when we obtain regulatory approval for and commercialize our product candidates.
 
 
72

 
 
We currently anticipate that, assuming consummation of the current offering, we will utilize approximately $33,350 for research and development and clinical trial activities through the end of 2016. We also anticipate utilizing $9,400 for capital expenditures over that period, which consists primarily of expenditures for upgrading and constructing our manufacturing facilities. Our future capital requirements will depend on many factors, including:
 
 
·
the number, scope, progress, and costs of our pre-clinical studies and clinical trials;
 
 
·
the scope, progress, and costs of our other research and development activities;
 
 
·
the costs of completing and operating self-owned manufacturing facilities;
 
 
·
the costs and timing of obtaining regulatory approvals for our product candidates;
 
 
·
the costs of filing, prosecuting, enforcing, and defending patent claims and other intellectual property rights;
 
 
·
the costs of, and timing for, manufacturing of sufficient clinical and commercial quantities of our product candidates;
 
 
·
the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally;
 
 
·
the costs of acquiring or undertaking the development and commercialization efforts for additional, future therapeutic applications of our product candidates; the magnitude of our general and administrative expenses; and payments to the OCS.
 
Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through our existing cash, cash equivalents and short term deposits, the net proceeds from this offering, debt or equity financings, and/or by out-licensing applications of our proprietary platform technologies and/or our product candidates.
 
On January 14, 2014, we issued additional series E-2 preferred shares on the same terms that applied under the May 2012 Series E Preferred Share Purchase Agreement, for a total investment amount of $2,900,000.
 
We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research and development and commercialization of one or more of our product candidates.
 
 
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Contractual Obligations
 
The following table summarizes our significant contractual obligations at December 31, 2013:
 
(U.S. dollars in thousands)
 
Total
   
Less than 1 year
   
1 – 3 years
 
3 – 5 years
 
More than 5 years
 
Operating Lease Obligations(1)
  $ 391           $ 391          
                               
Purchase Obligations(2)
          $ 483                  
Employee benefit liabilities, net(3)
                            $ 53  
 
 
(1)
Future contractual obligations for leases represent future minimum payments under operating leases primarily for office space and motor vehicles
 
 
(2)
Purchase obligations consist primarily of outstanding purchase orders for materials and services from our vendors.
 
 
(3)
Reflects the balance due on account of employee benefit liabilities in the amount of $1,529, over the already accrued amount of $1,476.
 
The above table does not include royalties that we may be required to pay to the OCS. For more information, see “Business— Grants from the Office of the Israeli Chief Scientist”. The above table also does not include contingent contractual obligations or commitments that may arise in the future, such as contractual undertakings to pay royalties subject to certain conditions occurring.
 
Off-Balance-Sheet Arrangements
 
We currently do not have any off-balance-sheet arrangements.
 
Quantitative and Qualitative Disclosure about Market Risk
 
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, a substantial majority of our cash and cash equivalents is held in deposits that bear interest and have a low risk. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of foreign currency exchange rates, which is discussed in detail below.
 
Foreign Currency Exchange Risk
 
Our results of operations and cash flow are subject to fluctuations due to changes in foreign currency exchange rates. Most of our assets are held in USD, but some of our assets and expenses are denominated in NIS. For instance, in 2013, approximately 21% of our current assets and 40% of our expenses were denominated in NIS. Changes of 5% and 10% in the USD/NIS exchange rate would have increased or decreased those assets by 1.05% and 2.1% respectively, and would have increased or decreased those expenses by 2% and 4% respectively. However, these historical figures may not be indicative of future exposure. We expect that the percentage of our NIS denominated assets and expenses will materially decrease in the near future, therefore reducing our exposure to exchange rate fluctuations.
 
We do not hedge our foreign currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us from the material adverse effects of such fluctuations.
 
74

 
 
BUSINESS
 
Overview
 
We are a clinical-stage biopharmaceutical company focused on developing and commercializing cell therapeutic products for patients with blood cancer and severe genetic blood diseases. We use our proprietary platform technology to expand, in culture, highly functional stem cells derived from umbilical cord blood, which we believe will enhance the therapeutic efficacy of umbilical cord blood transplantation products.
 
We are developing our lead product candidate, NiCord, for potential use as a hematopoietic (blood) stem cell transplantation, or HSC transplantation, product in patients with blood cancer, such as leukemia and lymphoma, and serious genetic blood diseases, such as sickle cell disease and thalassemia. HSC transplantation is currently the only potential cure available for these patients. HSC transplantation is primarily performed through bone marrow transplantation, which requires a complete tissue match between the patient and the donor in order to mitigate the risk of certain medical complications. Approximately 40% of the patients who are indicated for an HSC transplant are unable to receive a transplant. We believe that a substantial portion of those patients who were unable to receive a transplant did not receive a transplant because they are unable to identify a suitable bone marrow donor in a timely manner. As a result, there is a significant unmet need for patients who could potentially be cured by HSC transplantation but fail to receive a transplant because they cannot identify a fully matched bone marrow donor in a timely manner. HSC transplantation from cord blood is an alternative to HSC transplantation from bone marrow and does not require full tissue matching between the patient and the HSC from the donor's cord blood cells, thereby making HSC transplantation from cord blood available to those patients who cannot identify a fully matched bone marrow donor. However, HSC transplantation from cord blood is limited by the small number of HSC in a unit of cord blood. A sufficient number of HSC is required for a successful transplant. NiCord is a graft derived from a unit of umbilical cord blood that has been expanded in culture using our NAM technology. We believe that NiCord has the potential to address this unmet need in HSC transplantation  because it has demonstrated the ability to effectively increase HSC in cord blood, which is rapidly available, and does not require full tissue matching between the patient and the donor.