A.           History and Development of the Company

Our legal and commercial name is RedHill Biopharma Ltd. The company was incorporated on August 3, 2009 and was registered as a private company limited by shares under the laws of the State of Israel. Our principal executive offices are located at 21 Ha’arba’a Street, Tel Aviv, Israel and our telephone number is 972-3-541-3131.

In February 2011, we completed our initial public offering in Israel, pursuant to which we issued 14,302,300 ordinary shares, and 7,151,150 tradable Series 1 Warrants to purchase 7,151,150 ordinary shares for aggregate gross proceeds of approximately $14 million. On December 27, 2012, we completed the listing of our ADSs on The Nasdaq Capital Market. Our ordinary shares are traded on the Tel Aviv Stock Exchange under the symbol “RDHL,” and our ADSs are traded on The Nasdaq Capital Market under the symbol "RDHL".

Our capital expenditures for the years ended December 31, 2015, 2014 and 2013 were $14,000, $70,000 and $14,000, respectively. Our current capital expenditures involve equipment and leasehold improvements.

B.         Business Overview

We are a biopharmaceutical company focused on the development and acquisition of late clinical-stage, proprietary, orally-administered drugs for the treatment of inflammatory and gastrointestinal diseases and cancer. From inception to the end of the period covered by this Annual Report, we have invested a total of $6.1 million on in-licensing and acquisitions of therapeutic candidates and related technologies.

Depending on the specific development program, our therapeutic candidates are designed to exhibit greater efficacy, provide improvements over existing drugs by improving their safety profile, reducing side effects, lowering the number of administrations, using a more convenient administration form and/or providing a cost advantage. Where applicable, we intend to seek FDA approval for the commercialization of certain of our therapeutic candidates through the alternative Section 505(b)(2) regulatory path under the Federal Food, Drug, and Cosmetic Act of 1938, as amended, and in corresponding regulatory paths in other foreign jurisdictions. Our current pipeline consists of eight late clinical development therapeutic candidates, including one therapeutic candidate (RP101) for which we have an option to acquire.

We generate our pipeline of therapeutic candidates by identifying, rigorously validating and in-licensing or acquiring products that are consistent with our products strategy and that we believe exhibit a relatively high probability of therapeutic and commercial success. With the exception of RIZAPORT™ which was approved for marketing in Germany, our therapeutic candidates have not yet been approved for marketing and, to date, our therapeutic candidates have not generated meaningful sales. We intend to commercialize our therapeutic candidates through licensing and other commercialization arrangements with pharmaceutical companies on a global and territorial basis. We also evaluate, on a case by case basis, co-development and similar arrangements and the independent commercialization of our therapeutic candidates in the U.S.

Our Strategy

Our goal is to become a significant player in the development of pharmaceuticals for the treatment of inflammatory and gastrointestinal (GI) diseases and cancer.

Key elements of our strategy are to:

Our eight current clinical stage therapeutic candidates include “RHB-105”, “RHB-104”, “BEKINDA™”, “RHB-106”,  “Yeliva™”, “MESUPRON ^® ”, “RP101” (subject to an option to acquire) and “RIZAPORT™” and related research and development programs, the most advanced of which are described below.

RHB-105

RHB-105 is intended for the eradication of H. pylori bacterial infection in the gastrointestinal tract. RHB-105 is a combination of three approved drug products – omeprazole, which is a proton pump inhibitor (prevents the secretion of hydrogen ions necessary for digestion of food in the stomach), and amoxicillin and rifabutin which are antibiotics. RHB-105 is administered to patients orally.

Chronic infection with H. pylori irritates the mucosal lining of the stomach and small intestine. The original discovery of the H. pylori bacteria and its association with peptic ulcer disease warranted the Nobel Prize in 2005. H. pylori infection has since been associated with a variety of outcomes which include: dyspepsia (non-ulcer or functional), peptic ulcer disease (duodenal ulcer and gastric ulcer), primary gastric B-cell lymphoma, vitamin B12 deficiency, iron deficiency anemia and gastric cancer.

Gastric cancer is the second most frequent cancer worldwide and is associated with a poor prognosis (five-year survival rate of only 10-15% in patients with advanced disease). Almost all gastric cancer is now known to be attributable to H. pylori infection, and H. pylori eradication seems to either eliminates, stabilizes, or reduces risk for progression to gastric cancer, depending upon the severity and extent of damage present when the H. pylori infection is cured.

RHB-105 was granted Qualified Infectious Disease Product (QIDP) designation by the FDA in November 2014. The QIDP designation was granted under the FDA's Generating Antibiotic Incentives Now (GAIN) Act, which is intended to encourage development of new antibiotic drugs for the treatment of serious or life-threatening infections that have the potential to pose a serious threat to public health. The granted QIDP designation allows us to benefit from Fast-Track development status with an expedited development pathway for RHB-105 and Priority Review status which potentially provides shorter review time by the FDA of a future potential marketing application. If approved, RHB-105 will also receive an additional five years of U.S. market exclusivity on top of the standard exclusivity period for a total of eight years.

RHB-105 is targeting a significantly broader indication than that of existing H. pylori therapies, as a first line treatment of H. pylori infection regardless of ulcer status.

As noted above, we acquired the rights to RHB-105 pursuant to an agreement with Giaconda Limited. See “– Acquisition and License Agreements – Acquisition of RHB-104, RHB-105 and RHB-106.”

Competition and Market

The most common treatments of H. pylori type bacteria combine clarithromycin or metronidazole antibiotics with amoxicillin and a proton pump inhibitor. Such current standard of care treatments fail in approximately 30% of the patients due to the development of antibiotic resistance, based on reports by Prof. David Y. Graham, MD, et al. published in Nature Clinical Practice Gastroenterology & Hepatology in 2008 and in Gut in 2010. The potential advantage of RHB-105 over these drugs (such as PrevPac ^® of Takeda Pharmaceuticals NA and Pylera ^® of Actavis) was shown in a Phase II study comprising of 130 subjects, in which a different formulation of RHB-105, using the same antibiotic ingredients and a similar proton pump inhibitor, was shown to eradicate H. pylori in over 90% of treated patients who failed previous eradication attempts using standard of care treatments, as published in the 2006 study report by Dr. T.J. Borody, et. al. in Alimentary Pharmacology & Therapeutics. Furthermore, top-line results from a Phase III study conducted by us demonstrated 89.4% efficacy in eradicating H. pylori infection with RHB-105 in 118 dyspepsia patients with confirmed H. pylori infection.

We estimate that there are approximately three million H. pylori infected patients present with first time dyspeptic symptoms per annum in the U.S., based on a 2007 report by Colin W. Howden, MD, et. al. published in The American Journal of Managed Care and a 2005 report by Nicholas J. Talley, MD, et al. published in The American Journal of Gastroenterology. Based on this figure, combined with the current price of current branded treatments, we estimate the potential global and U.S. market for RHB-105 at approximately $4.83 billion and $1.45 billion, respectively.

Clinical Development

A Phase II clinical trial in Australia was completed with a different formulation of RHB-105, using the same antibiotic ingredients and a similar proton pump inhibitor. A first Phase III trial in the U.S. was completed in 2015. Top line data showed 89.4% eradication of H. pylori with RHB-105 therapy while open-label standard-of-care yielded an H. pylori eradication of rate of 63% in placebo subjects. The full clinical study report is expected to be available in the first quarter of 2016. We intend to meet with the FDA to discuss the further clinical development path towards marketing approval of RHB-105 through the 505(b)(2) regulatory path.

Professor David Y. Graham, MD, from Baylor College of Medicine, Houston, Texas, served as the lead investigator of the first Phase III clinical trial of RHB-105.

The following chart summarizes the clinical trial history and status of RHB-105:

An additional Phase III study comparing RHB-105 to current therapy is planned to be undertaken following completion of the ERADICATE Hp study. Supplemental studies may be required as part of the RHB-105 global development program and regulatory strategy.

We cannot predict with certainty our development costs, and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

RHB-104

RHB-104 is intended to treat Crohn’s disease, which is a serious inflammatory disease of the gastrointestinal system that may cause severe abdominal pain and bloody diarrhea, malnutrition and potentially life-threatening complications.

RHB-104 is a patented combination of clarithromycin, clofazimine and rifabutin, three generic antibiotic ingredients, in a single capsule. The compound was developed to treat Mycobacterium avium paratuberculosis (MAP), infections in Crohn’s disease. According to a 2007 article in The Lancet Infectious Diseases by Feller et. al. , which contains a meta-analysis of 18 published scientific and clinical trials, Crohn’s disease patients are seven times more likely to be infected with MAP than non-Crohn’s patients.

To date, Crohn’s disease has been considered to be an autoimmune disease, but the exact pathological mechanism is unclear. Dr. Robert J. Greenstein suggested in The Lancet Infectious Diseases , 2003 that Crohn’s disease is caused by MAP, the same organism responsible for a major cause of disease in animal agriculture production, domestic and wild animals. This hypothesis is supported by an expanding number of scientific and clinical studies published in peer reviewed journals since a National Institute of Allergy and Infectious Diseases conference that focused on MAP in Crohn’s disease took place in 1998. Specific genetic loci like NOD2 have been implicated in the pathogenesis of Crohn’s disease with mutations in NOD2 suspected of leading to defective recognition of MAP and increased compensatory immune activation in patients with Crohn’s disease.

In 2011, we obtained FDA “Orphan Drug” status for RHB-104 for the treatment of Crohn’s disease in the pediatric population. See “– Government Regulations and Funding Orphan Drug Designation.”

The formulation for RHB-104 is presently complete and manufacturing of the all-in-one capsules for our clinical trials is currently in process. Stability testing of the clinical trial material is ongoing.

We acquired the rights to RHB-104, RHB-105 and RHB-106 pursuant to an asset purchase agreement with Giaconda Limited, a publicly traded Australian company. See “– Acquisition and License Agreements – Acquisition of RHB-104, RHB-105 and RHB-106.”

A diagnostic technology enabling the identification of the presence of MAP bacterial DNA in patients was developed and patented by Professor Saleh Naser of the University of Central Florida in Orlando. On September 15, 2011, we entered into an agreement with the University of Central Florida Research Foundation, Inc., pursuant to which we acquired the exclusive rights in this patented diagnostic test. See “– Acquisition and License Agreements – License Agreement related to RHB-104.”

On February 12, 2012, we entered into an agreement with Q Squared Solutions LLC (f/k/a Quest Diagnostics Ltd.) (Q Squared) to develop a commercial diagnostic test for detecting the presence of MAP bacterial DNA in the blood based upon the rights we acquired from the University of Central Florida Research Foundation, Inc. Additional intellectual property covering other aspects of MAP detection was licensed from the University of Minnesota in December 2014 in order to potentially enhance our ability to detect MAP.  On January 29, 2015, we announced that, together with Q Squared, we concluded a pre-submission meeting with the FDA regarding the development path of a commercial companion diagnostic test for the detection of MAP in Crohn’s disease patients. We initiated a study of Crohn's disease patients to assess the clinical utility of the companion diagnostic test during the third quarter of 2015.

Market

According to GlobalData, a provider of market intelligence for the pharmaceutical sector, there were approximately 1.38 million diagnosed cases of Crohn's disease in the 10 major markets in 2015. This number of diagnosed cases is expected to increase to 1.48 million by 2022.

The MAP bacterium is suspected of being a major factor in causing the inflammatory symptoms of Crohn’s disease patients. According to a study by Bull TJ, et. al. in 2003 in Journal of Clinical Microbiology , MAP was detected in 92% of Crohn’s disease patients evaluated in the study. According to a 2014 report by EvaluatePharma, a leading market intelligence and information resource, the market of drug treatments for Crohn’s disease was estimated to exceed $5.7 billion worldwide in 2015. The report also estimates that the worldwide market for drug treatment of Crohn’s disease will exceed $6 billion in 2017.

Competition

Unlike drugs on the market for the treatment of Crohn’s disease, which are immunosuppressive agents, RHB-104 is intended to address the suspected cause of the disease, MAP bacterial infection. To the best of our knowledge, there are no drugs approved for marketing that target infections of MAP bacteria in Crohn’s disease patients.

Currently available drugs on the market for the treatment of Crohn’s disease offer only symptomatic relief, the effects of which are largely temporary and accompanied by numerous adverse effects. A summary of these side effects described by Dr. Carol Nacy et. al. in a report from the American Academy of Microbiology published in June 2007 is included in the following chart (except with respect to 5-Aminosalicylates (5-ASA) as indicated below).

We may also be exposed to potentially competitive products which may be under development to treat Crohn’s disease, including new anti-TNFα and other biological therapies. Additionally, a clinical trial is being conducted by Valeant with the antibiotic rifaximin (Xifaxan ^® ) for the treatment of Crohn’s disease.

Clinical Development

In the Phase III clinical trial in Australia, sponsored by Pharmacia and published by Professor Warwick Selby et al. in 2007 in the medical journal Gastroenterology , the primary objectives were to evaluate the ratio of patients with recurrent symptoms of the disease following initial induction of remission with 16 weeks of treatment. Subjects were subsequently assessed at 52, 104 and 156 weeks. The main secondary objective was the percentage of patients who achieved clinical remission at 16 weeks. Although the study did not meet the main objective of showing a difference in relapse rate with long-term treatment, there was a statistically significant difference between the treatment groups in the percentage of subjects in remission at week 16. Professor Marcel Behr and Professor James Hanley from McGill University published a re-analysis of the study in The Lancet Infectious Diseases in June 2008, based on the intent-to-treat (ITT) principle, and found that there was a significant statistical advantage for the active therapy over the placebo throughout the period of administration that disappeared once the active therapy was discontinued.

We are currently conducting our first Phase III clinical trial in North America, Israel, Australia, New Zealand, Poland and other countries with RHB-104 (MAP US) as well as preparing a planned second clinical trial in Europe. These trials, based on the analysis and data from a Phase III trial conducted in Australia with the RHB-104 active ingredients in a different formulation, are designed as a Phase III trial for Crohn’s disease patients. The Map U.S. trial commenced in October 2013. We plan to increase the number of clinical sites of the MAP U.S. trial, currently ongoing from 100 to 120, and expect to include new sites mainly in Europe.

The MAP US trial of RHB-104 is being led by Professor David Y. Graham, MD, of Baylor College of Medicine, Houston, Texas, U.S., while the second Phase III clinical trial of RHB 104, in Europe (MAP Europe), will be led by Professor Colm O’Morain, MD, of Meath and Adelaide Hospital, Dublin, Ireland.

In October 2012, we entered into an agreement with our Canadian service provider which, in turn, entered into a back-to-back agreement with a Canadian manufacturer to complete the manufacturing and supply of RHB-104 for our clinical trials. In addition, we entered into an additional manufacturing agreements directly with the Canadian manufacturer.

In June 2011, we entered into an agreement with our Canadian service provider which entered into a back-to-back agreement with PharmaNet Canada Inc. for the provision of clinical trial services for the RHB-104 adult studies in North America and Europe. PharmaNet was subsequently acquired by inVentiv Health and our agreements were transferred to inVentiv. See “– Master Service Agreements with Canadian service provider” and see also "– Clinical Services Agreement related to RHB-104."

Subsequent to our discussions with the FDA for approval to conduct the North American trial based upon an Investigative New Drug (IND) approved by the FDA on July 18, 2007, we made a number of changes to the original protocol. On August 29, 2012, we revised the IND filed by Giaconda with the submission of a new Phase III protocol to the FDA, and after 30 days, the IND became effective. Based upon the response from the FDA on issues relating to the clinical study, additional changes have been made, and will be made, to the clinical study in North America and Israel and other countries. A further amendment to the protocol was submitted to the FDA on December 23, 2014 responding to recommendations from the investigators and to expedite recruitment in the study.

Approximately 270 Crohn’s disease patients are currently expected to participate in the MAP US trial. Half of the patients will receive RHB-104 and half will receive a placebo drug over a period of approximately six months to determine efficacy, with an additional six month follow-up period to further investigate maintenance of efficacy and safety. A Clinical Trial Application (CTA) for MAP EU Study has been submitted in Europe and approved by three countries to date.

The following chart summarizes the clinical trial history and status of RHB-104 and its earlier individual active agents:

Supplemental studies will be required as part of the RHB-104 global development program and regulatory strategy.

We cannot predict with certainty our development costs, and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

Multiple Sclerosis Indication of RHB-104

We have performed several preclinical studies, including studies in an experimental autoimmune encephalomyelitis (EAE) mouse model of MS, to investigate the potential impact of RHB-104 in treating MS. The first preclinical study measured cytokine production (biomarkers of inflammation) and demonstrated that the RHB-104 treatment led to a significant reduction of pro-inflammatory cytokine concentrations of IL-6 and TNF, which are associated with inflammation and MS, compared to the control group. The second preclinical study measured the efficacy of RHB-104 as prophylactic therapy, and the treatment with RHB-104 demonstrated a significant reduction in the inflammatory area and level of demyelination, compared with the control group. The third preclinical study measured relapses, demonstrating RHB-104’s efficacy in significantly reducing the incidence of relapse compared with the control group. Following these preclinical studies, we are conducting a Phase IIa proof of concept clinical trial at two sites in Israel. This clinical trial was initiated in June 2013 with interim top-line results expected during the first quarter of 2016.

MS is an inflammatory, demyelinating, and neurodegenerative disease of the central nervous system of uncertain etiology that exhibits characteristics of both infectious and autoimmune pathology. There is a growing consensus in the medical community that a dysregulated immune system plays a critical role in the pathogenesis of MS.

The following chart summarizes the development history and status of RHB-104-MS:

Additional trials will be required as part of the RHB-104 MS global development program and regulatory strategy.

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

BEKINDA ^™ (RHB-102)

BEKINDA ^™ is a once-daily controlled release oral formulation of ondansetron, a leading member of the family of 5HT-3 serotonin receptor inhibitors. We are developing two dose strength products, a 24 mg dose and a 12 mg dose. They are being developed for use in the following indications, the first two of which are novel indications for ondansetron targeting large potential markets and the third is an existing indication of ondansetron and therefore targets a smaller potential market:

BEKINDA ^™ utilizes a technology called CDT ^® that uses salts to provide an extended release of ondansetron. The CDT ^® platform enables extended drug release ( i.e. , measured rate of introduction of active drug) at a relatively low manufacturing cost.

In March 2014, we entered into a License Agreement with Temple University to secure direct rights to patents related to BEKINDA™. Previously, these rights were licensed to us from SCOLR Pharma Inc, which announced that they had ceased business operations in 2013. See “– Acquisition and License Agreements – License Agreement for BEKINDA™”.

Gastroenteritis and Gastritis Indication of BEKINDA™

Acute gastroenteritis/gastritis is an inflammation of the mucus membranes of the gastrointestinal tract, most commonly caused by a viral infection. Symptoms of gastroenteritis/gastritis include nausea, vomiting, diarrhea and abdominal pain.  Gastroenteritis/gastritis is a major cause of emergency room visits, particularly for pediatrics. If approved, BEKINDA™ could potentially decrease the number of emergency room visits of patients suffering from acute gastroenteritis, by offering them an effective and long lasting treatment which can be taken in the comfort of their home.

Competition and Market

A single dose of BEKINDA ^™ is intended to treat nausea and vomiting over a time window of approximately 24 hours. This is potentially advantageous for acute gastroenteritis and gastritis patients as it is intended to provide them with relief from nausea and vomiting symptoms for a full 24-hour period with a single oral tablet, thus avoiding the need to take additional drugs (tablets) during the day or receiving intravenously administered drugs. BEKINDA ^™ could also potentially reduce the burden on health systems by reducing visits to emergency departments.

If BEKINDA ^™ is approved for the treatment of acute gastroenteritis and gastritis, it could potentially hold substantial advantages over existing treatments. To the best of our knowledge, if approved, BEKINDA ^™ will be the only 5-HT3 serotonin receptor inhibitor indicated for the treatment of acute gastroenteritis and gastritis, whereas most treatments used today are not indicated or approved for this condition. If approved, BEKINDA ^™ could be prescribed by primary care physicians to patients early on, thus potentially preventing emergency room visits, dehydration and the need to provide IV fluids.

BEKINDA ^™ is targeting an annual potential worldwide market estimated to exceed $650 million, based on Graves S. Nancy, Acute Gastroenteritis, Prim Care Clin Office Pract 40 (2013) 727–741 and Company analysis.

To the best of our knowledge, there are no other 5-HT3 serotonin receptor inhibitors indicated or currently being developed for this indication. Patients presenting at hospitals with gastroenteritis and gastritis are often treated with antiemetic drugs, off label, including 5-HT3 serotonin receptor inhibitors, primarily in IV administration, which are not indicated or approved for this condition.

Clinical Development

We have initiated a randomized, double-blind, placebo controlled, parallel group Phase III trial (GUARD study) that is conducted in up to 30 clinical sites in the U.S. and is expected to enroll 320 adults and children over the age of 12 who suffer from acute gastroenteritis/gastritis. Patients are randomized to receive either BEKINDA™ or a placebo. The primary endpoint for the trial is the absence of vomiting, need for rescue medications or IV hydration from 30 minutes through 24 hours after the first dose of study medication. Secondary endpoints include, among others, frequency of vomiting, severity and time to resolution of nausea and time to resumption of normal activities. Top-line results from the BEKINDA™ GUARD Phase III trial are expected during the second half of 2016.

The lead investigator for the Phase III study is Dr. Robert A. Silverman, MD, MS, Associate Professor at the Hofstra North Shore-LIJ School of Medicine and an emergency medicine specialist.

Following prior discussions with the FDA and the UK Medicines and Healthcare Products Regulatory Agency (MHRA), the study is intended to support potential future submissions of marketing applications in both the U.S. and Europe in this indication.

If approved for this indication, BEKINDA™ could be the only 5-HT3 antagonist approved to treat gastritis and gastroenteritis. We expect that would potentially allow BEKINDA™ to capture a large segment of the potential market in this indication.

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

Irritable Bowel Syndrome with Diarrhea (IBS-D) Indication of BEKINDA™

Irritable bowel syndrome (IBS) is a multifactorial disorder marked by recurrent abdominal pain or discomfort and altered bowel function. It affects between 10 and 20 percent of the population in the developed world, about one-third of whom have IBS associated with diarrhea (IBS-D). Certain factors that alter gastrointestinal function can contribute to IBS symptoms, including stress, prior gastroenteritis, changes in the gut microbiome, and bile acids and short-chain fatty acids, which may stimulate serotonin (5-HT) release and increase colonic permeability and motility. (Source: http://www.mayoclinic.org/medical-professionals/clinical-updates/digestive-diseases/better-agents-needed-irritable-bowel-syndrome-diarrhea).

In preliminary studies, ondansetron has demonstrated activity in IBS-D (Garsed K, Chernova J, Hastings M, et al. Gut Published Online First December 12, 2013). Unlike alosetron (a currently approved 5-HT3 antagonist in IBS-D), ondansetron has not been noted to cause ischemic colitis (FDA labeling for Lotronex ^® (alosetron), 2010; FDA labeling for Zofran ^® (ondansetron), 2014).

BEKINDA™ is a bimodal release formulation of ondansetron. It provides an initial release similar to immediate release ondansetron and then extended release over 24 hours. Because of its extended release properties, and once daily dosing we believe it is a promising candidate for treatment of IBS-D.

Competition and Market

I rritable bowel syndrome is one of the most common gastrointestinal disorders, and irritable bowel syndrome with diarrhea is the most common subtype of IBS in the U.S., according to a report by GlobalData, a provider of market intelligence for the pharmaceutical sector.

According to reports by Saito YA. et al published in 2002 in The American Journal of Gastroenterology and by Lovell RM et al. , published in 2012 in Clinical Gastroenterology and Hepatology, it is estimated that at least 30 million Americans may suffer from IBS. According to GlobalData, worldwide over approximately 40% of the cases of IBS will be of the IBS-D subtype.

According to a 2015 report from EvaluatePharma, a provider of market intelligence for the pharmaceutical sector, the U.S. potential market for IBS-D treatments is estimated to reach approximately $1.3 billion in 2020.

To the best of our knowledge, there is one other 5-HT3 serotonin receptor inhibitor indicated for this indication – alosetron (currently marketed by Prometheus Laboratories Inc., Actavis plc and Roxane Laboratories). However, alosetron is approved only for the treatment of IBS in women with severe chronic IBS-D and is under a restricted prescribing program due to potential severe side effects. The active ingredient in BEKINDA ^™ , ondansetron, is approved by the U.S. FDA as an oncology support antiemetic and has a good safety profile. Therefore, we believe that BEKINDA ^™ , if approved, has the potential to be the preferred 5-HT3 serotonin receptor inhibitor treatment for patients suffering from IBS-D. To the best of our knowledge, the patent for alosetron (Lotronex ^® ) expired in November 2015. According to GlobalData, the U.S. sales of Lotronex ^®  exceeded $60 million in 2015.

To the best of our knowledge, the main competitor for BEKINDA ^™ for the treatment of IBS-D is Xifaxan ^® (Rifaximin) marketed in the U.S. by Valeant. Xifaxan ^® is an antibiotic treatment which was approved for the treatment of IBS-D in May 2015. Xifaxan ^® was previously approved in the U.S. for the treatment of hepatic encephalopathy and traveler's diarrhea. According to a report by GlobalData, it is believed that Xifaxan ^® exerts its therapeutic effects in patients with IBS by treating intestinal bacteria overgrowth. Xifaxan ^® is administered orally at a dose of 550 mg three times daily for two weeks in the treatment of IBS-D patients. According to a GlobalData analysis, due to the chronic nature of IBS, physicians may have safety concerns associated with the long-term use of antibiotics, such as the induction of antibiotic resistance and imbalance in the intestinal flora. According to a report by EvaluatePharma, the worldwide annual sales of Xifaxan ^® for the treatment of IBS-D are estimated to exceed $920 million by 2020. To the best of our knowledge, an oral version of Aloxi ^® was approved in August 2008 in the U.S., but is not currently marketed in the U.S.

Viberzi ^® (eluxadoline) is another new drug approved for the treatment of IBS-D in May 2015. Viberzi ^® is a locally-acting mu-opioid receptor agonist and a delta-opioid receptor antagonist marketed in the U.S. by Ironwood Pharmaceuticals and Allergan plc. According to a report by EvaluatePharma, the worldwide sales of Viberzi ^® are estimated to reach $470 million in 2020.

To the best of our knowledge, the most advanced treatment for IBS-D currently in development for the U.S. market is ibodutant, developed by A. Menarini Industrie Farmaceutiche Riunite Srl. Ibodutant is an oral tachykinin NK2 receptor antagonist, Ibodutant is currently undergoing a Phase III study for the treatment of women with IBS-D.

Clinical Development

We are conducting a randomized, double-blind, placebo controlled, Phase II trial that will be conducted in up to 12 clinical sites in the U.S. and is expected to enroll 120 adults over the age of 18 who suffer from IBS-D. Patients will be randomized to receive either BEKINDA™ 12 mg daily or a placebo.

The primary endpoint for the trial is the proportion of patients in each treatment group with response in stool consistency on study drug as compared to baseline. Response is defined as per FDA guidelines for the indication. Additional endpoints will be analyzed including:

• Proportion of patients in each treatment group who are pain responders, per FDA guidance definition
• Proportion of patients in each treatment group who are overall responders, per FDA guidance definition
• Differences between treatment groups in
• Abdominal pain
• Abdominal discomfort
• Frequency of defecation
• Incidence and severity of adverse events

IBS-D Phase II trial is expected to be initiated during the first quarter of 2016.

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.

Oncology Support Indication of BEKINDA™

Competition and Market

Chemotherapy-induced nausea and vomiting (CINV) is among the most severe symptoms cited by cancer patients receiving chemotherapy. CINV negatively impacts health-related quality of life following moderately and highly emetogenic chemotherapy (MEC and HEC) while leading to increased resource use and costs. BEKINDA ^™ (ondansetron) belongs to the family of 5-HT3 serotonin receptor inhibitors, which account for a substantial market share of CINV treatments. According to a report from EvaluatePharma, a provider of market intelligence for the pharmaceutical sector, the worldwide sales of 5-HT3 serotonin receptor inhibitors for CINV are estimated to exceed $479 million in 2016.

To the best of our knowledge, the main competitors of BEKINDA ^™ are other 5-HT3 serotonin receptor inhibitors. This class of medication includes the active ingredient ondansetron (the generic drug marketed in the U.S. under the trade name Zofran ^® , originally produced by GlaxoSmithKline). Additional first-generation generic drugs from the same family contain the active ingredient granisetron (marketed in the U.S. under the name Kytril ^® , produced by Hoffman-La Roche Ltd.) or the active ingredient dolasetron (marketed in the U.S. under the name of Anzemet ^® , produced by Sanofi-Aventis Group). In addition, second-generation drugs containing the active ingredient palonosetron are still under patent and marketed in the U.S. under the brand names Aloxi ^® and Akynzeo ^® by Eisai Pharmaceuticals Inc., or Eisai.

Ondansetron became generic in the U.S. in December 2006. The drug is available in the U.S. in the form of oral tablet, ODT, oral soluble film, oral solution and intravenous (IV) formulations.

Granisetron and dolasetron are additional first-generation generic drugs from the same family of 5-HT3 serotonin receptor inhibitors. The generic drugs containing these active ingredients are available both orally and intravenously and by transdermal patch. Additionally, Heron Therapeutics is developing Sustol ^® , a long-acting formulation of granisetron for the prevention of both acute and delayed CINV associated with moderately emetogenic chemotherapy (MEC) or highly emetogenic chemotherapy (HEC). To the best of our knowledge, a U.S. New Drug Application (NDA) for Sustol ^® is currently under review by the FDA. Sustol ^® is administered by injection.

BEKINDA ^™ is planned to be delivered orally, in tablet form. Oral administration is expected to allow self-administration by patient, without the need for a clinical setting, thus potentially saving patient travel time to the clinic or hospital and reducing health care professional work load, which we believe will lower its cost relative to currently available intravenous (IV) alternatives.

Aloxi ^® is a second-generation drug from the same family of inhibitors. To the best of our knowledge, it is currently administered only intravenously in the U.S. Akynzeo ^® , is a fixed combination capsule comprised of oral palonosetron (the API in Aloxi ^® ) and netupitant (NK1), and is the first orally available 5-HT3 and NK1 combination product to reach the market. Akynzeo ^® was approved by the FDA in October 2014 for prevention of acute and delayed nausea and vomiting following chemotherapy and is marketed by Eisai Inc. in the U.S. Both Aloxi ^® and Akynzeo ^® have longer duration of action in the body and are the only drugs in this family that were approved for use with an indication of nausea and vomiting prevention for more than 24 hours from the chemotherapy treatment (delayed onset). This means that the drugs continue to be effective from the time of their administration for more than the ensuing 24 hours. The price of these drugs is significantly higher than Zofran ^® and is estimated at approximately $480 per treatment with Aloxi ^® IV and approximately $560 per capsule of Akynzeo ^® , according to www.goodrx.com .

A single dose of BEKINDA ^™ is anticipated to prevent chemotherapy or radiotherapy-induced nausea and vomiting over a time window of approximately 24 hours. This effectiveness period is significantly longer than the effective time of Zofran ^® 8 mg, which is indicated to be administered several times a day. This is potentially advantageous for cancer patients undergoing chemotherapy and radiation treatments that would prefer to avoid the need to take additional drugs (tablets) during the day after the treatment, when they may suffer attacks of nausea and vomiting.

The potential advantages of BEKINDA ^™ compared to Aloxi ^® , the first of the only two drugs that have a relatively long-term effect (beyond 24 hours, as stated above), are the delivery method and price. Aloxi ^® is a drug that in the U.S. is delivered intravenously and costs approximately $480 per dose according to www.goodrx.com . BEKINDA ^™ is planned to be delivered orally, in tablet form. Oral administration is expected to allow self-administration by patient, without the need for a clinical setting, thus saving patient travel time to the clinic or hospital and reducing health care professional work load, significantly lowering its cost relative to currently available IV alternatives, including Aloxi ^® .

The potential advantage of BEKINDA ^™ compared to Akynzeo ^® , the second drug to have long-term effect, is the price. Akynzeo ^® is priced at approximately $560 per capsule according to www.goodrx.com . We estimate that the high price of Akynzeo ^® provides sufficient margins for BEKINDA ^™ to be priced significantly lower than Akynzeo ^® and potentially capture a large segment of the market at a premium price to the generic ondansetron tablets that need to be taken multiple times per day.

To the best of our knowledge, there are several plans to develop new products in the area of nausea and vomiting prevention, including the development of a product that directly competes with BEKINDA ^™ , for controlled release of ondansetron, based on a different technology of controlled release developed by Eurand N.V. and now owned by Allergan Plc. To the best of our knowledge, this product completed Phase II trials and according to GlobalData, a provider of market intelligence for the pharmaceutical sector, the development program for this drug is currently inactive.

Clinical Development

We completed two comparative bioavailability studies of BEKINDA™ given once daily as compared to approved regimens of Zofran ^® 8 mg tablets given in multiple doses per day, a food-effect study and a comparative bioavailability study of BEKINDA™ given once daily as compared to Zofran ^® 16 mg suppository, which is approved in major territories in the EU.

In order to carry out pharmacokinetic trials for BEKINDA™, in November 2011 we entered into an agreement with our Canadian service provider which entered into a back-to-back agreement with Algorithme Pharma Inc., a Canadian clinical research organization specializing in the performance of clinical trials. Algorithme Pharma Inc. performed the clinical trial described below for BEKINDA™. See “ Master Service Agreement with 7810962 Canada Inc.”

The following chart summarizes the pharmacokinetic trial history and status of BEKINDA™:

In light of the positive results of the clinical pharmacokinetic studies, we submitted a Marketing Authorization Application (MAA) in Europe for chemotherapy and radiotherapy -induced nausea and vomiting in December 2014 and have received an extension to respond to comments from MHRA until Feb 2016 following which we recently decided to withdraw the MHRA MAA and initiated discussions for potential MAA submission in other EU member states. Accordingly, we recently met with the French Agence Nationale de Sécurité du Médicament (ANSM) to seek further guidance about the potential path to approval in the EU for the oncology support indications. In the U.S., the FDA feedback in 2015 indicated that additional clinical efficacy data is required to support a U.S. New Drug Application (NDA) with BEKINDA™ for oncology support indications under the 505(b)(2) regulatory path. Further development for oncology support indications will be decided as more feedback is received from additional EU member states and data from the ongoing and planned efficacy studies of BEKINDA™ for gastroenteritis and gastritis and IBS-D becomes available.

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

RHB-106

RHB-106 is a tablet intended for the preparation and cleansing of the gastrointestinal tract prior to the performance of abdominal procedures, including diagnostic tests such as colonoscopy, barium enema or virtual colonoscopy, as well as surgical interventions, such as laparotomy.

As noted above, we acquired the rights to RHB-106 pursuant to an agreement with Giaconda Limited. See “– Acquisition and License Agreements – Acquisition of RHB-104, RHB-105 and RHB-106.”

On February 27, 2014, we entered into a licensing agreement with Salix Pharmaceuticals, Ltd. (Salix), which was later acquired by Valeant Pharmaceuticals International, Inc., or Valeant, by which Salix licensed the exclusive worldwide rights to our RHB-106 encapsulated formulation for bowel preparation and rights to other purgative developments. Pursuant to this agreement, we received an upfront payment of $7 million and are entitled to an additional potential $5 million in subsequent milestone payments. In addition, as part of the terms of the agreement, Salix agreed to pay us tiered royalties on net sales of RHB-106, ranging from the low single-digits up to low double-digits. See “– Acquisition and License Agreements – Exclusive License Agreement with Valeant Pharmaceuticals International, Inc.”

Competition and Market

According to a report by EvaluatePharma, the worldwide market of laxative products intended for cleansing the gastrointestinal system was estimated to reach approximately $1.3 billion in 2016.

 
To the best of our knowledge, the main competitors for RHB-106 are gastrointestinal cleansing products based on polyethylene glycol (PEG 3350). These products are delivered in the form of a water-soluble powder, and require users to drink between 2-4 liters of solution before performance of the gastroenterological procedure. In addition to the need to drink considerable amounts of solution, a common side effect that raises difficulties with users is the accompanying harsh and unpleasant taste leading to potential difficulties with patient compliance. RHB-106 offers the potential for improved patient compliance because it is tasteless and eliminates the need for drinking liters of poor tasting electrolyte solution. RHB-106 also potentially has an advantage compared to currently available tablet products in the field, in that it does not contain sodium phosphate, an active ingredient linked with a risk of nephrotoxicity.

An additional product, called PrepoPik ^TM in the U.S., is manufactured by Ferring Pharmaceuticals and received FDA approval on July 17, 2012. The product, marketed under the name PicoPrep ^TM in other countries, is based on an active chemical ingredient called sodium picosulfate, the same active ingredient used in RHB-106. This product is intended to be used for clearing the gastrointestinal system and it is given in the form of a water-soluble powder and requires drinking quantities of fluids.

Products administered in the form of tablets or capsules that were released on the market in the U.S., such as OsmoPrep ^® and Visicol ^® (produced by Valeant), are based on a chemical substance called sodium phosphate. In December 2008, the FDA published a severe warning against the use of these products due to rare but severe side effects linked to kidney damage. As a consequence of this development, the FDA required in 2008 that oral sodium phosphate products carry a severe warning (black box label). As announced by Salix Pharmaceuticals Inc. (now Valeant), following the black box warning received from the FDA, sales in 2009 of these products declined by 39% compared to 2008.

A leading product among the PEG 3350 family of products is MoviPrep ^® , marketed by Valeant in the U.S. and by Norgine B.V. in Europe. It requires drinking about 2 liters of solution, and some users report it has an unpleasant taste. The potential advantage of RHB-106 over the current competitor products of the PEG 3350 type (such as MoviPrep ^® ), as well as over PicoPrep ^TM , is that it is tasteless, permits the patient to drink any clear liquid with the product and spares the patient the exposure to the harsh tastes that may accompany these products. RHB-106 also does not fall under the black box warning against nephrotoxicity issued by the FDA in December 2008 with respect to currently marketed sodium phosphate capsule preparations.

Salix Pharmaceuticals, Inc. (now Valeant), which acquired a worldwide exclusive license to RHB-106 and other purgative developments from us, estimated in its 2014 Investor Day that the peak year revenue from their encapsulated bowel prep would reach approximately $280 million.

YELIVA™ (ABC294640)

YELIVA™ is a proprietary, first-in-class, orally-administered sphingosine kinase-2 (SK2) selective inhibitor, with anti-inflammatory and anti-cancer activities, targeting multiple inflammatory, gastrointestinal (GI) and oncology indications.

YELIVA™ inhibits SK2, a lipid kinase that catalyzes formation of the lipid signaling molecule sphingosine 1-phosphate (S1P). S1P promotes cancer growth, and proliferation and pathological inflammation, including TNFα signaling and other inflammatory cytokine production. Specifically, by inhibiting the SK2 enzyme, YELIVA ^™ blocks the synthesis of S1P which regulates fundamental biological processes such as cell proliferation, migration, immune cell trafficking and angiogenesis, and is also involved in immune-modulation and suppression of innate immune responses from T cells.

On March 31, 2015, we entered into an exclusive worldwide license agreement with Apogee Biotechnology Corporation (Apogee), pursuant to which Apogee granted us the exclusive worldwide development and commercialization rights to ABC294640 (which we then renamed to YELIVA™) and additional intellectual property for all indications. Under the terms of the agreement, we agreed to pay Apogee an upfront payment of $1.5 million, as well as $4 million in potential milestone payments, and tiered royalties starting in the low double-digits. See “– Acquisition and License Agreements – License Agreement for YELIVA™”.

Competition and Market

YELIVA ^™ , an orally-administered, first-in-class sphingosine kinase-2 (SK2) inhibitor is being developed for various indications, including for the treatment of refractory/relapsed diffused large B-cell lymphoma (DLBCL), for refractory or relapsed multiple myeloma and for radioprotection in cancer patients undergoing therapeutic radiotherapy. Additional oncology and inflammatory disease indications are currently being explored.

DLBCL can affect any age group but occurs mostly in older people (average age is mid-60s). The most widely used treatment for DLBCL is chemotherapy, usually with a regimen of 4 drugs known as CHOP (cyclophosphamide, doxorubicin, vincristine, and prednisone), plus the monoclonal antibody rituximab (Rituxan ^® ). This regimen, known as R-CHOP, is most often given in cycles 3 weeks apart.

According to the American Cancer Society, DLBCL is the most common subtype of non-Hodgkin’s lymphoma in the U.S., accounting for an estimated 30% of the approximately 72,000 projected non-Hodgkin’s lymphoma cases to be diagnosed in the U.S. in 2016. The total worldwide sales of DLBCL therapies are estimated to reach approximately $1.5 billion in 2016 according to GlobalData. There are several drugs in late-stage clinical development for DLBCL.

According to the American Cancer Society, approximately 30,000 new cases of multiple myeloma will be diagnosed in the U.S. in 2016. The risk of multiple myeloma increases as people age. Most people diagnosed with this cancer are at least 65 years old and less than 1% of cases are diagnosed in people younger than 35. Standard treatment options for multiple myeloma include biological therapy, chemotherapy, corticosteroids, stem cell transplantation and radiation therapy. The total worldwide sales of multiple myeloma therapies are estimated to exceed $12 billion in 2016 according to GlobalData. There are several drugs in late-stage clinical development for multiple myeloma.

Radiation therapy can cause both acute and chronic side effects. The side effects that develop depend, among other things, on the area of the body being treated, the dose given per day, the total dose given, the patient’s general medical condition, and other treatments given at the same time. Acute side effects may include skin irritation or damage at regions exposed to the radiation beams. The oral cavity is highly susceptible to direct and indirect toxic effects of cancer chemotherapy and ionizing radiation. According to a 2011 publication by Peterson DE et al., the incidence of World Health Organization (WHO) grade 3 or 4 oral mucositis in patients receiving high-dose head and neck radiation (e.g. 6000–7000 Gy) to the oral cavity approaches 85%, but all treated patients have some degree of oral mucositis. There are currently limited therapeutic options to prevent oral mucositis in cancer patients undergoing radiotherapy. To the best of our knowledge, several drugs are currently in development for prevention of oral mucositis in cancer patients undergoing radiation therapy. The most advanced programs undergoing Phase II clinical studies include IZN-6N4, an oral rinse developed by Izun Pharamaceuticals Corp., GC-4419, a small molecule enzyme replacement developed by Galera Therapeutics, Inc., Brilacidin, a defensin-mimetic antibiotic developed by Cellceutix Corporation and Cobiprostone, a locally acting chloride channel activator, developed by Sucampo Pharmaceuticals, Inc.

To the best of our knowledge, there is only one other SK2 inhibitor being developed by SphynKx Therapeutics LLC. According to the SphynKx Therapeutics website, the company’s sphingosine kinase-2 inhibitor program is targeting fibrosis and is currently in pre-clinical development stage of lead optimization.

Clinical Development

ABC-101: Oncology, advanced solid tumors

The last patient completed the final scheduled follow-up visit in the Phase I study evaluating YELIVA™ in advanced solid tumors in the summer of 2015. The Phase I study was conducted at the Medical University of South Carolina Hollings Cancer Center. The open-label, dose-escalation, pharmacokinetic (PK) and pharmacodynamic (PD) first-in-human Phase I study of YELIVA™ enrolled 22 patients with advanced solid tumors. The study met both its primary and secondary objectives. The primary objectives were to identify the maximum tolerated dose (MTD) and the dose limiting toxicities (DLTs) and to evaluate the safety of YELIVA™. The secondary objectives were to determine the pharmacokinetic (PK) and pharmacodynamic (PD) properties of YELIVA™ and to assess its antitumor activity.

Top-line results reported on October 26, 2015 showed that YELIVA™ can be safely administered to cancer patients in doses that provide circulating drug levels that are predicted to have therapeutic activity, based on levels required in preclinical models. A full analysis and the final clinical study report are expected in the first quarter of 2016.

The study was supported by grants from the National Cancer Institute (NCI) and the FDA’s Office of Orphan Products Development (OOPD) awarded to Apogee.

ABC-102: Refractory/relapsed diffused large B-cell lymphoma (DLBCL)

In June 2015, we initiated a Phase I/II study in the U.S. evaluating YELIVA ^™ in patients with refractory/relapsed diffuse large B-cell lymphoma (DLBCL) was initiated at the Louisiana State University Health Sciences Center (LSUHSC) in New Orleans.

The study will evaluate the safety and tolerability of YELIVA™, as well as provide a preliminary evaluation of efficacy of the study drug in patients with refractory/relapsed DLBCL, primarily patients with HIV-related DLBCL. Up to 33 patients are expected to be enrolled in the study. The study is funded primarily by a grant awarded to Apogee by the National Cancer Institute Small Business Technology Transfer program. Dr. Chris Parsons, MD, an associate professor in the Departments of Medicine and Microbiology, Immunology & Parasitology at LSUHSC, is the lead investigator for the study.

ABC-103: Refractory or relapsed multiple myeloma

We plan to initiate a Phase I/II study of YELIVA™ for the treatment of refractory or relapsed multiple myeloma in 2016. The study will be conducted at Duke University Medical Center and is planned to enroll up to 77 patients. Dr. Yubin Kang, MD, associate professor in the Division of Hematologic Malignancies and Cellular Therapy in the Department of Medicine at Duke University School of Medicine, will be the lead investigator for the study, which received Institutional Review Board approval from Duke University. The study is funded primarily by a grant awarded by the National Cancer Institute Small Business Innovation Research program, awarded to Apogee in conjunction with Duke University.

The primary objectives of the first portion of the study (Phase I) are to assess safety and determine the maximum tolerated dose in this group of patients. Secondary objectives include assessment of antitumor activity and determination of the pharmacokinetic (PK) and pharmacodynamic (PD) properties of YELIVA ^™ in refractory or relapsed multiple myeloma patients. 

The primary objectives of the second portion of the study (Phase II) are to assess the overall treatment response rate and overall survival. Secondary objectives include evaluating the treatment response of YELIVA™ in patients with refractory or relapsed multiple myeloma after three cycles of treatment and evaluation of pharmacodynamic markers.

ABC-104: Oncology support, radioprotectant. Prevention of radiation-associated mucositis in the treatment of head and neck cancer.

A Phase II study is planned to evaluate YELIVA™ as a radioprotectant in head and neck cancer patients undergoing therapeutic radiotherapy. We expect to submit this safety and efficacy study with YELIVA™ to the FDA in the second quarter of 2016.

The following chart summarizes the clinical trial history status of YELIVA™:

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

MESUPRON ^®

MESUPRON ^® (INN: upamostat) is a proprietary small molecule, first-in-class, urokinase-type plasminogen activator (uPA) inhibitor administered by oral capsule.

MESUPRON ^® inhibits the uPA system, which has been shown to play a key role in tumor cell growth, invasion and the metastasis process. High uPA levels are associated with poor prognosis in various solid tumor cancers, such as pancreatic, gastric, breast and prostate cancers. MESUPRON ^® presents a promising new non-cytotoxic approach to cancer therapy with several potential mechanisms of action to inhibit both tumor metastasis and growth.

As mentioned under “– Acquisition and License Agreements – License Agreement for MESUPRON ^® ”, on June 30, 2014, we signed an exclusive license agreement for this oncology therapeutic candidate. Under this agreement, we are responsible for all development, regulatory and commercialization of MESUPRON ^® in the entire world, excluding China, Taiwan, Macao and Hong Kong.

Competition and Market

MESUPRON ^® an orally-administered first-in-class urokinase-type plasminogen activator (uPA) inhibitor has been developed for the treatment of solid tumor cancers, including gastrointestinal cancers with the focus on locally advanced non-metastatic pancreatic cancer.

Pancreatic cancer is the fourth leading cause of mortality in western countries. It is characterized as a disease with some of the highest unmet need in oncology. According to the World Cancer Research Fund, with 338,000 new cases diagnosed in 2012 pancreatic cancer is the 12 ^th most common cancer in the world. According to a report by GlobalData from March 2014, the overall five-year survival rate for the disease is only approximately 5%, representing one of the poorest prognoses across the gastrointestinal cancers. The total worldwide sales of pancreatic cancer therapies are estimated to reach approximately $1.6 billion by 2017 according to GlobalData.

According to the same GlobalData report, the majority of pancreatic cancer cases are diagnosed late, at which point the disease is already locally advanced or metastatic, and these patients are often frail with co-morbidities. Furthermore, pancreatic cancer is predominately a cancer of the elderly, with the median age of diagnosis being 71 years in the U.S. These factors result in a significant minority, approximately 20%, of advanced patients being ineligible for chemotherapy treatment, who are managed with best supportive care (BSC).

Pancreatic adenocarcinoma has some of the highest levels of unmet needs in the oncology space, which present many challenges for physicians treating pancreatic cancer patients. Surgical resection remains the only curative method. Patients who are classified as resectable (no regional or distant organ metastasis) are often treated by surgical intervention, depending on the location of the tumor within the pancreas. Patients with greater than Stage IIb disease are usually deemed unresectable. Of the unresectable group, the majority of locally-advanced patients are treated in the same manner as metastatic patients - with treatment choices that are mainly dependent on their performance status.

There are a number of drugs in late-stage clinical development for pancreatic cancer. To the best of our knowledge, there is currently no uPA inhibitor in late clinical-stage development for this indication. There are several drugs in late-stage clinical development for pancreatic cancer.

Clinical Development

MESUPRON ^® has completed several Phase I trials and two Phase II proof of concept trials. The first Phase II trial in locally advanced non-metastatic pancreatic cancer and the second trial in metastatic breast cancer established the therapeutic candidate's safety and tolerability profile. The Phase II trials with MESUPRON ^® in both indications failed to demonstrate significant improvement in either progression-free survival or overall survival. While response rates were arithmetically higher in patients receiving MESUPRON ^® than in control patients, in no case did these differences approach clinical or statistical significance. A post hoc subgroup analysis of the breast cancer study suggested that a certain clinically defined subgroup may benefit from MESUPRON ^® added to a standard single agent cytotoxic therapy, capecitabine. In the pancreatic cancer study, patients treated with the higher dose of MESUPRON ^® along with gemcitabine had a three month longer median overall survival than those treated with gemcitabine alone, although the difference was not statistically significant. The phase II trials with MESUPRON ^® randomized 227 subjects, of which 95 subjects were in the pancreatic cancer study and 132 subjects were in the metastatic breast cancer study.

None of the prior studies used any molecular markers to target certain patient populations. Using technologies developed since the original clinical trials were performed, we are currently performing several preclinical studies, including biomarker analysis and mechanism of action studies. We expect to have initial data from these preclinical studies in the first half of 2016, which should help us determine the patient populations to be studied in clinical trials.

We cannot predict with certainty our development costs, and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

RP101

RP101 is a proprietary small molecule, first-in-class, heat shock protein 27 (Hsp27) inhibitor, administered orally, which may prevent the induction of resistance to chemotherapy (chemoresistance), thus maintaining sensitivity of the tumor to chemotherapy and potentially enhancing patient survival.

RP101 binds to Hsp27, a chaperone protein which is found in abnormally high levels in cancer cells, and inhibits its activity. The overexpression of Hsp27, which results in the amplification of a multidrug-resistance (MDR) gene, has been linked to tumor resistance to cytotoxic drugs and the development of metastasis. Chemoresistance limits the effectiveness of chemotherapy and can ultimately lead to treatment failure. By inhibiting Hsp27, RP101 may prevent chemoresistance and enhance the sensitivity of tumors to chemotherapy. RP101 activity is based on a new mechanism of action of the anti-viral drug brivudine, a nucleoside analogue approved and marketed in several European countries for the treatment of herpes zoster.

As mentioned under “– Acquisition and License Agreements – License Agreement for RP101”, on August 13, 2014, we entered into a binding exclusive option agreement for the acquisition of the oncology therapeutic candidate RP101 and next generation compounds. Under the terms of the agreement, we have a one year option to acquire the exclusive worldwide rights to RP101 for all indications, other than for the pancreatic cancer indication in South Korea. The one year option was extended for an additional year in July 2015. During the option period, we have conducted development activities with RP101.

Competition and Market

RP101 orally-administered nucleoside analogue has been shown to bind to heat shock protein 27 (Hsp27) and inhibit its anti-apoptotic effects. RP101 has been studied as an adjunct treatment of pancreatic cancer with potential applicability to other gastrointestinal cancers.

Please see MESUPRON ^® Competition and Market section for information on the pancreatic cancer market.

To the best of our knowledge, the only other Hsp27 inhibitor in development for oncology indications is Apatorsen (OGX-427), developed by OncoGeneX Pharmaceuticals Inc. According to OncoGenX’s presentation from November 2015, it is conducting a total of seven randomized Phase II studies with Apatorsen in oncology indications, including an investigator-sponsored Phase II study in metastatic pancreatic cancer which has been completed. The results from this study demonstrated that the addition of Apatorsen to ABRAXANE and gemcitabine did not demonstrate a survival benefit compared to ABRAXANE and gemcitabine alone.

Clinical Development

RP101 has completed several Phase I and Phase II clinical trials with a total of 249 subjects treated, including Phase II trials in pancreatic cancer.

RP101 has been granted Orphan Drug designation for the adjunct treatment of pancreatic cancer by the FDA and the European Medicines Agency EMA.

As part of the RP101 global development program and regulatory strategy, we are currently performing several preclinical studies, including studies in immunodeficient mice engrafted with pancreatic cancer tumor cell lines.  We expect to have initial data from these preclinical studies in the first half of 2016, which will allow us to make a decision regarding clinical trials.

We cannot predict with certainty our development costs, and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

RIZAPORT ™

RIZAPORT™ is an oral thin film formulation of rizatriptan intended for the treatment of acute migraine headaches. Migraines are generally treated through the usage of triptans, a class of molecules that narrow (constrict) blood vessels in the brain in order to relieve swelling and other migraine symptoms. Examples of triptans include sumatriptan, zolmitriptan and rizatriptan, the active pharmaceutical ingredient in RIZAPORT™.

RIZAPORT™ is based on a patented technology called “VersaFilm™.” This technology allows the production of thin film strips that dissolve rapidly in the mouth, allowing the drug to be absorbed through the oral mucosa and into the bloodstream. The proprietary VersaFilm™ technology is a novel, non-mucoadhesive, fast dissolving oral dosage form.

The VersaFilm™ platform offers potential advantages that include fast absorption of the drug and the convenience of use compared to conventional tablets.

We acquired the rights to RIZAPORT™ under an August 26, 2010 joint development and commercialization agreement with IntelGenx Corp., pursuant to which we received a worldwide, exclusive and perpetual license to various patent rights and know-how related to RIZAPORT™. See “– Acquisition and License Agreements – License Agreement for RIZAPORT™”.

Competition and Market

To the best of our knowledge, the main marketing competitors of RIZAPORT ^™ are oral drugs from the triptan family (5-HT 1B/1D serotonin agonists), such as rizatriptan from Merck and Co., Inc., which is marketed in the U.S. under the name of Maxalt ^® and in generic form since 2012, and sumatriptan, produced by GlaxoSmithKline and marketed in the U.S. as Imitrex ^® and in generic form since 2006. According to a report from GlobalData, the prevalence of migraines in the U.S. is estimated to reach over 30 million cases in 2016. The target market for RIZAPORT ^™ was estimated at approximately $697 million worldwide in 2015 according to an annual sales report from EvaluatePharma, a leading market intelligence and information resource.

In December 2012, the patent on rizatriptan expired and as of the date of this filing, there are various generic versions of Maxalt ^® and of Maxalt MLT® available for prescription.

We believe that RIZAPORT ^™ could compare favorably to the other triptan drugs due to the fact that it is delivered through oral dissolution, rather than through conventional tablets. This feature may be especially advantageous to patients suffering dysphagia, and to patients who suffer from migraine-related nausea, which according to an article published by Lipton RB et al. is estimated to affect 80% of all of total migraine population. We believe that RIZAPORT ^™ will also be advantageous to patient populations such as geriatrics who often struggle with swallowing capsules with water.

Clinical Development

In April 2012, we completed, together with our development partner IntelGenx Corp. a bioequivalence clinical study to examine the pharmacokinetic equivalence between the soluble film of RIZAPORT™ and rizatriptan of Merck & Co. Inc. (Maxalt MLT®), using 26 volunteers. The final results of the clinical trial, demonstrated that RIZAPORT™ met its specified endpoints and the FDA criteria in all parameters for bioequivalence with rizatriptan of Merck & Co. Inc. (Maxalt MLT®).

In March 2013, together with IntelGenx Corp., we filed a New Drug Application (NDA) with the FDA for U.S. marketing approval under the 505(b)(2) regulatory path for RIZAPORT™.

On February 4, 2014, together with IntelGenx Corp., we announced the receipt of a complete response letter from the FDA indicating that certain matters would need to be addressed prior to obtaining approval for marketing. These matters related primarily to third party chemistry, manufacturing and controls (CMC) issues, as well as to packaging and labeling of the film. The FDA’s letter did not raise any safety issues or questions regarding the results of the clinical trials. On March 3, 2014, together with IntelGenx Corp., we responded to the FDA’s complete response letter and in response, the FDA requested additional CMC data. In relation to the FDA response, we were also informed that a supplier of raw material for RIZAPORT™ was having compliance discussions with the FDA that are not specific to RIZAPORT™.

In April 2014, together with IntelGenx Corp., we initiated a comparative bioavailability study with RIZAPORT™ and the European reference drug Maxalt® lingua marketed in Germany by MSD Sharp & Dohme GMBH, based on a positive European Scientific Advice meeting with the German Federal Institute for Drugs and Medical Devices (BfArM) regarding RIZAPORT™ that took place in 2013. In May 2014, together with IntelGenx Corp., we announced the successful completion of the clinical trial that demonstrated bioequivalence based on the criteria discussed with BfArM.

Based on the data from that trial, we submitted a Marketing Authorization Application (MAA) to BfArM, as the reference member state under the European Mutual Recognition Procedure. In October 2015, BfArM informed us that the MAA had been approved. Approval from Luxembourg is anticipated during the first half of 2016 .

The following chart summarizes the clinical trial history status of RIZAPORT™:

Together with IntelGenx Corp., we are working diligently on a variety of options to ensure continued supply of the raw material.

We cannot predict with certainty our development costs and they may be subject to changes. See “Item 3. Key Information – D. Risk Factors – Risk Related to Our Financial Condition and Capital Requirements.”

Acquisition and License Agreements

Acquisition of RHB-104, RHB-105 and RHB-106

On August 11, 2010 we entered into an asset purchase agreement with Giaconda Limited, a publicly traded Australian company, pursuant to which Giaconda Limited transferred all of its patents, tangible assets, production files, regulatory approvals and other data related to the “Myoconda”, “Heliconda” and “Picoconda” products to us. We renamed these products RHB-104, RHB-105 and RHB-106, respectively. Giaconda Limited further transferred to us products in process, product samples and raw materials, as well as certain rights of first refusal with respect to intellectual property in relation to digestive condition treatments. The agreement excluded the transfer of the rights to two other products of Giaconda Limited that are not related to RHB-104, RHB-105 and RHB-106. However, to the extent that the intellectual property associated with these two other products shall be required for the research, development, manufacture, registration, import/export, use, commercialization, distribution, sale and/or offer for sale of any of RHB-104, RHB-105 and RHB-106, Giaconda Limited granted us an exclusive worldwide assignable right to such intellectual property for such purposes. The closing of this agreement occurred on August 26, 2010.

In consideration for the assets purchased by us, we paid Giaconda Limited $500,000. We and Giaconda Limited also agreed that until the expiration of the last patent transferred to us, we will pay to Giaconda Limited 7% of net sales from the sale of the products by us and 20% of the royalties received from sublicensees, in each case, only after we recoup the amounts and expenses exceeding an approved budget.

Under the agreement, it was agreed that none of Giaconda Limited or, the developer of the products, nor their respective affiliates may compete with us or assist others to compete with us with respect to the products and acquired technology. Such non-compete undertaking shall be in force for a period of time of up to 10 years from the date of the agreement.

The agreement provides that, should we elect not to proceed with the registration proceedings or the maintenance of any patent transferred to us, we will notify Giaconda Limited and Giaconda Limited will have the right to proceed with the registration, maintenance, development and commercialization of such patent at its expense. Should Giaconda Limited exercise such right, it will be entitled to all amounts received in connection with sales relating to such patent.

The agreement also requires us to make a good faith, continuous and commercially reasonable effort to allocate appropriate financial resources to prepare, initiate and complete the clinical development of the products (with the exception of Picoconda) and file an application for regulatory marketing approval in accordance with industry standards. Development failures, negative regulatory decisions, and/or other reasons beyond our control will not constitute a breach of this obligation. Should we breach this obligation with respect to the development of any of the products, and fail to cure the breach within 90 days from the date that Giaconda Limited sends us a default notice, Giaconda Limited may buy back all of the intellectual property rights with respect to such product for the original purchase price, plus the related development costs incurred by us through the date of the buy-back.

In connection with the license agreement with Salix (later acquired by Valeant), dated February 27, 2014, described below, we amended the asset purchase agreement and related agreements by excluding from the non-compete undertakings of Giaconda and certain of its affiliate products, technology and related activities in the purgative field and excluded from such non-compete undertakings certain of Giaconda's affiliates.

License Agreement for BEKINDA™

In March 2014, we entered into a License Agreement with Temple University to directly secure rights to patents related to BEKINDA™. Previously, these rights were licensed to us from SCOLR, which announced that they had ceased business operations in 2013. The agreement with Temple University replaced our previous license agreement with SCOLR Pharma Inc. (SCOLR). SCOLR had itself licensed those patents from Temple University, the original owner of the patents. Under the agreement with Temple University, we will continue to develop its BEKINDA™ formulation and pursue commercialization options once relevant.

License Agreement for YELIVA™

On March 31, 2015 we entered into an exclusive license agreement with Apogee , a privately-held biotech company located in Hummelstown, Pennsylvania, U.S., under which Apogee granted us the exclusive, world-wide development and commercialization rights to ABC294640 (which we then renamed to YELIVA™) and additional intellectual property rights. YELIVA™ is a proprietary, first-in-class, orally-administered sphingosine kinase-2 (SK2) inhibitor, with anti-inflammatory and anti-cancer activities, targeting multiple inflammatory, gastrointestinal (GI) and oncology indications. Under the terms of the agreement, we agreed to pay Apogee an upfront payment of $1.5 million, as well as an additional amount of $2 million which will be paid on the earlier of (i) a specific date or (ii) reaching a specific development milestone. In addition, we undertook to pay up to an additional $2 million in potential development milestone payments, and potential tiered royalties starting in the low double-digits. Such potential royalties are due until the later of (i) the expiration of the last to expire licensed patent that covers the product in the relevant country; and (ii) the expiration of regulatory exclusivity in the relevant country. Through December 31, 2015, we paid Apogee the initial amount of $1.5 million and recognized an amount of $2 million as a current liability. The license agreement will stay in effect as of its effective date unless terminated earlier as described in the agreement. We are entitled to terminate the agreement at any time upon 30 day prior written notice to Apogee. The agreement also provides for the right of termination for each party in the event of a material breach committed by the other party.

License Agreement for MESUPRON ^®

On June 30, 2014 we entered into an exclusive license agreement with Wilex AG, a German biopharmaceutical company focused on oncology (Wilex) under which Wilex granted us the exclusive development and commercialization rights, throughout the world for all indications excluding China, Hong Kong, Taiwan and Macao, to MESUPRON ^® , a small molecule, proprietary, urokinase-type plasminogen activator (uPA) inhibitor administered by oral capsule.

In consideration for the license we paid Wilex an upfront payment of $1 million. We have agreed to pay Wilex tiered royalties on net revenues, ranging from mid-teens up to 30%.

The license agreement will stay in effect as long as we are required to make royalty payments. We are entitled to terminate the agreement at any time on 30 days written notice to Wilex. The agreement also provides right of termination for each party in the event of a breach.

License Agreement for RP101

On August 13, 2014, we entered into a binding exclusive option agreement for the acquisition of the oncology therapeutic candidate RP101 and next generation compounds, with RESprotect GmbH, a German privately-held biopharmaceitucal company (RESprotect). In July 2015, we extended the term of the exclusive option agreement for an additional year. RP101 is a proprietary, first-in-class, heat shock protein 27 (Hsp27) inhibitor, administered orally. Under the terms of the agreement, we have the option to acquire the worldwide exclusive rights to RP101 for all indications, other than for the pancreatic cancer indication in South Korea.

In consideration for the option, we paid RESprotect for a one year option, and we paid RESprotect for the one year extension. During the option period, which includes the extended option period, we are entitled, at our discretion, to conduct development activities with RP101. If we elect to exercise the option, we will acquire the exclusive rights to RP101 for a total payment of $100,000, covering both the option and the acquisition of the rights. We also undertook to pay future potential milestone payments and tiered royalties on net revenues, ranging from single-digits to mid-teens.

The option agreement will terminate upon the earlier of (i) exercise of the option and subsequent execution of the respective Asset Purchase Agreement, (ii) expiry of the extended option period, and (iii) by written notice of termination by us, at our full discretion for any reason at any time during the option period.

License Agreement for RIZAPORT™

On August 26, 2010, we entered into a joint development and commercialization agreement with IntelGenx Corp. under which IntelGenx Corp. granted us a worldwide, exclusive and perpetual license to use its rights in patents and know-how relating to a triptan formula based on the VersaFilm™ technology and which we call RIZAPORT™.

The license includes the right to grant sublicenses. The license covers the co-developing, selling, offering for sale and importing the product for all indications, including, but not limited to, acute treatment of migraine attacks with or without an aura and all other therapeutic, diagnostic, and other human or animal uses.

The license provides that IntelGenx Corp. reserves the right to grant licenses to manufacture the product, subject to the approval of a steering committee. The agreement further limits our right to grant sublicenses by requiring that we give prior notice to IntelGenx Corp. of the identity of any proposed sub-licensee and provide IntelGenx Corp. with information regarding the main elements of the proposed sublicense agreement. If IntelGenx Corp. objects to a sublicense, the proposed sublicense will be presented for the approval of a steering committee.

Pursuant to the agreement,   as amended, the parties agreed on joint product development activities. Accordingly, IntelGenx Corp. agreed to devote sufficient resources (subject to the approved budget in the agreement) in order to conduct clinical trials and file an application with the FDA for marketing of the product, and we agreed to finance the balance of the development in the amount of approximately $1.2 million.

The joint development of the product is to be conducted through a steering committee, comprised of an equal number of members appointed by us and IntelGenx Corp. The committee is charged with supervising progress of our research and development efforts, reporting on possible delays and deciding on required revisions in the plan. IntelGenx Corp. has the deciding vote in any vote relating to issues of development, regulation and manufacture, while we have the deciding vote in any vote relating to issues of licensing, commercialization and collaborations. In consideration for the license, we made up-front and milestone payments in the aggregate amount of $800,000 and we are required to make additional milestone payments of up to $500,000 upon receipt of FDA marketing approval for the product.

In addition, we are required to make royalty payments to IntelGenx Corp. of 20% of net sales if the product is marketed by us and 60% of the first $2 million of net sublicense fees, and 40% of net sublicensing fees thereafter, if the product is marketed by sublicensees. However, if we bear the regulatory costs in a sublicense arrangement, royalties will be 20% of net sublicense fees until we recover these costs, plus 10% interest, and if IntelGenx Corp. bears such costs, royalties will be 70% of net sublicense fees.

The agreement provides that all intellectual property developed or to be developed exclusively by IntelGenx Corp. will belong exclusively to IntelGenx Corp. and will be licensed to us, and the intellectual property to be developed or financed jointly by IntelGenx Corp. and us will be jointly owned by us and IntelGenx Corp., and each party may make use of such joint intellectual property for uses not competing with either the product or the other party.

The agreement is of unlimited duration and will remain in force until terminated in accordance with its terms. Either party may terminate the agreement if (i) the other party is in material breach and does not cure within ninety (90) days; or (ii) a bankruptcy or liquidation event occurs with respect to the other party. This agreement also provides that we may terminate the agreement for convenience upon providing thirty (30) days written notice to IntelGenx Corp.

License Agreement for MAP diagnostic test related to RHB-104

On September 18, 2011, we entered into a license agreement with the University of Central Florida Research Foundation, Inc. pursuant to which we were granted an exclusive license for all indications and medical uses to a patent-protected diagnostic test that identifies the presence of MAP bacterial DNA in peripheral blood through DNA testing. The license covers future commercial use of the test, including its manufacture, marketing, sale and commercialization.

Under the agreement, we may grant sublicenses for the test with the consent of the University of Central Florida Research Foundation, Inc., from whom consent may not be unreasonably withheld.

To date, in consideration for the license, we have made payments in the aggregate amount of $90,000, and are required to make additional annual minimum royalty payments of $35,000 in each subsequent year until the last patent covered by the agreement expires. These annual minimum payment amounts will be deducted from future royalty payments.

In addition, we are required to make royalty payments equal to payments 7% of future sales, or an annual minimum amount noted above, as well as 20% of payments we receive from granting sublicenses.

The agreement will remain in force on a country by country basis until the last patent covered by the agreement expires. The University of Central Florida Research Foundation may terminate the agreement if (i) we are in material breach; (ii) if we fail to pay royalties when due and payable following provision of sixty (60) days notice; or (iii) a bankruptcy or liquidation event occurs with respect to us.  We may terminate the agreement at any time by providing ninety (90) days written notice to the University of Central Florida Research Foundation.

License Agreement with University of Minnesota related to MAP diagnostic test for RHB-104

On December 18, 2014, we announced that we licensed certain diagnostic technology from the University of Minnesota. This transaction is part of our efforts to develop a validated and precise method of detecting Mycobacterium avium subspecies paratuberculosis (MAP), which we believe plays an important role in Crohn’s disease and potentially other diseases.  Under the terms of the agreement, we paid the University of Minnesota a one-time upfront payment and are required to make an additional milestone payment. We are developing a diagnostic test for MAP in conjunction with Q Squared.

Exclusive License Agreement with Valeant Pharmaceuticals International, Inc.

On February 27, 2014 we entered into a worldwide exclusive license agreement with Salix Pharmaceuticals, Ltd. (later acquired by Valeant Pharmaceuticals International, Inc.) by which Salix licensed the worldwide exclusive rights to our RHB-106 encapsulated formulation for bowel preparation, and rights to other purgative developments. Pursuant to the agreement, we granted Salix the right to develop and commercialize RHB-106 and/or the related rights.

Additionally, we waived any applicable rights of first refusal granted to us by Giaconda Limited and its affiliates in our August 2010 asset purchase agreement transaction with respect to intellectual property in relation to digestive condition treatments.

Pursuant to the agreement, we received an up-front payment of $7 million and are entitled to an additional amount of up to $5 million in subsequent milestone payments. In addition, as part of the terms of the agreement, Salix agreed to pay us tiered royalties on net sales, ranging from low single-digit up to low double-digits.

Other than with respect to the rights granted to us, as described below, we agreed, during the term of the agreement, not to compete in the purgative field.

Salix granted us an option to commercialize certain of the products of Salix, in pre-determined territories. This right is subject to such products being available for distribution in the applicable territories and Salix's agreement to a potential exclusive distribution arrangement with us. We were granted exclusivity as to the commercialization right under the option, for a limited period, which has since expired.

The agreement expires on the date the royalties are no longer payable in connection with RHB-106 and/or related rights.  Following expiration of the agreement, the rights granted under the agreement shall become fully-paid, perpetual, royalty-free and irrevocable.  We have the right, following notice to Valeant, to terminate the agreement in the event that Valeant does not pursue the development of RHB-106 or related rights. This termination right is effective until the date on which all subsequent milestone payments referred to above have been paid to us.

Master Service Agreement with 7810962 Canada Inc.

On April 28, 2011, we entered into a master service agreement, which was later amended, with 7810962 Canada Inc., our Canadian service provider for various project management services. The agreement allowed our Canadian service provider to enter into service agreements with third parties for the relevant services. The agreement may be terminated by either party upon 30 days’ advance notice.

The agreement with our Canadian service provider provides that certain research and development services related to our projects will be carried out pursuant to our specific requests and upon the signing of specific agreements for each project. Such agreements shall include a description of the required services, service terms and fees. To date, we, through our Canadian service provider, have entered into manufacturing, clinical services and regulatory agreements mainly related to RHB-104.

Furthermore, pursuant to the agreement, the Canadian service provider may provide us with a discount to the research and development services with respect to incentives programs from various authorities that may be granted to the Canadian service provider in the future. As of December 31, 2015, the estimated discount we will receive from our Canadian service provider is approximately $0.2 million.

Clinical Services Agreements

Clinical Services Agreement related to RHB-104

On June 15, 2011, we entered into an agreement with our Canadian service provider which entered into a back-to-back agreement with inVentiv Health (f/k/a PharmaNet Canada Inc.), a subsidiary of an international CRO company, and other related entities, for the purpose of performing the clinical trial for RHB-104. InVentiv Health is a leading provider of global drug development services to pharmaceutical and biotechnology companies, offering therapeutically-specialized capabilities for Phase I-IV clinical development, and pursuant to the agreement, is responsible for the performance of the clinical trial, including entering into agreements with medical centers to perform the trial, supervision of the performance and progress of the trial and the analysis of the results, all pursuant and subject to applicable regulatory requirements.

Pursuant to this agreement and subsequent amendments, inVentiv Health is entitled to receive $7.4 million in connection with the MAP US Phase III clinical trial as well as reimbursement of investigator grant costs and pass-through costs to be paid during the trial for an estimated amount of about $5.8 million. The payments will be spread over the period of the clinical trial based upon quarterly administration fees and milestone payments based on patient recruitment, completion of subject dosing and report preparation, investigators grants paid to research centers that participate in the trial, as well as reimbursements of certain expenses. These fees, however, may vary widely from time to time in accordance with the final clinical trial protocol, length of the study and payments to be made to third parties, such as investigator grants costs.

The agreement includes a timetable for the recruitment of patients, performance of the trial and analysis of results, including a timetable for the performance of ongoing patient follow-up. Such timetables may vary as a result of possible delays in recruitment of patients for the clinical trial.

The agreement will remain in force until all relevant services have been provided and we have made all payments thereunder, or until terminated. Either party may terminate the agreement (i) if the other party is in material breach and does not cure within thirty (30) days; or (ii) upon a bankruptcy or liquidation event with respect to the other party. This agreement also provides that we may terminate the agreement at any time without cause upon providing forty five (45) days written notice to our Canadian service provider.

Intellectual Property

Our success depends in part on our ability to obtain and maintain proprietary protection for our technology and therapeutic candidates, its therapeutic applications, and related technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications related to our proprietary technology, inventions and improvements that are important to the development of our business. We also rely on our trade secrets, know-how and continuing technological innovation to develop and maintain our proprietary position. We vigorously defend our intellectual property to preserve our rights and gain the benefit of our technological investments. We have rights either through assignment, asset purchase or in-licensing to a total of approximately 360 issued patents and 115 patent applications. The patents and patent applications are registered in the U.S. and other key jurisdictions, the details of each family of patents being provided below. In addition, we have licensed rights to various platform technologies on a non-exclusive basis.

The patent positions of companies such as ours are generally uncertain and involve complex legal and factual questions. Our ability to maintain and solidify our proprietary position for our technology will depend on our success in obtaining effective claims and enforcing those claims once granted.

RHB-105

RHB-105 is protected by two patent families. The first patent family, titled “Improved Method of Eradication of H.pylori ”, was acquired as part of our asset purchase agreement with Giaconda Limited, and provides patent protection until 2019.

The second patent family, titled “Pharmaceutical Compositions for the Treatment of Helicobacter Pylori”, was filed by us and will provide patent protection until 2034.

RHB-104 – Inflammatory Bowel Disease

RHB-104 for Inflammatory Bowel Disease is protected by two patent families. The first patent family, titled “Methods and Compositions for Treating Inflammatory Bowel Disease”, was acquired as part of our asset purchase agreement with from Giaconda Limited, and provides patent protection until 2018 .

The second patent family, titled “Method and Composition for Treating Inflammatory Bowel Disease”, was filed by us and will provide patent protection until 2029.

We have also in-licensed from the University of Central Florida Research Foundation Inc. (UCF) U.S. Patent No. 7,488,580 entitled “Protocol for Detection of the Intracellular Infection Myobacterium Avium Paratuberculosis in Blood”, which will expire in H1 2026. This patent relates to a method and kit for detection of intracellular MAP infection in blood and blood derivative samples from humans by culture and PCR. The technology can screen for MAP in blood samples from patients having inflammatory and non-inflammatory bowel disease and the results used to identify those patients for appropriate treatment with antibiotics. The method and kit allows monitoring and evaluation of the outcome of antibiotic therapy.

Further, we have in-licensed U.S. Patent Nos. 7,074,559 and 7,867,704 from The University of Minnesota entitled “Mycobacterial Diagnostics”.  One U.S. patent will expire in 2022, and the other U.S. patent will expire in 2026. The acquired diagnostic technology is intended for the detection of Mycobacterium avium subspecies paratuberculosis (MAP) bacterium.

RHB-104 – Autoimmune Diseases

Another patent family that we filed relates to “A Composition and Method for Treating an Autoimmune Disease” and covers compositions comprising effective amounts of rifabutin, clarithromycin and clofazimine to enable treatment of an autoimmune disease by targeting cytokines or cytokine receptors. This patent family, if issued, would provide patent protection for methods of treating autoimmune diseases, such as MS, with RHB 104, up until 2034.

BEKINDA™ - Gastritis, Gastroenteritis and IBS-D

BEKINDA™ for gastroenteritis and other conditions is protected by one patent family that was filed by us, entitled “Ondansetron Extended Release Solid Dosage Forms for Treating Either Nausea, Vomiting or Diarrhea Symptoms”, and if issued would provide patent protection through 2035.

BEKINDA™ - Oncology Support

BEKINDA™ for oncology support is protected by two patent families.

The first patent family was, in-licensed by us from Temple University and is entitled “Monolithic tablet for controlled drug release”, with a US patent expiry date in 2018. This patent relates to formulations based on a swellable hydrodynamically balanced monolithic matrix.

The second patent family, filed by us, is entitled “Antiemetic Extended Release Solid Dosage Forms", and if issued would provide patent protection through 2034.

RHB-106 - Colonic Evacuation

RHB-106 includes three patent families .The first and second patent families, titled “Picodulfate-containing preparation for colonic evaluation” and “Administering osmotic colonic evacuant containing a picosulfate”, were acquired from Giaconda Limited as part of our asset purchase agreement. These patents provide patent protection until 2016 and 2018, respectively.

The third patent family was filed by us and is titled “Formulations and Methods of Manufacturing Formulations for use in Colonic Evacuation”. If issued, this patent will provide protection until 2033.

We are party to an exclusive agreement by which Salix (later acquired by Valeant). licensed the worldwide exclusive rights to the RHB-106 patent portfolio. As part of the agreement, Salix is responsible for the patent families related to RHB 106.

YELIVA™ - Inflammatory, Oncology, and Gastrointestinal Indications

This patent portfolio was in-licensed by us from Apogee Biotechnology Corp. YELIVA™ (ABC294640) is a first-in-class, proprietary sphingosine kinase-2 (SK2) inhibitor, administered orally, with anti-cancer and anti-inflammatory activities, targeting a number of potential inflammatory, oncology and gastrointestinal indications.

YELIVA™ includes three patent families. The first, titled “Sphingosine Kinase Inhibitors”, provides patent protection through 2028. The second patent family, titled “Methods for the Treatment and Prevention of Inflammatory Diseases”, provides patent protection through 2030. The third patent family, titled “Sphingosine Kinase Inhibitor Prodrugs”, provides patent protection through 2031.

These patents relate to sphingosine kinase inhibitors, pharmaceutical compositions, methods of preparing the inhibitors, methods of treating inflammatory diseases using the inhibitors, methods of treating cancer using the inhibitors, and methods of inhibiting sphingosine kinase.

MESUPRON ^® – Oncology

This patent portfolio was in-licensed by us from Wilex AG. MESUPRON ^® is a first-in-class urokinase-type plasminogen activator (uPA) inhibitor administered by oral capsule.

The first patent family relates to crystalline modifications of N- a -(2,4,6-triisopropylphenylsulfonyl)-3-hydroxyamidino-(L)-phenylalanine 4-ethoxycarbonylpiperazide and/or salts thereof, which can be used as pharmaceutical agents, and to pharmaceutical compositions and pharmaceutical uses comprising these novel crystalline modifications. The patents in this family will expire in 2025.

The second patent family relates to Urokinase inhibitor compounds. The patents in this family will expire in 2024.

The third patent family relates to methods for the production of phenylalanine derivatives. The patents in this family will expire in 2023.

The fourth patent family relates to methods for producing phenylalanine derivatives. The patents in this family will expire in 2025.

The fifth patent family relates to a method for producing phenylalanine derivatives. The U.S. patent will expire October 24, 2025.

The sixth patent family relates to Urokinase Inhibitors. The patents in this family will expire in 2019.

The seventh patent family relates to a method of preparing methylhydroxyalkylcellulose. The U.S. patent will expire September 15, 2026.

The eight patent family relates to formulations for phenylalanine derivatives. The patents in this family will expire in 2025.

The ninth patent family relates to Urokinase inhibitors. The patents in this family will expire in 2018.

RP101 – Oncology

In August 2014, we entered into a binding exclusive option agreement for the acquisition of RP101 and next generation compounds which was extended for an additional twelve months in July 2015. RP101 is an orally administered small molecule which binds to Hsp27, a chaperone protein which is found in abnormally high levels in cancer cells and inhibits its activity.

The first patent family relates to 5' substituted nucleosides and the patents in this family will expire in January 2016.

The second patent family relates to nucleosides and patents issuing from this family will expire in 2027.

The third patent family relates to uracil derivatives. The patents issuing from in this family will expire in 2029.

RIZAPORT™ - Acute Migraines

We have in-licensed from IntelGenx Corp., three issued U.S. patents, three pending U.S. non-provisional patent applications, and 15 pending international patent applications covering various aspects of the VersaFilm TM technology.

Government Regulations and Funding

Pharmaceutical companies are subject to extensive regulation by national, state and local agencies such as the FDA in the U.S., the Ministry of Health in Israel, or the European Medicines Agency (EMA). The manufacture, distribution, marketing and sale of pharmaceutical products are subject to government regulation in the U.S. and various foreign countries. Additionally, in the U.S., we must follow rules and regulations established by the FDA requiring the presentation of data indicating that our products are safe and efficacious and are manufactured in accordance with current good manufacturing practices (cGMP) regulations. If we do not comply with applicable requirements, we may be fined, the government may refuse to approve our marketing applications or not allow us to manufacture or market our products, and we may be criminally prosecuted. We and our manufacturers and clinical research organizations may also be subject to regulations under other federal, state and local laws, including, but not limited to, the U.S. Occupational Safety and Health Act, the Resource Conservation and Recovery Act, the Clean Air Act and import, export and customs regulations as well as the laws and regulations of other countries. The U.S. government has increased its enforcement activity regarding illegal marketing practices domestically and internationally. As a result, pharmaceutical companies must ensure their compliance with the Foreign Corrupt Practices Act and federal healthcare fraud and abuse laws, including the False Claims Act.

These regulatory requirements impact our operations and differ in one country to another, so that securing the applicable regulatory approvals of one country does not imply the approval in another country. However, securing the approval of a more stringent body, i.e. the FDA, may facilitate receiving the approval by a regulatory authority in a different country where the regulatory requirements are similar or less stringent. The approval procedures involve high costs and are manpower intensive, usually extend over many years and require highly skilled and professional resources.   

U.S. Food and Drug Administration Approval Process

The steps required to be taken before a new drug product candidate may be marketed in the U.S. generally include:

Clinical studies are conducted under protocols detailing, among other things, the objectives of the study, what types of patients may enter the study, schedules of tests and procedures, drugs, dosages, and length of study, as well as the parameters to be used in monitoring safety, and the efficacy criteria to be evaluated. A protocol for each clinical study and any subsequent protocol amendments must be submitted to the FDA as part of the IND.

In all the countries that are signatories of the Helsinki Declaration (including Israel), the prerequisite for conducting clinical trials (on human subjects) is securing the preliminary approval of the competent authorities of that country to conduct medical experiments on human subjects in compliance with the other principles established by the Helsinki Declaration.

The clinical testing of a drug product candidate generally is conducted in three sequential phases prior to approval, but the phases may overlap or be combined. A fourth, or post approval, phase may include additional clinical studies. The phases are generally as follows:

Phase I. In Phase I clinical studies, the drug product candidate is tested in a small number of patients with the target condition or disease or in healthy volunteers. These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the drug product candidate in humans, side effects associated with increasing doses, and, in some cases, to gain early evidence on efficacy. The number of participants included in Phase I studies is generally in the range of 20 to 80.

Phase II . In Phase II studies, in addition to safety, the sponsor evaluates the efficacy of the product candidate on targeted indications to determine dosage tolerance and optimal dosage and to identify possible adverse effects and safety risks. Phase II studies typically are larger than Phase I but smaller than Phase III studies and may involve several hundred participants

Phase III . Phase III studies typically involve an expanded patient population at geographically-dispersed test sites. They are performed after preliminary evidence suggesting effectiveness of the product candidate has been obtained and are designed to further evaluate clinical efficacy and safety, to establish the overall benefit-risk relationship of the product candidate and to provide an adequate basis for a potential product approval. Phase III studies usually involve several hundred to several thousand participants.

Phase IV.  Phase IV clinical trials are post marketing studies designed to collect additional safety data as well as potentially expand a product indication. Post marketing commitments are required of, or agreed to by, a sponsor after the FDA has approved a product for marketing. These studies are used to gain additional information from the treatment of patients in the intended therapeutic indication and to verify a clinical benefit in the case of drugs approved under accelerated approval regulations. If the FDA approves a product while a company has ongoing clinical trials that were not necessary for approval, a company may be able to use the data from these clinical trials to meet all or part of any Phase IV clinical trial requirement. These clinical trials are often referred to as Phase IV post-approval or post marketing commitments. Failure to promptly conduct Phase IV clinical trials could result in the inability to deliver the product into interstate commerce, misbranding charges, and civil monetary penalties.

Clinical trials must be conducted in accordance with the FDA’s good clinical practices, or GCP, requirements. The U.S. Food and Drug Administration may order the temporary or permanent discontinuation of a clinical study at any time or impose other sanctions if it believes that the clinical study is not being conducted in accordance with FDA requirements or that the participants are being exposed to an unacceptable health risk. An institutional review board, or IRB, generally must approve the clinical trial design and patient informed consent at study sites that the IRB oversees and also may halt a study, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions. Additionally, some clinical studies are overseen by an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee. This group recommends whether or not a trial may move forward at designated check points based on access to certain data from the study. The clinical study sponsor may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate.

 As a product candidate moves through the clinical testing phases, manufacturing processes are further defined, refined, controlled and validated. The level of control and validation required by the FDA would generally increases as clinical studies progress. We and the third-party manufacturers on which we rely for the manufacture of our product candidates and their respective components (including the active pharmaceutical ingredient, or API) are subject to requirements that drugs be manufactured, packaged and labeled in conformity with cGMP. To comply with cGMP requirements, manufacturers must continue to spend time, money and effort to meet requirements relating to personnel, facilities, equipment, production and process, labeling and packaging, quality control, recordkeeping and other requirements.

Assuming completion of all required testing in accordance with all applicable regulatory requirements, detailed information on the product candidate is submitted to the FDA in the form of an NDA, requesting approval to market the product for one or more indications, together with payment of a user fee, unless waived. An NDA includes all relevant data available from pertinent nonclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information on the chemistry, manufacture, control and proposed labeling, among other things. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the product candidate for its intended use to the satisfaction of the FDA

If an NDA submission is accepted for filing, the FDA begin an in-depth review of the NDA. Under the Prescription Drug User Fee Act, or PDUFA, the FDA’s goal is to complete its initial review and respond to the applicant within twelve months of submission, unless the application relates to an unmet medical need in a serious or life-threatening indication, in which case the goal may be within eight months of NDA submission. However, PDUFA goal dates are not legal mandates and FDA response often occurs several months beyond the original PDUFA goal date. Further, the review process and the target response date under PDUFA may be extended if the U.S. Food and Drug Administration requests or the NDA sponsor otherwise provides additional information or clarification regarding information already provided in the NDA. The NDA review process can, accordingly, be very lengthy. During its review of an NDA, the FDA may refer the application to an advisory committee for review, evaluation and recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it typically follows such recommendations. Data from clinical studies are not always conclusive and the FDA and/or any advisory committee it appoints may interpret data differently than the applicant.

After the FDA evaluates the NDA and inspects manufacturing facilities where the drug product candidate and/or its API will be produced, it will either approve commercial marketing of the drug product candidate with prescribing information for specific indications or issue a complete response letter indicating that the application is not ready for approval and stating the conditions that must be met in order to secure approval of the NDA. If the complete response letter requires additional data and the applicant subsequently submits that data, the FDA nevertheless may ultimately decide that the NDA does not satisfy its criteria for approval. The FDA could also approve the NDA with a Risk Evaluation and Mitigation Strategies, or REMS, plan to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-marketing testing. Such post-marketing testing may include phase 4 clinical studies and surveillance to further assess and monitor the product’s safety and efficacy after approval. Regulatory approval of products for serious or life-threatening indications may require that participants in clinical studies be followed for long periods to determine the overall survival benefit of the drug product candidate.

If the FDA approves one of our therapeutic candidates, we will be required to comply with a number of post-approval regulatory requirements. We would be required to report, among other things, certain adverse reactions and production problems to the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional labeling for any of our products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensive procedural, substantive and record keeping requirements. If we seek to make certain changes to an approved product, such as certain manufacturing changes, we will need FDA review and approval before the change can be implemented. For example, if we change the manufacturer of a product or its API, the FDA may require stability or other data from the new manufacturer, which will take time and is costly to generate, and the delay associated with generating this data may cause interruptions in our ability to meet commercial demand, if any. While physicians may use products for indications that have not been approved by the FDA, we may not label or promote the product for an indication that has not been approved. Securing FDA approval for new indications is similar to the process for approval of the original indication and requires, among other things, submitting data from adequate and well-controlled studies that demonstrate the product’s safety and efficacy in the new indication. Even if such studies are conducted, the FDA may not approve any change in a timely fashion, or at all.

We rely, and expect to continue to rely, on third parties for the manufacture of clinical and future commercial, quantities of our therapeutic candidates. Future FDA and state inspections may identify compliance issues at these third-party facilities that may disrupt production or distribution or require substantial resources to correct. In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing. Newly discovered or developed safety or efficacy data may require changes to a product’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Many of the foregoing could limit the commercial value of an approved product or require us to commit substantial additional resources in connection with the approval of a product. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development.

Section 505(b)(2) New Drug Applications

As an alternate path for FDA approval of new indications or new formulations of previously-approved products, a company may file a Section 505(b)(2) NDA, instead of a “stand-alone” or “full” NDA. Section 505(b)(2) of the Food, Drug, and Cosmetic Act, or FDC, was enacted as part of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Amendments. Section 505(b)(2) permits the submission of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Some examples of products that may be allowed to follow a 505(b)(2) path to approval are drug product candidates that have a new dosage form, strength, route of administration, formulation or indication.

The Hatch-Waxman Amendments permit the applicant to rely upon certain published nonclinical or clinical studies conducted for an approved product or the FDA’s conclusions from prior review of such studies. The FDA may require companies to perform additional studies or measurements to support any changes from the approved product. The FDA may then approve the new product for all or some of the labeled indications for which the reference product has been approved, as well as for any new indication supported by the NDA. While references to nonclinical and clinical data not generated by the applicant or for which the applicant does not have a right of reference are allowed, all development, process, stability, qualification and validation data related to the manufacturing and quality of the new product must be included in an NDA submitted under Section 505(b)(2).

To the extent that the Section 505(b)(2) applicant is relying on the FDA’s conclusions regarding studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book publication. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. The Section 505(b)(2) application also will not be approved until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the reference product has expired. Thus, the Section 505(b)(2) applicant may invest a significant amount of time and expense in the development of its products only to be subject to significant delay and patent litigation before its products may be commercialized.

Orphan Drug Designation

The Orphan Drug Act of 1983, or Orphan Drug Act, encourages manufacturers to seek approval of products intended to treat “rare diseases and conditions” with a prevalence of fewer than 200,000 patients in the U.S. or for which there is no reasonable expectation of recovering the development costs for the product. For products that receive Orphan Drug designation by the FDA, the Orphan Drug Act provides tax credits for clinical research, FDA assistance with protocol design, eligibility for FDA grants to fund clinical studies, waiver of the FDA application fee, and a period of seven years of marketing exclusivity for the product following FDA marketing approval.

GAIN Act

The FDA's Generating Antibiotic Incentives Now (GAIN) Act is intended to encourage development of new antibiotic drug product candidates for the treatment of serious or life-threatening infections. For products that receive Qualified Infectious Disease Product (QIDP) designation under the Act, the Act provides Fast-Track development status with an expedited development pathway and Priority Review status which potentially provides shorter review time by the FDA of a future potential marketing application. Following FDA approval, an additional five years of U.S. market exclusivity applies, received on top of the standard exclusivity period.

Not applicable.

We lease approximately 826 square meters of office space, a 27 square meter warehouse and eleven parking spaces in the “Platinum” building at 21 Ha’arba’a Street, Tel Aviv, Israel, of which we sublease 216 square meters of office space to a third party. The projected yearly rental expenses are approximately $357,000 per year. The term under our lease agreement will expire on January 31, 2020. These offices have served as our corporate headquarters since April 2011.