As filed with the Securities and Exchange Commission on September 3 , 2014.

Registration No. 333- 198123

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

Amendment No. 1
to
FORM F-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

Foamix Pharmaceuticals Ltd.
2 Holzman Street, Weizmann Science Park
Rehovot 76704, Israel
Tel: +972-8-9316233
(Address, including zip code, and telephone number,
including area code, of Registrant’s principal executive offices)

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

Copies of all correspondence to:

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

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

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

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

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

The following photographs, taken over 12 weeks of treatment, show the effect of FMX101 on a severe acne patient participating in our Phase II clinical trial who responded positively to treatment.

FMX102 for impetigo.     We are also developing FMX102, a 1% minocycline foam product candidate for the treatment of impetigo, including cases of impetigo caused by MRSA. Impetigo is a highly contagious bacterial skin infection that primarily afflicts preschool-aged children, and is typically caused by staphylococcus aureus, including MRSA. It typically results in red sores and lesions on the face, neck, arms and legs. According to Symphony Health Solutions, the U.S. prescription drug market for impetigo was estimated to be approximately $340 million for the 12 months ended March 31, 2014, the vast majority of which was attributed to Bactroban and other mupirocin-based topical products, which are the current standard of care for impetigo. In 2012, we completed a dose-ranging Phase II clinical trial in Israel with 32 pediatric patients with at least two impetigo lesions. Of those patients, 11 had confirmed MRSA infection. In our Phase II clinical trial, patients receiving FMX102 twice daily experienced an 81.3% success rate in only three days and a 100% success rate in 14 days. Moreover, all MRSA-infected patients were bacteriologically cured after seven days of treatment. While we have not conducted head-to-head trials, this contrasts with the results reported on the product label for Bactroban, which states that it achieves a clinical efficacy rate of between 71% and 96% after eight to 12 days of three-times daily application. We expect to develop FMX102 through the FDA’s 505(b)(2) regulatory pathway, and commence Phase III clinical trials in the second half of 2015 after discussions with the FDA to establish an acceptable trial design.

Additional product candidates.     Using our proprietary technology and foam platforms, we are developing several other product candidates, the most notable of which are FMX101 for rosacea, for which we expect to commence Phase II clinical trials in 2015, and FDX104 for chemotherapy-induced rashes, for which we expect to commence Phase I/II clinical trials in Israel in late 2014. Our product candidate pipeline also includes early-stage stable foam formulations of various drugs for the treatment of common dermatological indications, including antibacterial drugs, antifungal drugs, corticosteroids and immunomodulators.

Product candidate pipeline.     The following chart provides a summary of the developmental pipeline for our four lead product candidates:

Proprietary, innovative technology comprising different foam platforms.     We have independently developed a series of proprietary foam platforms, each having unique pharmacological features and characteristics, which enable us to formulate, stabilize and deliver a wide variety of drugs directly to their target site. For example, minocycline is known to be very unstable and rapidly degrades in the presence of most commonly-used formulation components. Utilizing our proprietary technology, we successfully stabilized minocycline in a novel topical foam formulation. Our

choice to develop foams over other platforms stems from foam’s significant advantages over alternative delivery systems, being that it spreads easily and can be applied to large skin areas, is readily absorbed, avoids a messy residue and is highly tolerable due to its use of gentle ingredients. All ingredients used in our minocycline foam are listed in the FDA Inactive Ingredient Database, or IID, and are used in concentrations that do not exceed the maximum concentrations given in the IID. Our foam platforms are generally designed to be suitable for dermal, vaginal, nasal and other applications and to treat a range of diseases and disorders.

Development and license agreements.     In addition to our product candidates, we have entered into development and license agreements with various pharmaceutical companies such as Bayer, Merz and Actavis, combining our foam technology with a drug selected by the licensee to create new products with improved efficacy and ease-of-use. Each license agreement entitles us to service payments, contingent payments and royalties from sales of any new products that are commercialized. Each agreement is exclusive only to the specific drug that is licensed, leaving us the rights to commercialize and develop products with other drugs for the same indications using our proprietary foam technology while also allowing the licensee to apply the new products to any indication with its specific drug. The prospective products under these various agreements are currently in pre-clinical Phase II, Phase III and pre-approval stages. To date, none of these prospective products have been effectively commercialized.

Patents.     In relation to FMX101, FMX102 and FDX104, we currently have one granted patent in the U.S. which is expected to remain in effect until 2030. We also have several pending patent applications relating to FMX101, FMX102 and FDX104 in the U.S., as well as one in each of Australia, Brazil, Canada, China, the European Union, India, Israel and Mexico. As of August 31, 2014, we had 70 granted patents and 114 pending patent applications worldwide. In the U.S., we have established, as of August 31, 2014, a patent portfolio of 31 granted patents and 60 pending patent applications describing and claiming our multiple foam-based platforms and other technology. Additionally, outside of the U.S., we had 39 granted patents and 54 pending patent applications as of August 31, 2014.

Our Competitive Strengths

We believe that our expertise in foam technology, as demonstrated by our development of a novel topical foam formulation of minocycline, enables us to develop global product candidates which address shortcomings of currently available treatment options and positions us to compete effectively in the markets for the treatment of acne, impetigo and other skin infections.

FMX101 and FMX102 represent improved treatment alternatives for moderate-to-severe acne and impetigo. Our lead product candidate, FMX101, is a novel topical foam formulation of minocycline, offering an easy-to-use and convenient alternative to existing treatment options for moderate-to-severe acne. While we have not conducted head-to-head trials, based on our current clinical data compared to the label claims of the current standard of care Solodyn, FMX101 offers a faster and more effective treatment for moderate-to-severe acne with no reported systemic side effects. We believe that FMX101, if approved, will capture a significant share of the acne treatment market, and may even expand the overall acne market by attracting new patients who avoid current treatment options due to their limited effectiveness and potentially severe systemic side effects.

We are developing our second lead product candidate, FMX102, for the treatment of impetigo, including cases of impetigo caused by MRSA. FMX102 possesses the same benefits as FMX101 in terms of ease of use and convenience, and in our clinical trial it achieved a success rate of 81.3% in only three days of treatment and 100% in 14 days with twice-daily applications. While we have not conducted head-to-head trials, this contrasts with a clinical efficacy rate of between 71% and 96% after eight to 12 days of three-times daily applications achieved by Bactroban, one of the topical drugs comprising the current standard of care, as reported in its product label.

Lower risk and expedited development pathway.     We are focused on reformulating established drugs using our proprietary foam platforms. As a result, we expect the approval process for our product candidates to be conducted according to the FDA’s 505(b)(2) regulatory pathway, which allows some of the information required for approval to come from studies and trials that we did not conduct, leading to a relatively less expensive and faster approval process. Furthermore, FDX104, our product candidate for the treatment of chemotherapy-induced rashes, may be eligible for orphan drug designation, which would entitle us to marketing exclusivity of up to seven years if approved by the FDA.

Large opportunity to expand use of our proprietary technology and foam platforms.     Our proprietary technology enables us to formulate and stabilize a wide variety of drugs, including extremely sensitive drugs that readily disintegrate when combined with most commonly-used topical compounds, enabling us to produce topical formulations of existing therapies that were previously unavailable. By making these drugs available for topical application, our foam platforms can enhance their potency, clinical effectiveness and ease-of-use while minimizing side effects. Our foam platforms are generally designed to be suitable for dermal, vaginal, nasal and other applications and can be tailored to treat a range of diseases and disorders. We believe that the diversity of our foam platforms and their numerous possible combinations with other drugs will allow us to select the best candidates for further development based on market need and the available regulatory pathway.

Cooperation with other pharmaceutical companies.     We have entered into development and license agreements with various pharmaceutical companies, including Bayer, Merz and Actavis, where we combine our foam technology with their proprietary drugs to create improved products. Under the terms of these agreements we receive service payments and contingent payments, which generated approximately $14.7 million in revenues from our inception to June 30, 2014, as well as royalties if the licensed products are eventually approved and marketed. Furthermore, each agreement is exclusive only to the specific drug that is licensed, leaving us the rights to commercialize and develop products with other drugs for the same indications using our proprietary foam technology while also allowing the licensee to apply the new products to any indication with its specific drug. Our licensed products are currently in pre-clinical Phase II, III and pre-approval stages and, if successfully commercialized, may demonstrate the value of our technology, support our development efforts and result in substantial income from royalties.

Proprietary intellectual property protection and barriers to entry.     In relation to FMX101, FMX102 and FDX104, we currently have one granted patent in the U.S. which is expected to remain in effect until 2030, and we also have several pending patent applications in the U.S. as well as one in each of Australia, Brazil, Canada, China, the European Union, India, Israel and Mexico. As of August 31, 2014, we had 70 granted patents and 114 pending patent applications worldwide describing and claiming our foam-based platforms and other technology. We believe these patents and patent applications offer protection for a range of our product candidates and act as a deterrent against certain competing designs by competitors. Our intellectual property position further relies on our proprietary know-how, presenting an additional barrier to entry by competitors.

Our Strategy

We intend to become a leading specialty pharmaceutical company in the dermatology space. The key elements of our strategy to achieve this goal include:

Complete development and obtain regulatory approval for FMX101 and FMX102.     We are in late-stage clinical development of FMX101 and FMX102 for the treatment of moderate-to-severe acne and impetigo, respectively. We have completed Phase II clinical trials of these product candidates and expect to initiate Phase III pivotal clinical trials for FMX101 in mid-2015 and for FMX102 in the second half of 2015. We expect to file for regulatory approvals for FMX101 and FMX102 in the U.S. in 2016 in order to enter the moderate-to-severe acne market, as well as the market for impetigo and other skin infections. To support these efforts, we have enlisted U.S.-based clinical and regulatory executives, who have extensive experience in conducting clinical development programs and obtaining FDA approval for dermatological products.

Build our own sales and marketing capabilities to commercialize FMX101 and FMX102 in the U.S.     We intend to build an internal sales force and commercial organization to launch FMX101 and FMX102 in the U.S., subject to obtaining FDA approval. We plan to build a specialized, focused and scalable sales force to target those key dermatologists and pediatricians in the U.S. who prescribe the majority of the medications for acne and impetigo. To support these efforts, we have enlisted U.S.-based marketing executives with extensive experience in commercializing products in the dermatology market.

Develop and commercialize our other proprietary product candidates.     In addition to FMX101 and FMX102, we are in the early stages of clinical development for other product candidates developed on our proprietary foam platforms. We are developing FMX101 for the treatment of rosacea, and expect to enter a Phase II clinical trial in this indication in 2015. We are also developing FDX104, a topical formulation of doxycycline for the treatment of acne-like rashes associated with chemotherapy, and we intend to apply for an orphan drug designation for this product

candidate. We intend to initiate Phase I/II clinical trials in Israel in late 2014 with FDX104. Our research and development team has an established track record of advancing early stage product candidates through all phases of clinical development and subsequent regulatory approval.

Assess and prioritize future therapeutic indications for our foam platforms.     Beyond our currently identified product candidates, we have developed a series of stable foam formulations with drugs that are known to effectively treat common dermatological indications including atopic dermatitis, psoriasis, genital warts and actinic keratoses, herpes and fungal infections. We intend to begin selective development of these products based on the outlook of these markets and the available regulatory pathway. We plan to develop our product candidates under the FDA’s 505(b)(2) regulatory pathway, which leads to a relatively less expensive and faster process for approval and eventual product launch. These efforts will be led by our research and development team, which has successfully cultivated several product candidates from early feasibility studies to advanced clinical trials, in both in-house and collaborative projects.

exercise in full their option to purchase additional shares). Following the closing of this offering, we will not be a party to and are not otherwise aware of any voting agreement among our shareholders. For further information about the ownership of our ordinary shares following this offering, see “Principal Shareholders.”

Our Corporate Information

We were incorporated under the laws of the State of Israel on January 19, 2003. Our principal executive offices are located at 2 Holzman St., Weizmann Science Park, Rehovot 76704, Israel, and our telephone number is +972-8-9316233. Our website is www.foamix. co.il . The information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. Our agent for service of process in the U.S. is Puglisi & Associates, located at 850 Library Ave. Suite 204, Newark, Delaware 19711, and its telephone number is +1 (302) 738-6680.

Throughout this prospectus, we refer to various trademarks, service marks and trade names that we use in our business. The “Foamix” word mark, the “Foamix” design logo and other trademarks or service marks of Foamix Pharmaceuticals Ltd. appearing in this prospectus are the property of Foamix Pharmaceuticals Ltd. We have several other registered trademarks, service marks and pending applications relating to our products. Although we have omitted the ^{“ ® ”} and ^“TM” trademark designations for such marks in this prospectus, all rights to such trademarks are nevertheless reserved. Other trademarks and service marks appearing in this prospectus are the property of their respective holders.

The 13,980,808 outstanding shares referred to above include 2,572,322 series A preferred shares, or preferred shares, that will automatically convert into ordinary shares immediately prior to the consummation of this offering. We therefore consider such preferred shares to be ordinary shares for the purpose of this prospectus. The warrants referred to above are also for the purchase of preferred shares which will likewise automatically convert into warrants to purchase ordinary shares immediately prior to the consummation of this offering, and we therefore consider such warrants to be for the purchase of ordinary shares for purpose of this prospectus.

Unless otherwise indicated, all information in this prospectus:

The terms “shekels,” “Israeli shekels” and “NIS” refer to New Israeli Shekels, the lawful currency of the State of Israel, and the terms “dollar,” “US$” or “$” refer to U.S. dollars, the lawful currency of the U.S.

We have conducted only one Phase II clinical trial relating to each of FMX101 and FMX102, in each case outside the U.S. , the results of which may not be predictive of future trial results .

Positive results in preclinical testing and early clinical trials do not ensure that later clinical trials will be successful. A number of pharmaceutical companies have suffered significant setbacks in clinical trials, including in Phase III, after promising results in preclinical testing and early clinical trials. These setbacks have included negative safety and efficacy observations in later clinical trials, including previously unreported adverse events.

To date, we have conducted only one Phase II clinical trial of each of FMX101 and FMX102 which met their respective primary efficacy and all secondary endpoints. Our Phase III clinical trials of FMX101 and FMX102 may not be successful, and even if they are, the FDA may not approve our NDA for FMX101 or FMX102, should we be in a position to file one, and may not agree that the benefits of FMX101 or FMX102 outweigh its risks, or may raise new concerns regarding our clinical trial designs.

If the FDA does not conclude that FMX101 or FMX102 satisfy the requirements under Section 505(b)(2) of the Federal Food Drug and Cosmetics Act, or Section 505(b)(2), or if the requirements for such product candidates under Section 505(b)(2) are not as we expect, the approval pathway for these product candidates will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.

We expect to commence pivotal Phase III trials for FMX101 and FMX102 under the FDA’s 505(b)(2) regulatory pathway. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant, and for which the applicant has not received a right of reference, which could expedite the development program for FMX101 and FMX102 by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for these product candidates, and complications and risks associated with these product candidates, would likely increase significantly. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market more quickly than our product candidates, which would likely harm our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, our product candidates may not receive the requisite approvals for commercialization.

In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain competitors and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway for FMX101 and FMX102, there is no guarantee this would ultimately lead to faster product development or earlier approval.

Moreover, even if these product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

Our Phase II clinical trials for FMX101 and FMX102 were not conducted head-to-head with the current standard of care for moderate-to-severe acne and impetigo, and the comparison of our results to those of existing drugs , and the conclusions we have drawn from such comparisons , may be inaccurate .

Our Phase II clinical trials for FMX101 and FMX102 were not conducted head-to-head with the drugs considered the current standard of care for the relevant indications, namely Solodyn for moderate-to-severe acne and Bactroban for impetigo. This means that none of the patient groups participating in these trials were treated with the standard of care drugs alongside the groups treated with our product candidates. Instead, we have compared the results of our clinical trials with historical data from prior clinical trials conducted for the standard of care drugs, as presented in their respective product labels.

Direct comparison generally provides more reliable information about how two or more drugs compare, and reliance on indirect comparison for evaluating their relative efficacy or other qualities is problematic due to lack of objective or validated methods to assess trial similarity. For example, the various trials were likely conducted in different countries with different demographic features and in patients with different baseline conditions and different hygiene standards, among other relevant asymmetries. Therefore, the conclusions we have drawn from comparing the results of our trials with those published in the product labels for these standard of care drugs, including conclusions regarding the relative efficacy and expediency of FMX101 and FMX102, may be distorted by the inaccurate methodology of the comparison.

The FDA may require our Phase III clinical trials of FMX101 and/or FMX102 to be controlled against the current standard of care for moderate-to-severe acne and impetigo, respectively , or we may decide to conduct such studies to support claims comparing FMX1 01, FMX102 or any of our other product candidates to the relevant standard of care .

The FDA may require our Phase III clinical trials of FMX101 for moderate-to-severe acne and/or FMX102 for impetigo to be controlled against the drugs that are currently considered the standards of care for the treatment of moderate-to-severe acne and impetigo, respectively, instead of being controlled against a placebo or against a different dosage of our minocycline foam, as was the case in our Phase II clinical trials. Furthermore, even if the FDA does not impose such a requirement in connection with our Phase III clinical trials, the FDA generally requires adequate, well-controlled head-to-head clinical trials to support comparative claims regarding marketed products. As a result, we may decide to conduct comparative studies of FMX101, FMX102 or any of our other product candidates that are commercialized to support comparative claims used in the marketing of those product candidates. Significant additional time and expense will be required to design and conduct any head-to-head trials. For example, in the case of FMX101 for moderate-to-severe acne, the standard of care is an oral drug, Solodyn, whereas FMX101 is a topical drug. To conduct a double blind study comparing the two treatments, all patients would need to receive both modalities, with either the oral or topical treatment consisting of a placebo, increasing the complexity and cost. If we are unable to conduct head-to-head trials for one or more of our product candidates, even if such product candidates are approved for marketing in the U.S., we will not be able to make claims comparing such product candidates to the current standard of care or other competitor products which may negatively impact sales of these products.

Our ability to finance our company and generate revenue s depends on the clinical and commercial success of FMX101, FMX102 and our other product candidates. Many of the factors that will determine whether we gain such success are beyond our control, and our failure to do so will negatively impact our business.

Our near-term prospects, including our ability to finance our company and generate revenues, depends on the successful development, regulatory approval and commercialization of FMX101 and FMX102, as well as our future product candidates. The clinical and commercial success of FMX101, FMX102 and our other product candidates depends on a number of factors, many of which are beyond our control, including:

If we fail to achieve these objectives or overcome the challenges presented above, many of which are beyond our control, in a timely manner, we could experience significant delays or an inability to successfully commercialize our product candidates. Accordingly, we may not be able to generate sufficient revenues through the sale of FMX101, FMX102 or our other product candidates to enable us to continue our business.

We may encounter delays in completing clinical trials for FMX101, FMX102 and our other product candidates and may even be prevented from commencing such trials due to factors that are largely beyond our control.

We have in the past and may in the future experience delays in completing our ongoing clinical trials and in commencing future clinical trials. We have already experienced delays in our Phase II clinical trial with FMX102 for impetigo that took place in Israel, due to our difficulty in enlisting a sufficient number of pediatric patients with the necessary severity of the disease to participate in the trial. This difficulty may arise again in future trials for impetigo, which has a low incidence in the developed countries in which we expect to conduct our trials, due to their higher sanitary conditions relative to developing countries. This difficulty may also arise in future trials for other indications and for our other product candidates.

We rely on contract research organizations, or CROs, and clinical trial sites to ensure the proper and timely conduct of our clinical trials. While we have agreements governing the committed activities of our CROs, we have limited influence over their actual performance. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. Clinical trials can be delayed or aborted for a variety of other reasons, including delay or failure to:

Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to available alternatives, including any new drugs or treatments that may be approved for the indications we are investigating.

We may also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the trial’s data safety monitoring board, by the FDA or by the applicable foreign regulatory authorities. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA or foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

If we experience delays in carrying out or completing any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

FMX101 and FMX102 may produce undesirable side effects that we may not have detected in our Phase II clinical trials. This could prevent us from gaining marketing approval or market acceptance for these product candidates, or from maintaining such approval and acceptance, and could substantially increase commercialization costs and even force us to cease operations.

Although FMX101 and FMX102 for the treatment of moderate-to-severe acne and impetigo have so far been shown to have no reported systemic side effects and only a few cases of mild and temporary skin reactions have been reported, all of which disappeared on their own within 12 weeks from the beginning of the treatment, the acne condition of several of the patients who participated in the FMX101 4% trial worsened rather than improved. Furthermore, the Phase III clinical trials will involve a much larger patient base than the Phase II clinical trials, and the commercial marketing of FMX101 and FMX102, if approved, will further expand the clinical exposure of the drug to a wider and more diverse group of patients than those participating in the clinical trials, which may identify undesirable side effects caused by these products that were not previously observed or reported in the Phase II clinical trials.

The FDA and foreign regulatory agency regulations require that we report certain information about adverse medical events if our products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date on which we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA or a foreign regulatory agency could take action including criminal prosecution, the imposition of civil monetary penalties or seizure of our products.

Additionally, in the event we discover the existence of adverse medical events or side effects caused by one of our product candidates, a number of other potentially significant negative consequences could result, including:

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could substantially increase commercialization costs or even force us to cease operations.

Even if FMX101, FMX102 or our other product candidates receive marketing approval, we may continue to face future developmental and regulatory difficulties. In addition, we are subject to government regulations and we may experience delays in obtaining required regulatory approvals to market our proposed product candidates.

Even if we complete clinical testing and receive approval of any regulatory filing for FMX101, FMX102 or any of our other product candidates, the FDA or applicable foreign regulatory agency may grant approval contingent on the performance of additional costly post-approval clinical trials, risk mitigation requirements and surveillance requirements to monitor the safety or efficacy of the product, which could negatively impact us by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. Absence of long-term safety data may further limit the approved uses of our products, if any.

The FDA or applicable foreign regulatory agency also may approve FMX101, FMX102 or any of our other product candidates for a more limited indication or a narrower patient population than we originally requested, or may not approve the labeling that we believe is necessary or desirable for the successful commercialization of our product candidates. Furthermore, any such approved product will remain subject to extensive regulatory requirements, including requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution and recordkeeping.

If we fail to comply with the regulatory requirements of the FDA or other applicable foreign regulatory authorities, or previously unknown problems with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative or judicially imposed sanctions or other setbacks, including the following:

In addition, various aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention and, consequently, could adversely affect our business operations and financial performance.

Even if FMX101, FMX102 or our other product candidates receive regulatory approval, they may fail to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success.

Even if we obtain FDA or foreign regulatory approvals for FMX101, FMX102 or any of our other product candidates, the commercial success of such products will depend significantly on their broad adoption and use by dermatologists, pediatricians and other physicians for approved indications, including, in the case of FMX101 and FMX102, for the treatment of moderate-to-severe acne, impetigo and other therapeutic or aesthetic indications that we may seek to pursue.

Moreover, if the treatment of acne and impetigo with FMX101 and FMX102 is deemed to be an elective procedure, the cost of which is borne by the patient, it will not be reimbursable through government or private health insurance.

The degree and rate of physician and patient adoption of FMX101, FMX102 and any of our other product candidates, if approved, will depend on a number of factors, including:

If FMX101, FMX102 or any of our other product candidates are approved for use but fail to achieve the broad degree of physician adoption and market acceptance necessary for commercial success, our operating results and financial condition will be adversely affected.

Our ability to market FMX101 and FMX102, if approved, will be limited to use for the treatment of moderate-to-severe acne and impetigo in the U.S., and if we want to expand the indications for which we may market FMX101 or FMX102 or the territories in which we may market these products, we will need to obtain additional regulatory approvals, which may not be granted.

We plan to seek regulatory approval for FMX101 and FMX102 for the treatment of moderate-to-severe acne and impetigo in the U.S. If FMX101 or FMX102 is approved, the FDA will restrict our ability to market or advertise FMX101 or FMX102 for other indications and other territories, which could limit physician and patient adoption. We may seek to promote and commercialize FMX101 and FMX102 for the treatment of acne and impetigo in Europe by applying for marketing approval from the European Medicines Agency, or EMA, or we may develop new or additional uses or protocols for FMX101 or FMX102 in the future, but we may not receive the clearances required

to do so. In addition, we would be required to conduct additional clinical trials or studies to support approvals for such additional jurisdictions or indications, which would be time consuming and expensive, and may produce results that do not support regulatory approvals.

Approval procedures vary among countries and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differ from that required to obtain FDA approval. The marketing approval process in other countries may include all of the risks detailed above regarding FDA approval in the U.S. as well as other risks. In particular, in many countries outside the U.S., it is required that a product receives pricing and reimbursement approval before the product can be commercialized. This can result in substantial delays in such countries. In other countries, product approval depends on showing superiority to an approved alternative therapy. This can result in significant expense for conducting complex clinical trials.

None of our products are currently approved for sale in any jurisdiction, including the U.S. or any international markets. If we fail to comply with regulatory requirements in the U.S. or any international market we decide to enter, or to obtain and maintain required approvals, or if regulatory approvals in the U.S. or the relevant international markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.

Marketing approval in one jurisdiction does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one jurisdiction may have a negative effect on the regulatory process in others. Failure to obtain marketing approval in other countries or any delay or setback in obtaining such approval would impair our ability to develop foreign markets for FMX101 and FMX102. This would reduce our target market and limit the full commercial potential of FMX101 and FMX102.

If FMX101, FMX102 or any of our other product candidates are approved for marketing, and we are found to have improperly promoted off-label uses, or if dermatologists, pediatricians or other physicians misuse our products or use our products off-label, we may suffer severe repercussions.

The FDA and foreign regulatory agencies strictly regulate the marketing and promotional claims that are made about drug products, such as FMX101 or FMX102, if approved. In particular, a product may not be promoted for uses or indications that are not approved by the FDA or such foreign regulatory agencies as reflected in the product’s approved labeling. For example, if we receive marketing approval for FMX101 for the treatment of moderate-to-severe acne, the first indication we are pursuing, we cannot prevent physicians from using FMX101 on their patients in a manner that is inconsistent with the approved label, potentially including for the treatment of other therapeutic or aesthetic indications. If we are found to have promoted such off-label uses, we may receive warning letters and become subject to significant liability, which would materially harm our business.

The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to FDA prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry.

Dermatologists, pediatricians and other physicians may also misuse our products, potentially leading to adverse results, side effects or injury, which may lead to product liability claims. If our products are misused, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. Furthermore, the use of our products for indications other than those cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. Any of these events could harm our business and results of operations and cause our stock price to decline.

If we are not successful in developing, acquiring regulatory approval for and commercializing additional product candidates beyond FMX101 and FMX102, our ability to expand our business and achieve our strategic objectives would be impaired.

Although we will devote a substantial portion of our resources on the continued clinical testing and potential approval of FMX101 and FMX102 for the treatment of moderate-to-severe acne and impetigo, respectively, another key element of our strategy is to discover, develop and commercialize a portfolio of products based on our proprietary foam platforms to serve additional therapeutic markets. We are seeking to do so through our internal research programs, but our resources are limited, and those that we have are geared towards clinical testing and seeking regulatory approval of FMX101 and FMX102. We may also explore strategic collaborations for the development or acquisition of new products, but we may not be successful in entering into such relationships. While we expect our lead product candidates, FMX101 and FMX102 for the treatment of moderate-to-severe acne and impetigo, respectively, to commence Phase III clinical trials, all of our other potential product candidates remain in the early stages of development. Research programs to identify product candidates require substantial technical, financial and human resources, regardless of whether any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including:

If we fail to develop and successfully commercialize other product candidates, our business and future prospects may be harmed and our business will be more vulnerable to any problems that we encounter in developing and commercializing FMX101 and FMX102.

Our product candidates, if approved, will face significant competition and our failure to compete effectively may prevent us from achieving significant market penetration and expansion.

If we receive marketing approval, the first expected use of our products will be for the treatment of moderate-to-severe acne. The facial aesthetic market in general, and the market for acne treatments in particular, is highly competitive and dynamic, and is characterized by rapid and substantial technological development and product innovations. This market is also characterized by competitors obtaining patents to protect what they consider to be their intellectual property. We are seeking regulatory approval of FMX101 for the treatment of moderate-to-severe acne. We anticipate that FMX101, if approved, will face significant competition from other acne products, including oral drugs such as Solodyn, Doryx, Dynacin and Minocin, and topical anti-acne drugs such as Acanya, Ziana, Epiduo, Benzaclin and Differin, all of which have been approved for marketing and are available to consumers. If approved, FMX101 may also compete with non-prescription anti-acne products and unapproved and off-label treatments. To compete successfully in the acne treatment market, we will have to demonstrate that FMX101 is safe and effective for the treatment of moderate-to-severe acne, has advantages over existing therapies, and that it does not infringe the intellectual property rights of any third parties. Competing in the acne market could result in price-cutting, reduced profit margins and loss of market share, any of which would harm our business, financial condition and results of operations.

Due to less stringent regulatory requirements, there are many more acne products and procedures available for use in international markets than are approved for use in the U.S. There are also fewer limitations on the claims that our competitors in international markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we face more competition in these markets than in the U.S.

We are seeking regulatory approval of FMX102 for the treatment of impetigo. We anticipate that FMX102, if approved, will face significant competition from other impetigo products, including Bactroban and Altabax, as well as oral antibiotics. If approved, FMX102 may also compete with non-prescription antimicrobial products and unapproved and off-label treatments. To compete successfully in the impetigo treatment market, we will have to demonstrate that FMX102 is safe and effective in reducing infected lesions, has advantages over existing therapies, and that it does not infringe the intellectual property rights of any third parties. Competing in the impetigo market could result in price-cutting, reduced profit margins and limited market share, any of which would harm our business, financial condition and results of operations.

Other pharmaceutical companies may develop competing products for acne, impetigo and other indications we are pursuing and enter the market ahead of us.

Other pharmaceutical companies are engaged in developing, patenting, manufacturing and marketing healthcare products that compete with those that we are developing. These potential competitors include large and experienced companies that enjoy significant competitive advantages over us, such as greater financial, research and development, manufacturing, personnel and marketing resources, greater brand recognition and more experience and expertise in obtaining marketing approvals from the FDA and foreign regulatory authorities.

Several of these potential competitors are privately-owned companies that are not bound by public disclosure requirements and closely guard their development plans, marketing strategies and other trade secrets. Publicly-traded pharmaceutical companies are also able to maintain a certain degree of confidentiality over their pipeline developments and other sensitive information. As a result, we do not know whether these potential competitors are already developing, or plan to develop, foam-based or other topical treatments for acne, impetigo or other indications we are pursuing, and we will likely be unable to ascertain whether such activities are underway in the future. These potential competitors may therefore introduce competing products without our prior knowledge and without our ability to take preemptive measures in anticipation of their commercial launch.

For example, we were recently approached by a pharmaceutical company inquiring as to whether we would be interested in working with it to develop a foam-based acne product using an antibiotic from the tetracycline family, which is the same family of compounds as minocycline and doxycycline. Although we declined the offer, this pharmaceutical company may pursue such development, whether independently or in collaboration with others, and other companies may have similar intentions.

Furthermore, such potential competitors may enter the market before us, and their products may be designed to circumvent our granted patents and pending patent applications. They may also challenge, narrow or invalidate our granted patents or our patent applications, and such patents and patent applications may fail to provide adequate protection for our product candidates.

We have agreements with third party licensees to develop new product candidates for them utilizing our foam technology, and our ability to benefit from such product candidates could be impaired or delayed if our licensees’ efforts to develop and commercialize these product candidates are unsuccessful.

In parallel to our core business focused on the development of FMX101, FMX102 and our other product candidates, we have also entered into and are pursuing development and license agreements with various pharmaceutical companies for the development and commercialization of product candidates that combine our proprietary technology with the licensees’ drugs for the treatment of various indications. These license agreements generally provide rights to the licensees for a single active pharmaceutical ingredient, and grant the licensee exclusivity in the development and commercialization of the specific licensed product candidates incorporating such active pharmaceutical ingredient. Our entitlement to contingent payments and royalties from such potential product candidates is therefore dependent upon the licensees’ performance of their responsibilities and their continued cooperation in developing and commercializing the potential product candidates.

Our licensees may not cooperate with us or perform their obligations under our agreements with them. Furthermore, the obligations of the licensees under such agreements are, for the most part, limited to ‘commercially

reasonable efforts,’ and they do not face penalties or other repercussions for failing to develop or commercialize the relevant product candidates within the designated timetable other than potentially forfeiting their rights to the relevant product candidate and assigning such rights to us. However, there is no guarantee that we will be able to successfully develop, manufacture or commercialize any such product candidate assigned to us. We cannot control the scope or timing of the resources that will be devoted by our licensees to performing their responsibilities under our agreements with them. Our licensees may choose to pursue alternative technologies in preference to those being developed with us. Several of these agreements may also be terminated for convenience by the licensee. The development and commercialization of these licensed product candidates as well as the anticipated contingent payments and royalties we hope to generate from them will be delayed or never obtained if the licensees fail to conduct their responsibilities in a timely manner or in accordance with applicable regulatory requirements, or if they breach their agreements with us. Disputes with our licensees could also impair our reputation or result in development delays, decreased revenues and litigation expenses.

We have granted several of our licensees the right to commercialize the licensed products for any indication, including acne and rosacea, which may allow them to compete against us using our own technology.

The license we granted to several of our licensees, with whom we are developing certain topical products based on our technology and the licensees’ proprietary drugs, allows them to commercialize the developed products for any topical application, not just for the specific indication for which each product was originally intended. If any such licensed product proves to be effective for moderate-to-severe acne, rosacea or any other indication that we are pursuing with FMX101, FMX102 or our other product candidates, we may face competition from these licensed products, as the licensees are not bound by any non-compete restrictions. Such competition may be especially challenging for us, as these licensees will have the benefit of our own foam technology along with their greater resources, experience and brand recognition, extensive marketing channels and other capabilities, and possibly the advantage of entering the market before us.

We expect the healthcare industry to face increased limitations on reimbursement, rebates and other payments as a result of healthcare reform, which could adversely affect third-party coverage of our products and how much or under what circumstances healthcare providers will prescribe or administer our products, if approved.

In both the U.S. and other countries, sales of our products, if approved for marketing, will depend in part upon the availability of reimbursement from third-party payors, which include governmental authorities, managed care organizations and other private health insurers. Third-party payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.

Increasing expenditures for healthcare have been the subject of considerable public attention in the U.S. Both private and government entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.

Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement for any approved products, which in turn would affect the price we can receive for those products. Any reduction in reimbursement that results from federal legislation or regulation may also result in a similar reduction in payments from private payors, as private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, or the Affordable Care Act, a law intended, among other things, to broaden access to health insurance and reduce or constrain the growth of healthcare spending. The Affordable Care Act increased the minimum rebate due for innovator drugs from 15.1% of average manufacturer price, or AMP, to 23.1% of AMP and capped the total rebate amount for innovator drugs at 100.0% of AMP. The Affordable Care Act and subsequent legislation also narrowed the definition of AMP.

Furthermore, the Affordable Care Act imposes a significant annual, nondeductible fee on companies that manufacture or import certain branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with healthcare practitioners, and a significant number of provisions are not yet, or have only recently become, effective. Although it is too early to determine the effect of the Affordable Care Act, it appears likely to continue to put pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. More recently, in August 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of an amount greater than $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to healthcare providers of up to 2.0% per fiscal year, which started in 2013. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several categories of healthcare providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

If we ever obtain regulatory approval and commercialization of FMX101, FMX102 or any of our other product candidates, these new laws may result in additional reductions in healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of FMX101, FMX102 or our other product candidates may be.

Although we cannot predict the full effect on our business of the implementation of existing legislation or the enactment of additional legislation pursuant to healthcare and other legislative reform, we believe that legislation or regulations that would reduce reimbursement for, or restrict coverage of, our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer our products. This could materially and adversely affect our business by reducing our ability to generate revenues, raise capital, obtain additional licensees and market our products. In addition, we believe the increasing emphasis on managed care in the U.S. has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact product sales.

It will be difficult for us to profitably sell FMX101, FMX102 or our other product candidates if reimbursement for these products is limited by government authorities and third-party payor policies.

In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of FMX101, FMX102 and our other product candidates, if approved, will depend on the reimbursement policies of government authorities and third-party payors. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

A primary trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for FMX101 or FMX102 or, if reimbursement is available, the level of reimbursement.

Reimbursement may impact the demand for, or the price of, any product for which we obtain marketing approval. In addition, third-party payors are likely to impose strict requirements for reimbursement in order to limit off-label use of a higher priced drug. Reimbursement by a third-party payor may depend upon a number of factors including the third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for FMX101, FMX102 or any of our other product candidates, if approved. Also, we cannot be sure

that reimbursement amounts will not reduce the demand for, or the price of, our future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize FMX101, FMX102 or our other product candidates, profitably or at all, even if approved.

Legislative or regulatory healthcare reforms in the U.S. may make it more difficult and costly for us to obtain regulatory clearance or approval of FMX101, FMX102 or any of our other product candidates and to produce, market, and distribute our products after clearance or approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of FMX101, FMX102 or any of our other product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

Each of these would likely entail substantial time and cost and could materially harm our business and our financial results.

If in the future we acquire or in-license technologies or product candidates, we may incur various costs, may have integration difficulties and may experience other risks that could harm our business and results of operations.

In the future, we may acquire and in-license additional product candidates and technologies. Any product candidate or technologies we in-license or acquire will likely require additional development efforts prior to commercial sale, including extensive preclinical or clinical testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate, or product developed based on in-licensed technology, will not be shown to be sufficiently safe and effective for approval by regulatory authorities. If intellectual property related to product candidates or technologies we in-license is not adequate, we may not be able to commercialize the affected products even after expending resources on their development. In addition, we may not be able to manufacture economically or successfully commercialize any product candidate that we develop based on acquired or in-licensed technology that is granted regulatory approval, and such products may not gain wide acceptance or be competitive in the marketplace. Moreover, integrating any newly acquired or in-licensed product candidates could be expensive and time-consuming. If we cannot effectively manage these aspects of our business strategy, our business may not succeed.

We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts.

Since our inception, most of our resources have been dedicated to the preclinical and clinical development of our lead product candidates FMX101 and FMX102. As of June 30, 2014, we had capital resources consisting of cash, cash equivalents and investments in marketable securities of $10.5 million. In the second quarter of 2014, we raised approximately $8.3 million from a group of investors and existing shareholders in an equity financing round that closed in two phases, the first on May 13, 2014 and the second on June 3, 2014, comprising $6.6 million and $1.7 million, respectively.

We believe that we will continue to expend substantial resources for the foreseeable future for the clinical development of FMX101, FMX102, FDX104 and the development of other indications and product candidates we may choose to pursue. These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, and manufacturing and supply as well as marketing and selling any products approved for sale. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of FMX101, FMX102, FDX104 and any of our other product candidates.

We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will allow us to fund our operating expenses and capital expenditure requirements throughout the Phase III clinical trials for our lead product candidates, FMX101 and FMX102, which we expect to complete by 2017. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional capital sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations or additional license arrangements. Such financings may result in dilution to shareholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Our future capital requirements depend on many factors, including:

Additional capital may not be available when we need them, on terms that are acceptable to us or at all. If adequate funds are not available to us on a timely basis, we may be required to:

If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing shareholders will be diluted and the terms of any new equity securities may have a preference over our ordinary shares. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures or specified financial ratios, any of which could restrict our ability to commercialize our product candidates or operate as a business.

We have a limited operating history and have incurred significant losses since our inception and we anticipate that we will continue to incur losses for the foreseeable future. We have only two product candidates that have completed any clinical trials and have no sales, which, together with our limited operating history, make it difficult to assess our future commercial viability.

We are a small clinical-stage specialty pharmaceutical company with a limited operating history. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We are not profitable and have incurred losses in each year since we commenced operations in 2003. We have only a limited operating history upon which you can evaluate our business and prospects. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry.

To date, we have not obtained any regulatory approvals for any of our product candidates or generated any revenues from product sales relating to FMX101, FMX102 or any of our other product candidates. We have generated revenues only from service payments and contingent payments paid toward or in the course of projects carried out under several of our development and license agreements with various pharmaceutical companies.

We continue to incur significant research and development and other expenses related to our ongoing clinical trials and operations. We have recorded a net loss of $3.5 million for the six months ended June 30, 2014 and $2.4 million and $2.2 million for the years ended December 31, 2013 and 2012, respectively, had an accumulated deficit through June 30, 2014 of $21.7 million and had a working capital surplus of $9.6 million as of June 30, 2014. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, and seek regulatory approvals for, FMX101, FMX102 and several of our other product candidates, and begin to commercialize FMX101 and FMX102.

Our ability to achieve revenues and profitability is dependent on our ability to complete the development of our product candidates, obtain necessary regulatory approvals and successfully manufacture, market and commercialize our products. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, may adversely affect the market price of our ordinary shares and our ability to raise capital and continue operations.

We currently contract with third party subcontractors and suppliers for certain compounds and components necessary to produce FMX101 and FMX102 for clinical trials and expect to continue to do so to support commercial scale production if FMX101 or FMX102 is approved. This increases the risk that we will not have sufficient quantities of FMX101 or FMX102 or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We currently rely on third party subcontractors and suppliers for certain compounds and components necessary to produce FMX101 and FMX102 for our clinical trials, including minocycline, doxycycline and other active ingredients, excipients used in the formulation of the foam, delivery apparatus comprising canisters, valves and propellants. We expect to continue to rely on these or other subcontractors and suppliers to support our commercial requirements if FMX101, FMX102 or any our other product candidates is approved for marketing by the FDA or foreign regulatory authorities.

Reliance on third party subcontractors and suppliers entails a number of risks, including reliance on the third party for regulatory compliance and quality assurance, the possible breach of the manufacturing or supply agreement by the third party, and the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. In addition, third party subcontractors and suppliers may not be able to comply with cGMP or quality system regulation, or QSR, or similar regulatory requirements outside the U.S. If any of these risks

transpire, we may be unable to timely retain alternate subcontractors or suppliers on acceptable terms and with sufficient quality standards and production capacity, which may disrupt and delay our clinical trials or the manufacture and commercial sale of our product candidates, if approved.

Our failure or the failure of our third party subcontractors and suppliers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of FMX101, FMX102 or any of our other product candidates that we may develop. Any failure or refusal to supply or any interruption in supply of the components for FMX101, FMX102 or any other product candidates or products that we may develop could delay, prevent or impair our clinical development or commercialization efforts.

We will rely on third parties and consultants to assist us in conducting our Phase III clinical trials for FMX101 and FMX102 and studies and clinical trials for our other product candidates. If these third parties or consultants will not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize FMX101, FMX102 or any of our other product candidates.

We do not have the ability to independently perform all aspects of our preclinical studies and clinical trials. We will rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as CROs, to assist us in conducting our Phase III clinical trials for FMX101 and FMX102 and studies and clinical trials for our other product candidates. The third parties with whom we intend to contract for execution of our clinical trials will play a significant role in the conduct of these trials and the subsequent collection and analysis of data. However, these third parties will not be our employees, and except for contractual duties and obligations, we will have limited ability to control the amount or timing of resources that they devote to our programs.

Although we will rely on these third parties to conduct certain aspects of our Phase III clinical trials and other studies and clinical trials, we will remain responsible for ensuring that each of our clinical trials and preclinical studies is conducted in accordance with its investigational plan and protocol. Moreover, the FDA and foreign regulatory authorities will require us to comply with regulations and standards, commonly referred to as current good clinical practices, or GCPs, for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of the potential risks of participating in clinical trials. We will also rely on our consultants to assist us in the execution, including data collection and analysis of our clinical trials.

In addition, the execution of clinical trials and preclinical studies, and the subsequent compilation and analysis of the data produced, will require coordination among these various third parties. In order for these functions to be carried out effectively and efficiently, it will be imperative that these parties communicate and coordinate with one another, which may prove difficult to achieve. Moreover, these third parties may also have relationships with other commercial entities, some of which may compete with us. Our agreement with these third parties may inevitably enable them to terminate such agreements upon reasonable prior written notice under certain circumstances.

If the third parties or consultants that will assist us in conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCPs, or for any other reason, we may need to conduct additional clinical trials or enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, or may be delayed in obtaining, regulatory approval for the product candidates being tested in such trials, and will not be able to, or may be delayed in our efforts to, successfully commercialize these product candidates.

We have no experience manufacturing our product candidates at full commercial scale. If our product candidates are approved, we intend to outsource our manufacturing to third parties, and will face certain risks associated with such outsourcing.

We have developed a small-scale integrated research, development and testing facility located at our corporate headquarters in Rehovot, Israel. However, we have not equipped our facility with manufacturing capabilities, and do not currently plan to do so. We do not have experience in manufacturing our product candidates at commercial scale, and if our product candidates are approved, we intend to outsource all or a significant portion of the manufacturing

of our products to third parties, including our drug substances and finished dose forms. Reliance on third parties to manufacture our products entails various risks, including the possibility of increased costs associated with the large- scale production of our products. These risks are similar to those involved in our current use of subcontractors and suppliers for certain compounds and components necessary to produce FMX101 and FMX102 for their clinical trials, as explained above.

If we are unsuccessful in outsourcing our manufacturing to third parties who are compliant with regulatory requirements, we may encounter delays or additional costs in achieving our commercialization objectives, which could materially damage our business and financial position.

We currently have limited marketing capabilities and no sales organization. If we are unable to establish sales and marketing capabilities on our own or through third parties, we will be unable to successfully commercialize FMX101, FMX102 or any other of our other product candidates, if approved, or generate product revenue s .

We currently have limited marketing capabilities and no sales organization. To commercialize FMX101, FMX102 or any other of our other product candidates, if approved, in the U.S. and other jurisdictions we may seek to enter, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If FMX101 or FMX102 receive regulatory approval, we expect to market FMX101 or FMX102 in the U.S. through a specialized internal sales force or a combination of our internal sales force and distributors, which will be expensive and time consuming.

There are significant risks involved in building and managing a sales organization, including our ability to hire, retain and incentivize qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel and effectively manage a geographically dispersed sales and marketing team. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of our product candidates.

We may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize FMX101, FMX102 or any of our other product candidates.

If we are not successful in commercializing FMX101, FMX102 or any of our other product candidates, either on our own or through collaborations with one or more third parties, our revenues will suffer and we would incur significant additional losses.

To establish our sales and marketing infrastructure and manufacturing capabilities, we will need to increase the size of our organization, and we may experience difficulties in managing this expansion.

As of June 30, 2014, we had 24 full-time employees. We will need to continue to expand our managerial, operational, finance and other resources to manage our operations and clinical trials, continue our development activities and commercialize FMX101, FMX102 or any other product candidates, if approved. Our management, personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our expansion strategy requires that we:

Due to our limited financial resources and our limited experience in managing a company with such anticipated expansion, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage expansion could delay the execution of our development and strategic objectives, or disrupt our operations.

We currently develop our clinical drug products exclusively in one research and development facility and may utilize this facility in the future to support commercial production if our product candidates are approved. If this or any future facility or our equipment were damaged or destroyed, or if we experience a significant disruption in our operations for any other reason, our ability to continue to operate our business would be materially harmed.

We currently research and develop both FMX101, FMX102 and our other product candidates exclusively in a single laboratory located in Rehovot, Israel.

If this or any future facility were to be damaged, destroyed or otherwise unable to operate, whether due to war, acts of hostility, earthquakes, fire, floods, hurricanes, storms, tornadoes, other natural disasters, employee malfeasance, terrorist acts, power outages or otherwise, or if performance of our research and development facility is disrupted for any other reason, such an event could delay our clinical trials or, if our product candidates are approved and we choose to manufacture all or any part of them internally, jeopardize our ability to manufacture our products as promptly as our prospective customers will likely expect, or possibly at all. If we experience delays in achieving our development objectives, or if we are unable to manufacture an approved product within a timeframe that meets our prospective customers’ expectations, our business, prospects, financial results and reputation could be materially harmed.

Currently, we maintain insurance coverage totaling $0.3 million against damage to our property and equipment and $5.8 million in workers compensation coverage, subject to deductibles and other limitations. If we have underestimated our insurance needs with respect to an interruption, or if an interruption is not subject to coverage under our insurance policies, we may not be able to cover our losses.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any of our other products we develop.

We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our products. Even a successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of FMX101, FMX102 or any other product we may develop. We currently carry general third party liability insurance up to an amount of $0.3 million per annum. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations

or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. If and when we obtain approval for marketing FMX101 and FMX102, we intend to expand our insurance coverage to include the sale of FMX101 and FMX102; however, we may be unable to obtain this liability insurance on commercially reasonable terms.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop FMX101, FMX102 or any of our other product candidates, conduct our clinical trials and commercialize FMX101, FMX102 or any of our other products we develop.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel. We believe that our future success is highly dependent upon the contributions of our senior management, particularly our Chief Executive Officer, as well as our senior scientists. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials or the commercialization of FMX101, FMX102 or any of our other product candidates.

Although we have not historically experienced unique difficulties in attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the pharmaceutical field is intense due to the limited number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms, or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output.

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

As a public company in the U.S., we will be subject to an extensive regulatory regime, requiring us to maintain various internal controls and facilities and to prepare and file periodic and current reports and statements, including reports on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404. Complying with these requirements will be costly and time consuming. We will need to retain additional employees to supplement our current finance staff, and we may not be able to do so in a timely manner, or at all. In the event that we are unable to demonstrate compliance with our obligations as a public company in the U.S. in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities, such as the U.S. Securities and Exchange Commission, or the SEC, or the NASDAQ Global Market, and investors may lose confidence in our operating results and the price of our ordinary shares could decline.

Our independent registered public accounting firm was not engaged to perform an audit of our internal control over financial reporting, and as long as we remain an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we will be exempt from the requirement to have an independent registered public accounting firm perform such audit. Accordingly, no such opinion was expressed. Once we cease to qualify as an “emerging growth company,” our independent registered public accounting firm will need to attest to our management’s annual assessment of the effectiveness of our internal controls over financial reporting, which will entail additional costs and expenses.

We have identified a material weakness in our internal control over financial reporting, which resulted in the restatement of our financial statements. We may also fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002. This may result in a further deficiency in our internal controls over financial reporting, as well as sanctions or other penalties that would harm our business.

We have identified a material weakness over our financial reporting as of December 31, 2013. As defined in Regulation 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected on a timely basis. Specifically, we determined that we do not have sufficient qualified staff to provide for effective control over a number of aspects of our accounting and financial reporting process under U.S. GAAP, as described below.

This material weakness led to several errors in the presentation of our financial results for the years 2013 and 2012 under U.S. GAAP. More specifically, we detected errors in the accounting of our convertible loans and in the classification of patent registration expenses, as further described in Note 2s to our audited financial statements included elsewhere in this prospectus. These errors resulted in us restating our financial statements for the twelve months ended December 31, 2013 and 2012 with respect to long term liabilities, total shareholders’ capital deficiency, research and development expenses, selling, general and administrative expenses, finance expenses and loss for the period.

We have taken action toward remediating this material weakness by retaining as additional advisors an international public accounting firm with specific expertise in U.S. GAAP and SEC rules and regulations, to assist us in the preparation and review of our financial statements. We are further seeking to hire additional qualified personnel with U.S. GAAP accounting and reporting experience, and intend to provide enhanced training to existing financial and accounting employees on related U.S. GAAP issues. However, the implementation of these initiatives may not fully address any material weakness or other deficiencies that we may have in our internal control over financial reporting.

Furthermore, we are only in the early stages of determining formally whether our existing internal controls over financial reporting systems are compliant with Section 404 and whether there are any other material weaknesses or significant deficiencies in our existing internal controls. These controls and other procedures are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is disclosed accurately and is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Even if we develop effective controls over financial reporting, these controls may become inadequate because of changes in conditions or the degree of compliance with these policies or procedures may deteriorate, and material weaknesses and deficiencies may be discovered in them. In any event, the process of determining whether our existing internal controls are compliant with Section 404 and sufficiently effective will require the investment of substantial time and resources, including by our chief financial officer and other members of our senior management. As a result, this process may divert internal resources and take a significant amount of time and effort to complete. In addition, we cannot predict the outcome of this process and whether we will need to implement remedial actions in order to implement effective controls over financial reporting. The determination of whether or not our internal controls are sufficient and any remedial actions required could result in us incurring additional costs that we did not anticipate, including the hiring of outside consultants. We may also fail to complete our evaluation, testing and any required remediation needed to comply with Section 404 in a timely fashion.

Irrespective of compliance with Section 404, any additional failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. As a result, we may experience higher than anticipated operating expenses, as well as higher independent auditor fees during and after the implementation of these changes. If we are unable to implement any of the required changes to our internal control over financial reporting effectively or efficiently or are required to do so earlier than anticipated, it could adversely affect our operations, financial reporting or results of operations and could result in an adverse opinion on internal controls from our independent auditors.

Furthermore, if we are unable to certify that our internal control over financial reporting is effective and in compliance with Section 404, we may be subject to sanctions or investigations by regulatory authorities, such as the SEC or stock exchanges, and we could lose investor confidence in the accuracy and completeness of our financial reports, which could hurt our business, the price of our ordinary shares and our ability to access the capital markets.

Our business involves the use of hazardous materials and we and our third party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our research and development activities and our third party subcontractors’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials owned by us, including minocycline and doxycycline, key components of our product candidates, and other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We are licensed by the Israeli Ministry of Health to manufacture small batches of product in topical dose form for Phase I and II clinical trials. In some cases, these hazardous materials are stored at our and our subcontractors’ facilities pending their use and disposal.

Despite our efforts, we cannot eliminate the risk of contamination. This could cause an interruption of our commercialization efforts and business operations, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by us and our subcontractors and suppliers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials and interrupt our business operations.

Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.

We may in the future be subject to various U.S. federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties.

While we do not expect that FMX101 and FMX102, if approved for the treatment of moderate-to-severe acne and impetigo, will subject us to the various U.S. federal and state laws intended to prevent health care fraud and abuse, we may in the future become subject to such laws. The federal anti-kickback statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced price items and services. Many states have similar laws that apply to their state health care programs as well as private payors. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.

The federal False Claims Act, or FCA, imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. The FCA includes a whistleblower provision that allows individuals to bring actions on behalf of the federal government and share a portion of the recovery of successful claims. If our marketing or other arrangements were determined to violate anti-kickback or related laws, including the FCA, then our revenues could be adversely affected, which would likely harm our business, financial condition, and results of operations.

State and federal authorities have aggressively targeted medical technology companies for alleged violations of these anti-fraud statutes, based on improper research or consulting contracts with doctors, certain marketing arrangements that rely on volume-based pricing, off-label marketing schemes, and other improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans, and have often become subject to consent decrees severely restricting the manner in which they conduct their business. If we become the target of such an investigation or prosecution based on our contractual relationships with providers or institutions, or our marketing and promotional practices, we could face similar sanctions, which would materially harm our business.

Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our internal control policies and procedures may not protect us from reckless or negligent acts committed by our employees, future distributors, licensees or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties or prosecution and have a negative impact on our business, results of operations and reputation.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Although we believe the market for acne and impetigo therapies is less vulnerable to unfavorable economic conditions due to the significant discomfort and distress they inflict, our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. We currently have very limited visibility regarding the prospects of FMX101, FMX102 or our other product candidates becoming eligible for

reimbursement by any government or third party payor and the possible scope of such reimbursement, and we must assume that demand for these product candidates may be tied to discretionary spending levels of our targeted patient population.

The recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for FMX101, FMX102 or any of our other product candidates, if approved, and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Exchange rate fluctuations between the U.S. dollar and the Israeli shekel may negatively affect our earnings.

The dollar is our functional and reporting currency. However, a significant portion of our operating expenses are incurred in Israeli shekels. As a result, we are exposed to the risks that the shekel may appreciate relative to the dollar, or, if the shekel instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation of the shekel, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations in Israel would increase and our dollar-denominated results of operations would be adversely affected. We cannot predict any future trends in the rate of inflation in Israel or the rate of devaluation (if any) of the shekel against the dollar. For example, although the dollar appreciated against the shekel in 2011, the rate of devaluation of the dollar against the shekel was 2.7% and 6.5% in 2012 and 2013, respectively, which was compounded by inflation in Israel at a rate of 1.6% and 1.8%, respectively. If the dollar cost of our operations in Israel increases, our dollar-measured results of operations will be adversely affected. Our operations also could be adversely affected if we are unable to effectively hedge against currency fluctuations in the future.

Risks Related to Our Intellectual Property

If our efforts to obtain, protect or enforce our patents and other intellectual property rights related to FMX101, FMX102 or any of our other product candidates are not adequate, we may not be able to compete effectively and we otherwise may be harmed.

Our commercial success depends in part on our ability to obtain and maintain patent protection and utilize trade secret protection for our intellectual property and proprietary technologies, our products and their uses, as well as our ability to operate without infringing upon the proprietary rights of others. We rely upon a combination of patents, trade secret protection and confidentiality agreements, assignment of invention agreements and other contractual arrangements to protect the intellectual property related to FMX101, FMX102 and our other development programs. Limitations on the scope of our intellectual property rights may limit our ability to prevent third parties from designing around such rights and competing against us. For example, our patents do not claim a new compound. Rather, the active pharmaceutical ingredients of our products are existing compounds and our granted patents and pending patent applications are directed to, among other things, novel formulations of these existing compounds that are dispensed as a foam. Accordingly, other parties may compete with us, for example, by independently developing or obtaining competing topical formulations that design around our patent claims, but which may contain the same active ingredients, or by seeking to invalidate our patents. Moreover any disclosure to or misappropriation by third parties of our confidential proprietary information, unless we have sufficient patent and/or trade secret protection and we are able to enforce such rights successfully, could enable competitors to quickly duplicate or surpass our technological achievements, eroding our competitive position in our market.

We currently have only one granted patent related to FMX101, FMX102 and FDX104 in the U.S., which is expected to remain in effect until 2030. This patent relates to a composition of matter comprising a claim to a formulation of a tetracycline antibiotic which can include minocycline or doxycycline, and therefore may be less protective than patents which claim a new drug. We also have patent applications claiming compositions of matter which relate to FMX101, FMX102 and FDX104 pending in various global markets including the U.S., Australia, Brazil, Canada, China, the European Union, India, Israel and Mexico. As of August 31, 2014, we had 70 granted patents and 114 patent applications worldwide covering our foam-based platforms and other technology.

However, the patent applications that we own or license may fail to result in granted patents in the U.S. or foreign jurisdictions, or if granted may fail to prevent a potential infringer from marketing its product or be deemed

invalid and unenforceable by a court. Competitors in the field of topically-administered therapies comprising an active ingredient in foam presentation have created a substantial amount of scientific publications, patents and patent applications and other materials relating to their technologies. Our ability to obtain and maintain valid and enforceable patents depends on various factors, including interpretation of our technology and the prior art and whether the differences between them allow our technology to be patentable. Patent applications and patents granted from them are complex, lengthy and highly technical documents that are often prepared under very limited time constraints and may not be free from errors that make their interpretation uncertain. The existence of errors in a patent may have a materially adverse effect on the patent, its scope and its enforceability. Our pending patent applications may not issue, and the scope of the claims of patent applications that do issue may be too narrow to adequately protect our competitive advantage. Also, our granted patents may be subject to challenges or narrowly construed and may not provide adequate protection.

Even if these patents do successfully issue, third parties may challenge the validity, enforceability or scope of such granted patents or any other granted patents we own or license, which may result in such patents being narrowed, invalidated or held unenforceable. For example, patents granted by the European Patent Office may be opposed by any person within 9 months from the publication of their grant. Also, patents granted by the U.S. Patent and Trademark Office, or USPTO, may be subject to reexamination and other challenges. In addition, recent changes to the patent laws of the U.S. provide additional procedures for third parties to challenge the validity of patents issuing from patent applications filed after March 15, 2013. Furthermore, efforts to enforce our patents could give rise to challenges to their validity or unenforceability in court proceedings. If the patents and patent applications we hold or pursue with respect to FMX101, FMX102 or any of our other product candidates are challenged, it could threaten our competitive advantage for FMX101, FMX102 or any of our other product candidates. Furthermore, even if they are not challenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. To meet such challenges, which are part of the risks and uncertainties of developing and marketing product candidates, we may need to evaluate third party intellectual property rights and, if appropriate, to seek licenses for such third party intellectual property or to challenge such third party intellectual property, which may be costly and may or may not be successful, which could also have a material adverse effect on the commercial potential for FMX101, FMX102 and any of our other product candidates.

Further, if we encounter delays in our clinical trials, the period of time during which we could market FMX101, FMX102 or any of our other product candidates under patent protection could be reduced. Since patent applications in the U.S. and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to either (i) file any patent application related to FMX101, FMX102 or any of our other product candidates or (ii) conceive and invent any of the inventions claimed in our patents or patent applications.

Furthermore, for applications filed before March 16, 2013, or patents issuing from such applications, an interference proceeding can be invoked by a third party, or instituted by USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications and patents. As of March 16, 2013, the U.S. transitioned to a “first-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO under the new first-to-file system before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party.

The change to “first-to-file” from “first-to-invent” is one of the changes to the patent laws of the U.S. resulting from the Leahy-Smith America Invents Act signed into law on September 16, 2011. Among some of the other changes to the patent laws are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge any issued patent in the USPTO. Because of a lower evidentiary standard in certain USPTO proceedings compared to the evidentiary standard in U.S. federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.

Even where patent, trade secret and other intellectual property laws provide protection, costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and the outcome of such litigation would be uncertain. Moreover, any actions we may bring to enforce our intellectual property against

our competitors could provoke them to bring counterclaims against us, and our competitors have intellectual property portfolios of their own, some of which are substantial. An unfavorable outcome could have a material adverse effect on our business and could result in the challenged patent being interpreted narrowly or invalidated, or one or more of our patent applications may be not be granted.

We also rely on trade secret protection and confidentiality agreements to protect our know how, data and information prior to filing patent applications and during the period before they are published. We further rely on trade secret protection and confidentiality agreements to protect proprietary know-how that may not be patentable, processes for which patents may be difficult to obtain or enforce and other elements of our product development processes that involve proprietary know-how, information or technology that is not covered by patents.

In an effort to protect our trade secrets and other confidential information, we incorporate confidentiality provisions in all our employees’ agreements and require our consultants, contractors and licensees to which we disclose such information to execute confidentiality agreements upon the commencement of their relationships with us. These agreements require that confidential information, as defined in the agreement and disclosed to the individual by us during the course of the individual’s relationship with us, be kept confidential and not disclosed to third parties for an agreed term. These agreements, however, may not provide us with adequate protection against improper use or disclosure of confidential information, and these agreements may be breached. Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. A breach of confidentiality could significantly affect our competitive position and we could lose our trade secrets or they could become otherwise known or be independently discovered by our competitors. Also, to the extent that our employees, consultants or contractors use any intellectual property owned by others in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions. Additionally, others may independently develop the same or substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets and other confidential information. Any of the foregoing could deteriorate our competitive advantages, undermine the trade secret and contractual protections afforded to our confidential information and have material adverse effects on our business.

Changes in U.S. or foreign patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other companies in the markets in which we participate, our success is heavily dependent on intellectual property, particularly patents. The strength of patents in the pharmaceutical field involves complex legal and scientific questions and in the U.S. and many foreign jurisdictions patent policy also continues to evolve and the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. This uncertainty includes changes to the patent laws through either legislative action to change statutory patent law or court action that may reinterpret existing law in ways affecting the scope or validity of granted patents, or both. Particularly in recent years in the U.S., there have been several major legislative developments and court decisions that have affected patent laws in significant ways and there may be more developments in the future that may weaken or undermine our ability to obtain new patents or to enforce our existing and future patents.

We have agreed to share ownership in certain patents that may result from our development and license agreements with certain major pharmaceutical companies, which may detract from our rights to such patents.

We have agreed with several of the pharmaceutical companies with whom we are developing certain topical products, based on our foam technology and the licensees’ active ingredients, to jointly own and have an undivided interest in patents that arise from the relevant projects, where the licensee made its own material contributions to the invention. In certain agreements, we have further agreed that inventions achieved exclusively or primarily by the licensees in the course of the development without significant contribution by us will be owned solely by them, and they will be allowed to file patent applications covering such inventions without our participation.

We have further granted certain licensees the primary right to enforce several of our existing patents, which we have licensed to these licensees to allow them to commercialize our jointly-developed product, in the event that any infringement of the licensed patents adversely affects the licensees’ ability to utilize the licenses for the purpose they were granted. Such rights may detract from our rights and title to such patents. In addition, any negative proceedings against our technology could impact any or all of our licensees, and we may be contractually responsible for the payment of certain claims and losses as a result of such impact.

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

A significant portion of our intellectual property has been developed by our employees in the course of their employment for us. The Israeli Compensation and Royalties Committee, or the Committee, a body constituted under the Israeli Patent Law, 5727-1967, has previously held that employees may be entitled to remuneration for intellectual property that they develop during their service for a company despite their explicit waiver of such right. In a recent decision, the Committee overturned its position and upheld that an employee’s waiver of his right to remuneration is valid and binding, but the Committee’s inconsistency raises doubt as to the outcome in different sets of circumstances. Furthermore, the plaintiff in this last case recently filed a petition with the Israeli Supreme Court requesting to remand the case to the Committee for a second review. The petition asserts that the Committee acted outside its administrative authority by considering the waiver and its effect, while its purview was limited to determining the compensation due to an employee for inventions shown to have been developed by him. The motion is pending the reply of the Committee and of the respondent (the employer), to be provided within 90 days. While the Committee’s last decision remains valid at this time, and while the scope of judicial review over the Committee’s decisions by the Supreme Court seems limited, the Committee's authority to pass judgment on the enforceability of employees' waivers may be in doubt. Therefore, although we enter into agreements with our employees pursuant to which they waive their right to special remuneration for inventions created in the scope of their employment or engagement and agree that any such inventions are owned exclusively by us, we may face claims by employees demanding remuneration beyond their regular salary and benefits.

If we infringe or are alleged to infringe or otherwise violate intellectual property rights of third parties, our business could be harmed.

Our research, development and commercialization activities may infringe or otherwise violate or be claimed to infringe or otherwise violate patents owned or controlled by other parties. Competitors in the field of prescription topical drugs for the treatment of acne, impetigo and other indications have developed large portfolios of patents and patent applications relating to our business. In particular, there are patents held by third parties that relate to the treatment with minocycline-based and doxycycline-based products for indications we are currently pursuing with our product candidates, namely FMX101, FMX102 and FDX104. There may be granted patents that could be asserted against us in relation to such product candidates. There may also be granted patents held by third parties that may be infringed or otherwise violated by our other product candidates and activities, and we do not know whether or to what extent we are infringing or otherwise violating third party patents. There may also be third party patent applications that if approved and granted as patents may be asserted against us in relation to FMX101, FMX102, FDX104 or any of our other product candidates or activities. These third parties could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages and legal fees. Further, if a patent infringement suit were brought against us, we could be temporarily or permanently enjoined or otherwise forced to stop or delay research, development, manufacturing or sales of the product candidate that is the subject of the suit.

As a result of patent infringement claims, or to avoid potential claims, we may choose or be required to seek licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property, or such rights might be restrictive and limit our present and future activities. Ultimately, we or a licensee could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.

There has been and there currently is substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical industry. In addition to possible infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference, derivation, re-examination or other post-grant proceedings declared or granted by the USPTO and similar proceedings in foreign countries, regarding intellectual property rights with respect to our current or of our other products. The cost to us of any patent litigation or other 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 than we can because of their substantially greater financial resources. Patent litigation and other proceedings may also absorb significant

management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings and their outcome could impair our ability to compete in the marketplace and impose a substantial financial burden on us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.

Furthermore, several of our employees were previously employed at universities or other pharmaceutical companies, including potential competitors. While we take steps to prevent our employees from using the proprietary information or know-how of others that is not in the public domain or that has not already been independently developed by us earlier, we may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee’s former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims successfully, in addition to paying monetary damages and possible ongoing royalties, we may lose valuable intellectual property rights or personnel.

If we are unable to protect our trademarks from infringement, our business prospects may be harmed.

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

We may become involved in lawsuits to protect or enforce our patents or other intellectual property or the patents of our licensors, which could be expensive and time consuming.

Competitors may infringe our intellectual property, including our patents or the patents of our licensors. As a result, we may be required to file infringement claims to stop third party infringement or unauthorized use. This can be expensive and burdensome, particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patent claims do not cover its technology or that the factors necessary to grant an injunction against an infringer are not satisfied.

An adverse determination of any litigation or other proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference, derivation or other proceedings brought at the USPTO may be necessary to determine the priority or patentability of inventions with respect to our patent applications or those of our licensors or licensees. Litigation or USPTO proceedings brought by us may fail or may be invoked against us by third parties. Even if we are successful, domestic or foreign litigation or USPTO or foreign patent office proceedings may result in substantial costs and distraction to our management. We may not be able, alone or with our licensors or licensees, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the U.S.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or other proceedings, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation or proceedings. In addition, during the course of this kind of litigation or proceedings, there could be public announcements of the results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our ordinary shares could be significantly harmed.

We may not obtain intellectual property rights or otherwise be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive. We primarily file patent applications in the U.S., and may file in some other selected jurisdictions on a case-by-case basis. As a result, our intellectual property rights in countries outside the U.S. are generally less extensive than those in the U.S. In addition, the laws of some foreign countries, particularly of certain developing countries, do not protect intellectual property rights to the same extent as federal and state laws in the

U.S., and these countries may limit the scope of what can be claimed, and in some cases may even force us to grant a compulsory license to competitors or other third parties. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not sought or obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Moreover, competitors or others may raise legal challenges against our intellectual property rights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to pharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Further, third parties may prevail in their claims against us, which could potentially result in the award of injunctions or substantial damages against us. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

In addition, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in domestic and foreign intellectual property laws.

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

We generally enter into non-competition agreements as part of our employment agreements with our employees. These agreements generally prohibit our employees, if they cease working for us, from competing directly with us or working for our competitors or clients for a limited period. We may be unable to enforce these agreements under the laws of the jurisdictions in which our employees work and it may be difficult for us to restrict our competitors from benefitting from the expertise our former employees or consultants developed while working for us.

For example, Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer which have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property.

Risks Related to an Investment in Our Ordinary Shares

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

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

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

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

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

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

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

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

If our existing shareholders, particularly our directors, their affiliates, or our executive officers, sell a substantial number of our ordinary shares in the public market, the market price of our ordinary shares could decrease

significantly. The perception in the public market that our shareholders might sell our ordinary shares could also depress the market price of our ordinary shares and could impair our future ability to obtain capital, especially through an offering of equity securities.

Substantially all of our shares outstanding prior to this offering and our shares issuable upon the exercise of warrants and vested options are subject to lock-up agreements with the underwriters that restrict the ability of their holders to transfer such shares for 180 days after the date of this prospectus. Consequently, upon expiration of the lock-up agreements and subject to our compliance with public reporting requirements, approximately 14,155,605 additional ordinary shares, including 1,527,978 ordinary shares issuable upon the exercise of our outstanding options and warrants, will be eligible for sale in the public market. We intend to file one or more registration statements on Form S-8 with the SEC covering all of the ordinary shares issuable under our share option plan and such shares will be available for resale following the expiration of the restrictions on transfer.

After this offering, the holders of approximately 2,572,322 ordinary shares and of warrants to purchase an additional 1,968,894 ordinary shares will be entitled to registration rights. The market price of our ordinary shares may drop significantly when the restrictions on resale by our existing shareholders lapse and these shareholders are able to sell our ordinary shares into the market. In addition, our sale of additional ordinary shares or similar securities in order to raise capital might have a similar negative impact on the share price of our ordinary shares. A decline in the price of our ordinary shares might impede our ability to raise capital through the issuance of additional ordinary shares or other equity securities, and may cause you to lose part or all of your investment in our ordinary shares.

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

The initial public offering price of our ordinary shares in this offering is considerably greater than the net tangible book value per share of our outstanding ordinary shares immediately after this offering. Accordingly, investors in this offering will incur immediate dilution of $7.57 per share, based on an assumed initial public offering price of $11.00 per share, the midpoint of the estimated initial public offering price range shown on the cover of this prospectus. In addition, if outstanding options and warrants to purchase our ordinary shares are exercised in the future, you will experience additional dilution. See “Dilution.”

The significant share ownership position of affiliates of our co-founders, Dr. Dov Tamarkin and Meir Eini, may limit your ability to influence corporate matters.

After giving effect to this offering, Tamarkin Medical Innovations Ltd., a company beneficially owned by Dr. Dov Tamarkin, or Tamarkin, our co-founder and chief executive officer, will beneficially own or control, directly or indirectly, 14.8% of our outstanding ordinary shares (or 14.2% if the underwriters fully exercise their option to purchase additional ordinary shares), and Meir Eini Holdings Ltd., a company beneficially owned by Meir Eini, or Eini, our co-founder, chief operations officer and chairman of our board of directors, will beneficially own or control, directly or indirectly, 15.1% of our outstanding ordinary shares (or 14.4% if the underwriters fully exercise their option to purchase additional ordinary shares). Accordingly, Tamarkin and Eini will be able to significantly influence, though not independently determine, the outcome of matters required to be submitted to our shareholders for approval, including decisions relating to the election of our board of directors and the outcome of any proposed merger or consolidation of our company. Tamarkin’s and Eini’s interests may not be consistent with those of our other shareholders. In addition, Tamarkin’s and Eini’s significant interest in us may discourage third parties from seeking to acquire control of us, which may adversely affect the market price of our ordinary shares.

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

We currently intend to use the net proceeds we receive from this offering to conduct Phase III clinical trials and other pre-launch studies for FMX101 and FMX102, to conduct a Phase I/II clinical trial for FDX104, and to use the balance, if any, to conduct a Phase II clinical trial for FMX101 for the treatment of rosacea, for research and development of other pipeline products and for other general corporate purposes. However, our management will have broad discretion in the application of the net proceeds. Our shareholders may not agree with the manner in which our management chooses to allocate the net proceeds from this offering. The failure by our management to apply these funds effectively could have a material adverse effect on our business, financial condition and results of operation. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income.

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

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

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

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

We may in the future elect to follow home country practices in Israel (and consequently avoid the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Global Market) with regard to other matters as well, such as (i) the formation of a nominating and governance committee, (ii) separate executive sessions of independent directors and non-management directors and (iii) the requirement to obtain shareholder approval for certain dilutive events such as (a) for the establishment or amendment of certain equity-based compensation plans, (b) issuances that will result in a change of control of the company, (c) certain transactions other than a public offering involving issuances of a 20% or more interest in the company and (d) certain acquisitions of the stock or assets of another company.

Following our home country governance practices as opposed to the requirements that would otherwise apply to a U.S. company listed on the NASDAQ Global Market may provide less protection to you than what is accorded to investors under the NASDAQ Stock Market rules applicable to domestic U.S. issuers.

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

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

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

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

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not “emerging growth

companies.” Most of such requirements relate to disclosures that we would only be required to make if we cease to be a foreign private issuer in the future. Nevertheless, as a foreign private issuer that is an emerging growth company, we will not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for up to five fiscal years after the date of this offering.

We will remain an emerging growth company until the earliest of: (i) the last day of our fiscal year during which we have total annual gross revenues of at least $1.0 billion; (ii) the last day of our fiscal year following the fifth anniversary of the closing of this offering; (iv) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (v) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

When we are no longer deemed to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above. We cannot predict if investors will find our ordinary shares less attractive as a result of our reliance on exemptions under the JOBS Act. If some investors find our ordinary shares less attractive as a result, there may be a less active trading market for our ordinary shares and our share price may be more volatile.

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

Generally, if for any taxable year 75% or more of our gross income is passive income, or at least 50% of the average quarterly value of our assets (which may be determined in part by the market value of our ordinary shares, which is subject to change) are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. Our status as a PFIC may also depend on how quickly we use the cash proceeds from this offering in our business.

Based on certain estimates of our gross income and gross assets, our intended use of proceeds of this offering, and the nature of our business, we believe that we were not classified as a PFIC for the taxable year ended December 31, 2013, and will not be classified as a PFIC for the taxable year ending December 31, 2014. Because we currently hold, and expect to continue to hold, a substantial amount of cash and cash equivalents and other passive assets used in our business, and because the value of our gross assets is likely to be determined in large part by reference to our market capitalization, a decline in the value of our ordinary shares may result in our becoming a PFIC. Accordingly, we may be considered a PFIC for any taxable year.

If we are characterized as a PFIC, our U.S. shareholders may suffer adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than as capital gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Holders (as defined in “Taxation—U.S. Federal Income Tax Consequences”), and having interest charges apply to distributions by us and the proceeds of share sales. Certain elections exist that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. holders to make qualified electing fund elections if we are classified as a PFIC. See “Taxation—U.S. Federal Income Tax Consequences—Passive Foreign Investment Company Considerations.”

Risks Related to our Operations in Israel

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

Our headquarters, and research and development facilities are located in Rehovot, Israel. In addition, the majority of our key employees, officers and directors are residents of Israel. Accordingly, political, economic and military conditions in Israel may directly affect our business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have taken place between Israel and its neighboring countries. Since early July 2014, there has been a significant increase in hostilities between Hamas, an Islamist organization governing the Gaza Strip, and Israel, including missiles launched by Hamas from the Gaza Strip into Israel and airstrikes and ground operations conducted by Israel in the Gaza Strip. On July 21, 2014, all U.S. airlines and most major airlines of other nationalities suspended their flights to Israel’s Ben-Gurion International Airport for several days after a missile landed approximately 1.5 km away. Any hostilities involving Israel or the interruption or curtailment of trade or transport between Israel and its trading partners could adversely affect our operations and results of operations.

Further, our operations could be disrupted by the obligations of personnel to perform military service. As of June 30, 2014, we had 21 employees based in Israel. Two of these employees are military reservists, and may be

called upon to perform military reserve duty of up to 54 days in each three year period until they reach the age of 40. Our operations could be disrupted by the absence of these employees due to military service. Such disruption could materially adversely affect our business and operating results.

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

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

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

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

We are incorporated in Israel. Most of our executive officers and the majority of our directors listed in this prospectus reside outside of the U.S., and most of our assets and most of the assets of these persons are located outside of the U.S. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the U.S. and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the U.S. or to assert U.S. securities law claims in original actions instituted in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law.

There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. See “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this prospectus.

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

The rights and responsibilities of the holders of our ordinary shares are governed by our amended articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S.-based companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in the company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and related party transactions

requiring shareholder approval. In addition, a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company has a duty of fairness toward the company with regard to such vote or appointment.

There is limited case law available to assist us in understanding the nature of this duty or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our ordinary shares that are not typically imposed on shareholders of U.S. companies.

The preceding table excludes (i) warrants to purchase 1,968,894 ordinary shares as of August 31, 2014 at an exercise price of $7.62 per share, (ii) 1,635,694 ordinary shares reserved as of August 31, 2014 for issuance to employees, directors, consultants and other service providers, of which options to purchase 907,500 ordinary shares had been granted at a weighted average exercise price of $1.92 per share. Such number includes options to purchase up to 31,250 ordinary shares, which grant is contingent upon the closing of this offering and the amount of proceeds we receive from it. The warrants referred to above are currently for the purchase of preferred shares, but will automatically convert into warrants to purchase ordinary shares immediately prior to our listing in connection with this offering, and we therefore consider such warrants to be for the purchase of ordinary shares for purpose of this prospectus.

If all of such outstanding options and warrants were exercised, as adjusted net tangible book value per share would be $3.73, and dilution per ordinary share to new investors would be $7.27, the number of shares held by our existing shareholders would increase to 16,857,202, constituting 74.0% of our total issued shares (while new shareholders in this offering would only hold 26.0% of our issued shares), the total consideration amount paid by existing shareholders would increase to $41.0 million, or 38.7% of total consideration received by us for our shares (while the percentage of consideration paid by new shareholders in this offering would decrease to 61.3%) and the average price per share paid by our existing shareholders would instead be $2.40.

To date, we have financed our operations primarily with the net proceeds from private placements of our shares and convertible notes, and from service payments and contingent payments received under our development and license agreements.

Since inception, we have incurred significant operating losses. Our operating income was $144,000 for the six months ended June 30, 2014 and we incurred operating losses of $1.4 million and $1.6 million for the years ended December 31, 2013 and 2012, respectively. As of June 30, 2014, we had an accumulated deficit of $21.7 million. We have not generated any revenues to date from sales of FMX101 or FMX102.

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

Financial Operations Overview

Revenue s

To date, we have not generated any revenues from sales of FMX101 or FMX102. We do not expect to commercially launch FMX101 or FMX102 or generate any revenues from sales before 2017, after completing their development and clinical testing, obtaining approvals for their marketing in the U.S. and conducting preliminary onsite training and hands-on demonstrations in selected dermatological clinics throughout the U.S. Our ability to generate revenues from sales will depend on the successful commercialization of FMX101 and FMX102.

As of June 30, 2014, we had generated cumulative revenues of approximately $14.7 million under development and license agreements, of which approximately $14.1 million was development service payments and approximately $0.6 million was contingent payments. We may become entitled to additional contingent payments in an aggregate amount of up to $30 million, subject to achievement of the applicable clinical results by our licencees, of which $16 million are sales-related contingent payments. In light of the current phase of development under these agreements, we do not expect to receive significant payments in the near term, if at all. We are also entitled to royalties from net sales or net profits generated by the various products to be developed under these agreements, if they are successfully commercialized. In those development and license agreements in which royalties are based on net sales, their rate ranges from 3% to 8.5%, and in the agreement in which royalties are based on net profits, their rate is 6%.

Cost of Revenues

Cost of revenues includes costs and expenses we incur in supplying services to our licensees under our development and license agreements with them. These services include design and development of product prototypes, performance of in-vitro studies and other lab tests, compiling project reports and recommendations and

carrying out other tasks related to such efforts. Our services to licensees do not include development work beyond the prototype stage, clinical trials or pursuit of regulatory approval, which are the responsibility and at the expense of each licensee.

Accordingly, our cost of revenues includes payroll and other payments on behalf of the employees and consultants assigned to these projects; laboratory services related to the studies we perform on behalf of the licensees; rent and office maintenance costs related to the use of our facilities and infrastructure, utilities and other overhead services in connection with the projects performed for the licensees.

The expenses that currently make up our cost of revenues are primarily fixed, as is evident from their moderate decrease from $491,000 for the twelve months ended December 31, 2012 to $453,000 for the twelve months ended December 31, 2013 and moderate increase from $257,000 for the six months ended June 30, 2013 to $293,000 for the six months ended June 30, 2014. As a result, our cost of revenues is not expected to vary substantially unless and until such time as we obtain regulatory approval for our lead product candidates and begin serial production of such products, whether internally or through third party manufacturers, at which point we expect our cost of revenues to grow along with the growth of our sales and inventory needs.

Cost of revenues as a percentage of revenues for the twelve months ended December 31, 2012 and December 31, 2013 were 45.2% and 32.2%, respectively. Since our costs of revenues are primarily fixed expenses, the 13.0% decrease in cost of revenues as a percentage of revenues resulted primarily from the increase of $318,000 in our revenues, which was driven primarily by our development service payments in 2013 and 2012.

A change in the outcome of any of these variables with respect to the development of FMX101, FMX102 or our other product candidates could result in a significant change in the costs and timing associated with their development. For example, if the FDA or foreign regulatory authority were to require us to conduct preclinical studies and clinical trials beyond those which we currently anticipate for the completion of clinical development of our product candidates, or if we experience significant delays in enrollment in any clinical trials, we could be required to expend significant additional financial resources and time on the completion of the clinical development.

Research and development expenses consist primarily of:

We have managed to finance our research and development operations and expenses without the aid of government grants, other than a loan in the amount of approximately $450,000 received from the Israel-U.S. Bi-national Industrial Research and Development Foundation, or BIRD, in 2008. Accordingly, we are not subject to the provisions of the Law for Encouragement of Research and Development in Industry, 5744-1984, nor to any directives issued by the Israeli Office of the Chief Scientist.

Selling , general and administrative expenses

Our selling, general and administrative expenses consist principally of:

As part of our growth strategy, we have begun building up our dedicated U.S. marketing and business development team and infrastructure, and we intend to further increase such U.S. infrastructure, as well as expand our marketing effort to new markets. We therefore expect selling and marketing expenses to increase in absolute terms and as a percentage of our revenues. We expect that our general and administrative expenses will also increase in the future as our business expands and we incur additional general and administrative costs associated with being a public company in the U.S., including compliance under the Sarbanes-Oxley Act of 2002 and rules promulgated by the SEC. These public company-related increases will likely include costs of additional personnel, additional legal fees, accounting and audit fees, directors’ liability insurance premiums and costs related to investor relations. In

addition, upon the completion of this offering, and subject to certain conditions, we have agreed to pay bonuses of up to $500,000 in the aggregate to certain of our executive officers for their contribution to completing this offering.

Finance Expenses

Finance expenses consist primarily of convertible loans interest, changes in fair value of embedded derivatives and the beneficial conversion feature, or BCF, of the convertible loans net of exchange rate differences. Finance income includes gains from sale of marketable securities.

Taxes on I ncome

The standard corporate tax rate in Israel for the 2014 tax year and thereafter is 26.5%, and was 25% for each of the 2012 and 2013 tax years.

We have yet to generate taxable income in Israel, as we have historically incurred operating losses resulting in carry forward tax losses totaling approximately $16.8 million as of December 31, 2013. We anticipate that we will be able to carry forward these tax losses indefinitely to future tax years. Accordingly, we do not expect to pay taxes in Israel until we have taxable income after the full utilization of our carry forward tax losses. We provided a full valuation allowance with respect to the deferred tax assets related to these carry forward losses.

Under the Law for the Encouragement of Capital Investments, 5719-1959, or the Investment Law, and other Israeli legislation, we may be entitled to certain additional tax benefits if we decide to establish a manufacturing facility in Israel and produce our products in-house. Such tax benefits may include reduced tax rates and accelerated depreciation and amortization rates for tax purposes on certain assets.

Revenues

Our total revenues increased by $1.7 million, or 586%, from $290,000 in the six months ended June 30, 2013 to $2.0 million in the six months ended June 30, 2014, due to an increase in fees paid to us by our licensees under our development service payments and a contingent payment of $600,000 from a licensee under a developement and license agreement, upon completion of a Phase II clinical trial by such licensee.

Cost of revenues

Our cost of revenues for the six months ended June 30, 2014 and June 30, 2013 was $293,000 and $257,000, respectively. The $36,000 increase in cost of revenues resulted primarily from an increase of $27,000 in payroll expenses due to an increase in the number of employees.

Cost of revenues as a percentage of revenues for the six months ended June 30, 2014 and June 30, 2013 was 14.6% and 88.6%, respectively. The 74.0% decrease in cost of revenues as a percentage of revenues resulted primarily from an increase of $1.7 million in revenues, $600,000 of which were contingent revenues that were not accompanied by any cost of revenues.

Research and Development expenses

Research and development expenses increased by $239,000, or 51.6%, from $463,000 in the six months ended June 30, 2013 to $702,000 in the six months ended June 30, 2014. The increase in research and development expenses resulted primarily from an increase of $193,000 in payroll expenses and an increase of $55,000 in professional consulting costs related to development activity, primarily due to the increase in the number of employees and consultants in preparation for our phase III clinical trials for FMX101 and FMX102.

Selling, General and administrative expenses

Selling, general and administrative expenses decreased by $126,000, or 12.7%, from $993,000 in the six months ended June 30, 2013 to $867,000 in the six months ended June 30, 2014. The decrease in selling, general and administrative expenses resulted primarily from a decrease of $305,000 in share-based compensation expenses, mainly to consultants, partially offset by an increase in payroll expenses of $79,000, an increase in travel expenses of $63,000 and an increase in professional accounting services expenses of $65,000 primarily due to an increase in employees and consultants hired by us in anticipation of this offering.

Finance expenses

Finance expenses, net, includes cash and non-cash components. The cash component of finance expenses, net, consists of bank fees and realized gain or loss on marketable securities. The non-cash components of our finance expenses, net, consist of (i) finance expenses on convertible loans, (ii) linkage of the BIRD foundation loan to the U.S. CPI, (iii) gain or loss from foreign currency exchange differentials, and (iv) changes in fair value of warrants. The finance expenses (or income) by cash and non-cash components are as follows:

Finance expenses, net, increased by $3.3 million, or 933%, from $350,000 in the six months ended June 30, 2013 to $3.6 million in the six months ended June 30, 2014. The increase was primarily due to an increase of $3.2 million in the finance expenses on our convertible loans.

Taxes on income

We had no income tax expenses in either the six months ended June 30, 2013 or the six months ended June 30, 2014, and we do not foresee any tax liabilities in the near future.

Comparison of the years ended December 31, 2013 and 2012

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

Revenues

Our total revenues increased by $318,000, or 29%, from $1.1 million in the year ended December 31, 2012 to $1.4 million in the year ended December 31, 2013, due to an increase in fees paid to us by our licensees under our development and license agreements.

Cost of revenues decreased $38,000, or 7.7%, from $491,000 in the year ended December 31, 2012 to $453,000 in the year ended December 31, 2013. These expenses were related to the supply of services to our licensees under our development and license agreements with them. The decrease resulted primarily from a decrease in professional consulting services by $64,000 and in rent and office maintenance services by $9,000, which were partially offset by an increase in payroll and other employment related expenses of $23,000 and in other expenses of $14,000. Cost of revenues as a percentage of revenues decreased from 45.2% in the year ended December 31, 2012 to 32.3% in the year ended December 31, 2013. The decrease resulted primarily from the fact that our cost of revenues is relatively fixed while our revenues grew by $318,000.

Research and development expenses

Research and development expenses decreased $116,000, or 9.7%, from $1.2 million in the year ended December 31, 2012 to $1.1 million in the year ended December 31, 2013. These expenses were primarily related to the development of FMX101 and FMX102, and the decrease resulted primarily from a decrease in consultancy expenses. Professional consulting costs related to non-clinical development activity decreased by $145,000 in the year ended December 31, 2013 due to completion of our Phase II clinical trial for FMX101.

Selling , General and administrative expenses

Selling, general and administrative expenses increased by $268,000, or 28.1%, from $953,000 in the year ended December 31, 2012 to $1.2 million in the year ended December 31, 2013. The increase in selling, general and administrative expenses resulted primarily from an increase of $181,000 in share-based compensation expenses, an increase in patent prosecution-related expenses of $140,000 in the year ended December 31, 2013, primarily due to an increase in success fees paid to our patent attorneys following the grant of U.S. patents in accordance with the terms of our engagement with them, and a decrease of $60,000 in professional consulting expenses.

Finance expenses

Our net finance expenses include cash and non-cash components. The cash component of our finance expenses consists of bank fees and realized gain or loss on marketable securities. The non-cash components of our net finance expenses consist of (i) finance expenses on convertible loans, (ii) linkage of the BIRD foundation loan to the U.S. CPI, (iii) gain or loss from foreign currency exchange differentials, and (iv) changes in fair value of marketable securities. The finance expenses (or income) by cash and non-cash components are as follows:

Finance expenses, net, increased by $466,000, or 76.5%, from $609,000 in the year ended December 31, 2012 to $1.1 million in the year ended December 31, 2013. The increase was primarily due to an increase of $452,000 in finance expenses on our convertible loans and a foreign currency exchange loss of $24,000 resulting from the translation of NIS balances into U.S. dollars.

Taxes on income

We had no income tax expenses in either 2012 or 2013, and we do not foresee any tax liabilities in the near future.

at a 25% discount on the applicable per share price in the event of a qualified round of equity financing, an initial public offering of our shares or a merger, acquisition, asset sale or similar deemed-liquidation event. The principal and interest under the 2012 loan agreement were also convertible at the discretion of the lender, at a discount of 25%, upon an equity financing round in excess of $2.5 million, even if not qualified. Furthermore, each lender under the 2012 loan agreement was issued, for no additional consideration, one ordinary share for each $5.84 of principal amount of its loan. As a result, we issued the lenders under the 2012 loan agreement a total of 247,897 ordinary shares, in addition to any shares that may have been issuable to them upon conversion of their loans.

In May and June of 2013 we received an additional amount of $1.5 million in convertible loans from shareholders who joined the 2012 loan agreement. In accordance with the terms of such loan agreement, we issued these joining lenders a total of 256,764 ordinary shares upon receiving their loans. The convertible loans received under the 2012 loan agreement in 2012 and 2013, collectively, are referred to as the 2012 loans.

Total liability pursuant to 2011 and 2012 loans.     The total principal amount of convertible loans outstanding and payable to all lenders under both the 2011 and 2012 loans was $5.1 million and $3.6 million as of December 31, 2013 and December 31, 2012, respectively. Of such amounts, $3.7 million and $2.8 million were recorded as a liability in our balance sheet for each of 2013 and 2012, respectively, with the remainder recorded as additional paid-in capital for each of such years. Additionally, we owed all lenders accrued interest in a total amount of $817,000 and $384,000 as of December 31, 2013 and December 31, 2012, respectively. As a result, the total amount recorded as a liability for convertible loans on our balance sheet was $4.5 million and $3.2 million as of December 31, 2013 and December 31, 2012, respectively.

Events during 2014 .    During the first quarter of 2014, we reached an agreement with certain lenders of the 2011 loans that were due to mature during that period, according to which the maturity date of those loans was deferred by one year and the interest rate was increased to 12% for the duration of the deferral period. In the second quarter of 2014, we raised approximately $8.3 million from a group of investors in an equity financing round that closed in two phases, the first on May 13, 2014 and the second on June 3, 2014, comprising $6.6 million and $1.7 million, respectively. The May-June 2014 financing round constituted a ‘qualified round’ under the 2011 and 2012 loan agreements, and consequently triggered the conversion of all loans outstanding under such agreements into equity. Accordingly, all principal amounts and accrued interest owed under the 2011 and 2012 loans, including those deferred as aforesaid, were converted in their entirety at that time into a total of 1,269,768 preferred shares and 634,884 preferred warrants. Such preferred shares and warrants will be converted into ordinary shares and ordinary warrants of the same number immediately prior to the completion of this offering, in accordance with their terms.

Cash flows

The following table summarizes our statement of cash flows for the years ended December 31, 2013 and 2012 and the six months ended June 30, 2014 and 2013:

Net cash provided by ( used in ) operating activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and measurements and changes in components of working capital. Adjustments to net income for non-cash items mainly include depreciation and amortization finance expenses on convertible loan and share-based compensation.

Net cash provided by operating activities was $570,000 in the six months ended June 30, 2014, compared to $104,000 of net cash used in operating activities in the six months ended June 30, 2013. The increase was attributable primarily to a decrease in trade receivable of $51,000 in the six months ended June 30, 2014 compared to an increase of $211,000 in the six months ended June 30, 2013 and a decrease in accounts payable and other accruals of $339,000 compared to a decrease of $26,000 in the six months ended June 30, 2013.

Net cash provided by operating activities was $228,000 in the year ended December 31, 2013, compared to $2.4 million of net cash used in operating activities in the year ended December 31, 2012. The increase was

attributable primarily to a $255,000 increase in cash, resulting from net sales of marketable securities during 2013 compared to a net investment of $816,000 in marketable securities in 2012, increase in deferred revenues of $954,000 in 2013 compared to a decrease of $438,000 in deferred revenues in 2012 and offset by an increase in trade receivable of $312,000 in 2013 compared to $58,000 in 2012.

Net cash used in investing activities

The use of cash in investing activities has been primarily related to purchase of marketable securities. Net cash used in investing activities was $9.0 milion in the six months ended June 30, 2014, compared to $23,000 in the six months ended June 30, 2013. Net cash used in investing activities was $35,000 in the year ended December 31, 2013, compared to $33,000 in the year ended December 31, 2012.

Net cash provided by financing activities

Net cash provided by financing activities was $8.2 million in the six months ended June 30, 2014, an increase of $6.7 million from $1.5 million in the six months ended June 30, 2013. The increase was attributable primarily to an equity financing round that closed in two phases, the first on May 13, 2014 and the second on June 3, 2014, comprising $6.6 million and $1.7 million, respectively, net of issuance costs, as compared to the $1.5 million in proceeds received under convertible loans in the six months ended June 30, 2013.

Net cash provided by financing activities was $1.5 million in the year ended December 31, 2013, compared to $1.8 million in the year ended December 31, 2012. The $281,000 decrease was attributable primarily to a decrease in the amount of proceeds received under convertible loans in the year ended December 31, 2013.

See “—Cash and funding sources.”

Cash and funding sources

The table below summarizes our sources of financing for the years ended December 31, 2013 and 2012:

Our sources of financing in the year ended December 31, 2013 totaled $3.6 million and consisted of (i) $1.5 million in proceeds from issuance of convertible loans and ordinary shares, and (ii) $2.1 million in cash payments received from licensees.

Our sources of financing in the year ended December 31, 2012 totaled $2.5 million and consisted primarily of (i) $1.8 million in proceeds from issuance of convertible loans and ordinary shares, and (iii) $759,000 in cash payments received from licensees.

We have no ongoing material financial commitments (such as lines of credit) that may affect our liquidity over the next five years.

Funding requirements

We believe, based on our current business plan, that our existing cash, cash equivalents and marketable securities, together with the net proceeds of this offering, will enable us to fund our operating expenses and capital expenditure requirements throughout the Phase III clinical trials for our lead product candidates, FMX101 and FMX102, which we expect to complete by 2017. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

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

For more information as to the risks associated with our future funding needs, see “Risk factors—We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, other operations or commercialization efforts.”

Contractual obligations and commitments

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

Off-balance Sheet Arrangements

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

Quantitative and Qualitative Disclosure about Market Risk

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

Foreign currency exchange risk

The U.S. dollar is our functional and reporting currency. Although a substantial portion of our expenses (mainly salaries and related costs) are denominated in Israeli shekels, accounting for 64%, 67% and 61% of our expenses in the six months ended June 30, 2014 and the years ended December 31, 2013 and 2012, respectively, almost all our revenues were generated under agreements denominated in U.S. dollars and our share issuance and convertible loan agreements, which are the main source of our financing, are denominated in U.S. dollars. Furthermore, while we anticipate that a portion of our expenses, principally salaries and related personnel expenses in Israel, will continue to be denominated in shekels, we expect to incur an increasing amount of expenses in U.S. dollars as we expand our operations in the U.S. We also have expenses, although to a much lesser extent, in other non-dollar currencies, in particular the Euro. Moreover, for the next few years we expect that the substantial majority of our revenues, if any, will be denominated in U.S. dollars from the sale of FMX101 and FMX102 in the U.S. Having the substantial majority of our revenues denominated in U.S. dollars while having a substantial portion of our expenses denominated in Israeli shekels and other non-U.S. currencies exposes us to risk, associated with exchange rate fluctuations vis-à-vis the U.S. dollar. See “Risk Factors—Exchange rate fluctuations between the U.S. dollar and the Israeli shekel may negatively affect our earnings.”

A devaluation of the shekel in relation to the U.S. dollar has the effect of reducing the U.S. dollar amount of our expenses or payables that are payable in shekels, unless those expenses or payables are linked to the U.S. dollar. Conversely, any appreciation of the shekel in relation to the U.S. dollar has the effect of increasing the U.S. dollar

value of our unlinked shekel expenses, which would have a negative impact on our profit margins. In 2013, the value of the shekel appreciated in relation to the U.S. dollar by 6.5%, the effect of which was compounded by inflation in Israel at a rate of approximately 1.8%. In 2012, the value of the shekel appreciated in relation to the U.S. dollar by 2.7%, the effect of which was compounded by inflation in Israel at the rate of approximately 1.6%.

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

The following table presents information about the changes in the exchange rates of the shekel against the U.S. dollar and changes in the exchange rates of the Euro against the U.S. dollar:

As we begin clinical trials of FMX101 and FMX102 in the U.S., we will continue to monitor exposure to currency fluctuations. We do not currently engage in currency hedging activities in order to reduce this currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks may include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but we may not be fully protected against material foreign currency fluctuations.

Inflation-related risks

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

Internal Control over Financial Reporting

We identified a material weakness over our financial reporting as of December 31, 2013. As defined in Regulation 12b-2 under the Securities Exchange Act of 1934, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented, or detected on a timely basis. Specifically, we determined that we do not have sufficient qualified staff to provide for effective control over a number of aspects of our accounting and financial reporting process under U.S. GAAP as described below. This material weakness led to several errors in the presentation of our financial results for the years 2013 and 2012 under U.S. GAAP.

More specifically, we detected errors in the accounting of our convertible loans and the classification of patent registration expenses, as further described in Note 2s to our audited financial statements included elsewhere in this prospectus. These errors resulted in us restating our financial statements for each of the years 2013 and 2012 in relation to long term liabilities, total shareholders’ capital deficiency, research and development expenses, selling, general and administrative expenses, finance expenses and loss for the period.

We have retained an international public accounting firm with specific expertise in U.S. GAAP and SEC rules and regulations to assist us in the preparation and review of our financial statements. We are further seeking to hire additional qualified personnel with U.S. GAAP accounting and reporting experience, and intend to provide enhanced training to existing financial and accounting employees on related U.S. GAAP issues. However, the implementation of these initiatives may not fully address any material weakness or other deficiencies that we may have in our internal control over financial reporting. See “Risk Factors—Risks Related to Our Business and Industry—We have identified a material weakness in our internal control over financial reporting, which resulted in the restatement of our financial statements. We may also fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002. This may result in a further deficiency in our internal controls over financial reporting, as well as sanctions or other penalties that would harm our business.”

As an “emerging growth company,” as defined in the JOBS Act, we may take advantage of 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 SOX (and the rules and regulations of the SEC thereunder). When

these exemptions cease to apply, we expect to incur additional expenses and devote increased management effort toward ensuring compliance with them. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.

Application of Critical Accounting Policies and Estimates

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

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

Research and development expenses

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

Share-based compensation

We account for our share-based compensation for employees in accordance with the provisions of ASC 718, Compensation—Stock Compensation, U.S. GAAP “Stock-based Payment,” which requires us to measure the cost of share-based compensation based on the fair value of the award on the grant date.

Option Valuations

We selected the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value of our share-based awards. The resulting cost of a share incentive award is recognized as an expense over the requisite service period of the award, which is usually the vesting period. We recognize compensation expense over the vesting period using the straight-line method, and classify these amounts in the financial statements based on the department to which the related employee reports.

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

estimate, the expected term for grants to employees and directors is determined based on the midpoint between the available exercise dates (the end of the vesting periods) and the last available exercise date (the contracted expiry date). The expected term for grants to consultants and service providers is determined based on the contractual life of the options.

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

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

The following table presents the grant dates, number of underlying shares and related exercise prices of options granted to employees and non-employees since January 1, 2013, as well as the estimated fair value of the underlying ordinary shares on the grant date.

Based on the assumed initial public offering price of $11.00 per share, the midpoint of the range set forth on the cover page of this prospectus, the intrinsic value of the awards outstanding as of June 30, 2014 was $8.2 million, of which $6.9 million related to vested options and $1.3 million related to unvested options.

Valuation of our ordinary shares

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

May and July 2013 Awards .    On May 8 and July 9, 2013, we granted options to purchase 71,875 ordinary shares to a service provider (which is also a shareholder) under the 2009 Plan. Our board of directors set an exercise price of $1.92 per share for these options based on the previous grants from 2012. In preparation for our initial public offering, we performed in May 2014 a retrospective valuation, with the assistance of a third party valuation firm, of our ordinary shares as of May 2013, which determined that their fair value at that time was $6.88 per share. For the purpose of determining our enterprise value, we used the discounted cash flow, or DCF, method. Under the DCF method, our projected after-tax cash flows available to return to holders of invested capital were discounted back to present value, using the discount rate. Since it is not possible to project our after-tax cash flows beyond a limited number of years, the DCF method relies on determining a “terminal value” representing the aggregate value of the future after-tax cash flows after the end of the period for which annual projections are possible. The discount rate, known as the weighted average cost of capital, or WACC, accounts for the time value of money and the appropriate degree of risk inherent in a business. The DCF method requires significant assumptions, in particular, regarding our

projected cash flows and the discount rate applicable to our business. For the purpose of that valuation we applied a discount rate of 22%, and projected after-tax cash flows based on a 64.55% probability of the realization of the scenario in which we receive FDA approval for FMX101 and FMX102.

Having determined our enterprise value, we allocated it among the different elements of our share capital using the option pricing method, or OPM. Under the OPM, each security – ordinary shares, convertible loans and options – is treated as a call option having an exercise price based on the amount of debt and optimal conversion price. The value of the call options is determined using the Black-Scholes option pricing model. The Black-Scholes model requires significant assumptions, in particular, the time until investors in our company would experience an exit event and the volatility of our ordinary shares (which we determined based on the volatilities of public companies with business and financial risks comparable to our own). Under the OPM, we assumed a liquidity event in 1.06 years resulting in a fair value per ordinary share of $6.88. We applied such valuation to the option grant of July 2013 and determined that the fair value of our ordinary shares at that time was also $6.88 per share, as there had been no material change in our business, financial condition or prospects, positive or adverse, between these two dates.

March 2014 Awards .    On March 31, 2014, we granted additional options to purchase 131,250 ordinary shares to certain of our officers and employees under the 2009 Plan. Our board of directors set an exercise price of $1.92 per share for these options based on the previous grants from 2013, as described above. The board further resolved to grant to an IPO consultant up to 31,250 options to purchase ordinary shares upon completion of our initial public offering, depending on the gross proceeds raised in such offering, as further specified in his consultancy and option agreement. The options are exercisable at a price of $1.92 per share for a period of six years from completion of the initial public offering.

June 2014 Awards.      On June 9, 2014, we granted additional options to purchase 37,500 ordinary shares to certain of our officers and employees in the U.S. under the 2009 Plan. These options are exercisable for a period of 10 years. On that date, our board of directors further resolved to grant to two consultants options to purchase 31,250 ordinary shares. These options are exercisable for a period of six years. Our board of directors set an exercise price of $7.98 per share for these options based on the share price as of the last private placement round that closed in May and June of 2014, or the 2014 financing round.

In July 2014 we performed a retrospective valuation of our ordinary shares as of March and June 2014, with the assistance of a third party valuation firm, which determined that their fair value at that time was $4.80 per share. We considered the fair value of the ordinary shares based on a number of objective and subjective factors, consistent with the methodologies outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. In particular, we considered three possible scenarios under the probability-weighted expected return method, or PWERM. The first two scenarios were conducting an IPO in September 2014 or conducting an IPO in June 2015. The third scenario was dissolution of the company. We did not consider our acquisition to be a likely scenario. We attributed a probability of approximately 30% to the September 2014 IPO scenario. The probabilities of the other scenarios were estimated by back solving to the amount of $8.28 million invested by a group of new investors and several of our existing shareholders in the 2014 financing round. The probabilities implied from the above mentioned back solving were estimated at approximately 25% for the June 2015 IPO scenario and 45% for the dissolution scenario. In assessing the likely valuations in the case of an IPO, we considered market data for companies in our industry, in particular IPOs and transactions where the target entities were considered our peers. We also considered information received from the underwriters regarding our expected value in this offering. We note that the new investors in the 2014 financing round, who provided the majority of the investment amount ($7.28 million out of a total investment of $8.28 million), had no prior affiliation with us, and our negotiations with them were held at arm’s length and reflected market terms, while the existing shareholders who participated in the 2014 financing round did so by exercising their preemptive rights after the terms of the investment had been finalized. The price of each unit in the 2014 financing round, consisting of one preferred share and one preferred warrant, was $6.35. On this basis, we concluded that the individual components of the PWERM valuation and the probabilities of their occurrence, as well as the resulting value of one ordinary share of $4.80, were reasonable.

At the end of August 2014, in consultation with the underwriters, we determined our anticipated offering price range to be $10.00 to $12.00 per share. As of the date of our most recent option grant in June 2014, we had determined the fair value of our ordinary shares to be $4.80 per share. The primary reason for the increase in fair value was the increased likelihood of an IPO which was driven in part by two recent events. First, in a pre-IND meeting held with the FDA on July 30, 2014, the FDA confirmed that our Phase II clinical trial of FMX101 for

moderate-to-severe acne was sufficient as a guide to design our Phase III trials of FMX101 without conducting further Phase II clinical trials. This eliminated our concern that our Phase II clinical trial of FMX101, which we conducted without the benefit of the FDA’s advance input on the trial’s protocol design and statistical analysis plan, may not be acceptable to the FDA, and that it may require us to repeat it. This event improved the likelihood of us successfully completing the development of FMX101 and achieving regulatory approval for its marketing in the United States. Second, during June and July 2014, we effectively launched the operations of our U.S. subsidiary, Foamix Pharmaceuticals Inc., and began taking advantage of the inputs and services of the three key executives and two senior consultants it had recently engaged for this purpose. These executives and consultants possess significant experience in regulatory matters, clinical trials and marketing and sales operations in the dermatology space, and considerably boost our development and commercialization capabilities in the United States. We previously had no formal presence in the United States, and the successful assimilation of the U.S. team enhances our ability to succeed in our principal target market. Had the IPO scenario, which reflected these and other factors, been assigned a 100% probability in June 2014, taken together with a general increase in market prices of comparable publicly traded companies, the fair value of our ordinary shares before any discount for lack of marketability would have been within the anticipated offering price range.

We believe that the factors described above are the primary factors accounting for the increase in the fair value of our ordinary shares from June 2014 to the date of our IPO. Although we believe that it is reasonable to expect that the completion of our IPO will add value to our ordinary shares for the reasons described above and because they will have increased liquidity and marketability, the amount of such additional value cannot be measured or projected with precision or certainty.

Future option awards.      Following the completion of our initial public offering and the listing of our shares on the NASDAQ Global Market, the determination of the fair market value of our ordinary shares for purposes of setting the exercise price of future option awards or other share-based compensation to employees and other grantees will no longer require good faith estimates by our board of directors based on various comparisons or benchmarks.

Accounting treatment of the loans

2011 C onvertible L oans .     The automatic conversion feature in the 2011 convertible loans was bifurcated and accounted for as an embedded derivative. Upon an automatic conversion, the conversion feature provided to the loan holders the right to receive a variable number of the most senior class of shares at a value which was based on a fixed monetary amount (i.e., based on the discount mechanism). Such feature was bifurcated from the loan and accounted for as an embedded derivative in our balance sheet on a combined basis with the related host contract. The loans were measured at amortized costs using the effective interest rate method.

2012 C onvertible L oans .     The automatic conversion feature in the 2012 convertible loans was bifurcated and accounted for as an embedded derivative measured initially and subsequently at fair value with changes in fair value recorded as finance expenses. Upon an automatic conversion, the conversion feature provided to the loan holders the right to receive a variable number of the most senior class of shares at a value which was based on a fixed monetary amount. Such feature was bifurcated from the loan and accounted for as an embedded derivative. The bifurcated embedded derivative was presented in our balance sheet on a combined basis with the related host contract.

We allocated the proceeds from the issuance of a unit consisting of 2012 convertible loans along with ordinary shares between the convertible loans and the ordinary shares based on their relative fair values at the issuance date of the unit. We then recorded the embedded derivative feature based on its fair value at the issuance date, and the remaining amount (i.e., the proceeds allocated to the convertible loans less the fair value of the embedded derivative feature) was attributed to the convertible loans.

In accordance with ASC 470-20, “Debt with Conversion and Other Options,” we determined that a BCF existed at the issuance date of the 2012 convertible loans. The BCF was recorded in equity and the loans net of the amount of BCF assigned to them are measured at amortized costs using the effective interest rate method.

Accordingly, we allocated the proceeds from the 2012 convertible loans between these components, as follows:

Warrants

On May 13 and June 3, 2014, we completed a private placement of preferred shares with a group of new investors and several existing shareholders, which we refer to as the 2014 financing round. As part of the 2014 financing round, we granted the participants in the private placement, as well as the lenders whose loans were converted as a result of it, warrants to purchase a total of 1,968,894 preferred shares at $7.62 per share, fully vested and exercisable at any time until the fourth anniversary of the date of grant. The warrants will automatically expire upon closing of an M&A transaction, as defined in our articles of association, at any time after this offering. The warrants can be exercised for cash or on a cashless ‘net issuance’ basis, and will automatically convert into warrants to purchase ordinary shares upon the completion of this offering. The exercise price stated above assumes the occurrence of a “triggering event”, as defined in our articles of association (namely, the completion of this offering at a per share price reflecting a pre-money company valuation of less than $200 million), and may be further reduced if the per share price in this offering is lower than the current exercise price of the warrants by 16.67% or more, as adjusted for splits or consolidations. As a result of this down-round protection, the warrants were classified as liabilities in our balance sheets for the period ended June 30, 2014. The liability was measured both initially and in subsequent periods at fair value, with changes in fair value charged to finance expenses, net, as explained in Note 3 to the financial statements. We determined the fair value of these warrants by using a probability-weighted expected return method valuation model, based on the following scenarios and assumptions:

Accounting treatment of the preferred shares and warrants

We classified our preferred shares outside of permanent equity, as there was no cap on the number of ordinary shares into which they were convertible and their conversion could have been triggered by certain events that were outside of our control.

The proceeds from the 2014 financing round in the amount of $8.3 million have been allocated first to the fair value of the warrants in the amount of $1.41 million, with the remaining proceeds in the amount of $6.87 million allocated to the issuance of the preferred shares.

The applicable issuance costs, amounting to $157,000, have been allocated proportionately to the proceeds from the 2014 financing round between the preferred shares and the warrants as aforesaid. The fair value of 25,035 warrants that were issued for no consideration to certain investors in the 2014 financing round, amounting to $34,000, were considered part of these issuance costs and were allocated between the preferred shares and the warrants in the same manner. Costs allocated to the issuance of the preferred shares have been recorded in the balance sheet as a reduction of the preferred shares’ allocated amount, and costs allocated to the issuance of warrants has been recorded in the statements of operations as finance expenses.

Deferred Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is recognized to the extent that it is more likely than not that the deferred taxes will not be realized in the foreseeable future. We have provided a full valuation allowance with respect to its deferred tax assets.

Recent Accounting Pronouncements

There are no U.S. GAAP standards as issued by the FASB that are effective for the first time for the financial year beginning on or after January 1, 2014, that would be expected to have a material impact on our financial position. See Note 2r to our annual financial statements.

JOBS Act Exemptions

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

We believe the efficacy of FMX101 coupled with the absence of reported systemic drug-related side effects has the potential to position it as the new standard of care for moderate-to-severe acne, provided we are able to obtain regulatory approval. Furthermore, we may pursue an indication for mild acne given the efficacy and safety shown in our Phase II clinical trial of FMX101 as well as its convenience of use. We expect to develop FMX101 through the FDA’s 505(b)(2) regulatory pathway and commence Phase III clinical trials in the first half of 2015 according to established FDA efficacy endpoints for acne trials, namely a reduction of lesion counts and investigator’s global assessment.

The following photographs, taken over 12 weeks of treatment, show the effect of FMX101 on a severe acne patient participating in our Phase II clinical trial who responded positively to treatment.

FMX102 for impetigo.     We are also developing FMX102, a 1% minocycline foam product candidate for the treatment of impetigo, including cases of impetigo caused by MRSA. Impetigo is a highly contagious bacterial skin infection that primarily afflicts preschool-aged children, and is typically caused by staphylococcus aureus, including MRSA. It typically results in red sores and lesions on the face, neck, arms and legs. According to Symphony Health Solutions, the U.S. prescription drug market for impetigo was estimated to be approximately $340 million for the 12 months ended March 31, 2014, the vast majority of which was attributed to Bactroban and other mupirocin-based topical products, which are the current standard of care for impetigo. In 2012, we completed a dose-ranging Phase II clinical trial in Israel with 32 pediatric patients with at least two impetigo lesions. Of those patients, 11 had confirmed MRSA infection. In our Phase II clinical trial, patients receiving FMX102 twice daily experienced an 81.3% success rate in only three days and a 100% success rate in 14 days. Moreover, all MRSA-infected patients were bacteriologically cured after seven days of treatment. While we have not conducted head-to-head trials, this contrasts with the results reported on the product label for Bactroban, which states that it achieved clinical efficacy rate of between 71% and 96% after eight to 12 days of three-times daily applications. We expect to develop FMX102 through the FDA’s 505(b)(2) regulatory pathway and commence Phase III clinical trials in mid-2015 after discussions with the FDA to establish an acceptable trial design.

Additional product candidates.     Using our proprietary technology and foam platforms, we are developing several other product candidates, the most notable of which are FMX101 for rosacea, for which we expect to commence Phase II clinical trials in late 2015, and FDX104 for chemotherapy-induced rashes, for which we expect to commence Phase I/II clinical trials in Israel in late 2014. Our product candidate pipeline also includes early-stage foam formulations of various drugs for the treatment of common dermatological indications, including antibacterial drugs, antifungal drugs, corticosteroids and immunomodulators.

Based on the results of FMX101 for moderate-to-severe acne, we are pursuing an additional indication for FMX101 in rosacea. This chronic skin disorder is characterized by facial redness and inflammatory lesions, afflicting about 14 million people in the U.S. alone. The most common treatments for rosacea are oral minocycline and doxycycline, such as Oracea, which has been shown in its clinical trials to reduce inflammatory lesions by approximately 50% in 16 weeks. Based on our clinical data for acne and the dermatological similarities between rosacea lesions and inflammatory acne lesions, we intend to conduct initial clinical trials in the belief that FMX101 will be a safe and effective treatment for rosacea.

FDX104 is a topical foam formulation of the antibiotic doxycycline for the treatment of severe acne-like rashes induced by chemotherapy. Between 45% and 100% of patients taking epidermal growth-factor receptor inhibitor, or EGRFI, drugs, such as Erbitux and Vectibix, are affected by these severe acne-like rashes, which typically occur in cosmetically sensitive areas such as the face and upper trunk. These symptoms cause approximately 76% of all such patients to modify their dosage of EGFRI drugs and approximately 32% to stop treatment altogether. While there are no approved drugs for these rashes, oral doxycycline and minocycline are currently used ‘off-label’ as the standard of care, with significant drawbacks, including systemic side effects and potential adverse drug-drug interaction with

EGFRI drugs. Based on the results of the FMX101 Phase II clinical trial for moderate-to-severe acne, we intend to conduct initial clinical trials for FDX104 which we believe will show that our topical form of doxycycline, which has pharmacologic attributes and physicochemical characteristics similar to minocycline, will effectively reduce these rashes with virtually none of the adverse systemic side effects or drug-drug interaction of oral therapy. We believe our solution will improve the quality of life of these cancer patients while reducing the rate of abandonment of the EGFRI drugs. Given a patient population of less than 200,000, FDX104 may be eligible for orphan drug designation.

Product candidate pipeline.     The following chart provides a summary of the developmental pipeline for our four lead product candidates:

Proprietary, innovative technology comprising different foam platforms.     We have independently developed a series of proprietary foam platforms, each having unique pharmacological features and characteristics, which enable us to formulate, stabilize and deliver a wide variety of drugs directly to their target site. For example, minocycline is known to be very unstable and rapidly degrades in the presence of most commonly-used formulation components. Utilizing our proprietary technology, we successfully stabilized minocycline in a novel topical foam formulation. Our choice to develop foams over other platforms stems from foam’s significant advantages over alternative delivery systems, being that it spreads easily and can be applied to large skin areas, is readily absorbed, avoids a messy residue and is highly tolerable due to its use of gentle ingredients. All ingredients used in our minocycline foam are listed in the FDA Inactive Ingredient Database, or IID, and are used in concentrations that do not exceed the maximum concentrations given in the IID. Our foam platforms are generally designed to be suitable for dermal, vaginal, nasal and other applications and to treat a range of diseases and disorders.

Development and license agreements.     In addition to our product candidates, we have entered into development and license agreements with various pharmaceutical companies such as Bayer, Merz and Actavis, combining our foam technology with a drug selected by the licensee to create new products with improved efficacy and ease-of-use. Each license agreement entitles us to service payments, contingent payments and royalties from sales of any new products that are commercialized. Each agreement is exclusive only to the specific drug that is licensed, leaving us the rights to commercialize and develop products with other drugs for the same indications using our proprietary foam technology while also allowing the licensee to apply the new products to any indication with its specific drug. The prospective products under these various agreements are currently in pre-clinical Phase II, Phase III and pre-approval stages. To date, none of these prospective products has been commercialized.

Patents.     In relation to FMX101, FMX102 and FDX104, we currently have one granted patent in the U.S. which is expected to remain in effect until 2030. We also have several pending patent applications relating to FMX101, FMX102 and FDX104 in the U.S., as well as one in each of Australia, Brazil, Canada, China, the European Union, India, Israel and Mexico. As of August 31, 2014, we had 70 granted patents and 114 pending patent applications worldwide. In the U.S., we have established, as of August 31, 2014, a patent portfolio of 31 granted patents and 60 pending patent applications describing and claiming our multiple foam-based platforms and other technology. Additionally, outside of the U.S., we had 39 granted patents and 54 pending patent applications as of August 31, 2014.

About us.     We were founded in 2003 and are headquartered in Israel, with operations in the U.S. led by a team of executives with vast experience in regulatory matters, clinical trials and marketing and sales operations in the dermatology space. Our founders and executive management team have held senior positions at leading healthcare

companies, as well as significant entrepreneurial experience. Members of our executive management team have played key roles at large pharmaceutical companies including Pfizer Inc., Teva Pharmaceutical Industries Ltd., Warner Chilcott Company, Inc., LEO Pharma A/S, Macrocure Ltd., Biotechnology General Israel Ltd., a wholly-owned subsidiary of Ferring Pharmaceuticals, and Savient Pharmaceuticals Inc.

Lead Product Candidates

FMX101 for Treatment of Acne

Our lead product candidate, FMX101, is a novel topical foam formulation of minocycline for the treatment of moderate-to-severe acne. FMX101 is a 4% minocycline foam that delivers minocycline directly to the sebaceous glands in the pilosebaceous units (skin structures also consisting of a hair follicle) where both inflammatory and non-inflammatory acne lesions originate, resulting in significantly improved efficacy and speed.

Market opportunity:     Acne is characterized by areas of scaly red skin, non-inflammatory blackheads and whiteheads, inflammatory lesions, papules and pustules and occasionally boils and scarring. It affects approximately 40 to 50 million people in the U.S. alone, of whom approximately 10 million suffer from moderate-to-severe acne. For most people, acne diminishes over time and tends to disappear, or at the very least to decrease, by age 25. There is, however, no way to predict how long it will take for acne to disappear entirely, and some individuals continue to suffer from acne well into their 30s, 40s and beyond. Though not life-threating, acne inflicts significant trauma and burden on those suffering from it. In addition to carrying a substantial risk of permanent facial scarring, it causes psychological strain, social withdrawal and lowered self-esteem, sometimes to the point of failure in school and work. Early and aggressive treatment is therefore advocated to lessen the overall long-term impact.

According to Symphony Health Solutions, a leading healthcare market research and analysis company, the U.S. market for branded prescription drugs for acne was estimated to be approximately $2.6 billion for the 12 months ended March 31, 2014, of which $1 billion was attributed to oral antibiotics, and the remaining $1.6 billion was attributed to topical drugs which are used to treat mild acne. Solodyn, a branded oral minocycline, the current standard of care for moderate-to-severe acne, accounted for nearly one half of the total branded oral market for this indication. Generic (non-branded) oral prescription drugs for acne represent an additional potential market.

The charts below show the respective market shares of the oral branded prescription acne drug market and the topical branded prescription acne drug market according to total number of prescriptions. ⁽¹⁾

There are approximately 14,000 registered dermatologists in the U.S., of which approximately 4,500 generate nearly 80% of prescriptions for acne treatments. As such, we believe we will be able to efficiently cover this customer base with a relatively small dedicated sales force of approximately 75 representatives. We intend to selectively target key opinion leaders in the dermatology community through a combination of professional conferences, publications and marketing efforts. We also plan to work toward having FMX101 added as “recommended for use” in influential clinical guidelines and treatment protocols for moderate-to-severe acne. We expect these steps will trigger rapid and widespread recognition and adoption of our product once we obtain FDA approval.

The market segment for aesthetic dermatology in general, and for indications such as acne in particular, is especially attractive because patients are highly motivated and more willing to pay out-of-pocket for treatments that will relieve them of the negative aesthetic aspects of the condition. As a result, we believe that patients will tolerate less favorable reimbursement schemes than they would when paying for drugs for other indications. We also believe FMX101 can expand the overall acne market beyond the current patient base, by attracting new patients who prefer a more tolerable treatment and who currently avoid medication for their condition altogether, due to the unsatisfactory results of their previous treatment methods.

As shown in the charts below, the markets for oral and topical branded prescription acne drugs are heavily weighted towards commercial reimbursement, generally, reimbursement through private insurance rather than government assistance, with 72% of all prescriptions for branded oral acne drugs and 81% of all prescriptions for branded topical acne drugs being commercially reimbursed or paid for in cash during May 2014. We believe that this reimbursement characteristic increases the likelihood of formulary acceptance and reduces our exposure to negative pressure on net sales margins of FMX101 for moderate-to-severe acne, if regulatory approval is obtained.

Payer types, oral and topical branded prescription acne drugs, May 2014. ⁽¹⁾

Limitations of current standard of care for acne:     Oral minocycline, such as Solodyn, is the current standard of care for moderate-to-severe acne. According to its product label, Solodyn did not demonstrate any effect on non-inflammatory acne lesions and reduced inflammatory lesions by 44% over the 12 week treatment period. According to its product label, the most common adverse systemic side effects of Solodyn include diarrhea, dizziness, drowsiness, indigestion, lightheadedness, loss of appetite, nausea, sore mouth, throat or tongue and vomiting. Additionally, there are uncommon but severe side effects of Solodyn such as severe allergic reactions, bloody stools, blurred vision, change in the amount of urine produced, fever, chills or sore throat, hearing problems, joint pain, muscle pain or weakness, rectal or genital irritation, red, swollen, blistered or peeling skin, ringing in the ears, seizures, severe or persistent headache, severe skin reaction to the sun, severe, watery diarrhea, stomach cramps or pain, swollen glands, symptoms of pancreatitis, trouble swallowing, unusual bruising or bleeding, unusual tiredness or weakness, vaginal irritation or discharge, white patches in the mouth and yellowing of the skin or eyes.

In 2009, the FDA added oral minocycline to its Adverse Event Reporting System, a list of medications under investigation by the FDA, due to its severe side effects. In 2011, we conducted a blind survey of 40 U.S. dermatologists. The results of the survey revealed that 90% of the dermatologists surveyed who prescribed oral minocycline were concerned about its side effects, and 76% of these dermatologists stated they would prefer prescribing a topical minocycline drug over an existing oral medication, assuming the topical treatment was safe, effective and approved by the FDA.

FMX101 clinical results:     We conducted a randomized, double-blind, dose-ranging, controlled Phase II clinical trial in Israel over 12 weeks with 150 patients between 12 and 25 years old with a mean age of approximately 16.5 years, each suffering from at least 20 inflammatory and 25 non-inflammatory facial lesions. The patients were randomly divided into three groups of 50 patients each, with one group receiving a 1% concentration of our minocycline foam, a second group receiving a 4% concentration and a third control group receiving our foam vehicle without minocycline, which we refer to as the vehicle. Each patient received one application daily before bedtime.

The primary efficacy endpoints of the trial were:

The trial was completed in 2013 and showed a dose-dependent effect that was statistically significant for both primary endpoints of the trial, namely reduction in inflammatory and non-inflammatory lesions and decrease of the IGA. Notably, the effect on inflammatory lesions became statistically significant in the 4% dosage group after as little as three weeks of therapy, and the full therapeutic effect of an approximately 71% reduction in inflammatory lesions was reached in that group after six weeks of treatment. The effect on non-inflammatory lesions also became statistically significant after three weeks of therapy, with the full therapeutic effect of an approximately 73% reduction in non-inflammatory lesions reached after 12 weeks of treatment. Patients in the vehicle-only treatment group who were treated with the vehicle also showed a statistically and clinically significant reduction in inflammatory lesions. We believe that this is due to the ability of our foam to dissolve sebum, which has been demonstrated in preclinical testing. The build-up of sebum secreted by the sebaceous glands creates the substrate on which acne bacteria thrive, and its removal expedites the bacteria’s elimination.

The percent of patients’ IGA where the scores were “clear” or “almost clear” at the completion of the trial was 53% in the 4% dosage group, compared with 37% in the 1% dosage group and 20% in the vehicle-only treatment. The safety and tolerability profile of the drug was also favorable, with no reported drug-related systemic side effects. The cases of skin reaction in the trial were few, mild and transient, with all reactions subsiding by week 12 of treatment, and there was equal incidence of skin reaction in all three groups. Based on this data, we expect to proceed to Phase III clinical trials with the 4% formulation of FMX101 for moderate-to-severe acne.

The following diagrams and table show the reduction of inflammatory and non-inflammatory lesions from baseline and over the trial period for the 4% dosage, 1% dosage and vehicle-only treatment groups. Although percentage change was a secondary endpoint of the trial, it is the metric typically presented in the acne industry.

Additionally, in questionnaires filled out upon completion of the trial, 86% of the patients receiving the 4% dosage rated the drug as “very-highly” or “highly” effective compared to drugs they had formerly used, 98% of all patients were generally satisfied with the ease of use of the foam and 92% of all patients indicated they preferred the foam-based treatment over alternative topical products they had used in the past.

While we did not file a formal application for an investigational new drug, or IND, with the FDA in connection with the FMX101 Phase II clinical trial, the trial was conducted in compliance with the International Conference of Harmonization, or ICH, good clinical practice, or GCP, guidelines and applicable Israel Ministry of Health regulations. The trial protocol complied with the procedures, criteria and endpoints specified by the FDA’s 2005 draft industry guidance for acne trials. Because minocycline, the active ingredient in FMX101, is a well-known drug with an established safety profile, the ethical committee for our Phase II clinical trial and the Israeli Ministry of Health allowed us to conduct Phase II clinical trials of FMX101 without our having first conducted a Phase I clinical trial.

Next steps.     We plan to file an application for an IND under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which would allow us to obtain approval of a new drug application, or NDA, that includes investigations of safety and efficacy that were not conducted by us but for which the FDA has issued an approval. This approach results in a relatively less expensive and faster process than traditional regulatory paths. Furthermore, in a pre-IND meeting with the FDA, the FDA confirmed that our Phase II clinical trial of FMX101 for moderate-to-severe acne was sufficient as a guide to design our Phase III trials of FMX101 without conducting further Phase II clinical trials. Using the FDA’s 505(b)(2) regulatory pathway, we plan to undertake two independent Phase III clinical trials of FMX101 for moderate-to-severe acne commencing in mid-2015. The Phase III clinical trials will be conducted primarily in the U.S. and will include two treatment groups, with one group receiving FMX101 in a 4% concentration and the other receiving the foam vehicle alone. The trials will be double-blinded and placebo-controlled, and their protocols and endpoints will be conducted in accordance with the FDA’s 2005 draft industry guidance for acne trials. We expect to complete animal toxicology studies followed by human toxicology studies prior to undertaking these Phase III clinical trials, and to complete the remaining required safety studies concurrently with the Phase III clinical trials.

FMX102 for Treatment of Impetigo

FMX102 is a 1% formulation of our minocycline foam for the treatment of impetigo. In our Phase II clinical trial, FMX102 cured impetigo faster and more effectively than the results indicated in the product label for Bactroban, one of the leading branded topical drugs comprising the current standard of care. We expect to commence Phase III clinical trials with FMX102 in the second half of 2015.

Market opportunity:     Impetigo is a highly contagious bacterial skin infection that primarily afflicts preschool-aged children and is typically caused by staphylococcus aureus, including MRSA. Impetigo, including MRSA, typically results in red sores and lesions on the face, neck, arms and legs. Many MRSA infections occur in hospitals and healthcare facilities, most commonly in pediatric wards. In the early 1970s, MRSA accounted for only 2% of all staphylococcus aureus hospital-acquired infections. By 2007, it accounted for 60% to 70% of these infections, and

a 10-state 2006 study of emergency room patients reported that staphylococcus aureus caused 76% of all soft tissue infections acquired by such patients, of which 59% were from MRSA. Drugs for the treatment of MRSA may be entitled to certain benefits under the Generating Antibiotic Incentives Now Act, or GAIN Act, including five additional years of exclusivity and accelerated timing for FDA approval.

As shown in the table below, the U.S. market for prescription drugs for impetigo was estimated to be approximately $340 million for the 12 months ended March 31, 2014, the vast majority of which was attributed to Bactroban and other mupirocin-based topical products, which are the current standard of care for impetigo.

Sales of prescription drug s for impetigo, 12 months ended March 31, 2014. ⁽¹⁾

Limitations of current standard of care for impetigo:      The topical antibiotic Bactroban and other mupirocin-based topical products are the current standard of care for the treatment of impetigo. According to its product label, Bactroban achieves a clinical efficacy rate of between 71% and 96% for impetigo after eight to 12 days of three-times daily treatment. According to the product label for Altabax, the most recently approved topical treatment for impetigo, it achieves a success rate of 89% for impetigo after five days of twice-daily treatment.

FMX102 clinical results:     We conducted a randomized, double-blind Phase II clinical trial in Israel over seven days with 32 pediatric patients ages two to 15 with at least two impetigo lesions. Of these patients, 34% were diagnosed with MRSA infection. The patients were randomly divided into two groups of 16 patients each, with one group receiving a 1% concentration of our minocycline foam and the other group receiving a 4% concentration, with each patient receiving applications twice-daily. No vehicle-only control was used, as ethical guidelines for pediatric trials in Israel do not permit the use of control groups.

The primary efficacy endpoints of the trial, based on the FDA files for approval of Altabax, were:

The trial was completed in 2013 and showed that approximately 80% of the patients in both groups were cured or improved and met the clinical success criteria after three days of treatment. Clinical response at the end of the treatment was 92% for the 1% dosage and 100% for the 4% dosage, and all patients (100%) showed success by the fourteenth day of the trial. With regards to MRSA, the trial showed that both the 1% dosage and 4% dosage met the efficacy success criteria, with the MRSA infection being completely eradicated by the seventh day of the trial in all 11 patients who were infected with MRSA at the beginning of the trial. This presents a more convenient treatment, especially for pediatric purposes, and potentially limits the transfer of infection from one child to the other.

The following table shows the clinical success rate of the 1% dosage and 4% dosage in impetigo pediatric patients, including MRSA cases of impetigo, from the beginning of the trial and over the trial period. In the table, “EOT” means “end of treatment” and “FU” means “follow-up.”

The safety and tolerability profile of the drug was also favorable, with none of the trial participants experiencing any drug-related side effects. In addition, questionnaires filled out by the participant’s parents upon completion of the trial revealed high satisfaction with the treatment, with more than 55% of the participant’s parents receiving either the 1% or 4% dosage rating their general satisfaction with the drug as “very high” or “high,” and none of them rating the product as “unsatisfactory”. Likewise, in the usability category 71% of the participants’ parents in all groups rated the product as “very satisfactory” or “excellent” and an additional 24% of the participants’ parents in all groups rated it as “moderately satisfactory,” raising the general level of satisfaction with usability to over 90%. Based on the similar efficacy results seen across the two dosage groups, we expect to proceed with the 1% formulation of FMX102, to Phase III clinical trials for impetigo.

The following series of photographs, taken over seven days of treatment, show the effect of FMX102 on two pediatric patients infected with impetigo participating in our Phase II clinical trial who responded positively to treatment.

The trial followed the procedures described in the summary basis of approval of Altabax, the most recent topical antibiotic drug approved by the FDA for impetigo. Its endpoints and success criteria, including clinical success, bacteriological success and clinical failure, were adapted from the FDA’s approval package for Altabax. While we did not file a formal IND with the FDA in connection with the Phase II clinical trial of FMX102 for impetigo, the trial was conducted in compliance with ICH and GCP guidelines and with relevant Israel Ministry of Health regulations. Because minocycline, the active ingredient in FMX102, is a well-known drug with an established safety profile, the ethical committee for our Phase II clinical trial and the Israeli Ministry of Health allowed us to conduct Phase II clinical trials of FMX102 without our having first conducted a Phase I clinical trial for FMX102.

Next steps.     We plan to undertake two concurrent independent Phase III clinical trials of FMX102 with a 1% concentration for impetigo commencing in the second half of 2015. We expect to complete animal toxicology studies followed by human toxicology studies prior to undertaking these Phase III clinical trials, and plan to complete the remaining required safety studies concurrently with the Phase III clinical trials, under the FDA’s 505(b)(2) regulatory pathway.

FMX101 for Rosacea

Based on our clinical data for acne and the similarities between rosacea lesions and inflammatory acne lesions, we are developing our minocycline foam, FMX101, for the treatment of rosacea. This chronic skin disorder is characterized by facial redness and inflammatory lesions, afflicting about 14 million people in the U.S. alone.

The topical drugs most commonly used to treat mild-to-moderate rosacea, Metrogel, generic metronidazole and Finacea, generate approximately $440 million in aggregate annual revenues in the U.S. The oral drugs usually prescribed for moderate-to-severe cases of rosacea are minocycline and doxycycline, such as Oracea. According to Symphony Health Solutions, Oracea’s annual sales in the U.S. for the 12 months ended March 31, 2014 were approximately $350 million. Based on our clinical trials for acne and the similarity between acne and rosacea inflammatory lesions and the fact that they are both currently treated using similar oral antibiotics, we believe our product candidate for this indication will offer a significant advantage over the current standard of care. We expect to commence Phase II clinical trials with FMX101 for rosacea in 2015. As was the case with FMX101 for moderate-to-severe acne and FMX102 for impetigo, we anticipate that we will obtain the requisite approvals to commence a Phase II clinical trial for FMX101 for rosacea without first having conducted a Phase I clinical trial, because minocycline, the active ingredient in FMX101, is a well-known drug with an established safety profile. We further plan to support and expedite the filing of an NDA under the FDA’s 505(b)(2) regulatory pathway using safety data collected in our acne trials and studies.

FDX104 for Chemotherapy-Induced Rashes

FDX104 is a topical foam formulation of the antibiotic doxycycline for the treatment of severe acne-like rashes induced by chemotherapy. Between 45% and 100% of patients taking EGFRI drugs, such as Erbitux and Vectibix, are affected by these severe acne-like rashes, which typically occur in cosmetically sensitive areas such as the face and upper trunk. The rashes are associated with symptoms of pain and itching, and superinfections occur in approximately 30% of patients receiving EGFRI treatment. These symptoms cause approximately 76% of all such patients to modify their dosage of EGFRI drugs and approximately 32% to stop treatment altogether. While there are no approved drugs for these rashes, oral doxycycline and minocycline are currently used ‘off-label’ as the standard of care, with significant drawbacks, including adverse side effects and potential adverse drug-drug interaction with the EGFRI drug. Based on our acne results with topical minocycline, we believe our topical form of doxycycline, which has pharmacologic attributes and physicochemical characteristics similar to minocycline, will effectively reduce the rash without the adverse systemic side effects or drug-drug interaction of oral therapy.

We believe FDX104 has the potential to be commercially viable in light of this unmet medical need and the relief it is expected to provide to patients already burdened with the hardships of cancer and chemotherapy. We also believe FDX104 has the potential to reduce the abandonment rate of EGFRI drugs that are essential to the patients undergoing this treatment.

Given a patient population of less than 200,000, FDX104 may be eligible to receive orphan drug designation, which can entitle us to marketing exclusivity for seven years post-approval by the FDA. Furthermore, if FDX104 is designated as an orphan drug, certain statistical burdens applying to the requisite clinical trial for approval would be alleviated, including allowing the trial to be carried out with fewer participants than would otherwise be required. We expect to enter Phase I/II clinical trials for FDX104 in Israel in late 2014.

Our Competitive Strengths

We believe that our expertise in foam technology, as demonstrated by our development of a novel topical foam formulation of minocycline, enables us to develop global product candidates which address shortcomings of currently available treatment options and positions us to compete effectively in the markets for the treatment of acne, impetigo and other skin infections.

FMX101 and FMX102 represent improved treatment alternatives for moderate-to-severe acne and impetigo. Our lead product candidate, FMX101, is a novel topical foam formulation of minocycline, offering an easy-to-use and convenient alternative to existing treatment options for moderate-to-severe acne. While we have not conducted head-to-head trials, based on our current clinical data compared to the label claims of the current standard of care Solodyn, FMX101 offers a faster and more effective treatment for moderate-to-severe acne, with no reported systemic side effects. We believe that FMX101, if approved, will capture a significant share of the acne treatment market, and may even expand the overall acne market by attracting new patients who avoid current treatment options due to their limited effectiveness and potentially severe systemic side effects.

We are developing our second lead product candidate, FMX102, for the treatment of impetigo, including cases of impetigo caused by MRSA. FMX102 possesses the same benefits of FMX101 in terms of ease of use and convenience, and in our clinical trial it achieved a success rate of 81.3% in only three days of treatment and 100% in 14 days with twice-daily applications. While we have not conducted head-to-head trials, this contrasts with a