B.           Capitalization and Indebtedness

Not applicable.

C .            Reasons for the Offer and Use of Proceeds

Not applicable.

D.           Risk Factors

You should carefully consider the risks we describe below, in addition to the other information set forth elsewhere in this Annual Report, including our financial statements and the related notes beginning on page F-1, before deciding to invest in our ordinary shares (the “Ordinary Shares”) or our American Depositary Shares (“ADSs”). The risks and uncertainties described below in this annual report on Form 20-F for the year ended December 31, 2018 are not the only risks facing us. We may face additional risks and uncertainties not currently known to us or that we currently deem to be immaterial. Any of the risks described below or incorporated by reference in this Form 20-F, and any such additional risks, could materially adversely affect our reputation, business, financial condition or results of operations. In such case, you may lose all or part of your investment.

Risks Related to Our Financial Condition and Capital Requirements

Since our incorporation in 2009, we have focused primarily on the development and acquisition of late-stage clinical development therapeutic candidates and more recently on the acquisition of rights to products for promotion and/or commercialization in the U.S. and we have a history of operating losses. We expect to incur additional losses in the future and may never be profitable.

Since our incorporation in 2009, we have focused primarily on the development and acquisition of late-stage clinical development therapeutic candidates. Most of our therapeutic candidates are in the late-stage clinical development and none of our therapeutic candidates is approved for sale. However, in December 2016 we obtained certain rights to promote, but not to sell or distribute, Donnatal ®   in certain U.S. territories pursuant to an exclusive agreement with a subsidiary of ADVANZ PHARMA (“ADVANZ”) (f/k/a Concordia International Corp.). In 2017, we obtained certain rights to commercialize EnteraGam ®   (a prescription medical food product) in the U.S. and certain rights to promote Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in certain U.S. territories, and in 2018 we obtained exclusive U.S. rights to co-promote Mytesi ® (crofelemer 125 mg delayed-release tablets) in certain U.S. territories for the approved indication in people living with HIV/AIDS with respect to certain gastroenterologists and other healthcare practitioners.

Most of our therapeutic candidates will require additional clinical trials before we can obtain the regulatory approvals in order to initiate commercial sales of them, if at all. We have incurred losses since inception, principally as a result of research and development, selling, marketing and business development, and general and administrative expenses in support of our operations. We experienced net losses of approximately $38.8 million in 2018, $45.5 million in 2017, and $29.4 million in 2016. As of December 31, 2018, we had an accumulated deficit of approximately $169.1 million. We are expected to incur significant additional losses as we continue to focus our resources on prioritizing, selecting and advancing our therapeutic candidates, promoting Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercializing EnteraGam ® , and prioritizing, selecting, and advancing other products that we may

promote or commercialize in the future. Our ability to generate sufficient revenues to sustain our business operations in accordance with our plan and achieve profitability depends mainly upon our ability, alone or with others, to successfully develop our therapeutic candidates, obtain the required regulatory approvals in various territories and commercialize our therapeutic candidates, promote Donnatal ® , Mytesi ® , Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercialize EnteraGam ® and products that we may acquire or for which we may acquire commercialization rights in the future. We may be unable to achieve any or all of these goals with regard to our therapeutic candidates, our commercial products or products we may commercialize. As a result, we may never achieve sufficient revenues to sustain our business operations in accordance with our plan or be profitable.

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

We have a limited operating history, and our operations to date have been limited primarily to acquiring and in-licensing therapeutic candidates and rights to promote or commercialize products in certain U.S. territories, research and development, raising capital and recruiting scientific and management personnel and third-party partners. Except with respect to RHB-106 and related rights, which is out-licensed to Bausch Health Companies Inc. (“Bausch Health”), we have not yet demonstrated an ability to commercialize or obtain regulatory approval for our therapeutic candidates. Consequently, any predictions about our future performance may not be accurate, and you may not be able to fully assess our ability to complete development or commercialization of our therapeutic candidates, promote Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercialize EnteraGam ® and products that we may promote or commercialize in the future, obtain regulatory approvals, reimbursement by third-party payors, achieve market acceptance or competitive pricing for our therapeutic candidates or our current commercial products, Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, and EnteraGam ® (collectively, “our current commercial products”), and products that we may promote or commercialize in the future.

Our current working capital is not sufficient to complete our research and development with respect to any or all of our therapeutic candidates or to commercialize our products or products to which we have rights, including the promotion of Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercialization of EnteraGam ® . We will need to raise additional capital to achieve our strategic objectives of acquiring, in-licensing, developing and commercializing therapeutic candidates, promoting Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercializing EnteraGam ® and other products that we may promote or commercialize in the future, and our failure to raise sufficient capital or on favorable terms would significantly impair our ability to fund our operations, develop our therapeutic candidates, promote products such as Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or other products that we may promote in the future, commercialize EnteraGam ® or the products we may commercialize in the future, attract development or commercial partners or retain key personnel.

As of December 31, 2018, we had cash and short-term investments of approximately $53.2 million, and as of December 31, 2017, we had cash and short-term investments of approximately $46.2 million. We have funded our operations primarily through public and private offerings of our securities. We plan to fund our future operations through commercialization and out-licensing of our therapeutic candidates, commercialization of in-licensed or acquired products, and we will also need to raise additional capital through equity or debt financing or non-dilutive financing. These amounts may not be sufficient to complete the research and development of all of our therapeutic candidates, and we are also not yet certain of the financial impact of our commercialization activities.

To date, our business has generated limited revenues and is not profitable. As we plan to continue expending funds in research and development, including clinical trials, as well as to continue to promote Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercialize EnteraGam ® and acquire additional products, we will need to raise additional capital in the future through equity or debt financing or a non-dilutive financing or pursuant to development or commercialization agreements with third parties with respect to particular therapeutic candidates. However, we cannot be certain that we will be able to raise capital on commercially reasonable terms or at all, or that our actual cash requirements will not be greater than anticipated. We may have difficulty raising needed capital at all or on favorable terms, or securing a development or commercialization partner in the future as a result of, among other factors, our limited revenues from commercialization of the therapeutic candidates and promoting Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercializing EnteraGam ® and products that we may

promote or commercialize in the future, as well as the inherent business risks associated with our company, our therapeutic candidates, our current commercial products and products that we may promote or commercialize in the future, and present and future market conditions. To the extent we are able to generate meaningful revenues from our current commercial products, we may still need to raise capital because the revenues from our current commercial products may not be sufficient to cover all of our operating expenses and may not be sufficient to cover our commercial operations expenses. In addition, global and local economic conditions may make it more difficult for us to raise needed capital or secure a development or commercialization partner in the future and may impact our liquidity. If we are unable to obtain sufficient future financing, we may be forced to delay, reduce the scope of, or eliminate one or more of our research, development or commercialization programs for our therapeutic candidates or EnteraGam ® or the promotion of Donnatal ® , Mytesi ® , and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and products that we may promote or commercialize in the future, any of which may have an adverse effect on our reputation, business, financial condition or results of operations. Moreover, to the extent we are able to raise capital through the issuance of debt or equity securities, it could result in substantial dilution to existing shareholders.

Our long-term capital requirements are subject to numerous risks.

Our long-term capital requirements are expected to depend on many potential factors, including:

 the number of therapeutic candidates in development;

 the regulatory clarity and path of each of our therapeutic candidates;

 the progress, success, and cost of our clinical trials and research and development programs including manufacturing;

 our ability to successfully complete our clinical trials and research and development programs since the very advanced disease state and poor prognosis of the oncology patients in our oncology studies, including our ongoing Phase 2 cholangiocarcinoma study, make it particularly difficult to successfully treat the patients and to successfully complete the studies;

 the identification and acquisition of additional therapeutic candidates;

 the costs, timing, and outcome of regulatory review and obtaining regulatory clarity and approval of our therapeutic candidates and addressing regulatory and other issues that may arise post-approval;

 the costs of enforcing our issued patents and defending intellectual property-related claims;

 the costs of manufacturing, developing and maintaining sales, marketing, and distribution channels;

 our ability to successfully commercialize our therapeutic candidates, promote Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercialize EnteraGam ® and products that we may promote or commercialize in the future, including through securing commercialization agreements with third parties and favorable pricing and market share or through securing and maintaining our own commercialization capabilities;

 the existence and entrance of generics into the market that could compete with our products and erode the profitability of the products we are promoting or commercializing;

 our ability to successfully commercialize products that we develop or acquire or for which we acquire commercialization rights; and

 our consumption of available resources, especially a more rapid consumption than currently anticipated, resulting in the need for additional funding sooner than anticipated.

Risks Related to Our Business and Regulatory Matters

If we or our development, co-promotional or commercialization partners are unable to obtain or maintain the U.S. Food and Drug Administration (“FDA”) or other foreign regulatory clearance and approval for our therapeutic candidates or products we may promote or commercialize, we or our co-promotional or commercialization partners will be unable to commercialize our therapeutic candidates or products we may promote or commercialize.

To date, other than our limited experience in promoting Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercializing EnteraGam ® , we have not marketed, distributed or sold any therapeutic candidate

or product. Several of the products that we currently promote or commercialize must obtain and maintain FDA and other foreign regulatory clearance and approval.

In June 2017, we commenced commercializing EnteraGam ®  in certain territories in the U.S., and in September 2017, we commenced promoting Esomeprazole Strontium DR Capsules 49.3 mg to gastroenterologists in certain U.S. territories. EnteraGam ®  is marketed as an FDA-regulated “medical food” product intended for the dietary management of chronic diarrhea and loose stools, which must be administered under medical supervision. The FDA could require that EnteraGam ® obtain FDA approval in the future to remain in distribution in the United States if the FDA disagrees with the classification of EnteraGam ® as a medical food.

In June 2017, we commenced promoting Donnatal ®   (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide) in the U.S. Donnatal ®   is an anticholinergic and barbiturate combination drug product used as an adjunctive therapy for irritable bowel syndrome (“IBS”), a condition characterized by abdominal pain, bloating, and diarrhea or constipation. It may also be used as an adjunctive therapy for acute enterocolitis and duodenal ulcers.

Although we have certain rights to promote Donnatal ®   in certain U.S. territories, which is currently included in the FDA Drug Efficacy Study Implementation (“DESI”) review program, we cannot guarantee that our co-promotion partner will continue to be allowed to sell or promote Donnatal ® in the U.S. without future regulatory developments that may lead to the FDA requiring Donnatal ® to seek a U.S. New Drug Application (“NDA”) approval. See “—We or our co-promotional or commercialization partners are subject to risks related to the regulatory environment of the Drug Efficacy Study Implementation review program with respect to Donnatal ® .” In addition, future regulatory developments may lead to a loss of the right to commercialize EnteraGam ® or the right to promote Mytesi ® or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg.

Esomeprazole Strontium DR Capsules 49.3 mg is an FDA-approved proton pump inhibitor (“PPI”) drug product indicated for adults for the treatment of gastroesophageal reflux disease (“GERD”), risk reduction of NSAID-associated gastric ulcer,  Helicobacter pylori  (“ H. pylori ”) eradication to reduce the risk of duodenal ulcer recurrence and for pathological hypersecretory conditions, including Zollinger-Ellison syndrome.

In July 2018, we commenced promoting Mytesi ®   (crofelemer), an FDA-approved anti-diarrheal prescription drug indicated for the symptomatic relief of non-infectious diarrhea in adults with HIV/AIDS on anti-retroviral therapy (ART).

Currently, we have seven therapeutic candidates, most in late-clinical stage development, for which we ultimately plan to seek FDA approval: TALICIA ® (proposed tradename for RHB-105, if approved) for the treatment of H. pylori infection with two positive Phase 3 studies; RHB-104 for the treatment of Crohn’s disease with positive top-line results from a first Phase 3 study and a completed proof-of-concept Phase 2a study for multiple sclerosis; RHB-204, with a planned pivotal Phase 3 study for pulmonary nontuberculous mycobacteria (“NTM”) infections; RHB-106 (out-licensed to Bausch Health) for bowel preparation; BEKINDA ® (proposed tradename for RHB-102, if approved) with positive results from a first Phase 3 study for acute gastroenteritis and gastritis and positive results from a Phase 2 study for IBS-D; YELIVA ® (proposed tradename for ABC294640, if approved), with an ongoing Phase 2a study for cholangiocarcinoma and other ongoing studies; and RHB-107 (Upamostat ; formerly MESUPRON), targeting cancer and inflammatory GI diseases. Our therapeutic candidates are subject to extensive governmental laws, regulations, and guidelines relating to development, clinical trials, manufacturing, marketing, promotion, and commercialization of pre- and post-approval prescription drugs. We may not be able to obtain marketing approval for any of our therapeutic candidates in a timely manner or at all.

Any material delay in obtaining or maintaining, or the failure to obtain or maintain, required regulatory clearances and approvals will increase our costs and materially adversely affect our ability to generate meaningful revenues. Any regulatory clearance or approval to market a therapeutic candidate, our current commercial products, or other products that we may promote or commercialize may be subject to limitations on the indicated uses for marketing or may impose restrictive conditions of use, including cautionary information, thereby altering or eliminating the size of the market for the therapeutic candidate, our current commercial products, or other products that we may promote or commercialize in the future. We also are, and will be, subject to numerous regulatory requirements from both the FDA and other foreign regulatory authorities that govern the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. Moreover, clearance or approval by one regulatory authority does not ensure clearance or approval by other regulatory authorities in separate jurisdictions. Each jurisdiction may have different approval processes

and requirements and may impose additional testing, development and manufacturing requirements for our therapeutic candidates, our current commercial products and products that we may promote or commercialize in the future.

Additionally, the FDA or other foreign regulatory authorities may change their clearance or approval policies or adopt new laws, regulations or guidelines in a manner that materially delays or impairs our ability to obtain the necessary regulatory clearances or approvals or our ability to commercialize our therapeutic candidates, promote Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercialize EnteraGam ® and products that we may promote or commercialize in the future.

We may encounter delays in receipt of FDA approval, if any, for commercialization of TALICIA ® due to CMC, clinical, regulatory, supply or other issues.

We may encounter significant delays in receipt of FDA approval, if any, for commercialization of TALICIA ® .  For example, the FDA may determine that the chemistry, manufacturing and controls (“CMC”) of TALICIA ® are not satisfactory due to the manufacturing standards of the products or that additional CMC work, information or quality assurances are needed.  The FDA may also consider the clinical studies conducted with TALICIA ® to date and the additional information provided to be inadequate, or insufficient, or require us to provide additional information, which may require us to conduct additional studies or otherwise significantly delay potential FDA approval of the NDA for TALICIA ® , if at all.  In addition, we rely on the current manufacturer of TALICIA ® for the manufacture of validation and registration batches in support of our potential submission of an NDA with the FDA.  In addition, we rely on suppliers of active pharmaceutical ingredients and excipients. We cannot guarantee that our manufacturer, suppliers or other vendors will be able to perform as required, will not terminate their agreements with us, or otherwise will not perform satisfactorily. The delay in identifying, engaging, qualifying and training an alternative manufacturer or suppliers may be extended, leading to a significant delay. Furthermore, the FDA may also change its clearance or approval policies or adopt new laws, regulations or guidelines in a manner that materially delays or impairs our ability to obtain approval of the NDA for TALICIA ® . 

If any of these or other issues occur, we may face substantial additional expenses and otherwise experience delays in obtaining potential FDA approval of the NDA for TALICIA ® or may never obtain the FDA approval of the NDA for TALICIA ® .

We or our co-promotional or commercialization partners are subject to risks related to the regulatory environment of the Drug Efficacy Study Implementation review program with respect to Donnatal ® .

Currently, we promote Donnatal ® , which is a pre-1962 drug that is not FDA-approved but is currently cleared to be marketed and sold in the U.S., as it is currently included in the DESI review program of the FDA. Donnatal ® was first commercialized before Congress’s 1962 amendment to the Food Drug and Cosmetic Act. The 1962 amendment required evidence of efficacy to be granted FDA approval.  At that time, the FDA introduced the DESI program to evaluate the efficacy of drugs approved before 1962.  Under DESI, Donnatal ® is not an FDA-approved drug, but it may continue to be marketed and sold until a final determination regarding efficacy is made. To our knowledge at this time and based on our review of docketed correspondence with the FDA, the FDA has not made a final determination as to the efficacy of Donnatal ® .

Based on our review of docketed correspondence with the FDA, our co-promotion partner, ADVANZ, is currently a party to the unresolved Notice of Opportunity Hearing for anticholinergic and barbiturate combination drug products. We make no assurances that the FDA will not seek to begin a hearing process to remove Donnatal ®   from the market or otherwise remove Donnatal ® from the market at any time. If this were to happen, it could have a material adverse effect on our reputation, business, financial condition or results of operations. It is also the case that other manufacturers would try to take advantage of the regulatory uncertainty to launch unauthorized copies of Donnatal ® . Any delay or inaction by the FDA or other regulatory body to remove unauthorized copies of Donnatal ® from the market will harm our ability to successfully promote this product.

Our offering of EnteraGam ® as a “medical food” in the U.S. may be challenged by regulatory authorities.

EnteraGam ® is sold under physician supervision in the U.S. as a “medical food” on the basis of its meeting the criteria for “medical foods” in the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and FDA regulations. The term “medical food” is defined in the FDCA as a food which is formulated to be consumed or administered entirely under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation. “Medical foods” are not required to undergo premarket review or approval by the FDA.

To our knowledge, EnteraGam ® meets the criteria for “medical foods” established by the FDCA, and, to our knowledge to date, the labeling and promoting of EnteraGam ® is consistent with FDA regulatory requirements. However, our offering of EnteraGam ® as a “medical food” could be challenged by the FDA. The FDA has previously issued warning letters to other companies challenging the classification of their products as “medical foods.” These letters, along with guidance written by the FDA regarding medical foods, indicate that the FDA may be applying a more narrow interpretation of what qualifies as a “medical food.” Given this enhanced focus on “medical food” companies, we cannot provide any assurance that we will not also receive such a letter or other potential enforcement action, and the FDA could take the position that EnteraGam ® may not be lawfully sold in the U.S. as a “medical food.” If such a challenge were to occur, we could incur significant costs responding to such an enforcement action or claim and defending the status of EnteraGam ® as a “medical food” and ultimately litigation. If we or Entera Health Inc. (“Entera Health”) are not able to demonstrate to the FDA’s satisfaction that EnteraGam ® meets the regulatory requirements for “medical foods,” we would need to suspend further commercialization of EnteraGam ® in, and could be required to withdraw EnteraGam ® from, the U.S. market. The drug development process can be lengthy and may involve the expenditure of substantial monetary and other resources.

Furthermore, the process is uncertain, as there can be no assurance that EnteraGam ® will ultimately be approved by the FDA as a drug. The U.S. is the only territory in which we have rights to commercialize EnteraGam ® , and the cessation of such sales, even for a limited period, could have a material adverse effect on our reputation, business, financial condition or results of operations.

Clinical trials and related non-clinical studies may involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. We or our development or commercialization partners may not be able to commercialize our therapeutic candidates and products we may promote or commercialize without completing such trials in accordance with the applicable regulatory standards, even products that may have already been cleared or approved for marketing.

We have limited experience in conducting and managing the clinical trials that are required to obtain regulatory approvals and commence commercial sales of our therapeutic candidates. Clinical trials and related non-clinical studies are expensive, complex, can take many years and have uncertain outcomes. We cannot predict whether we, independently or through third parties, will encounter problems with any of the completed, ongoing or planned clinical trials that will cause delays, including suspension of a clinical trial, delay of data analysis or release of the final report. The clinical trials of our therapeutic candidates may take significantly longer to complete than estimated. Failure can occur at any stage of the testing, and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could materially delay or prevent the obtainment of a regulatory approval and commercialization of our current or future therapeutic candidates.

In connection with the clinical trials for our therapeutic candidates and other therapeutic candidates that we may seek to develop in the future, either on our own or through licensing or partnering agreements, we face various risks and uncertainties, including but not limited to:

A number of companies in the pharmaceutical and biotechnology industries, including those with greater resources and experience than us, have suffered significant setbacks in advanced clinical trials, even after seeing promising results in earlier clinical trials. As such, despite the results reported in earlier clinical trials of our therapeutic candidates, we do not know if we will be able to complete the clinical trials we conduct or if such clinical trials will demonstrate adequate safety and efficacy sufficient to request and obtain regulatory approval to market our therapeutic candidates. If any of the clinical trials of any of our current or future therapeutic candidates do not produce favorable results, or are found to have been conducted in violation of the FDA’s standards governing such studies, our ability to request and obtain regulatory approval for the therapeutic candidate may be adversely impacted, which could have a material adverse effect on our reputation, business, financial condition or results of operations.

If we are unable to develop a diagnostic test for Mycobacterium avium paratuberculosis (“MAP”), this may adversely impact our ability to develop or obtain approval for RHB-104.

We are expecting to continue to advance the development program for a companion diagnostic for the detection of MAP bacteria in Crohn’s disease patients in collaboration with several U.S. universities and with Q 2  Solutions. However, we do not know if and when a diagnostic test for MAP will become available. If we are unable to develop a diagnostic test for MAP, this may adversely impact our ability to develop or obtain regulatory approval to market RHB-104.

If we are unable to establish collaborations for our therapeutic candidates or products we may promote or commercialize, or otherwise not be able to raise substantial additional capital, we will likely need to alter our development and commercialization plans.

Our drug development programs and the potential commercialization of our therapeutic candidates and products that we may promote or commercialize will require additional cash to fund expenses. As such, our strategy includes either selectively partnering or collaborating with multiple pharmaceutical and biotechnology companies to assist us in furthering development or potential commercialization of our therapeutic candidates, promoting or commercializing products, in whole or in part, in some or all jurisdictions or through securing our own commercialization capabilities. With respect to potential new third-party partners for the development or commercialization of our therapeutic candidates and development or commercialization of products that we may promote or commercialize, we may not be successful in entering into collaborations with third parties on acceptable terms, or at all. In addition, if we fail to negotiate and maintain suitable development, commercialization or promotion agreements or otherwise raise substantial additional capital to secure our own commercialization capabilities, we may have to limit the size or scope of our activities or we may have to

delay or terminate one or more of our development or commercialization programs. Any failure to enter into development or commercialization agreements with respect to the development, marketing and commercialization of any therapeutic candidate or failure to develop, market and commercialize such therapeutic candidate independently may have an adverse effect on our reputation, business, financial condition or results of operations.

Any collaborative arrangements that we have established or may establish may not be successful, or we may otherwise not realize the anticipated benefits from these collaborations, including our out-licensing of RHB-106, as well as our promotion of Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or commercialization of EnteraGam ® . We do not control third parties with whom we have or may have collaborative arrangements, and we rely on such third parties to achieve results which may be significant to us. In addition, any future collaborative arrangements may place the development or commercialization of our therapeutic candidates, promotion of Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or commercialization of EnteraGam ® or products that we may promote or commercialize in the future, outside our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us.

Each of our collaborative arrangements requires us to rely on external consultants, advisors, and experts for assistance in several key functions, including clinical development, manufacturing, regulatory, market research, intellectual property, and commercialization. We do not control these third parties, but we rely on such third parties to achieve results, which may be significant to us. To date, we have out-licensed one of our therapeutic candidates, RHB-106, and related rights to Bausch Health. We do not control Bausch Health, but we rely on Bausch Health to clinically develop and, ultimately, if approved, commercialize RHB-106 and related rights. In addition, with respect to Donnatal ® , Mytesi ® , Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and EnteraGam ® , we rely on ADVANZ, Napo Pharmaceuticals, Inc. (“Napo”), ParaPRO LLC (“ParaPRO”) and Entera Health, respectively, as the party responsible for, among others, the manufacture, supply, generation of product information, and other operating responsibilities.

Relying upon collaborative arrangements to develop and commercialize our therapeutic candidates, such as RHB-106, products we promote, such as Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, and EnteraGam ® , which we commercialize, and other products that we may promote or commercialize in the future, subjects us to a number of risks, including but not limited to the following:

In addition, our reliance upon our partners in connection with promotional activities subjects us to a number of additional risks, including but not limited to, the following:

If any of these or other scenarios materialize, they could have an adverse effect on our reputation, business, financial condition or results of operations.

As a result of ADVANZ’s rebranding, recapitalization in September 2018 and its delisting from the NASDAQ Stock Market in July 2018, we are subject to the additional risks that ADVANZ may delay, reduce or cease payments to us under the ADVANZ Co-Promotion Agreement or otherwise be unable or unwilling to meet its obligations to us under the ADVANZ Co-Promotion Agreement, including its manufacture, supply, and other operating responsibilities. If any of these scenarios materialize, it could have an adverse effect on our reputation, business, financial condition or results of operations.

Our co-promotion agreement with Napo for the promotion of Mytesi ®   is short-term, and Napo will continue to control the sale of Mytesi ® and have the right to set policies concerning pricing and other terms of sale that may impact the adoption and use of Mytesi ® .

We entered into the co-promotion agreement with Napo on June 28, 2018, and initiated U.S. promotion of Mytesi ®   in July 2018. The agreement, as amended, will expire, without renewal or a follow-on agreement, on January 28, 2020, without us ever realizing benefits from the agreement. We have not realized and may not in the future realize any meaningful revenue from our activities under the agreement and any launch of our promotional activities may fail. Our promotional activities under the agreement are also limited to the promotion of the product to gastroenterologists and other gastro/intestinal specialty healthcare providers, and we did not obtain the right to promote Mytesi ® to other healthcare providers, such as infectious disease specialists who may have greater numbers of patients with HIV and HIV specialists who are high prescribers of antiretroviral therapies medications. We will only receive compensation from Napo if sales of Mytesi ® are attributable to our promotional activities within the territory agreed upon with Napo. In addition, we rely upon Napo, a third party, to manufacture, sell, and manage all regulatory and other issues related to Mytesi ® . Napo’s failure to properly execute any of its legal or other responsibilities, in a manner that complies with all applicable governing laws and regulations, may subject us to various regulatory and litigation risks. In addition, Napo’s failure to manufacture Mytesi ® in sufficient quantities and in a timely manner would impair our ability to successfully promote this product.

Donnatal ® , Mytesi ® , Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, and EnteraGam ®   or products which we may promote or commercialize in the future may be withdrawn from the market at any time due to product withdrawal requests by the FDA or other foreign regulatory authorities.

Products we acquire or to which we acquire certain commercialization rights may be subject to withdrawal requests by the FDA or other foreign regulatory authorities for various reasons. For instance, certain products, such as Donnatal ® , may be subject to regulatory review under the DESI program, through which the FDA may determine such products to be ineffective and impose limitations or require withdrawal of the product from the market. Donnatal ® is currently subject to the FDA’s DESI proceedings to determine its effectiveness and the right to continue to be marketed in the U.S., and there is no assurance as to the outcome of such proceedings. To our knowledge at this time and based on our review of docketed correspondence with the FDA, the FDA has not made a final determination as to the efficacy of Donnatal ® . In addition, the process and timing of any FDA DESI proceedings with respect to Donnatal ® are unclear. Historically, the FDA has generally permitted products to stay on the market during these proceedings, although there is no assurance as to the time of commencement of such proceedings or whether the FDA will, in fact, grant such permission to any future DESI-related proceedings, thereby resulting in our current commercial products being subject to withdrawal requests by the FDA. The status of EnteraGam ® as a “medical food” in the U.S. may be challenged by regulatory authorities, which may result in its withdrawal from the market until additional regulatory requirements are met. Regulatory authorities in other jurisdictions may have similar procedures that may subject any product we may promote or commercialize to limitations or withdrawal requests. In addition, the FDA or other foreign regulatory authorities may determine that the chemistry, manufacturing and controls (“CMC”) of marketed products that we develop, acquire or to which we acquire commercialization rights, such as our current commercial products, is unsatisfactory due to the manufacturing standards of the products. If either of these or any regulatory action is taken, our current commercial products or any product we promote or commercialize in the future could be withdrawn from the market at any time. In addition, we may suffer from delays in further commercialization of any product we promote or commercialize.

We may not be successful in acquiring products or companies that own rights to, or otherwise acquire commercialization rights to, products cleared or approved for marketing in the U.S. or elsewhere that achieve commercial success or in further establishing our own marketing and commercialization capabilities.

Part of our strategy is to identify and acquire rights to products that have been cleared or approved for marketing in the U.S. or elsewhere, and in particular, those with a therapeutic focus on GI. Specifically, we seek to acquire rights to products that are already commercialized, which would enable us to commercialize such products independently and further establish our own marketing and commercialization capabilities in the U.S. We have entered into the ADVANZ Co-Promotion Agreement pursuant to which we were granted certain rights to promote Donnatal ® in certain U.S. territories, which was our first agreement to commercialize a product being marketed in the U.S. We have also entered into a license

agreement with Entera Health pursuant to which we were granted the exclusive rights to commercialize EnteraGam ® in certain U.S. territories, an agreement with ParaPRO pursuant to which we were granted the exclusive rights to promote Esomeprazole Strontium Delayed-Release Capsules 49.3 mg to gastroenterologists in certain U.S. territories and a co-promotion agreement with Napo pursuant to which we were granted the exclusive right to co-promote Mytesi ® in certain U.S. territories to certain gastroenterologists and other healthcare practitioners for the approved indication in people living with HIV/AIDS. However, there can be no assurance as to our ability to identify and acquire rights to any additional products, in particular, those with a therapeutic focus on GI. If we are not successful in acquiring any additional products, or in commercializing EnteraGam ® , or in promoting Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, we may not be able to further establish or maintain our own marketing and commercialization capabilities in the U.S. This may limit our ability to commercialize products on our own and may require us to contract with third-party development or commercialization partners on terms which may not be commercially favorable to us. Additionally, these efforts to further establish and maintain our commercial capabilities in the U.S. could be found to be more costly than our forecast and have an adverse effect on our reputation, business, financial condition or results of operations.

In addition, there can be no assurance that we will accurately or consistently identify products approved or cleared for marketing that will achieve commercial success or that we will be able to successfully commercialize such products.

If we are unable to maintain, train and build an effective sales and marketing infrastructure, or establish and maintain compliant and adequate sales and marketing capabilities, we will not be able to commercialize and grow our products and product candidates successfully.

To further establish and maintain our own marketing and commercialization capabilities in the U.S. we may need to expand, among other things, our development, regulatory, manufacturing, marketing, and sales capabilities and to increase or maintain our personnel to accommodate sales. We may not be able to secure sales personnel or organizations that are adequate in number or expertise to successfully and lawfully market and sell our products in the U.S. If we are unable to expand our sales and marketing capability, train our sales force effectively or provide any other capabilities necessary to commercialize our products and therapeutic candidates, we may need to contract with third parties to market and sell our products.

Our employees and sales personnel must comply with applicable regulatory requirements and restrictions, including, but not limited to, “fair balance” promotion of our products and state and federal anti-kickback laws. If we are unable to establish and maintain compliant and adequate sales and marketing capabilities, we may not be able to increase our product revenue, may generate increased expenses and may be subject to regulatory and compliance investigation and enforcement.

The FDA also requires that our sales and marketing efforts, as well as promotions, comply with various laws and regulations. Prescription drug promotions must be consistent with and not contrary to labeling, present “fair balance” between risks and benefits, be truthful and not false or misleading, be adequately substantiated (when required), and include adequate directions for use.

In addition to the requirements applicable to approved drug products, we may also be subject to enforcement action in connection with any promotion of an investigational new drug. A sponsor or investigator, or any person acting on behalf of a sponsor or investigator, may not represent in a promotional context that an investigational new drug is safe or effective for the purposes for which it is under investigation or otherwise promote the drug candidate.

If the FDA investigates our marketing and promotional materials or other communications and finds that any of our current or future commercial products are being marketed or promoted in violation of the applicable regulatory restrictions, we could be subject to FDA enforcement action. Any enforcement action (or related lawsuit, which could follow such action) brought against us in connection with alleged violations of applicable drug promotion requirements, or prohibitions, could harm our business and our reputation, as well as the reputation of any approved drug products we may promote or commercialize.

Expanding and maintaining our commercial infrastructure for our commercial capabilities in the U.S. is a significant undertaking that requires substantial financial and managerial resources, and we may encounter delays or may not be successful in our efforts.

While we are currently promoting Donnatal ® , Mytesi ® and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in certain U.S. territories, we only began to promote products in the U.S. in 2017 and have limited experience in promoting products.  We are currently commercializing EnteraGam ® in the U.S., and we likewise have only recently begun to commercialize products in the U.S., and we have limited experience in marketing and selling products. Establishing, maintaining and/or expanding the necessary capabilities are competitive and time-consuming, and the commercialization of EnteraGam ®   and promotion of Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg require a significant expenditure of operating, financial and management resources.  Even with those investments, we may not be able to effectively promote Donnatal ® Mytesi ® or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercialize EnteraGam ® , or we may incur more expenditures than anticipated in order to maximize our sales.  We cannot guarantee that we will be able to establish, maintain and/or expand our sales, marketing, distribution, and market access capabilities and enter into and maintain any agreements necessary for commercialization with payers and third-party providers on acceptable terms, if at all.  If we are unable to establish, maintain and/or expand such capabilities, either on our own or by entering into agreements with others, or are unable to do so in an efficient manner or on a timely basis, we will not be able to maximize our commercialization of EnteraGam ®   or promotion of Donnatal ® , Mytesi ®   or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, which would adversely affect our business, operating results or financial condition.

Even if the promotion of Donnatal ® , Mytesi ®   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and/or commercialization of EnteraGam ®   are successful, we may fail to further our business strategy as anticipated or to achieve anticipated benefits and success.  We may incur higher than expected costs in connection with our promotion of Donnatal ® , Mytesi ®   or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg or commercialization of EnteraGam ® , and we may encounter general economic or business conditions that adversely affect these products. In addition, Donnatal ®   continues to face pressure from competitive products and from non-FDA approved copies of Donnatal ®   being distributed in the United States.

In addition, if we incur higher than expected costs in connection with our promotion of Donnatal ® , Mytesi ®   or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, or commercialization of EnteraGam ® , we may need to reduce or terminate our commercial activities, which may have a material adverse effect on our business, operating results or financial condition.

We have no history of independently commercializing any of our therapeutic candidates that may be approved in the future and may have difficulty promoting Donnatal ® , Mytesi ® or Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, commercializing EnteraGam ® , or promoting or commercializing any therapeutic candidates or products to which we may acquire the rights in the future.

We have limited experience in commercializing therapeutic candidates or marketed products on our own, which may materially increase marketing and sales expenses or cause us to be ineffective in these efforts.  In June 2017, we began promoting Donnatal ® and commercializing EnteraGam ® in the U.S., in September 2017, we began promoting Esomeprazole Strontium Delayed-Release Capsules 49.3 mg to gastroenterologists in certain U.S. territories and in July 2018, we began the promotion of Mytesi ® to certain gastroenterologists and other healthcare practitioners in certain U.S. territories. There can be no assurance we will successfully commercialize our therapeutic candidates, such as TALICIA ® , if approved in the future, or promote Donnatal ® , Mytesi ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, or successfully commercialize EnteraGam ® or any products we may promote or commercialize in the future.

In addition, many companies, both public and private, including well-known pharmaceutical companies and smaller niche-focused companies, are currently selling, marketing and distributing drug products that directly compete with the therapeutic candidates that we may seek to commercialize. Many of these companies have significantly greater financial capabilities, marketing, and sales experience and resources than us. As a result, our competitors may be more successful than we are in commercializing products.

We rely on third parties to conduct our clinical trials and related non-clinical studies and those third parties may not perform satisfactorily, including but not limited to failing to meet established deadlines and compliance with applicable laws and regulations for the completion of such clinical trials.

We currently do not have the ability to independently conduct clinical trials and related non-clinical studies for our therapeutic candidates, and we rely on third parties, such as contract research organizations, medical institutions, contract laboratories, development and commercialization partners, clinical investigators and independent study monitors to perform these functions. Our reliance on these third parties for research and development activities reduces our control over these activities. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. Although we have, in the ordinary course of business, entered into agreements with such third parties, other than with respect to RHB-106 and related rights, which we have out-licensed to Bausch Health, we continue to be responsible for confirming that each of our clinical trials and related non-clinical studies is conducted in accordance with its general investigational plan and protocol, as well as all applicable laws and regulations. For example, the FDA requires us to comply with regulations and standards, commonly referred to as good clinical practices (“GCP”), for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the trial participants are adequately protected, and regulatory authorities in other jurisdictions may have similar responsibilities and requirements. Our reliance on third parties does not relieve us of these responsibilities and requirements. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them or perform such functions independently. Although we believe that there are a number of other third-party contractors we could engage to continue these activities, it may result in a delay of the affected trial and additional costs. Accordingly, we may be materially delayed in obtaining regulatory approvals if any, for our therapeutic candidates and may be materially delayed in our efforts to successfully commercialize our therapeutic candidates for targeted diseases.

In addition, our ability to bring our therapeutic candidates to market depends on the quality and integrity of data that we present to regulatory authorities in order to obtain marketing authorizations. Although we attempt to audit and control the quality of third-party data, we cannot guarantee the authenticity or accuracy of such data, nor can we be certain that such data has not been fraudulently generated. Furthermore, the FDA may consider clinical studies inadequate where steps have not been taken in the design, conduct, reporting, and analysis of the studies to minimize bias. For example, one potential source of bias in clinical studies is a clinical investigator with a financial stake in the outcome of the study. Accordingly, we (or the applicant of the IND or Biologics License Application, as applicable) must submit for all applicable clinical investigators either: (i) a completed Form FDA 3454 attesting to the absence of financial interests and arrangements described in the regulations, dated and signed by the chief financial officer or other responsible corporate official; or (ii) for any investigators for whom a Form FDA 3454 is not submitted, a Form FDA 3455 disclosing completely and accurately the following:

The FDA may refuse to file an NDA that does not contain the required certifications and disclosures or an attestation by the applicant that the applicant has acted with due diligence to obtain the information but was unable to do so and stating the reason. Additionally, FDA refusal of an NDA on potential bias grounds may have a material adverse effect on our reputation, business, and the credibility of our other therapeutic candidates and/or commercial products.

We rely on contract research organizations for the management of clinical data generated from our studies, and such contract research organizations may not perform satisfactorily.

We rely on contract research organizations to provide monitors for and to manage data for our studies, including the ERADICATE Hp2 study and the MAP US study. Our reliance on these contract research organizations for data management reduces our control over clinical data management. While we have agreements governing their activities, we have limited influence over their actual performance. The ERADICATE Hp2 study enrolled 455 patients at 55 clinical sites across the U.S., and the MAP US study enrolled 331 patients across clinical sites in several countries. If these contract research organizations do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, we may be required to replace them, or our clinical studies may be extended, delayed or terminated. In addition, such failure of our contract research organizations would pose risks to the accuracy and usability of clinical data from our clinical studies. Replacing a contract research organization may result in a delay of our clinical studies and generation of data from such studies. In addition, we face the risk of potential unauthorized disclosure or misappropriation of our intellectual property by contract research organizations, which may reduce our trade secret protection and allow our potential competitors to access and exploit our proprietary technology, including those regarding TALICIA ® or RHB-104.

We rely on data from third parties in connection with the sale of our commercial products and our assessment of product acquisition opportunities, and this data may be inaccurate or may not accurately reflect the sales of commercial products, which may affect the revenues of some of our commercial products and our allocation of resources, which may adversely affect our business and the reputation of the commercial products that we promote.

We rely on data from third parties, including data providers, in connection with our commercial business. Revenues for our promotion of some of our commercial products, as well as our assessment of opportunities to acquire rights to products, are dependent on the volume of sales of our commercial products, which is calculated based on information obtained from third parties. Although we take steps to verify this data, the information we receive may be inaccurate or incomplete.  In the event the information we receive is inaccurate or incomplete, this may affect our reported revenue for a reporting period or our decisions of whether to acquire rights to certain products.

If third parties do not manufacture TALICIA ® or our other therapeutic candidates or do not manufacture and sell any products we may promote or commercialize, including our current commercial products, in sufficient quantities, in the required timeframe, and at an acceptable cost and quality, clinical development and commercialization of TALICIA ® or our other therapeutic candidates or promotion of products we may promote or commercialize could be delayed and sales of any product we may promote or commercialize may be adversely affected.

We do not currently own or operate manufacturing facilities. We rely on, and expect to continue to rely on, third parties to manufacture clinical and commercial quantities of TALICIA ® or our other therapeutic candidates and products that we may promote or commercialize. For TALICIA ® , we rely on the manufacturer of TALICIA ® for the manufacture of validation and registration batches in support of our potential submission of an NDA with the FDA and, if approved for marketing, for marketing and commercial sale of TALICIA ® .  For Donnatal ® , we rely on ADVANZ, which has a manufacturing agreement with a third party to provide sufficient quantities of Donnatal ® in the required timeframe. For EnteraGam ® we rely on Entera Health and the manufacturer, The Lauridsen Group, Inc., to provide sufficient quantities of EnteraGam ® in the required timeframe, and for Esomeprazole Strontium Delayed-Release Capsules 49.3 mg we rely on ParaPRO, which has a manufacturing agreement with a third party to provide sufficient quantities of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in the required timeframe. For Mytesi ® , we rely on Napo, which has a manufacturing agreement with a third party to provide sufficient quantities of Mytesi ® in the required timeframe. Our reliance on third parties includes our reliance on them for quality assurance related to regulatory compliance. Our current and anticipated future reliance upon others for the manufacture of our therapeutic candidates and any products that we may promote or commercialize may adversely affect our future operations and our ability to develop therapeutic candidates and commercialize any therapeutic candidates and any products that we may promote or commercialize on a timely and competitive basis.

We may not be able to maintain our existing or future third-party manufacturing arrangements on acceptable terms, if at all. If for some reason our manufacturers or our development or commercialization partners’ manufacturers do not perform as agreed or expected or terminate or fail to renew their agreements with us for any reason, we or our partners may be 

required to replace them, in which event we may incur added costs and delays in identifying, engaging, qualifying under applicable regulatory requirements and training any such replacements and entering into agreements with such replacements on acceptable terms. Obtaining the necessary FDA or other regulatory approvals or other qualifications required for changes in manufacturing sites, methods or processes under applicable regulatory requirements could result in a significant interruption of supply. In the case of the manufacturer of TALICIA ® , in particular, the delay in identifying, engaging, qualifying and training its replacement may be extended, leading to a significant interruption of supply.  Any such additional costs and delays may adversely impact our ability to obtain regulatory clearances and approvals to commercialize TALICIA ® or our other therapeutic candidates or any product we may promote or commercialize or make such commercialization or marketing economically unfeasible.

We rely on third parties to manufacture and supply us with high quality active pharmaceutical ingredients (“APIs”) in the quantities we require on a timely basis.

We currently do not manufacture any APIs ourselves. Instead, we rely on third-party vendors for the development, manufacture, and supply of our APIs that are used to formulate our therapeutic candidates and products we may promote or commercialize. If these suppliers are incapable or unwilling to meet our current or future needs on acceptable terms or at all, we could experience a delay in obtaining regulatory clearances or approvals for our therapeutic candidates or products that we may promote or commercialize or in conducting clinical trials of our therapeutic candidates and incur additional costs or experience an adverse effect on our sale of any product we may promote or commercialize.

While there may be several alternative suppliers of APIs on the market, for most of our products (but not Mytesi ® , as discussed below), we have yet to conclude extensive investigations into the quality or availability of their APIs. In addition, we do not believe that there are alternative suppliers of APIs for Mytesi ® , and we are wholly dependent upon Napo’s ability to source or procure the API; the raw material used to manufacture Mytesi ® is a crude plant latex (“CPL”), derived from the Croton lechleri tree, which is found in countries in South America, principally Peru. The ability of Napo’s contract suppliers to harvest CPL is governed by the terms of their respective agreements with local government authorities. Although CPL is available from multiple suppliers, to our knowledge, Napo only has contracts with a small number of suppliers to obtain CPL and arrange its shipment to its contract manufacturer. Accordingly, if Napo’s contract suppliers do not or are unable to comply with the terms of their respective agreements with Napo, and Napo is not able to negotiate new agreements with alternate suppliers on terms that it deems commercially reasonable, it may harm our co-promotion of Mytesi ® . The countries from which CPL is obtained could also change their laws and regulations regarding the export of the natural products or impose or increase taxes or duties payable by exporters of such products. Restrictions could be imposed on the harvesting of the natural products or additional requirements could be implemented for the replanting and regeneration of the raw material. Such events could have a significant impact on our co-promotion of Mytesi ® . As a result of each of the foregoing circumstances related to Mytesi ®   and the APIs of other products that we promote or commercialize, we can provide no assurances that supply sources will not be interrupted from time to time. Changing API suppliers or finding and qualifying new API suppliers can be costly and take a significant amount of time. Many APIs require significant lead-time to manufacture. There can also be challenges in maintaining similar quality or technical standards from one manufacturing batch to the next.

If we are not able to find stable, affordable, high quality, or reliable supplies of our APIs, we may not be able to produce enough supplies of our therapeutic candidates or products we may promote or commercialize, which could have a material adverse effect on our reputation, business, financial condition or results of operations.

We anticipate continued reliance on third-party manufacturers if we are successful in obtaining marketing approval from the FDA and other regulatory agencies for any of our therapeutic candidates and reliance on third-party manufacturers for any products that we may promote or commercialize, including our current commercial products.

To date, our therapeutic candidates have been manufactured in relatively small quantities for preclinical testing and clinical trials as well as for other regulatory purposes by third-party manufacturers. If the FDA or other regulatory agencies approve any of our therapeutic candidates for commercial sale, we expect that we would continue to rely, at least initially, on third-party manufacturers to produce commercial quantities of our approved therapeutic candidates. In addition, we rely on, and we expect to continue to rely on, third-party manufacturers to produce commercial quantities of our current commercial products or any product that we may gain the rights to in the future to promote or commercialize. These manufacturers

may not be able to successfully increase or maintain the manufacturing capacity for any of our therapeutic candidates that may be approved in the future, our current commercial products or any product we may gain the rights to in order to promote or commercialize in the future, in a timely or economic manner, or at all. Except for current FDA regulations with respect to “medical foods,” the significant scale-up of manufacturing may require additional validation studies, which the FDA must review and approve. Foreign regulatory agencies may also require the approval of additional validation studies for scaling up the manufacturing process of any of our products, including “medical foods.” If the third-party manufacturers are unable to successfully increase or maintain the manufacturing capacity for a therapeutic candidate or for products that we may promote or commercialize, or if we are unable to secure replacement third-party manufacturers or unable to establish our own manufacturing capabilities, the commercial launch of any approved products may be delayed or there may be a shortage in supply which could have a material adverse effect on our reputation, business, financial condition or results of operations.

We and our third-party manufacturers or our partners’ manufacturers are, and will be, subject to regulations of the FDA and other foreign regulatory authorities, such as applicable current good manufacturing practices and other quality-based regulations.

We and our third-party manufacturers or our partners’ manufacturers are, and will be, required to adhere to laws, regulations, and guidelines of the FDA and other foreign regulatory authorities setting forth current good manufacturing practices (“cGMP”). These laws, regulations and guidelines cover all aspects of the manufacturing, testing, quality control and recordkeeping relating to our therapeutic candidates with varying cGMP rigors depending on what phase each of our respective therapeutic candidates is in with respect to its drug development process and any products we may promote or commercialize, including our current commercial products. We and our third-party manufacturers and our partners’ manufacturers may not be able to comply with applicable laws, regulations, and guidelines. We and our third-party manufacturers and our partners’ manufacturers are, and will be, subject to unannounced inspections by the FDA, state regulators and similar foreign regulatory authorities outside the U.S. Our failure, or the failure of our third-party manufacturers or our partners’ manufacturers, to comply with applicable laws, regulations and guidelines could result in the imposition of sanctions on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our therapeutic candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our therapeutic candidates and commercially-marketed products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect regulatory approval and supplies of our therapeutic candidates and commercially-marketed products, and materially and adversely affect our reputation, business, financial condition or results of operations.

Our therapeutic candidates, our current commercial products, and any product we may promote or commercialize in the future, even if all regulatory clearances and approvals are obtained, will be subject to ongoing regulatory review. If we fail to comply with continuing U.S. and applicable foreign laws, regulations, and guidelines, we could lose those clearances and approvals, and our reputation, busines s , financial condition or results of operations may be materially and adversely affected.

We and/or our commercialization partners, as applicable, will be subject to ongoing reporting obligations with respect to our therapeutic candidates, even if they receive regulatory clearance or approval, and with respect to our current commercial products and any cleared or approved product that we may gain the rights to promote or commercialize in the future, including pharmacovigilance. In addition, the manufacturing of our therapeutic candidates, our current commercial products, and any other product we may promote or commercialize, whether currently or in the future, will be subject to continuing regulatory review, including inspections by the FDA and other foreign regulatory authorities. The results of any ongoing review may result in withdrawal from the market of a therapeutic candidate or one of our current commercial products, Donnatal ® , Mytesi ® , EnteraGam ® _,   and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, or another product we may promote or commercialize, interruption of manufacturing operations or imposition of labeling or marketing limitations for such therapeutic candidate or product. Since many more patients are exposed to drugs following their marketing clearance or approval, serious adverse reactions that were not observed in clinical trials may occur during the commercial marketing of the therapeutic candidate or any product we may promote or commercialize, including our current commercial products.

If a product receives regulatory approval, the approval may be limited, which could restrict the commercial value of the product. As a condition of approval or after approval (if the FDA becomes aware of new safety information), the FDA may require us to implement a Risk Evaluation and Mitigation Strategy (REMS), which may include distribution or use restrictions to manage a known or potential serious risk associated with the product. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (ETASU).  ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The requirement for a REMS can materially affect the potential market and profitability of a given drug. Once adopted, REMS are subject to periodic assessment and modification. Additionally, the FDA may require post-approval, “Phase 4” clinical trials to generate additional information on safety and/or efficacy. The results of such post-marketing studies may be negative and could cause the Agency to, among other things, further limit marketing efforts or a product’s approved uses.

As we develop our therapeutic candidates or commercialize our products, we may also periodically discuss with the FDA and other regulatory authorities certain clinical, regulatory and manufacturing matters and, our views may, at times, differ from those of the FDA and other regulatory authorities. For example, the FDA may seek to regulate our therapeutic candidates or any product we may promote or commercialize that consist of two or more active ingredients as combination drugs under its Combination Drug Policy. The Combination Drug Policy requires that we demonstrate that each active ingredient in a drug product contributes to the product’s claimed effect. If the FDA raises questions regarding whether available data and information provided to the FDA demonstrate the contribution of each active ingredient in such combination drug products, we may be required to provide additional information, which may require us to conduct additional preclinical studies or clinical trials. If we and/or our commercialization partners, as applicable, are required to conduct additional clinical trials or other testing of our therapeutic candidates or of our current commercial products, or any other product we may promote or commercialize, we may face substantial additional expenses, be delayed in obtaining marketing clearance or approval, if required by the FDA, or may never obtain marketing clearance or approval for such therapeutic candidate or product we may promote or commercialize, including Donnatal ® .  In addition, Donnatal ® is currently subject to the FDA’s DESI proceedings to determine its effectiveness and the right to continue to be marketed in the U.S., and there is no assurance as to the outcome of such proceedings.  To our knowledge at this time and based on our review of docketed correspondence with the FDA, the FDA has not made a final determination as to the efficacy of Donnatal ® .

In addition, in 2011, the FDA granted RHB-104 orphan drug designation for the treatment of Crohn’s disease in the pediatric population, and, in 2017, the FDA granted YELIVA ®  orphan drug designation for the treatment of cholangiocarcinoma and granted RHB-107 orphan drug designation for the treatment of pancreatic cancer. If we fail to maintain these orphan drug designations, we will lose our associated marketing exclusivity, and our competitors may sell competing products and our revenues could be reduced.

In 2014, the FDA granted TALICIA ®   a Qualified Infectious Disease Product (“QIDP”) designation for the treatment of H. pylori infection. In 2017, we announced that RHB-204 had been granted QIDP designation by the FDA for the treatment of NTM infections. If either TALICIA ®   or RHB-204 fails to maintain its QIDP designation, it could significantly increase the development time for TALICIA ®   for the treatment of H. pylori infection and RHB-204 for NTM infections, as the case may be.

Third-party manufacturers and the manufacturing facilities that we and our development or commercialization partners use to manufacture any therapeutic candidate and any other products that we may promote or commercialize, including our current commercial products, will be subject to periodic review and inspection by the FDA and may be subject to similar review by other regulatory authorities. Later discovery of previously unknown problems with any therapeutic candidate or product we may promote or commercialize, including our current commercial products, manufacturer or manufacturing process, or failure to comply with rules and regulatory requirements, may result in actions, including but not limited to the following:

If we or our commercialization partners, suppliers, third-party contractors or clinical investigators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or the adoption of new regulatory requirements or policies, we and our development or commercialization partners may lose marketing clearance or approval for any of our therapeutic candidates if any of our therapeutic candidates are approved, and we may lose marketing clearance or approval of any products already cleared or approved for marketing in any jurisdiction, resulting in decreased or lost revenue from such therapeutic candidates and products and could also result and other civil or criminal sanctions, including fines and penalties.

Modifications to our therapeutic candidates, or to any product that we may promote or commercialize, may require new regulatory clearances or approvals or may require us or our development or commercialization partners, as applicable, to recall or cease marketing any of our cleared or approved products, if any, or delay further studies of our therapeutic candidates in human subjects until clearances or approvals are obtained.

Modifications to our therapeutic candidates and any products we may promote or commercialize, including our current commercial products, after they have been cleared or approved for marketing, if at all, may require new regulatory clearance or approvals, and, if necessitated by a problem with a marketed product, may result in the recall or suspension of marketing of the previously approved and marketed product until clearances or approvals of the modified product are obtained. The FDA and other regulatory authorities require pharmaceutical product and device manufacturers to initially make and document a determination of whether or not a modification requires a new approval, supplement or clearance. A manufacturer may determine in conformity with applicable laws, regulations, and guidelines that a modification may be implemented without pre-clearance by the FDA or other regulatory authorities. However, the FDA or other regulatory authorities can review a manufacturer’s decision and may disagree. The FDA or other regulatory authorities may also, on their own initiative, determine that a new clearance or approval is required. If the FDA or other regulatory authorities require new clearances or approvals of any pharmaceutical product for which we or our partners, including development or commercialization partners, previously received marketing approval, we or our partners, including development or commercialization partners, may be required to recall and stop marketing such marketed product, which could require us or our partners, including development or commercialization partners, to redesign the marketed product and may cause a material adverse effect on our reputation, business, financial condition or results of operations.

We may depend on our ability to identify and in-license or acquire additional therapeutic candidates to achieve commercial success, including products approved or cleared for marketing in the U.S. or elsewhere.

Our seven clinical stage development therapeutic candidates were all acquired or licensed by us from third parties. We evaluate internally and with external consultants each therapeutic candidate we in-license or acquire. However, there can be no assurance as to our ability to accurately or consistently identify therapeutic candidates or products that have been approved or cleared for marketing in the U.S. or elsewhere that are likely to achieve commercial success. In addition, even if we identify additional therapeutic candidates or products that have been approved or cleared for marketing in the U.S. or elsewhere that are likely to achieve commercial success, there can be no assurance as to our ability to in-license or acquire such therapeutic candidates or products under favorable terms or at all.

We compete with other entities for some in-license or acquisition opportunities.

As part of our overall strategy, we pursue opportunities to in-license or acquire therapeutic candidates and products that have been approved or cleared for marketing in the U.S. We may compete for in-license and acquisition opportunities with

other companies, including established and well-capitalized companies. As a result, we may be unable to in-license or acquire additional therapeutic candidates or products that have been approved or cleared for marketing in the U.S. at all or on favorable terms. Our failure to further in-license or acquire therapeutic candidates or products that have been approved or cleared for marketing in the U.S. in the future may materially hinder our ability to grow and could materially harm our reputation, business, financial condition or results of operations.

If we or a licensor or a partner of ours cannot meet our or their respective obligations under our acquisition, in-license or other development or commercialization agreements or renegotiate the obligations under such agreements, or if other events occur that are not within our control, such as bankruptcy of a licensor or a partner, we could lose the rights to our therapeutic candidates or products we may promote or commercialize, experience delays in developing or commercializing our therapeutic candidates or products we may promote or commercialize or incur additional costs, which could have a material adverse effect on our reputation, business, financial condition or results of operations.

We acquired our rights to three of our therapeutic candidates, TALICIA ® , RHB-104, and RHB-106, from a third party pursuant to an asset purchase agreement. In addition, we in-licensed our rights to three other therapeutic candidates, BEKINDA ® , YELIVA ® _,   and RHB-107 pursuant to license agreements in which we received exclusive perpetual licenses to certain patent rights and know-how related to these therapeutic candidates. We have also obtained certain rights to promote Donnatal ® in certain U.S. territories under a co-promotion agreement, the exclusive U.S. rights to commercialize EnteraGam ® in certain U.S. territories pursuant to a license agreement, the exclusive rights to promote Esomeprazole Strontium Delayed-Release Capsules 49.3 mg to gastroenterologists in certain U.S. territories pursuant to an agreement and the exclusive right to co-promote Mytesi ® to certain gastroenterologists and other healthcare practitioners in certain U.S. territories under a co-promotion agreement. These agreements require us to make payments and satisfy various performance obligations in order to maintain our rights and licenses with respect to these therapeutic candidates and marketed products. If we or our collaborators do not meet our or their respective obligations under these agreements, or if other events occur that are not within our control, such as the bankruptcy of a licensor, we could lose the rights to our therapeutic candidates, experience delays in developing or commercializing our therapeutic candidates or incur additional costs, any of which could have a material adverse effect on our reputation, business, financial condition or results of operations.

In addition, we are responsible for the cost of filing and prosecuting certain patent applications and maintaining certain issued patents licensed to us. If we do not meet our obligations under these agreements in a timely manner or if other events occur that are not within our control, such as the bankruptcy of a licensor, which impact our ability to prosecute certain patent applications and maintain certain issued patents licensed to us, we could lose the rights to our therapeutic candidates which could have a material adverse effect on our reputation, business, financial condition or results of operations. We manage a large portfolio of patents and may decide to discontinue maintaining certain patents in certain territories for various reasons, including costs, such as a current belief that the commercial market for the therapeutic candidate will not be large or that there is a near-term patent expiration that may reduce the value of the therapeutic candidate. In the event we discontinue maintaining such patents, we may not be able to enforce rights for our therapeutic candidates or protect our therapeutic candidates from competition in those territories.

Our business and operations would suffer in the event of computer system failures, cyber-attacks or deficiencies in our cyber-security.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, compliance-related data, research data, our proprietary business information and that of our suppliers, technical information about our products, clinical trial plans, and employee records. Similarly, our third-party providers possess certain of our sensitive data and confidential information. The secure maintenance of this information is critical to our operations and business strategy. Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are vulnerable to damage from computer viruses, malware, ransomware, cyber-fraud, natural disasters, terrorism, war, telecommunication and electrical failures, cyber-attacks or cyber-intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber-intrusion, including by computer hackers, foreign governments, and cyber-terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Any such breach could compromise our networks and the

information stored there could be accessed, publicly disclosed, encrypted, lost or stolen. Any such access, inappropriate disclosure of confidential or proprietary information or other loss of information, including our data being breached at third-party providers, could result in legal claims or proceedings, liability or financial loss under laws that protect the privacy of personal information, disruption of our operations or our product development programs and damage to our reputation, which could adversely affect our business. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

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

The loss of the services of members of senior management or other key personnel could delay or otherwise adversely impact the successful completion of our planned clinical trials or the commercialization of our therapeutic candidates and any product we may promote or commercialize, including our current commercial products, or otherwise affect our ability to manage our company effectively and to carry out our business plan. These key personnel are Dror Ben-Asher, our Chief Executive Officer, Reza Fathi, Ph.D., our Senior Vice President for Research and Development, Gilead Raday, our Chief Operating Officer, Adi Frish, our Senior Vice President for Business Development and Licensing, Guy Goldberg, our Chief Business Officer, and Micha Ben Chorin, our Chief Financial Officer. We do not maintain key-man life insurance. Although we have entered into employment or consultancy agreements with all of the members of our senior management team, members of our senior management team may resign at any time. High demand exists for senior management and other key personnel in the pharmaceutical industry. There can be no assurance that we will be able to continue to retain and attract such personnel.

Our growth and success also depend on our ability to attract and retain additional highly qualified scientific, technical, business development, marketing, sales, managerial and finance personnel. We experience intense competition for qualified personnel, and the existence of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals or subject us to liability from their former employers. In addition, as part of our plan to promote our current commercial products and potentially products we may develop, we may need to expand and maintain our marketing and sales capabilities. While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel. If we cannot attract and retain sufficiently qualified suitable employees on acceptable terms, we may not be able to develop and commercialize competitive therapeutic candidates and our commercialized products. Further, any failure to effectively integrate new personnel could materially prevent us from successfully growing our company.

We face several risks associated with international business .

We operate our business in multiple international jurisdictions. Such operations could be materially affected by changes in foreign exchange rates, capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, trade regulations and procedures and actions affecting approval, production, pricing, and marketing of, reimbursement for and access to, our therapeutic candidates and products we may promote or commercialize, including our current commercial products, as well as by political unrest, unstable governments and legal systems and inter-governmental disputes. Any of these changes could have a material adverse effect on our reputation, business, financial condition or results of operations. Additionally, because our corporate headquarters are in Israel while our commercial office is in the U.S., there is additional risk in our ability as a company to control the activities occurring in the U.S., due to the geographic separation within the company.

Uncertain geopolitical conditions could have a material adverse effect on our promotion of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg.

We rely on ParaPRO to manage all aspects of manufacturing, including entering into agreements with third parties to provide sufficient quantities of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in the required timeframe.  This includes both the API and the finished dosage.  Major aspects of manufacturing have taken place in South Korea and may continue in the foreseeable future. Accordingly, geopolitical and military conditions in South Korea and the surrounding region may directly affect our promotion of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg.  

In the past, there have been heightened security concerns regarding North Korea’s nuclear weapons and long-range ballistic missile programs. This has resulted in increased uncertainty regarding both North Korea’s actions and those of the U.S. If a party will take an aggressive action, including acts of war, we may not receive sufficient quantities of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg in the required timeframe, and our promotion of Esomeprazole Strontium Delayed-Release Capsules 49.3 mg may be adversely affected.

Risks Related to Our Industry

Even if our therapeutic candidates or any product we may promote or commercialize, receive, have received regulatory clearance or approval or do not require regulatory clearance or approval, they may not become commercially viable products.

None of our therapeutic candidates have been cleared or approved for marketing, and none of our therapeutic candidates is currently being marketed or commercialized in any jurisdiction. We were granted certain rights to promote our current commercial products in certain U.S. territories and to commercialize EnteraGam ® Even if any of our therapeutic candidates or any product we may promote or commercialize receive, have received or do not require regulatory clearance or approval, it may not become a commercially viable product. For example, even if we or our development or commercialization partners receive regulatory clearance or approval to market a therapeutic candidate or receive regulatory clearance or approval to promote or commercialize any product, the clearance or approval may be subject to limitations on the indicated uses or subject to labeling or marketing restrictions, which could materially and adversely affect their marketability and profitability. In addition, a new therapeutic candidate may appear promising at an early stage of development or after clinical trials but never reach the market, or it may reach the market but not result in sufficient product sales, if any. A therapeutic candidate or any product that we may promote or commercialize, may not result in commercial success for various reasons, including but not limited to:

Physicians, various other health care providers, patients, payors or the medical community, in general, may be unwilling to accept, utilize or recommend any of our approved therapeutic candidates and any product we may promote or commercialize. If we are unable, either on our own or through third parties, to manufacture, commercialize or market our

proposed formulations, therapeutic candidates or any product we may promote or commercialize when planned, or to develop them commercially, we may not achieve any market acceptance or generate meaningful revenue.

Unexpected product safety or efficacy concerns may arise and cause any product we may promote or commercialize to fail to gain or lose market acceptance.

Unexpected safety or efficacy concerns can arise with respect to any product we may promote or commercialize, whether or not scientifically justified, potentially resulting in product recalls, withdrawals and/or declining sales, as well as product liability, consumer fraud and/or other claims. The market perception and reputation of any product we may promote or commercialize, and their safety and efficacy are important to our business and the continued acceptance of any product we may promote or commercialize. Any negative publicity about any of our products, such as the pricing of any product we may promote or commercialize, discovery of safety issues with any product we may promote or commercialize, adverse events involving any product we may promote or commercialize, or even public rumors about such events, could have a material adverse effect on our reputation, business, financial condition or results of operations. In addition, the discovery of one or more significant problems with a product similar to any product we may promote or commercialize that implicate (or are perceived to implicate) an entire class of products or the withdrawal or recall of such similar products could have an adverse effect on the commercialization of any product we may promote or commercialize. New data about any product we may promote or commercialize, or products similar to any product we may promote or commercialize, could cause us reputational harm and could negatively impact demand for any product we may promote or commercialize due to real or perceived side effects or uncertainty regarding safety or efficacy and, in some cases, could result in product withdrawal. Any of the foregoing could have a material adverse effect on our reputation, business, financial condition or results of operations.

The market for our therapeutic candidates and for any product we may promote or commercialize is rapidly changing and competitive, and new drug delivery mechanisms, drug delivery technologies, new drugs, generic products, treatments and products which may be developed by others could impair our ability to maintain and grow our business and remain competitive.

The pharmaceutical and biotechnology industry is highly competitive, and we face significant competition from many pharmaceutical, biopharmaceutical and biotechnology companies that are researching, developing and marketing products designed to address the indications for which we are currently developing therapeutic candidates or may develop therapeutic candidates in the future or for which we may promote or commercialize products. There are various other companies that currently market, are in the process of developing or may develop in the future products that address all of the indications or diseases treated by our therapeutic candidates or products that we may promote or commercialize. For information regarding our competition, see “Item 4. Information on the Company – B. Business Overview – Our Therapeutic Candidates.”

New drug delivery mechanisms, drug delivery technologies, new drugs and new treatments that have been developed or that are in the process of being developed or will be developed by others may render our therapeutic candidates and products we may promote or commercialize noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Some of these technologies may have an entirely different approach or means of accomplishing similar therapeutic effects compared to our therapeutic candidates and products we may promote or commercialize. In addition, our current commercial products and products we may promote or commercialize may compete with products of third parties for market share, and generic drugs or products that treat the same indications as our current commercial products or products we may promote or commercialize can have an adverse effect on our revenues by reducing our market share or requiring us to reduce the price of the products we market.  We are aware of at least two products that are, to our understanding, unauthorized copies of Donnatal ®   that currently are being sold in the U.S. The FDA has not taken action against these products and this has had a negative effect on our commercial success. We understand that ADVANZ is pursuing legal remedies in an attempt to stop the sale of unauthorized copies of Donnatal ® .

Technological competition from, and commercial capabilities of, pharmaceutical and biotechnology companies, universities, governmental entities, and others is intense and is expected to increase. Many of these entities have significantly greater research and development capabilities, human resources, and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial resources. These entities represent significant

competition for us. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing, and other resources.

The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations, therapeutic candidates or products we may promote or commercialize, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medications or drug delivery technologies. These treatments may be widely accepted in medical communities and have a longer history of use, among other possible advantages. The established use of these competitive drugs may limit the potential for our therapeutic candidates to receive widespread acceptance if commercialized and may limit the potential for widespread acceptance of our current commercial products and products we may promote or commercialize in the future.

We could be adversely affected if healthcare reform measures substantially change the market for medical care or healthcare coverage in the U.S.

On March 23, 2010, President Obama signed the “Patient Protection and Affordable Care Act” (P.L. 111-148) and on March 30, 2010, the signed the “Health Care and Education Reconciliation Act” (P.L. 111-152), collectively commonly referred to as the “Healthcare Reform Law.” The Healthcare Reform Law included a number of new rules regarding health insurance, the provision of healthcare, conditions to reimbursement for healthcare services provided to Medicare and Medicaid patients, and other healthcare policy reforms. Through the law-making process, substantial changes have been and continue to be made to the current system for paying for healthcare in the U.S., including changes made to extend medical benefits to certain Americans who lacked insurance coverage and to contain or reduce healthcare costs (such as by reducing or conditioning reimbursement amounts for healthcare services and drugs, and imposing additional taxes, fees, and rebate obligations on pharmaceutical and medical device companies). This legislation was one of the most comprehensive and significant reforms ever experienced by the U.S. in the healthcare industry and has significantly changed the way healthcare is financed by both governmental and private insurers. This legislation has impacted the scope of healthcare insurance and incentives for consumers and insurance companies, among others. Additionally, the Healthcare Reform Law’s provisions were designed to encourage providers to find cost savings in their clinical operations. Pharmaceuticals represent a significant portion of the cost of providing care. This environment has caused changes in the purchasing habits of consumers and providers and resulted in specific attention to the pricing negotiation, product selection and utilization review surrounding pharmaceuticals. This attention may result in our therapeutic candidates and products we may promote or commercialize, including our current commercial products, being chosen less frequently or the pricing being substantially lowered. At this stage, it is difficult to estimate the full extent of the direct or indirect impact of the Healthcare Reform Law on us.

These structural changes could entail further modifications to the existing system of private payors and government programs (such as Medicare, Medicaid, and the State Children’s Health Insurance Program), creation of government-sponsored healthcare insurance sources, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for prescribed drugs and pharmaceuticals, including our current commercial products, those we and our development or commercialization partners are currently developing and/or those that we may promote or commercialize in the future. If reimbursement for our approved therapeutic candidates, products we currently commercialize or promote, or any product we may promote or commercialize is substantially reduced or otherwise adversely affected in the future, or rebate obligations associated with them are substantially increased, it could have a material adverse effect on our reputation, business, financial condition or results of operations.

Extending medical benefits to those who currently lack coverage will likely result in substantial costs to the U.S. federal government, which may force significant additional changes to the healthcare system in the U.S. Much of the funding for expanded healthcare coverage may be sought through cost savings. While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care and increased enforcement activities. Cost of care could be reduced further by decreasing the level of reimbursement for medical services or products (including those therapeutic candidates currently being developed by us or our development or commercialization partners or any product we may promote or commercialize, including our current commercial products), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction in the utilization of, or reimbursement for, any therapeutic candidate or any product we may promote or commercialize, including our current commercial products, or

for which we receive marketing approval in the future, could have a material adverse effect on our reputation, business, financial condition or results of operations.

Several states and private entities initially mounted legal challenges to the Healthcare Reform Law, and they continue to litigate various aspects of the legislation. On July 26, 2012, the U.S. Supreme Court generally upheld the provisions of the Healthcare Reform Law at issue as constitutional. However, the U.S. Supreme Court held that the legislation improperly required the states to expand their Medicaid programs to cover more individuals. As a result, the states have a choice as to whether they will expand the number of individuals covered by their respective state Medicaid programs. Some states have not expanded their Medicaid programs and have chosen to develop other cost-saving and coverage measures to provide care to currently uninsured individuals. Many of these efforts to date have included the institution of Medicaid-managed care programs. The manner in which these cost-saving and coverage measures are implemented could have a material adverse effect on our reputation, business, financial condition or results of operations.

Further, the healthcare regulatory environment has seen significant changes in recent years and is still in flux.  Legislative initiatives to modify, limit, replace, or repeal the Healthcare Reform Law and judicial challenges continue, and may increase in light of the current administration and legislative environment.  We cannot predict the impact on our business of future legislative and legal challenges to the Healthcare Reform Law or other changes to the current laws and regulations. The financial impact of U.S. healthcare reform legislation over the next few years will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes for therapeutics affected by the legislation. From time to time, legislation is drafted, introduced and passed in the U.S. Congress that could significantly change the statutory provisions governing coverage, reimbursement, and marketing of pharmaceutical products. In addition, third-party payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our products.

Since taking office, President Trump has continued to support the repeal of all or portions of the Healthcare Reform Law. President Trump has also issued an executive order in which he stated that it is his administration’s policy to seek the prompt repeal of the Healthcare Reform Law and in which he directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the Healthcare Reform Law to the maximum extent permitted by law. Congress has enacted legislation that repeals certain portions of the Healthcare Reform Law, including but not limited to the Tax Cuts and Jobs Act, passed in December 2017, which included a provision that eliminates the penalty under the Healthcare Reform Law’s individual mandate, effective January 1, 2019, as well as the Bipartisan Budget Act of 2018, passed in February 2018, which, among other things, repealed the Independent Payment Advisory Board (which was established by the Healthcare Reform Law and was intended to reduce the rate of growth in Medicare spending). There have also been more recent examples of judicial challenges, such as federal judges attempting to invalidate the entire Healthcare Reform Law based on the individual mandate. There is still uncertainty with respect to the impact President Trump’s administration and the U.S. Congress may have, if any, and any changes will likely take time to unfold.

Third-party payors may not adequately reimburse customers for any of our therapeutic candidates that are approved or cleared for marketing or for products that we may promote or commercialize, including our current commercial products, and may impose coverage restrictions or limitations that affect their use.

Our revenues and profits depend heavily upon the availability of adequate reimbursement for the use of our approved or cleared therapeutic candidates, our current commercial products, and any products that we may promote or commercialize, from governmental or other third-party payors, both in the U.S. and in foreign markets. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that the use of an approved or cleared therapeutic candidate or product is:

Obtaining reimbursement approval for a therapeutic candidate or for any product that we may promote or commercialize, including our current commercial products, from any government or other third-party payor is a time-consuming and costly process that could require us or our development or commercialization partners to provide supporting scientific, clinical and cost-effectiveness data for the use of our therapeutic candidates or any product that we currently, or may, promote or commercialize to each payor. Even when a payor determines that a therapeutic candidate or a product that we promote or commercialize is eligible for reimbursement under its criteria, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or other foreign regulatory authorities, or may impose restrictions, such as prior authorization requirements, or may simply deny coverage altogether. Reimbursement rates may vary according to the use of the therapeutic candidate or the use of any product that we promote or commercialize and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed, may be incorporated into existing payments for products or services, and may reflect budgetary constraints or imperfections in Medicare, Medicaid or other data used to calculate these rates. In particular, reimbursement for our products may not be available from Medicare or Medicaid, and reimbursement from other third-party payors may be limited, reduced or revoked. For example, reimbursement for Donnatal ® has been limited and is mostly available only through private payors, with certain restrictions, such as prior authorization requirements. Commercial coverage for Esomeprazole Strontium Delayed-Release Capsules 49.3 mg has been limited, and the class as a whole is highly genericized with certain products available inexpensively and over the counter, and many payors manage the pricing of the generics as well. In addition, because EnteraGam ® is a “medical food” it is subject to unique FDA regulations and requirements that may limit its market potential. Overall, our ability to get reimbursement coverage for our commercial products has historically been limited. Successful commercialization of our current commercial products requires a conducive reimbursement environment. If our products do not receive adequate reimbursement coverage, or if reimbursement coverage is reduced or otherwise adversely affected, then their respective commercial prospects could be severely limited. Although certain payors may currently provide some form of coverage for our commercial products, payors may suspend or discontinue reimbursement at any time, may require or increase co-payments from patients, may impose restrictions or limitations on coverage, or may reduce reimbursement rates for our products. If we fail to establish broad adoption of and reimbursement for our commercial products, or if we are unable to maintain any existing reimbursement from payors, our ability to generate revenue could be harmed and this could have a material adverse effect on our reputation, business, financial condition or results of operations. In addition to our existing commercial products, any new product we may promote or commercialize in the future may require that we expend substantial time and resources in order to obtain and retain reimbursement, and any of these efforts may not be successful.

In the U.S., there have been, and we expect that there will continue to be, federal and state proposals to constrain expenditures for medical products and services, which may affect payments for our therapeutic candidates or for any product that we may promote or commercialize in the U.S. In addition, there is a growing emphasis on comparative effectiveness research, both by private payors and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payors may elect to cover such therapies in lieu of our products or reimburse our products at a lower rate. Legislation that reduces reimbursement for our therapeutic candidates could adversely impact how much or under what circumstances healthcare providers will prescribe or administer our therapeutic candidates, if approved, or for any product that we may promote or commercialize, including our current commercial products. This could materially and adversely impact our reputation, business, financial condition or results of operations by reducing our ability to generate meaningful revenue, raise capital, obtain additional collaborators and market. At this stage, we are unable to estimate the extent of the direct or indirect impact of any such federal and state proposals.

Furthermore, the Centers for Medicare and Medicaid Services frequently change product descriptors, coverage policies, product and service codes, payment methodologies and reimbursement values. Third-party payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and both the Centers for Medicare and Medicaid Services and other third-party payors may have sufficient market power to demand significant price reductions. Price reductions or other significant coverage policies or payment limitations could materially and adversely affect our reputation, business, financial condition or results of operations.

We are subject to U.S. federal and state healthcare laws and regulations relating to our business, and our failure to comply with such laws could have a material adverse effect on our reputation, business, financial condition or results of operations.

We are subject to additional healthcare regulation and enforcement by the U.S. federal government and the states in which we conduct or will conduct our business. Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of our therapeutic candidates, current commercial products, or any products we may promote or commercialize. Our arrangements with third-party payors, customers, employees, or others may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our products. The laws that may affect our ability to operate include, but are not limited to, the following:

Compliance efforts may involve substantial costs, and if our operations or business arrangements with third parties are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can help mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any violations of these

laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, financial condition or results of operations.

The Healthcare Reform Law also imposes reporting requirements on certain medical device and pharmaceutical manufacturers, among others, to make annual public disclosures of certain payments and other transfers of value to physicians and teaching hospitals and ownership or investment interests held by physicians or their immediate family members. Failure to submit required information may result in civil monetary penalties for all payments, transfers of value or ownership or investment interests that are not reported. In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing, medical directorships, and other purposes. Some states impose a legal obligation on companies to adhere to voluntary industry codes of behavior (e.g., the PhRMA Code and the AdvaMed Code of Ethics), which apply to pharmaceutical and medical device companies’ interactions with healthcare providers; some mandate implementation of corporate compliance programs, along with the tracking and reporting of gifts, compensation and other remuneration to physicians, and some states limit or prohibit such gifts.

Most recently, there has been a trend in federal and state legislation aimed at requiring pharmaceutical companies to disclose information about their production and marketing costs, and ultimately lowering costs for drug products. Several states have passed or introduced bills that would require disclosure of certain pricing information for prescription drugs that have no threshold amount or are above a certain annual wholesale acquisition cost. In June 2016, Vermont became the first state to pass legislation requiring certain drug companies to disclose information relating to justification of certain price increases. The U.S. Congress has also introduced bills targeting prescription drug price transparency, and two such bills, the Patient Right to Know Drug Prices Act (for private plans) and the Know the Lowest Price Act (for Medicare Parts C and D), were signed into law on October 10, 2018. These laws and any other such implementation of legislation requiring publication of drug costs could materially and adversely impact our reputation, business, financial condition or results of operations by promoting a reduction in drug prices. As such, patients may choose to use other low-cost, established drugs or therapies.

The scope and enforcement of these laws are uncertain and subject to change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and guidance. We cannot predict the impact that new legislation or any changes in existing legislation will have on our reputation, business, financial condition, or results of operations. Federal or state regulatory authorities may challenge our current or future activities under these laws. Any such challenge could have a material adverse effect on our reputation, business, financial condition or results of operations. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming and could negatively and adversely affect our business or results of operations.

Our marketing, promotional and business practices, including with respect to pricing, as well as the manner in which sales forces interact with purchasers, prescribers and patients, are subject to extensive regulation, including but not limited to, state and federal anti-kickback laws and any material failure to comply could result in significant sanctions against us.

The marketing, promotional, and business practices, including with respect to pricing, of pharmaceutical companies, as well as the manner in which companies’ in-house or third-party sales forces interact with purchasers, prescribers, and patients, are subject to extensive regulation, the enforcement of which may result in the imposition of civil and/or criminal penalties, injunctions, and/or limitations on marketing practices for some of our products and/or pricing restrictions or mandated price reductions for some of our products. Many companies have been the subject of claims related to these practices asserted by state or federal authorities. These claims have resulted in fines and other consequences, such as entering into corporate integrity agreements with the U.S. government. Companies may not promote drugs for “off-label” uses, that is, uses that are not described in the product’s labeling and that differ from those approved by the FDA or other applicable regulatory agencies. A  company that is found to have improperly promoted drug products for off-label uses may be subject to significant liability, including civil and administrative remedies, as well as criminal sanctions. In addition, an enforcement action against us could cause management’s attention to be diverted from our business operations and damage our reputation.

We must comply with the U.S. Foreign Corrupt Practices Act.

The U.S. Foreign Corrupt Practices Act (the “FCPA”) applies to companies, such as us, with a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The FCPA to which various of our operations may be subject generally prohibits companies and their intermediaries from engaging in bribery or making other improper payments to officials for the purpose of obtaining or retaining business. In various jurisdictions, our operations require that we and third parties acting on our behalf routinely interact with government officials, including medical personnel who may be considered government officials for purposes of these laws because they are employees of state-owned or controlled facilities. Our policies mandate compliance with these anti-bribery laws; however, we operate in many parts of the world that have experienced governmental and/or private corruption to some degree. As a result, the existence and implementation of a robust anti-corruption program cannot eliminate all risks that unauthorized reckless or criminal acts have been or will be committed by our employees or agents. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties. Violations of the FCPA, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations or cash flows.

We could be exposed to significant drug product liability claims which could be time-consuming and costly to defend, divert management attention and adversely impact our ability to obtain and maintain insurance coverage.

The clinical trials that we conduct and the testing, manufacturing, marketing, and commercial sale and use or misuse of our therapeutic candidates and any products we may promote or commercialize, involve and will involve an inherent risk that significant liability claims may be asserted against us or our development or commercial partners. Product liability claims, or other claims related to our therapeutic candidates and any products we may promote or commercialize, regardless of merit or their outcome, could require us to spend significant time and money in litigation or to pay significant settlement amounts or judgments. A product liability claim could also significantly harm our reputation and the market price of our shares and delay market acceptance of our therapeutic candidates and decrease demand for any products that we promote or commercialize, including our current commercial products. In addition, regardless of merit or eventual outcome, product liability claims may result in:

We currently have a product liability policy that includes coverage for our clinical trials and our commercial operations. However, our insurance may prove inadequate to cover claims or litigation costs, especially in the case of wrongful death claims. Any successful product liability or other claim may prevent us from obtaining adequate liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our therapeutic candidates or products we may promote or commercialize.

Our clinical trials may indicate unexpected serious adverse events or other adverse events and/or undesirable side effects that may harm our business prospects, operating results or financial condition. Serious adverse events identified during one of our Expanded Access Programs (EAPs) may present additional risks that may adversely affect our development of the therapeutic candidates involved in the applicable EAP.

As is the case with pharmaceuticals generally, certain side effects and adverse events may emerge as safety risks associated with the use of our therapeutic candidates. Similarly, serious adverse events (SAEs) have occurred and may occur in the future in connection with our clinical trials. Results of our clinical trials could reveal a high and unacceptable severity and

prevalence of side effects or unexpected characteristics. Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may have a material adverse effect on reputation, business, financial condition or results of operations.

Patients who receive access to investigational new drugs that have not yet received regulatory marketing approval through expanded access programs may be suffering from life-threatening illnesses and poor prognosis and may have exhausted all other available therapies. The risk for serious adverse events in this patient population is high, which could have a negative impact on the prospects of our therapeutic candidates that are provided under the EAP.

Serious adverse events or other undesirable side effects in connection with the use of our therapeutic candidates provided under the EAP could cause significant delays or an inability to successfully develop or commercialize such therapeutic candidates, which would materially harm our business. In particular, any such serious adverse events or other undesirable side effects could cause us or regulatory authorities to interrupt, delay or halt non-clinical studies and clinical trials, or could make it more difficult for us to enroll patients in our clinical trials. If serious adverse events or other undesirable side effects, or unexpected characteristics of our investigational new drugs that have not yet received regulatory marketing approval are observed in patients who were granted expanded access to our investigational new drugs under the EAP, further clinical development of such product candidate may be delayed or we may not be able to continue development of such product candidates at all, and the occurrence of these events could have a material adverse effect on our business. Undesirable side effects caused by our therapeutic candidates could also result in the delay or denial of regulatory approval by the FDA or other regulatory authorities or in a more restrictive label than we expect.

Global economic conditions may make it more difficult for us to commercialize our therapeutic candidates and any products that we may promote or commercialize.

The pharmaceutical industry, like other industries and businesses, continues to face the effects of the challenging economic environment. Patients experiencing the effects of the challenging economic environment, including high unemployment levels and increases in co-pays, may switch to generic products, delay treatments, skip doses or use other less effective treatments to reduce their costs. Challenging economic conditions in the U.S. include the demands by payors for substantial rebates and formulary restrictions limiting access to brand-name drugs. In addition, in Europe and in a number of emerging markets there are government-mandated reductions in prices for certain pharmaceutical products, as well as government-imposed access restrictions in certain countries. All of the aforesaid may make it more difficult for us to commercialize our therapeutic candidates and any products that we may promote or commercialize including our current commercial products.

Our business involves risks related to handling regulated substances, which could severely affect our ability to conduct research and development of our therapeutic candidates.

In connection with our or our development or commercialization partners’ research and clinical development activities, as well as the manufacture of materials and therapeutic candidates and any products that we may promote or commercialize, we and our development or commercialization partners are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and waste. We and our development or commercialization partners may be required to incur significant costs to comply with environmental and health and safety regulations in the future. Our research and clinical development, as well as the activities of our manufacturing and commercialization partners, both now and in the future, may involve the controlled use of hazardous materials, including, but not limited to, certain hazardous chemicals. We cannot completely eliminate the risk of accidental contamination or injury from these materials. In the event of such an occurrence, we could be held liable for any damages that result and any such liability could exceed our resources.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we may collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers and business partners, as well as personally identifiable information of patients, clinical trial participants and employees. We also have outsourced elements of our information technology structure, and as a result, we are managing independent vendor relationships with third parties who may or could have access to our confidential information. Similarly, our business partners and other third-party providers possess certain of our sensitive data. The secure maintenance of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee, vendor, or business partner error, malfeasance or other disruptions. We, our partners, vendors, and other third-party providers could be susceptible to attacks on our and their information security systems, which attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including criminal groups. Any such breach could compromise our and their networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, any of which could adversely affect our business.

Risks Related to Intellectual Property

We may be unable to adequately protect or enforce our rights to intellectual property, causing us to lose valuable rights. Loss of patent rights may lead us to lose market share and anticipated profits.

Our success depends, in part, on our ability, and the ability of our development or commercialization partners to obtain patent protection for our therapeutic candidates and any products that we may promote or commercialize, maintain the confidentiality of our trade secrets and know-how, operate without infringing or violating on the proprietary rights of others and prevent others from infringing or violating on our proprietary rights.

We try to protect our proprietary position by, among other things, filing U.S., European, and other patent applications related to our therapeutic candidates, inventions and improvements that may be important to the continuing development of our therapeutic candidates, and we plan to try to do the same with products we may acquire, promote or commercialize in the future, where this is possible.

Because the patent position of pharmaceutical companies involves complex legal and factual questions, we cannot predict the scope, validity or enforceability of patents with certainty. Our issued patents and the issued patents of our development or commercialization partners may not provide us with any competitive advantages, may be held invalid or unenforceable as a result of legal challenges by third parties or could be circumvented. Ownership of the patent rights we in-license from our development or commercialization partners or the patent rights to the products already approved for marketing that we acquire or for which we acquire commercialization rights may be challenged, and as a result, the rights we in-license and the rights to products we acquire may turn out not to be exclusive or we may not actually have rights under the patents despite receiving representations from a development or commercialization partner. Our competitors may also independently develop drug delivery technologies or products similar to ours or design around or otherwise circumvent patents issued to, or licensed by, us. Thus, any patents that we own or license from others may not provide any protection against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not result in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages. The degree of future protection to be afforded by our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

Patent rights are territorial; thus, the patent protection we do have will only extend to those countries in which we have issued patents. Even so, the laws of certain countries do not protect our intellectual property rights to the same extent as do the laws of the U.S. and the European Union. Competitors may successfully challenge our patents, produce similar drugs or products that do not infringe our patents or produce drugs in countries where we have not applied for patent protection or that do not respect our patents. Furthermore, it is not possible to know the scope of claims that will be allowed

in published applications, and it is also not possible to know which claims of granted patents, if any, will be deemed enforceable in a court of law.

After the completion of development and registration of our patents, third parties may still manufacture or market products in infringement of our patent-protected rights. Such manufacture or market of products in infringement of our patent-protected rights is likely to cause us damage and lead to a reduction in the prices of our therapeutic candidates or any product we may promote or commercialize, including our current commercial products, thereby reducing our potential profits.

In addition, due to the extensive time needed to develop, test and obtain regulatory approval for our therapeutic candidates or any product we may promote or commercialize, any patents that protect our therapeutic candidate or any product we may promote or commercialize may expire early during commercialization. This may reduce or eliminate any market advantages that such patents may give us. Following patent expiration, we may face increased competition through the entry of generic products into the market and a subsequent decline in market share and profits.

In addition, in some cases, we may rely on our licensors to conduct patent prosecution, patent maintenance or patent defense on our behalf. Therefore, our ability to ensure that these patents are properly prosecuted, maintained, or defended may be limited, which may adversely affect our rights in our therapeutic candidates and potential approval for marketing products. Any failure by our licensors or development or commercialization partners to properly conduct patent prosecution, patent maintenance, patent enforcement, or patent defense could materially harm our ability to obtain suitable patent protection covering our therapeutic candidates or products or ensure freedom to commercialize the products in view of third-party patent rights, thereby materially reducing our potential profits.

We are reliant on our licensing partner, Bausch Health, to prosecute, maintain and defend the patents and other intellectual property rights of RHB-106, which we have licensed to Bausch Health. If Bausch Health does not prosecute, maintain and defend the patents and other intellectual property rights of RHB-106, it could materially harm our ability to obtain suitable patent protection covering RHB-106 or ensure freedom to commercialize RHB-106 in view of third-party patent rights, thereby materially reducing our potential profits from RHB-106.

In addition, Donnatal ® , for which we were granted certain rights to promote Donnatal ® in certain U.S. territories, and EnteraGam ® , for which we were granted the exclusive U.S. rights to EnteraGam ® for all indications for human use, are not protected by patents.   The third GI-specialty product, Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, includes the active ingredient esomeprazole strontium, which is protected by a process patent covering methods of preparing esomeprazole salts. The fourth GI-specialty product, Mytesi ®   (crofelemer), is protected by three methods of use patents that protect only the approved first therapeutic use of crofelemer as described on the Mytesi ® label. If the FDA proceedings related to Donnatal ® designed to determine its effectiveness will be ongoing, only products that receive an NDA from the FDA, DESI products and those actively participating in the hearing process of the FDA may be marketed. However, other competing products may freely enter the market, and we and our partners may not have sufficient intellectual property rights in Donnatal ® to protect it from such competition. See “ —Risks Related to Our Business and Regulatory Matters – Donnatal ® , Mytesi ® , Esomeprazole Strontium Delayed-Release Capsules 49.3 mg, and EnteraGam ®   or products which we may promote or commercialize in the future may be withdrawn from the market at any time due to product withdrawal requests by the FDA or other foreign regulatory authorities

If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.

In addition to filing patents, we generally try to protect our trade secrets, know-how, and technology by entering into confidentiality or non-disclosure agreements with parties that have access to them, such as our development or commercialization partners, employees, contractors, and consultants. We also enter into agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees, advisors, research collaborators, contractors and consultants while we employ or engage them. However, these agreements can be difficult and costly to enforce or may not provide adequate remedies. Any of these parties may breach the confidentiality agreements and willfully or unintentionally disclose our confidential information, or our competitors might learn of the information in some other way. The disclosure to, or independent development by, a competitor of any trade

secret, know-how or other technology not protected by a patent could materially adversely affect any competitive advantage we may have over any such competitor.

To the extent that any of our employees, advisors, research collaborators, contractors or consultants independently develop, or use independently developed, intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to this type of information. If a dispute arises with respect to any proprietary right, enforcement of our rights can be costly and unpredictable, and a court may determine that the right belongs to a third party.

Legal proceedings or third-party claims of intellectual property infringement and other challenges may require us to spend substantial time and money and could prevent us from developing or commercializing our therapeutic candidates and any products we may promote or commercialize.

The development, manufacture, use, offer for sale, sale or importation of our therapeutic candidates or any products that we may promote or commercialize may infringe on the claims of third-party patents or other intellectual property rights. The nature of claims contained in unpublished patent filings around the world is unknown to us and it is not possible to know which countries patent holders may choose for an extension of their filings under the Patent Cooperation Treaty or other mechanisms. We may also be subject to claims based on the actions of employees and consultants with respect to the usage or disclosure of intellectual property learned at other employers. The cost to us of any intellectual property litigation or other infringement proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation or defense of intellectual property litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Intellectual property litigation and other proceedings may also absorb significant management time. Consequently, we are unable to guarantee that we will be able to manufacture, use, offer for sale, sell or import our therapeutic candidates or any products we may promote or commercialize in the event of an infringement action.

In the event of patent infringement claims, or to avoid potential claims, we may choose or be required to seek a license from a third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could potentially limit our competitive advantage. Ultimately, we could be prevented from commercializing a therapeutic candidate and any products that we may promote or commercialize or be forced to cease some aspect of our business operations if, as a result of actual or threatened patent infringement or other claims, we are unable to enter into licenses on acceptable terms. This inability to enter into licenses or the ability to exclude others using proprietary rights could have a material adverse effect on our reputation, business, financial condition or results of operations.

We may be subject to other patent-related litigation or proceedings that could be costly to defend and uncertain in their outcome.

In addition to infringement claims against us, we may become a party to other patent litigation or proceedings before regulatory agencies, including post-grant review, inter parties review, interference or re-examination proceedings filed with the U.S. Patent and Trademark Office or opposition proceedings in other foreign patent offices regarding intellectual property rights with respect to our therapeutic candidates or any products that we may promote or commercialize, as well as other disputes regarding intellectual property rights with development or commercialization partners, or others with whom we have contractual or other business relationships. Post-issuance proceedings challenging patent claims validity are not uncommon, and we and/or our development or commercialization partners will be required to defend these procedures as a matter of course. Such procedures may be costly, and there is a risk that we may not prevail, which could harm our business significantly.

Risks Related to our Ordinary Shares and ADSs

It is possible that we may be treated as a “passive foreign investment company”, which could result in adverse U.S. federal income tax consequences to U.S. investors.

There is some uncertainty in the determination of our PFIC status, and it is possible that we may be treated as a PFIC for U.S. federal income tax purposes for our current taxable year and future taxable years. A non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets that produce or are held for the production of passive income. Because the value of our assets for purposes of this determination will generally be determined by reference to the market price of the ADSs, our PFIC status will depend in large part on the market price of the ADSs. A separate determination must be made each taxable year as to whether we are a PFIC (after the close of each such taxable year). If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information – Taxation — U.S. Federal Income Tax Considerations – Passive Foreign Investment Companies”) holds Ordinary Shares or ADSs, the U.S. Holder may be subject to adverse tax consequences, including (i) the treatment of all or a portion of any gain on disposition as ordinary income, (ii) the application of an interest charge with respect to such gain and certain dividends and (iii) compliance with certain reporting requirements. Each U.S. Holder is urged to consult its own tax advisor regarding these issues.

The market price of our Ordinary Shares and our ADSs are subject to fluctuation, which could result in substantial losses by our investors.

The stock market in general and the market price of our Ordinary Shares on the Tel Aviv Stock Exchange (“TASE”) and our ADSs on the NASDAQ in particular, are subject to fluctuation, and changes in the price of our securities may be unrelated to our operating performance. The market price of our Ordinary Shares on the TASE and the market price of our ADSs on the NASDAQ have fluctuated in the past, and we expect they will continue to do so. The market price of our Ordinary Shares and ADSs are and will be subject to a number of factors, including but not limited to:

These factors and any corresponding price fluctuations may materially and adversely affect the market price of our Ordinary Shares or ADSs and result in substantial losses by our investors.

Additionally, market prices for securities of biotechnology and pharmaceutical companies historically have been very volatile. The market for these securities has from time to time, experienced significant price and volume fluctuations for reasons unrelated to the operating performance of any one company. In the past, following periods of market volatility,

shareholders have often instituted securities class action litigation and derivative actions. If we were involved in securities or other litigation, it could have a substantial cost and divert resources and attention of management from our business, even if we are successful.

Future sales of our Ordinary Shares or ADSs could reduce the market price of our Ordinary Shares and ADSs .

All of our outstanding Ordinary Shares are registered and available for sale in Israel. In addition, as of December 31, 2018, we had options to purchase 29,400,235 Ordinary Shares under our Amended and Restated Award Plan (2010) (the “2010 Award Plan”) outstanding, options to purchase 3,000 ADSs (each representing 10 Ordinary Shares) outside the 2010 Award Plan and non-tradable warrants to purchase an aggregate of 2,025,458 ADSs (each representing 10 Ordinary Shares) outstanding. In addition, as of December 31, 2018, there were 38,518,375 Ordinary Shares reserved for issuance under our 2010 Award Plan (including Ordinary Shares subject to outstanding options under such plan). Substantial sales of our Ordinary Shares or ADSs, or the perception that such sales may occur in the future, including sales of Ordinary Shares issuable upon the exercise of options, warrants or other equity-based securities, may cause the market price of our Ordinary Shares or ADSs to decline. Moreover, the issuance of shares underlying our options and warrants will also have a dilutive effect on our shareholders, which could further reduce the price of our Ordinary Shares and ADSs on their respective exchanges.

Our Ordinary Shares and our ADSs are traded on different markets and this may result in price variations.

Our Ordinary Shares have been traded on the TASE since February 2011, and our ADSs were listed on the NASDAQ Capital Market from December 27, 2012, through July 19, 2018, and have been listed on the NASDAQ Global Market since July 20, 2018. Trading in our securities on these markets takes place in different currencies (U.S. dollars on the NASDAQ and NIS on the TASE), and at different times (resulting from different time zones, different trading days and different public holidays in the U.S. and Israel). The trading prices of our securities on these two markets may differ due to these and other factors. Any decrease in the price of our securities on one of these markets could cause a decrease in the trading price of our securities on the other market.

There has been a limited market for our ADSs and our Ordinary Shares. We cannot ensure investors that an active market will continue or be sustained for our ADSs on the NASDAQ and our Ordinary Shares on the TASE, and this may limit the ability of our investors to sell our ADSs in the U.S. and our Ordinary Shares on the TASE.

In the past, there was limited trading in our ADSs and our Ordinary Shares, and there is no assurance that an active trading market of our ADSs or our Ordinary Shares will continue or will be sustained. Limited or minimal trading in our ADSs and our Ordinary Shares has in the past, and may in the future, lead to dramatic fluctuations in market price and investors may not be able to liquidate their investment at all or at a price that reflects the value of the business.

While our ADSs began trading on the NASDAQ Capital Market in December 2012, and on the NASDAQ Global Market in July 2018, and our Ordinary Shares began trading on the TASE in February 2011, we cannot assure you that we will maintain compliance with all of the requirements for our ADSs and our Ordinary Shares to remain listed. Additionally, there can be no assurance that trading of our ADSs and our Ordinary Shares on such markets will be sustained or desirable.

We have incurred significant costs as a result of the listing of our ADSs on the NASDAQ, and we may need to devote substantial time and resources to new and current compliance initiatives and reporting requirements.

As a public company in the U.S. and Israel, we incur significant accounting, legal and other expenses as a result of the listing of our securities on both the NASDAQ and the TASE. These include costs associated with the reporting requirements of the Securities and Exchange Commission (the “SEC”) and the requirements of the NASDAQ Listing Rules, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). These rules and regulations have increased our legal and financial compliance costs, introduced new costs such as investor relations, travel costs, stock exchange listing fees, and shareholder reporting, and made some activities more time-consuming and costly. Any future changes in the laws and regulations affecting public companies in the U.S. and Israel, including Section 404 and other provisions of the Sarbanes-Oxley Act, the rules and regulations adopted by the SEC and the NASDAQ Listing Rules, as well as applicable Israeli reporting requirements, will result in increased costs to

us as we respond to such changes. These laws, rules, and regulations could make it more difficult and costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers and may require us to pay more for such positions.

As of December 31, 2018, we no longer qualify as an “emerging growth company” as defined in the JOBS Act. As such, certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act (and the rules and regulations of the SEC thereunder) ceased to apply, and we have begun to incur and expect to incur additional expenses and devote increased management time, effort and attention toward ensuring compliance with such reporting requirements, which are significant.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of applicable SEC and NASDAQ Stock Market requirements, which may result in less protection than is accorded to investors under rules applicable to domestic issuers.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices instead of those otherwise required under the NASDAQ Listing Rules for domestic issuers. For instance, we follow the home country practice in Israel with regard to, among other things, director nomination procedures and quorum at shareholders’ meetings. In addition, we follow our home country law, instead of the NASDAQ Listing Rules, which require that we obtain shareholder approval for certain dilutive events, such as for the establishment or amendment of certain equity-based compensation plans, an issuance that will result in a change in control, certain transactions other than a public offering involving issuances of a 20% or more interest in us and certain acquisitions of the stock or assets of another company. Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. domestic issuer listed on the NASDAQ Stock Market may provide less protection than is accorded to investors under the NASDAQ Listing Rules applicable to domestic issuers.

In addition, as a foreign private issuer, we are exempt from the rules and regulations under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as domestic companies whose securities are registered under the Exchange Act.

We may fail to maintain effective internal control over financial reporting, which may adversely affect investor confidence in us and, as a result, may affect the value of our Ordinary Shares and ADSs.

We have documented and tested our internal control systems and procedures in order for us to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, which requires us to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting, and requires our auditor's attestation report on the effectiveness of our internal control over financial reporting. The continuous process of strengthening our internal control and complying with Section 404 of the Sarbanes-Oxley Act is complicated, expensive and time-consuming. While our assessment of our internal control over financial reporting resulted in our conclusion that as of December 31, 2018, our internal control over financial reporting was effective, we cannot predict the outcome of our testing or any subsequent testing by our auditor in future periods. If we fail to maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting. Even if we do conclude that our internal control over financial reporting is effective, our independent registered public accounting firm may still issue a report that is qualified or adverse if it is not satisfied with our internal control. Failure to maintain effective internal control over financial reporting could result in investigation or sanctions by regulatory authorities and could have a material adverse effect on our reputation, business, financial condition, results of operations or investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our Ordinary Shares and ADSs to decline.

We currently do not anticipate paying cash dividends, and accordingly, investors must rely on the appreciation in our ADSs and our Ordinary Shares for any return on their investment.

We currently anticipate that we will retain future earnings, if any, for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in our ADSs and our Ordinary Shares will depend upon any future appreciation in their value. There is no guarantee that our ADSs or our Ordinary Shares will appreciate in value or even maintain the price at which our investors have purchased their securities.

Investors in our ADSs may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, investors in our ADSs may not receive dividends or other distributions on our Ordinary Shares and may not receive any value for them, if it is illegal or impractical to make them available to investors in our ADSs.

The depositary for the ADSs has agreed to pay to investors in our ADSs the cash dividends or other distributions it or the custodian receives on Ordinary Shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. Investors in our ADSs will receive these distributions in proportion to the number of Ordinary Shares such ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act of 1933, as amended, but that are not properly registered or distributed under an applicable exemption from registration. In addition, conversion into U.S. dollars from a foreign currency that was part of a dividend made in respect of deposited Ordinary Shares may require the approval or license of, or a filing with, any government or agency thereof, which may be unobtainable. In these cases, the depositary may determine not to distribute such property and hold it as “deposited securities” or may seek to effect a substitute dividend or distribution, including net cash proceeds from the sale of the dividends that the depositary deems an equitable and practicable substitute. We have no obligation to register under U.S. securities laws any ADSs, Ordinary Shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Ordinary Shares, rights or anything else to holders of ADSs. In addition, the depositary may deduct from such dividends or distributions its fees and may withhold amounts on account of taxes or other governmental charges to the extent the depositary believes it is required to make such withholding. This means that investors in our ADSs may not receive the same distributions or dividends as those we make to the holders of our Ordinary Shares, and, in some limited circumstances, investors in our ADSs may not receive any value for such distributions or dividends if it is illegal or impractical for us to make them available to investors in our ADSs. These restrictions may cause a material decline in the value of the ADSs.

Holders of ADSs must act through the depositary to exercise their rights as our shareholders.

Holders of our ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying Ordinary Shares in accordance with the provisions of the deposit agreement for the ADSs. Under Israeli law, the minimum notice period required to convene a shareholders’ meeting is no less than 35 or 21 calendar days, depending on the proposals on the agenda for the shareholders’ meeting. When a shareholders’ meeting is convened, holders of our ADSs may not receive sufficient notice of a shareholders’ meeting to permit them to withdraw their Ordinary Shares to allow them to cast their vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to holders of our ADSs or carry out their voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to holders of our ADSs in a timely manner, but we cannot assure holders that they will receive the voting materials in time to ensure that they can instruct the depositary to vote their ADSs. Furthermore, the depositary and its agents are not responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, holders of our ADSs may not be able to exercise their right to vote and they may lack recourse if their ADSs are not voted as they requested. In addition, in the capacity as an ADS holder, they are not able to call a shareholders’ meeting.

The depositary for our ADSs gives us a discretionary proxy to vote our Ordinary Shares underlying ADSs if a holder of our ADSs does not give voting instructions, except in limited circumstances.

Under the deposit agreement for the ADSs, the depositary gives us a discretionary proxy to vote our Ordinary Shares underlying ADSs at shareholders’ meetings if a holder of our ADSs does not give voting instructions, unless:

The effect of this discretionary proxy is that a holder of our ADSs cannot prevent our Ordinary Shares underlying such ADSs from being voted by us in our discretion, absent the situations described above. Holders of our Ordinary Shares are not subject to this discretionary proxy.

Risks Related to our Operations in Israel

We conduct our operations in Israel and therefore our results may be adversely affected by political, economic and military instability in Israel and the region.

We are incorporated under the laws of the State of Israel, and our principal offices are located in central Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors, including Hezbollah in Lebanon (and Syria) and Hamas in the Gaza Strip, both of which involved missile strikes in various parts of Israel causing the disruption of economic activities.  Our principal offices are located within the range of rockets that could be fired from Lebanon, Syria or the Gaza Strip into Israel. In addition, Israel faces many threats from more distant neighbors, in particular, Iran. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Any hostilities involving Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect our operations or results of operations and could make it more difficult for us to raise capital.

Our commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the Middle East. Although the Israeli government is currently committed to cover the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, there is no assurance that this government coverage will be maintained, or if maintained, will be sufficient to compensate us fully for damages incurred. Any losses or damages incurred by us could have a material adverse effect on our business.

Several countries, principally in the Middle East, restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies. In addition, there have been increased efforts by activists to cause companies and consumers to boycott Israeli goods based on Israeli government policies. Such business restrictions and boycotts, particularly if they become more widespread, may materially and adversely impact our business.

Because a certain portion of our expenses is incurred in currencies other than the U.S. dollar, our results of operations may be harmed by currency fluctuations and inflation.

Our reporting and functional currency is the U.S. dollar. Most of our revenues and royalty payments from our agreements with our development or commercialization partners are in U.S. dollars, and we expect our revenues from future licensing and co-promotion agreements to be denominated mainly in U.S. dollars or in Euros. We pay a substantial portion of our expenses in U.S. dollars; however, a portion of our expenses, including salaries of our employees in Israel and payment to

part of our service providers in Israel and other territories, are paid in NIS and in other currencies. In addition, a portion of our financial assets is held in NIS and in other currencies. As a result, we are exposed to currency fluctuation risks. For example, if the NIS strengthens against the U.S. dollar, our reported expenses in U.S. dollars may be higher. In addition, if the NIS weakens against the U.S. dollar, the U.S. dollar value of our financial assets held in NIS will decline.

Provisions of the RedHill Biopharma Ltd. 2010 Award Plan, Israeli law, our articles of association and our change in control retention plan may delay, prevent or otherwise impede a merger with, or an acquisition of, our Company, or an acquisition of a significant portion of our shares, which could prevent a change in control, even when the terms of such a transaction are favorable to us and our shareholders.

Our 2010 Award Plan provides that all options granted by us will be fully accelerated upon a “hostile takeover” of us. A “hostile takeover” is defined in our 2010 Award Plan as an event in which any person, entity or group that was not an “interested party”, as defined in the Israeli Securities Law – 1968, on the date of the initial public offering of our Ordinary Shares on the TASE, will become a “controlling shareholder” as defined in the Israel Securities Law, 1968, or a “holder,” as defined in the Israeli Securities Law – 1968, of 25% or more of our voting rights or any merger or consolidation involving us, in each case without a resolution by our board of directors supporting the transaction. In addition, if a “Significant Event” occurs and following which the employment of a grantee with us or a related company is terminated by us or a related company other than for “Cause”, and unless the applicable agreement provides otherwise, all the outstanding options held by or for the benefit of any such grantee will be accelerated and immediately vested and exercisable. A “Significant Event” is defined in our 2010 Award Plan as a consolidation or merger with or into another corporation approved by our board of directors in which we are the continuing or surviving corporation or in which the continuing or surviving corporation assumes the option or substitutes it with an appropriate option in the surviving corporation.

The Israeli Companies Law, 1999, or the Israeli Companies Law, regulates mergers, requires tender offers for acquisitions of shares or voting rights above specified thresholds, requires special approvals for transactions involving directors, officers or significant shareholders and regulates other matters that may be relevant to these types of transactions. For example, a merger may not be consummated unless at least 50 days have passed from the date that a merger proposal was filed by each merging company with the Israel Registrar of Companies and at least 30 days from the date that the shareholders of both merging companies approved the merger. In addition, a majority of each class of securities of the target company must approve a merger. Moreover, the Israeli Companies Law provides that certain purchases of securities of a public company are subject to tender offer rules. As a general rule, the Israeli Companies Law prohibits any acquisition of shares or voting power in a public company that would result in the purchaser holding 25% or more, or more than 45% of the voting power in the company, if there is no other person holding 25% or more, or more than 45% of the voting power in a company, respectively, without conducting a special tender offer. The Israeli Companies Law further provides that a purchase of shares or voting power of a public company or a class of shares of a public company which will result in the purchaser’s holding 90% or more of the company’s shares, class of shares or voting rights, is prohibited unless the purchaser conducts a full tender offer for all of the company’s shares or class of shares. The purchaser will be allowed to purchase all of the company’s shares or class of shares (including those shares held by shareholders who did not respond to the offer), if either (i) the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company or of the applicable class, and more than half of the shareholders who do not have a personal interest in the offer accept the offer, or (ii) the shareholders who do not accept the offer hold less than 2% of the issued and outstanding share capital of the company or of the applicable class. The shareholders, including those who indicated their acceptance of the tender offer (except if otherwise detailed in the tender offer document), may, at any time within six months following the completion of the tender offer, petition the court to alter the consideration for the acquisition. At the request of an offeree of a full tender offer which was accepted, the court may determine that the consideration for the shares purchased under the tender offer was lower than their fair value and compel the offeror to pay to the offerees the fair value of the shares. Such an application to the court may be filed as a class action.

In addition, the Israeli Companies Law provides for certain limitations on a shareholder that holds more than 90% of the company’s shares, or class of shares.

Pursuant to our articles of association, the size of our board of directors may be no less than five persons and no more than eleven, including any external directors whose appointment is required under law. The directors who are not external

directors are divided into three classes, as nearly equal in number as possible. At each annual general meeting, the term of one class of directors expires, and the directors of such class are re-nominated to serve an additional three-year term that expires at the annual general meeting held in the third year following such election (other than any director originally nominated for election by virtue of the nomination right granted to any investor who purchased, in the Company’s public offering which closed on December 27, 2016, together with its affiliates, at least $15 million of ADSs and warrants (excluding the proceeds, if any, from the exercise of warrants, whose term of office may expire earlier depending on the beneficial ownership by the investor of the Company’s shares)). This process continues indefinitely. Such provisions of our articles of association make it more difficult for a third party to effect a change in control or takeover attempt that our management and board of directors oppose.

In addition, we have adopted a change in control employee retention plan providing for compensation to Company officers and employees in the event of a change in control (as defined by the plan), subject to the satisfaction of various conditions.  See “Item 6 B. – Compensation – Change in Control Retention Plan.”

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

These and other similar provisions could delay, prevent or impede an acquisition of us or our merger with another company, or an acquisition of a significant portion of our shares, even if such an acquisition or merger would be beneficial to us or to our shareholders.

It may be difficult to enforce a U.S. judgment against us and our directors and officers in Israel or the U.S. or to serve process on our directors and officers.

We are incorporated in Israel. Most of our directors and executive officers reside outside of the U.S., and most of our assets and most of the assets of our directors and executive officers may be located outside of the U.S. Therefore, a judgment obtained against us or most of our executive officers and our directors in the U.S., including one based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the U.S. and may not be enforced by a U.S. or Israeli court. It may also be difficult to effect service of process on these persons in the U.S. or to assert U.S. securities law claims in original actions instituted in Israel.

The obligations and responsibilities of our shareholders are governed by Israeli law, which may differ in some respects from the obligations and responsibilities of shareholders of U.S. companies. Israeli law may impose obligations and responsibilities on a shareholder of an Israeli company that are not imposed upon shareholders of corporations in the U.S.

We are incorporated under Israeli law. The obligations and responsibilities of the holders of our Ordinary Shares are governed by our articles of association and Israeli law. These obligations and responsibilities differ in some respects from the obligations and responsibilities of shareholders in typical U.S.-based corporations.  In particular, a shareholder of an Israeli company has a duty to act in good faith toward the company and other shareholders and to refrain from abusing its power in the company, including, among other things, in voting at the general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and interested party transactions requiring shareholder approval. In addition, a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company. There is limited case law available to assist us in understanding the implications of these provisions that govern shareholders’ actions. These provisions may be interpreted to impose additional obligations and responsibilities on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. corporations.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful shareholder claims against us and may reduce the amount of money available to us.

The Israeli Companies Law and our articles of association permit us to indemnify our directors and officers for acts performed by them in their capacity as directors and officers. The Israeli Companies Law provides that a company may not exempt or indemnify a director or an officer nor enter into an insurance contract, which would provide coverage for any monetary liability incurred as a result of: (a) a breach by the director or officer of his duty of loyalty, except for insurance and indemnification where the director or officer acted in good faith and had a reasonable basis to believe that the act would not prejudice the company; (b) a breach by the director or officer of his duty of care if the breach was done intentionally or recklessly, except if the breach was solely as a result of negligence; (c) any act or omission done with the intent to derive an illegal personal benefit; or (d) any fine, civil fine, monetary sanctions, or forfeit imposed on the officer or director. Our articles of association provide that we may exempt or indemnify a director or an officer to the maximum extent permissible under law.

We have issued letters of indemnification to our directors and officers, pursuant to which we have agreed to indemnify them in advance for any liability or expense imposed on or incurred by them in connection with acts they perform in their capacity as a director or officer, subject to applicable law. The amount of the advance indemnity is limited to the higher of 25% of our then shareholders’ equity, per our most recent annual financial statements, or $5 million.

Our indemnification obligations limit the personal liability of our directors and officers for monetary damages for breach of their duties as directors by shifting the burden of such losses and expenses to us. Although we have obtained directors’ and officers’ liability insurance, certain liabilities or expenses covered by our indemnification obligations may not be covered by such insurance or the coverage limitation amounts may be exceeded. As a result, we may need to use a significant amount of our funds to satisfy our indemnification obligations, which could severely harm our business or financial condition and limit the funds available to who may choose to bring a claim against us. These provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their duties and may similarly discourage the filing of derivative litigation by our shareholders against the directors and officers even though such actions, if successful, might otherwise benefit our security holders.

B.         Business Overview

We are a specialty biopharmaceutical company, primarily focused on proprietary drugs for gastrointestinal (“GI”) diseases. From inception to the end of the period covered by this Annual Report, we invested a total of $5.3 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 and provide improvements over existing drugs by one or more of the following: by improving their safety profile, reducing side effects, lowering the number of administrations, using a more convenient administration form 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 (“FDCA”), and in corresponding regulatory paths in other foreign jurisdictions. Our current pipeline consists of seven therapeutic candidates, most in late-stage clinical development.

We generate our pipeline of therapeutic candidates by identifying, rigorously validating and in-licensing or acquiring products that are consistent with our product strategy and that we believe exhibit a relatively high probability of therapeutic and commercial success. None of our therapeutic candidates has 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.

In addition to our primary focus on the development of clinical-stage GI products, we have established commercial presence and capabilities in the U.S., intended primarily to support potential future launch of our GI-related therapeutic candidates currently under development in the U.S. We pursue our GI-focused sales force in the U.S. currently promotes Donnatal ®   (Phenobarbital, Hyoscyamine Sulfate, Atropine Sulfate, Scopolamine Hydrobromide), Mytesi ® (crofelemer 125 mg delayed-release tablets) and Esomeprazole Strontium Delayed-Release Capsules 49.3 mg and commercializes EnteraGam ® (serum-derived bovine immunoglobulin/protein isolate (“SBI”)).

Our Strategy

Our goal is to become a significant player in the development and commercialization of pharmaceuticals for the treatment of GI diseases.

Key elements of our strategy are to:

Our Therapeutic Candidates

Summary

The ongoing development programs of our seven therapeutic candidates, most in late-stage clinical development, include “TALICIA ® ”, “RHB-104”, “RHB-204”, “BEKINDA ® ”, “RHB-106”, “YELIVA ® ” and “RHB-107” and related research and development programs, the most advanced of which are described below.

TALICIA ®   (proposed tradename for RHB-105, if approved)

TALICIA ® is an investigational new drug intended for the eradication of H. pylori bacterial infection in the GI tract. TALICIA ® 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), amoxicillin and rifabutin, which are antibiotics. TALICIA ® 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 one of the most commonly diagnosed cancers worldwide and one of the most common causes of cancer-related deaths, accounting for approximately 780,000 deaths annually, according to the World Health Organization (“WHO”). According to a 2010 report by Polk DB et al. published in Nature Reviews Cancer, H. pylori- induced gastritis is the strongest singular risk factor for cancers of the stomach, and eradication of  H. pylori  significantly decreases the risk of developing cancer in infected individuals without pre-malignant lesions.

In November 2014, TALICIA ®   was granted QIDP designation by the FDA. 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 TALICIA ® and eligibility for Priority Review status which potentially provides shorter review time by the FDA of a future potential marketing application. If approved, TALICIA ® 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 of market exclusivity.

TALICIA ® is targeting a significantly broader indication than that of existing H. pylori therapies, as a treatment of H. pylori infection, regardless of ulcer status.

We acquired the rights to TALICIA ® pursuant to an agreement with Giaconda Limited. See “Item 4. Information on the Company – B. Business Overview – Acquisition, Commercialization and License Agreements – Acquisition of RHB-104, TALICIA ®, and RHB-106.”

Market and Competition

The first-line therapies for H. pylori infection recommended by the American College of Gastroenterology in 2017 commonly include clarithromycin or metronidazole antibiotics with amoxicillin and a proton pump inhibitor. Such current standard-of-care treatments fail in approximately 30-40% of the patients due to the development of antibiotic resistance, based on “The Toronto Consensus for the Treatment of Helicobacter pylori Infection in Adults” by Fallone et al. published in Gastroenterology in 2016 and reports by Prof. David Y. Graham, M.D., et al. published in Nature Clinical Practice Gastroenterology & Hepatology in 2008 and in Gut in 2010 and by Malfertheiner P. et al. published in Gut in 2012.

As published in the 2006 study report by Dr. T.J. Borody, et al. in Alimentary Pharmacology & Therapeutics, the potential advantage of TALICIA ® over the current first-line therapies was shown in a Phase 2 study comprised of 130 subjects. In the study, a different formulation of TALICIA ® , 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. Furthermore, final results from the first Phase 3 study in the U.S. (the “ERADICATE Hp Study”) conducted by us demonstrated 89.4% efficacy in eradicating H. pylori infection with TALICIA ® in 118 dyspepsia patients with confirmed H. pylori infection.

H. pylori  bacterial infection affects over 50% of the adult population worldwide, according to a 2018 report by Kakelar HM et al., published in Gastric Cancer, and approximately 35% of the U.S. population, according to a report by Hooi JKY et al. published in 2017 in Gastroenterology. In the U.S., we estimate that approximately 2.5 million patients per annum are treated for H. pylori eradication, based on a 2018 analysis by Foster Rosenblatt, a provider of analytic consulting and management development services for the life sciences industry. Based on the analysis by Foster Rosenblatt, we estimate the potential global and U.S. market for TALICIA ® was approximately $4.8 billion and $1.4 billion in 2018, respectively.

Clinical Development

A Phase 2 clinical trial in Australia was completed with a different formulation of TALICIA ® , using the same antibiotic ingredients and a similar proton pump inhibitor. A first Phase 3 trial in the U.S., the ERADICATE Hp Study, which was completed in 2015, showed 89.4% eradication of H. pylori with TALICIA ®   therapy while open-label standard-of-care yielded an H. pylori eradication rate of 63% in placebo subjects.

We met with the FDA in April 2016 to discuss the results of the ERADICATE Hp Study and the proposed design of the confirmatory Phase 3 study for the treatment of  H. pylori infection. In light of the feedback received from the FDA, in January 2017 we entered into an agreement with ICON Clinical Research Limited to perform clinical trial services for the confirmatory Phase 3 study. Pursuant to a recommendation from the FDA, we completed a successful supportive pharmacokinetic (PK) program in May 2017 prior to initiating the confirmatory Phase 3 study.

In June 2017, we initiated a confirmatory Phase 3 study with TALICIA ® for the treatment of  H. pylori infection (the “ERADICATE Hp2 study”). The ERADICATE Hp2 study is a two-arm, randomized, double-blind, active comparator-controlled study, that investigated 455 dyspepsia patients with confirmed  H. pylori  infection at 55 clinical sites across the U.S. Subjects were randomized 1:1 to receive four capsules, three times daily, of either TALICIA ® or the active comparator, a dual therapy amoxicillin and omeprazole regimen at equivalent doses, for a period of 14 days.

In December 2018, we announced positive top-line results from the ERADICATE Hp2 study. The study successfully met its primary endpoint with a high degree of statistical significance, demonstrating 84% eradication of H. pylori infection with TALICIA ® versus 58% in the active comparator arm in the intent-to-treat population (p<0.0001). No safety issues were reported in the study and TALICIA ® was found to be well tolerated.

Preliminary H. pylori culture results taken throughout the ERADICATE Hp2 study from patients across 20 U.S. states confirmed the high resistance of H. pylori to the antibiotics most commonly used for treatment, clarithromycin (17% resistance) and metronidazole (44% resistance). Importantly, no resistance to rifabutin, a key component in TALICIA ® ’s unique and proprietary formulation, was detected in the study.

Moreover, consistent with the literature describing the diminished efficacy of standard-of-care therapies, results from the open-label part of the ERADICATE Hp2 Phase 3 study showed 60% eradication of H. pylori with these therapies.

Results from the ERADICATE Hp2 study showed consistent 21- 29% treatment benefit of TALICIA ®   versus the active comparator across all H. pylori culture susceptibility and resistance subgroups, including amoxicillin, clarithromycin, and metronidazole.

We will continue to analyze the data from the ERADICATE Hp2 study, including antibiotic susceptibility and resistance, and plan to meet with the FDA to present the data and discuss the path towards potential marketing approval of TALICIA ® in the U.S.

Subject to any additional regulatory feedback, the ERADICATE Hp2 study is expected to complete the clinical package required for a potential submission of an NDA with the FDA for TALICIA ®   in the first half of 2019.

The following chart summarizes the clinical trial history and status of TALICIA ® :

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

RHB-104

Crohn’s Disease

RHB-104 is an investigational new drug intended to treat Crohn’s disease, which is a serious inflammatory disease of the GI 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 MAP infections in Crohn’s disease. We announced positive top-line safety and efficacy results from the first Phase 3 study with RHB-104 for Crohn’s disease (the “MAP US study”) in July 2018, and have an ongoing open-label extension Phase 3 study (the “MAP US2 study”) to evaluate the safety and efficacy of RHB-104 in subjects who remain with active Crohn’s disease (CDAI ≥ 150) after 26 weeks of blinded study therapy in the Phase 3 MAP US study.

To date, Crohn’s disease has been considered 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 causing a major 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/CARD15 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. Advances in diagnostic technology have led to increasingly higher identification of MAP, with studies, such as Bull TJ et al . J Clin Microbiol, 2003 and Shafran I et al.  Dig Dis Sci, 2002, demonstrating a high prevalence of MAP in Crohn’s disease patients. However, there is currently no FDA-approved commercial diagnostic test for MAP.

In 2011, we obtained FDA “Orphan Drug” status for RHB-104 for the treatment of Crohn’s disease in the pediatric population. See “Item 4. Information on the Company – B. Business Overview – Government Regulations and Funding – Orphan Drug Designation.”

The formulation for RHB-104 and manufacturing of the all-in-one capsules for our clinical trials have been completed. Stability testing of the clinical trial material is ongoing.

We acquired the rights to RHB-104 pursuant to an asset purchase agreement with Giaconda Limited, an Australian company. See “Item 4. Information on the Company – B. Business Overview – Acquisition, Commercialization and License Agreements – Acquisition of RHB-104, TALICIA ®, and RHB-106.”

We continue to pursue the development program for a companion diagnostic for the detection of MAP bacteria in Crohn’s disease patients in collaboration with U.S. universities and diagnostic companies. These efforts are in part based on detecting the presence of MAP bacterial DNA in the blood, the rights for which we acquired from UCF.   We do not know if or when such a diagnostic test would become available.

Market and Competition

According to GlobalData, a provider of market intelligence for the pharmaceutical sector, there were approximately 1.69 million diagnosed prevalent cases of Crohn's disease in the seven major markets (U.S., France, Germany, Italy, Spain, UK, Japan) in 2018. This number of prevalent cases is expected to increase to 1.85 million by 2022.

According to GlobalData, the 2018 sales of drug treatments for Crohn’s disease were estimated at approximately $10.5 billion in the seven major markets and are expected to exceed $12.8 billion in 2022 in the seven major markets.

Therapeutic interventions in Crohn’s disease patients are based on the disease location, severity, and associated complications. Therapeutic approaches for the treatment of Crohn’s disease are individualized according to the patient’s symptomatic response and tolerance to the prescribed treatment. Since the existing treatments are not curative, the current therapeutic approaches are sequential and involve treatment of an acute disease or inducing clinical remission followed by maintenance of the response or remission to improve the patient’s quality of life.

Currently, available drugs on the market for the treatment of Crohn’s disease offer symptomatic relief, the effects of which are largely temporary or partial and are accompanied by numerous adverse effects. The most commonly prescribed drugs for treatment of Crohn’s disease include 5 Aminosalicylates (5-ASA, such as mesalamine), corticosteroids (such as prednisone), immunosuppressant drugs (such as azathioprine and methotrexate) and biologic agents, including TNF-α inhibitors (such as Remicade ® , Humira ® and Cimzia ® ), integrin inhibitors (such as Tysabri ® and Entyvio ® ) and an IL 12 and IL23 antagonist (such as Stelara ® ).

Unlike drugs currently 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 caused by MAP bacteria in Crohn’s disease patients.

We may also be exposed to potentially competitive products, which may be under development to treat Crohn’s disease, including new biological therapies and other new therapies. Additionally, Salix Pharmaceuticals (a wholly owned subsidiary of Bausch Health) together with Alfasigma S.p.A announced that they will initiate a late-stage clinical program to study a formulation of the antibiotic rifaximin (Xifaxan ® ) for the treatment of Crohn’s disease.

Clinical Development

A Phase 3 clinical trial for RHB-104 was conducted in Australia, sponsored by Pharmacia, a Swedish company (which merged with Pfizer), with the primary endpoint of evaluating the ratio of patients with recurrent symptoms of Crohn’s disease following the initial induction of remission with 16 weeks of treatment with prednisolone initiated at 40 mg / day and weaned over the 16-week period. 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. The results of the trial were published by Professor Warwick Selby et al. in 2007 in the medical journal Gastroenterology . 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 two-year period of administration that disappeared once the active therapy was discontinued.

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 which became Syneos Health (“Syneos”), and our agreements were transferred to Syneos. See “—Master Service Agreement with 7810962 Canada Inc. and see also "Clinical Services Agreement –  Clinical Services Agreement related to RHB-104."

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 additional manufacturing agreements directly with the Canadian manufacturer.

In July 2018, we announced positive top-line results from the MAP US study, a randomized, double-blind, placebo-controlled first Phase 3 study with RHB-104 for Crohn’s disease. The Phase 3 study enrolled 331 subjects with moderately to severely active Crohn’s disease (defined as Crohn’s Disease Active Index (“CDAI”) between 220 and 450) in the U.S., Canada, Europe, Australia, New Zealand, and Israel. Subjects were randomized 1:1 to receive RHB-104 or placebo as an add-on therapy to baseline standard-of-care medications, including 5-ASAs, corticosteroids, immunomodulators or anti-TNF agents.

Our MAP US study successfully met its primary endpoint, as well as key secondary endpoints. Top-line results in the intent-to-treat (ITT) population demonstrated superiority of RHB-104 over placebo in achieving remission at week 26, defined as CDAI value of less than 150, the primary endpoint of the study. The proportion of patients meeting the primary endpoint was significantly greater in the RHB-104 group compared to placebo at week 26 (37% vs. 23%, p= 0.007). Moreover, while the secondary endpoints were not powered for significance in this induction of remission trial, key secondary endpoints were nevertheless met with statistically and clinically meaningful outcomes, demonstrating consistent benefit to Crohn’s disease patients treated with RHB-104. RHB-104 was found to be generally safe and well tolerated.

The top-line results were provided to us by an independent third party following an independent analysis and remain subject to completion of the independent review and analysis of the underlying data, including all safety, secondary and other outcome measures, and completion of the Clinical Study Report. We believe that additional clinical studies will most likely be required to support an NDA for RHB-104, if filed. We plan to meet with key opinion leaders and the FDA to present the data package and discuss the development path to potential approval and also continue discussions with potential partners for RHB-104.

In addition, an open-label extension Phase 3 study (the “MAP US2 study”) is ongoing to evaluate the safety and efficacy of RHB-104 in subjects who remain with active Crohn’s disease (CDAI ≥ 150) after 26 weeks of blinded study therapy in the Phase 3 MAP US study. These subjects had the opportunity to receive treatment with RHB-104 for a 52-week period in the open-label MAP US2 study. We expect that the data collected in the MAP US2 study will be supplemental to the MAP US study data. The MAP US2 study’s primary endpoint is disease remission at week 16, defined as CDAI of less than 150. In July 2018, the MAP US2 study completed enrollment of 54 subjects in the U.S., Canada, Europe, Israel, and New Zealand.

We have conducted several supportive studies with the current formulation of RHB-104, and a long-term population pharmacokinetic study is ongoing as part of the MAP US study.

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

Expanded Access Programs (EAP) for Treatment of Crohn’s Disease

Responding to a number of requests from investigators in the MAP US study, we recently opened up an EAP for the use of RHB-104 for treatment of Crohn’s Disease outside of clinical trials. Treating physicians are required to submit to us expanded access requests on behalf of patients in addition to obtaining the local regulatory approval for the proposed use of the investigational medicinal product. Our medical professionals evaluate each request and respond based on the scientific evidence available at the time of the request and specific criteria set by us.  We cannot predict how long this program will continue, and we may decide for various reasons, including but not limited to, resources and availability of RHB-104, not to continue with the EAP for RHB-104.

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

Multiple Sclerosis (“MS”)

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. In a study published in PLOS One (April 2011 | Volume 6 | Issue 4 | e18482) by Cusso et al ., among 50 MS patients and 56 healthy patients, MAP was detected in 42% and 12% respectively.

Clinical Development

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 in 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, in June 2013, we initiated a Phase 2a proof-of-concept study with RHB-104 for relapsing-remitting multiple sclerosis (“RRMS”) (the “CEASE MS” study) at two clinical sites in Israel. The study was completed, and the final results (48 weeks) were announced in December 2016. The final results (48 weeks) were consistent with the interim results (24 weeks), suggesting meaningful positive safety and clinical signals upon 24 weeks of treatment with RHB-104 as an add-on therapy, including an encouraging relapse-free rate, Expanded Disability Status Scale scores and MRI results, which support further clinical development.

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